For years, Governments in this State have been forced to grapple with the problems caused by high levels of Exchequer borrowing and a soaring national debt. It is thus tempting to dismiss the recent recovery in the Exchequer finances as temporary and to expect that before long we will be back to the familiar cycle of struggling to balance the annual Budget. However, unless the economy heads into an unexpected downturn, there is no reason to expect this to happen. For this reason, it is time to debate seriously how to manage the Exchequer finances, based on the likelihood that they will remain in good health for some years.
Nothing can be taken for granted, of course. We are entering uncharted waters as we head into monetary union and must plan for a lower level of EU structural and cohesion funding. Also, economic growth is bound to slow sooner or later.
Even taking these factors into account, the outlook for the economy and for the Exchequer finances remains strong. It is quite conceivable that the surplus of Government revenue over spending this year could reach £1 billion and further strong surpluses are in prospect, for the following couple of years at least.
On the face of it, this gives the Minister for Finance, Mr McCreevy, substantial scope as he frames his 1999 Budget. However while his predecessors faced the problems caused by a tight Budget position, Mr McCreevy must deal with the dangers of economic success. He could afford to budget for significant spending increases and tax reductions next year, but by doing so would risk adding further fuel to an economy already growing at record pace. His job will be to balance economic prudence against the political reality that employees expect tax cuts while spending increases are justified in some areas by social need.
Clearly, aiming significant tax reductions at the better off, as he did in this year's Budget, would be most unwise. Instead, what reductions there are should be directed at the less well off. Meanwhile day-to-day spending must be held in check, which will be difficult, given the pressure already building due to public-sector pay demands.
The Government must also start looking to the longer term. It is time to put in place a financial framework for the next four to five years, based on a coherent view of how best to prolong economic growth and put the Government finances on a sound long-term footing.
Among the issues which should be addressed are the need for investment in areas of infrastructure - particularly given the expected depletion in EU funding. The Government should also decide to what extent resources should be spent on reducing the national debt and whether we should be putting money aside to fund future pension requirements. The danger is that the Government parties will instead spend their time arguing over what the 1999 Budget should contain. The temptation of the political machine is always to concentrate on the short term. But our future economic prosperity will be much more reliant on the appropriate use of the current fruits of growth than on the intricacies of the tax "giveaways" in the 1999 Budget.