The Government is now facing serious difficulties in framing the December Budget, following the publication of the latest Exchequer figures. They indicate that the Exchequer could be €1.2 billion in deficit by the end of this year, well above the latest official forecast of a €750 million shortfall.
Despite recent cutbacks, current spending is still running far ahead of target, while tax revenue remains well below expectations, according to the Department of Finance's Exchequer statement for the first 10 months of the year.
These trends will pose serious difficulties for the Minister, Mr McCreevy, with pressure to curb spending growth sharply and find new sources of tax revenue in next month's Budget. The Labour party's newly appointed finance spokesperson, Ms Joan Burton, said the Minister would have to rely "on further cuts and accountancy tricks" to produce the Budget package.
The latest figures show a sharp deterioration, with a €1 billion turn-around from a €594 million surplus at end-September to a €439 million deficit at the end of last month. At the end of October last year, the Budget was in surplus to the tune of €2.3 billion.
Government spending remains well ahead of target, despite recent attempts to get it back on track. Day-to-day spending by the Government is 19.6 per cent up on last year, despite Mr McCreevy's commitment that the increase would be kept at the budgeted 14.3 per cent.
Senior Government sources said difficult negotiations between Government departments over next year's budgets were nearly at an end. The 2003 Estimates will be published later this month and will aim to slow sharply the rate of spending growth.
Tax trends are also a major problem for the Government, with the latest figures showing a 2.3 per cent rise, well below the 8.6 per cent Budget target.
Despite greater numbers of people working, the end-October income tax return of €6.7 billion is 9 per cent below the figure achieved this time last year.
Some of the fall is blamed on tax reliefs due to 1.2 million holders of Special Savings Investment Accounts (SSIAs), which are deducted by Revenue before tax is paid.
In addition, individualisation changes to the tax code made by the Minister, along with lower overtime and bonus payments, are also responsible, economists say.
The worsening situation will reinforce pressure on the Minister to curb the SSIAs, and reduce the Exchequer's €1.3 billion contribution to the National Pension Reserve Fund.
Sharply critical of Mr McCreevy, the Labour Party said the Government had until now "clung to its claim" that public spending would not exceed Budget 2002 targets.
"Today's Exchequer figures provide further proof, if it were needed, that their targets will be massively breached," declared the Labour spokesperson, Ms Burton.
Illustrating the fall in fortunes, Fine Gael's finance spokesperson, Mr Richard Bruton, pointed out the Exchequer was €4.8 billion in the black less than two years ago.
