Govt dampens hopes of more tax cuts

The Government tonight dampened hopes of more tax cuts after pointing to "a significant moderation in the pace of growth" in a revised forecast of this year’s economic progress.

The Department of Finance said gross national product this year was set to rise by 6% during 2001, compared with 10.4% last year.

Finance Minister Charlie McCreevy pointed out that, while significantly slower than during 2000, the rates of growth were still high in both international and historical terms.

But Mr McCreevy, who has come under fire from the European Commission for tax-reduction policies, claimed to have overheated the "Celtic Tiger" economic boom, added the warning: "There is a more uncertain economic climate, and it will be necessary to adjust expectations to meet the new situation."

In a further comment, Tanaiste and Enterprise, Trade and Employment Minister Mary Harney said any tax changes in next December’s budget would have to account for the overall economic situation and fresh challenges.

She spoke out ahead of a meeting in Macroom, Co Cork, with representatives of almost 700 employees due to lose their jobs as a result of a decision by the American-owned General Semiconductor company to pull out of the town, marking the latest in a series of recent blows for the Irish hi-tech sector.

Tonight’s departmental Economic Review and Outlook also predicted that the fall in the rate of inflation was likely to be less than previously expected, with the price-rise level set to average 5% over the year, well ahead of the European Union average, and more than twice the recommended eurozone rate.

In one of the bleakest official assessments of the economy for some years, the Government reported that tax receipts had been lower than anticipated - leading to a big reduction in exchequer revenues.

But it was made clear, too, that the foot-and-mouth crisis had created problems.

The outlook also said unemployment levels were likely to fall to around 3.5%, one of the smallest figures in the country's history.