Our historians are not the only revisionists out there: the statisticians are also busy rewriting the past. The Central Statistics Office recently issued National Accounts data for 1998, incorporating substantial revisions to earlier estimates of national income.

It now appears that we are better off than originally thought, with GDP in 1997 revised up from £48.2 billion to £51.8 billion (€61.2 billion and €65.77 billion), and as a result the 1998 level of GDP was much higher than forecast, at £59.6 billion.

In turn this means that national income this year will be a whopping £68 billion, on the basis that real growth is around 10 per cent. One factor underlying the revisions is that spending by consumers is now thought to have been much stronger than initial estimates suggested: personal consumption in 1997 is now put at £27.5 billion, or some £2.5 billion above the previous figure.

The treatment of computers in the national accounts has also changed, as major purchases of software are now treated as a capital outlay, so largely explaining the fact that investment has also been revised up by a substantial amount.

So the 1990s now look even more remarkable in terms of economic activity than originally thought, thanks to higher spending by the private sector. However, certain items of spending cannot be revised, including that of the Government in its budgets over the years.

As a result, it now appears that State spending has fallen dramatically in relation to national income, both in current and capital terms. Take non-debt current spending, the bulk of which is public sector pay and welfare payments. This is budgeted at some £12 billion in 1999, which amounts to 20 per cent of GNP, against 25 per cent in 1993 and more than 30 per cent in the mid 1980s. If one adds in debt spending the total rises to 26 per cent of GNP, which is still well below the figures recorded in 1993 (36 per cent). In fact Government spending is now probably the lowest in the developed world in relation to national income.

Of course a lot of State spending moves inversely with the economic cycle, in that social welfare payments will rise as unemployment rises and fall as economic growth expands and employment picks up.

On that basis the fall in spending as a proportion of national income will naturally reverse, at least in part, as the economy slows down over the next few years. However, if one looks at discretionary spending, particularly capital spending, the picture is one of sustained decline, the scale of which is startling. Capital spending funded by the Exchequer exceeded 10 per cent of GNP 20 years ago (although not all of this could be said to be productive), but then collapsed in the 1980s. In 1989 the figure was an extraordinary 30 per cent below the 1983 level, and this is purely in nominal terms so the real decline was much more pronounced.

It is this period which we are paying for now, in terms of the obvious infrastructure deficit that is apparent for all to see. Anyone holidaying in Western Europe will be struck by the quality of the public transport system compared to the Republic, despite the fact that the statistics show that Irish income per head is above the EU average.

Similarly, the litter-strewn streets of our major cities are shameful when compared with most cities on the Continent. This "private affluence, public squalor" contrast was highlighted in the US more than 35 years ago by J.K. Galbraith in his Affluent Society, and the

Republic risks falling further into that trap.

The cry in the 1980s was that the State could not afford to spend on capital investment or infrastructure, even though there was ample spare resources, particularly labour. The paradox now is that there are ample funds, but no spare resources, given full employment in the construction industry. Yet even the higher levels of capital spending in recent years are still low relative to national income.

For example, the £2.4 billion projected in 1999 is only 4 per cent of GNP, and to return to the 10 per cent ratio of the early 1980s a figure of £6 billion would be required, i.e the whole of the likely Budget surplus this year. Higher capital spending is clearly needed, but the reality is that the State simply cannot spend £5 billion or £6 billion overnight, particularly in a sector with no spare labour and where the time lag between implementation and the cutting of the white tape by the local TD is long and variable.

For that reason it is advisable to invest some of this and the coming years' budget surpluses, to be drawn down as appropriate as resources are freed up from a slowing economy.

Dr Dan McLaughlin is chief economist at ABN-AMRO Stockbrokers