Stay tough on spending, departments warned

FINANCE Minister Charlie McCreevy has once again warned departments not to exceed their budgets even after new figures showed the Government borrowed €900 million less than expected.

Figures from the Department of Finance last night revealed the Exchequer posted a deficit of €980m in 2003. But this was €889m below what the minister forecast in Budget 2003.

The public finances were buoyed by a surge in stamp duty on houses, which was ahead by €520m, and a €815m boost in capital gains tax the bulk of which was down to the strength of the property market.

However, despite the figures, Mr McCreevy warned that strict control of expenditure must continue.

"Given, however, the scale of borrowing projected for the next three years of nearly €10bn in total, there is an obvious need for continued restraint on the expenditure side and for ongoing strict management of spending to ensure value for money from the record sums involved," he said. Opposition parties hit out at the Government, saying the deficit came about as a result of cuts in public spending.

"The reality is, of course, that the minister is talking down the budgetary situation at the beginning of each year to justify his cuts in public services, and to take credit at year-end for unexpectedly good results," said Labour's Brendan Howlin.

The Exchequer returns showed that the total tax take was up by 9.6% at €32bn compared to an 8% forecasted rise. Overall spending rose by 6.7% and came in €15m below the Budget target. Current expenditure, which is mainly wages, was ahead by 9%, but capital spending was down by 4%. Mr McCreevy had expected a 1.4% decrease in capital expenditure.

Apart from the strength of stamp duty, the public finances were boosted by corporation tax receipts, up €300m, and the lower cost of paying off the national debt, which shaved €203m from the deficit.

Even after the lower-than-projected outturn, department officials still expect the country to borrow €2.8bn this year and said it was prudent not to cut the deficit forecast for 2003.

"At the time we made what we thought were prudent and sensible estimates for taxes.

There was a good deal of uncertainty and in those circumstances it is always well to be prudent," head of finance Philip Hamill said yesterday.

Much of the hike in capital acquisitions tax and stamp duty came in the last two months of 2003 and it was difficult to predict if the Exchequer would see a repeat this year.