With one bound the Government is free. Or so it appears. In the most extraordinary turnaround we have seen in the run up to any budget, expectations of significant cuts disappeared within a matter of months, to be replaced by a package which gives a little bit to just about everyone.

The original plan had been further austerity of €2 billion in Budget 2015.

As recently as this summer,the Department of Finance quietly estimated that it wasn’t that bad , but cuts of €1 billion would still be needed. In recent weeks a remarkable upward revision to Irish economic growth prospects moved the goalposts again.

In the event, the budget – rather than cutting – will actually add €600 million or so to the amount we are borrowing next year.

Add in some extra money found in the kitty and the impact of an expansionary budget on taxes and the budget just about broke the €1 billion barrier when you count up the tax and spending measures.

There was some €400 million in the tax package and €600 million in spending – not huge in the overall scheme of a €50 billion annual budget, but quite a turnaround from recent years.

Economic growth really does make that much difference to the figures. With austerity, governments have to chase their tails, as cutting spending and taxing more in itself slows the economy. Growth reverses everything.

Suddenly we are in a virtuous budgetary circle. But it is on the continuation of this growth that we now depend if the numbers are to continue to add up.

This is why international bodies and the Fiscal Advisory Council, appointed by the Government to give it independent advice, had been calling for the Coalition to stick with the original plan and cut by €2 billion.

Sustainable growth

Nobody can be sure whether the surge in growth is sustainable, they warn, and it’s better to avoid any risk of having to return to austerity next year or the year after.

The ESRI disagrees, saying that on reasonable assumptions the Government could beat its borrowing target next year again. The big risk would appear to lie in the euro zone, where another slump into recession could damage our exporters.

There is some leeway in the figures and if GDP growth here was, say 3 per cent, next year, compared to the 3.9 per cent forecast, the figures will still be okay. If growth slumps back to, say , 1-2 per cent, then we could be in trouble.

In the light of the strong growth figures seen for the first half of this year, this kind of growth collapse looks unlikely. However, the growth figures will be closely watched.

Remember, we are still adding to our national debt of more than €200 billion by borrowing more money and we need higher growth to cut this burden and reduce the debt-to- GDP ratio from 110 per cent now to below 100 per cent by 2018.

This is the legacy of the bust, which makes strong growth all the more essential.

For the moment, however, the Government can present upbeat forecasts and press forward in the hope that next year it will again beat its target, setting itself up for a generous pre-election budget in a year’s time.

Looking at the three-year projections for tax and spending it is clear that we are now in an era when any “giveaways” will remain limited enough.

Day-to-day government spending is forecast to remain around current levels and nor will there be room for major tax cuts. Politically, the Government will hope to have a similar budget to this one in a year ’s time.

This is what makes the decision of where the limited gains would be given so interesting.

Income taxes were cut, but a conscious decision was made that those over €70,000 a year should not gain by too much, and this was achieved via USC changes.

Employees

High marginal rates of 52 per cent for PAYE employees earning above this level and 55 per cent for the self-employed earning more than €100,000 are now in place.

To sweeten the pot a bit, a €5 a month rise in child benefit was announced – given the limited scale of the income tax changes, this means families with children gain more.

Overall, of course, there will not be a significant amount of extra money left in household budgets when the impact of the water charges is added in. However, it is quite a reversal from the never-ending cuts and tax hikes of recent years.

The Government is betting that it will be enough to persuade people that, to use Brian Lenihan’s famous phrase, the corner has now (really) been turned.

If this leads consumers to spend a bit more, it will support growth. It could also yield a political dividend for the Coalition.

But as we have seen, growth brings it own pressures on the Government and dividing up limited spoils is never easy.