A few weeks ago the Taoiseach, Mr Ahern, said that there was a "compelling case" for running a surplus on the Exchequer finances next year. But the political pressures mean that the Minister for Finance, Mr McCreevy, will again have to borrow, albeit only £89 million, to balance the books next year.
The final negotiations between the Government parties on the Budget again demonstrate that once the money is there, politicians are inclined to spend it.
Mr McCreevy cannot be accused of being gravely imprudent. After all, he has chosen not to include the proceeds from the sale of State shares in ACC and ICC in his sums. And when the likely buoyancy in tax revenue is taken into account, it is possible that 1998 will see an overall surplus on the Exchequer finances.
But like all Ministers before him, he is budgeting on the boom continuing. Day-to-day spending is set to increase by some 6 per cent again next year, although Mr McCreevy made a welcome statement on the need to get a tighter grip on public sector pay. And the Budget also gave a significant amount in tax relief, with reductions valued at over £300 million in 1998.
The risk is that if economic growth slows, the room for Budgetary manoeuvre will quickly disappear, as tax buoyancy slows and pressure rises on Government spending. And with Ireland due to be a founder member of monetary union on January 1st, 1999, our power to independently adjust interest rates will disappear, meaning that the Budget will be the only vehicle for managing the overall level of economic activity.
But next year growth should again remain strong. The expansionary nature of the Budget also means that the economy is in for a strong stimulus in the middle of next year, when the tax reductions start to feed through into people's pay packets. This boost will coincide with an expected reduction in interest rates, which simply have to fall next year in the run up to the start of monetary union.
Does this mixture of higher take-home pay and lower interest rates threaten to overheat the economy and stoke up inflation? It will certainly add fuel to an economy already growing at an unprecedented rate. The Government will hope that the lower tax burden will limit the extent to which taxpayers demand improvements in excess of the current national programme and thus keep a lid on wage inflation.
But the economy is likely to roar ahead next year. Government forecasters expect GNP to rise by 7 per cent again. And the combination of lower interest rates, lower income taxes and the sharp reductions in capital taxes will add fuel to the housing market and lead to an acceleration in overall consumer spending.
Whether this will lead to unsustainable pressures in these areas remains to be seen.
So far the economy has shown a remarkable capacity to grow rapidly without fuelling inflationary pressure. But whether another spending spree will lead to some pressures next year remains to be seen. In particular, the Central Bank will be nervous about developments in the housing market, where prices have shot up.
In framing his tax package, Mr McCreevy aimed directly at higher earners. The strategy of cutting income tax rates inevitably focuses the main gains at the higher end of the income spectrum. The Government can argue, of course, that by doing so it is merely delivering on what it promised. Also, there were some resources put into increasing personal income tax allowances.
The Budget package will increase the incentive to work by putting more money into people's pockets. But the gains are greatest for higher income earners. This may go down well with much of the electorate.
But the Government made a conscious choice to ignore the case for cutting tax on lower income-earners and easing the transition from unemployment to work. Concentrating gains on lower-earners would have been a better way to attack the real problems in the Irish tax system - which are high levels of tax on relatively low income levels. It would also have helped smaller companies to attract workers to move from unemployment into lower-to-average paid jobs.
Instead Mr McCreevy targeted the higher earners not only through the income tax measures but also by a major reductions in capital gains tax. The cut in the capital gains tax rate from 40 per cent to 20 per cent is a major and very welcome reform. It will be a major boost to business people with shares in their own companies and to employee share-ownership schemes.
And the Government hopes that it will encourage people to cash in capital investments and reinvest in productive enterprises.
And the Government has clearly indicated that it will be more of the same in future Budgets. A clear path of cutting income tax rates has been set, but no clear strategy of reforming the overall tax system is evident from Mr McCreevy's first Budget.