The Irish Times view on the latest official economic forecasts: use the surpluses wisely

The latest updated forecasts from the Department of Finance - contained in the annual Stability Programme Update – are not a straightforward exercise. Estimates for the public finances are surrounded by the usual uncertainties related to the sustainability of corporate tax, necessitating separate forecasts subtracting what the department feels is the portion of this revenue which the exchequer cannot rely on in the longer term. The State finances are either in strong surplus or in deficit , depending on which set of figures you choose to focus on.

How do we make sense of this? Politics – and the forthcoming budget – will inevitably deal in the reality of the figures and estimates that, pre-budget, the surplus using the EU measure is close to €10 billion for next year. Even allowing for money due to go into the two savings funds planned by the Government, this still allows for a generous package, albeit one significantly smaller than the Covid and cost-of-living budgets of recent years.

This will face the Government with choices – in particular a repeat of the so-called “once-off” universal supports, such as the energy credits, would leave less to spend elsewhere. Better, surely, to revert now to more normal budgeting, focusing on permanent spending and tax changes. Even then, the Coalition may struggle to afford everything referred to recently by senior ministers.

The flush state of the exchequer finances carries risks, in terms of tempting politicians on all sides to outbid each other on pre-election promises. Budget surpluses inevitably provide temptation, even if based on unpredictable revenues. But Ireland also has an opportunity, funded by strong public finances, to address some of the key issues – such as housing, health and infrastructure – in a planned way. The challenges are to take a multi-year approach and, above all, to find ways to deliver for the public. Unusually, the key constraint is not money, in many cases, but the means to make progress.

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This is difficult and politically testing. On the flipside, short-term tax and spending giveaways are easy and likely to be popular.