ANOTHER strong set of Exchequer figures will impress the financial markets as they show that the Government was one of Europe's lowest borrowers last year.
Interpreting the figures is a straightforward exercise, as a late surge in tax revenues and under spending on restructuring State companies left borrowing at £627 million, £186 million below the Budget target. The more difficult part is assessing what it means for this month's Budget.
How Ruairi Quinn must wish he could harvest last year's revenue overshoot and somehow shift it over for use in 1996. Unfortunately, it does not work like that. Last year's books are closed off and while £119 million in debt service savings made last year have been carried forward, the key question now for Mr Quinn and his advisers is whether the buoyant tax trends evident last year can continue in 1996.
Here the 1995 returns brought good news in terms of a late surge in receipts, particularly excise duties. Overall, then, there is no reason why Mr Quinn should not benefit from further growth in tax receipts in 1996. Economic growth remains strong and employment should continue to rise.
Furthermore, the weak spot in 1995 receipts - corporation tax - should bounce back in 1996. The poor 1995 return was due to once off losses suffered by financial institutions, particularly those in the IFSC, in 1994. By contrast, most will have made profits in healthier markets last year.
In the game of budgetary swings and roundabouts, Mr Quinn will also be disappointed about underspending of £80 million on his capital budget last year, due to the delay in EU approval for the restructuring of Irish Steel and also for a planned capital injection into Bord Na Mona. This money will now have to come out of the 1996 Budget.
On balance, the Exchequer returns appear to underpin predictions that Mr Quinn should afford tax reductions of around £200 million or possibly a little more on Budget day. In the annual game of poker, the Department of Finance is likely to continue claiming that less than £150 million will be available.
However, when the buoyancy impact of the Budget on the economy is taken into account, along with some modest revenue raising measures. Mr Quinn is likely to have more than £200 million to spend on reducing income tax and PRSI. To put this in context, last year's Budget involved tax and PRSI reductions costing just over £200 million, so a similar package is in store.
On the spending side, Mr Quinn has already set his parameters. On top of spending commitments made in the estimates, he has to allocate £13 million to a defence forces early retirement scheme. Allowing for departmental balances at the end of 1995, this should leave him with around £100 million to spend on a social welfare package and special measures to tackle long term unemployment.
All this should be possible while still aiming for an Exchequer Borrowing Requirement of around 2.2 or 2.3 per cent of Gross National Product, or £750 million to £800 million in cash terms.
