McCreevy sounds warning on spending

CHARLIE McCREEVY yesterday warned his successor against opening the public purse strings too much after he departs for Brussels.

Signing off on a booming economy and borrowing at least €1 billion less than anticipated this year, the outgoing Minister for Finance said continued prudent management of the public finances was crucial for economic growth.

Yesterday the Department of Finance cut its forecast of the amount the Government will need to borrow to balance the books this year to €1.8bn, from the €2.8bn predicted in last December’s Budget 2004.

But economists suggested the department was being pessimistic as the borrowing requirement would be a lot lower by the end of the year and Government figures also accepted it may indeed be less.

The biggest threat to the global economic upturn is the uncertainty over supply and price of oil, the department warned.

The boost in income comes from dramatically higher tax returns of €1.2bn in the first half of the year, including the once-off €616 million from the Revenue Commissioners’ special investigation into offshore accounts.

The economy is growing faster than expected this year, according to the department’s ‘Economic Review and Outlook 2004’, which predicts the key GNP (Gross Domestic Product) will be 4.7%, as opposed to the 3.3% budget forecast.

Despite the boom, inflation is under control with an average rate of 2.2% expected this year, compared to 3.5% in 2003.

The report appears to validate Mr McCreevy’s economic policies before he leaves the Cabinet next month to become Ireland’s European Commissioner and suggests his lead should be followed by the new holder of the portfolio.

“Our reputation for fiscal discipline has been hard-won,” the report says.

Mr McCreevy echoed that message when the report was published.

“The minister pointed out that if our economy is to grow in accordance with its potential, it is essential that we continue to manage our public finances in a prudent and responsible manner,” an official statement said.

But opposition parties were less upbeat about the economy’s future, with Labour and the Green Party attacking Mr McCreevy’s policies.

Labour finance spokesperson Joan Burton said it was no surprise Mr McCreevy got his figures wrong and said Fianna Fáil was gearing up for a pre-election spending spree.

While the report painted a rosy picture of the economy taking advantage of a global upturn, Greens finance spokesman Dan Boyle said the more likely scenario was of an uncertain future darkened by fears on the availability and cost of oil.