The Irish Business and Employers Confederation has called for any surplus in the Government's finances to be used to reduce the national debt of £29.5 billion. Following the publication of the July Exchequer returns on Tuesday, IBEC said the healthy state of the nation's finances must not be a signal for increased spending or enhanced tax concessions.

The figures showed an increase in tax revenue of 15.4 per cent over the first seven months of this year compared to the same period in 1996.

IBEC pointed out that, while the returns cannot give precise indicators for the financial year as a whole, it seems likely the budgetary outturn is heading for a substantial surplus rather than the deficit of £640 million budgeted at the start of the year.

According to Mr John Dunne, director general of IBEC, any upward pressure on spending only exposes the economy to serious financial difficulties in the event of an economic slowdown.

He added that the most sensible action for the Minister for Finance, Mr McCreevy, to take is to run an Exchequer surplus this year, establish a precedent of EBR surpluses over the coming years and make inroads into repaying the high burden of Government debt.