As Fianna Fáil and Fine Gael consider how best to put together a coalition government for the next five years two things that will not be in scarce supply are cash and advice.
Exchequer returns for November – one of the most important months of the year in tax revenue terms – showed the government has collected a record €99 billion in taxes so far this year, well ahead of last year’s final out-turn of €88 billion with one month yet to go.
Granted the figure includes €9 billion of the Apple cash but, even allowing for the extra €6 billion of those funds transferred to the exchequer last month, there is no sign of any dampening in record levels of corporation tax receipts which were €7.4 billion ahead of the same period last year.
The bottom line is that the Government is now forecasting an unprecedented €25 billion surplus this year.
The challenge for the incoming government will be to spend wisely rather than recklessly. In its world Economic Outlook published on Wednesday, the OECD said investment to address the State’s infrastructural problems would need to be “carefully sequenced” to avoid adding to inflation.
While conceding that large investments in housing, transport and energy were needed, the Paris-based agency said the Irish economy faced capacity constraints, especially in terms of labour and skills.
And in its latest assessment of policy the State budgetary watchdog, the Irish Fiscal Advisory Council (Ifac), says the pre-election budget put public spending on a potentially unsustainable trajectory. Noting that inflation has eased, it said net spending was now growing by a projected 8 per cent this year and next – double the economy’s projected growth rate over the medium term.
As the parties, and most likely a group of independent TDs, look to hammer a series of lavish election promises into a workable programme for government, Ifac said the next government would likely find itself in a strong position financially “but a lot will depend on two things. First, what happens corporation tax. Second, how the next government sets its budgets.”
Indeed. Keeping a lid on expectations could be the toughest challenge facing the incoming administration.
