McCreevy’s bleak forecast softened

Finance Minister Charlie McCreevy’s prediction that slack economic conditions will shape today’s Budget took a knock yesterday with the release of surprisingly buoyant Government figures.

As the rebellion within Fianna Fáil over the cuts in Community Employment Scheme places fizzled out completely last night, the Exchequer returns for November showed a massive €842 million surplus in receipts over expenditure.

It means with only a month remaining in the year, Mr McCreevy could have €500m more available than he predicted at the start of the year.

In last year’s Budget, Mr McCreevy predicted a deficit of €1.89 billion for 2003, but the pessimistic financial targets have been easily exceeded because of dramatic increases in VAT returns and tax revenue, as well as tight controls on Government spending. Increases in stamp duty for house buyers provided a further financial bonanza.

Last Friday, the deficit for 2003 was revised downwards by the Department of Finance to €1.5bn, almost €400m up on the Budget projections; yesterday’s figures to the end of November mean the deficit could be even lower.

With an €842m surplus for November, and €2bn in revenue expected for December, the Government would need to spend over €4.3bn in the next month to arrive at a €1.5bn deficit for the year.

Government sources said yesterday that spending was traditionally high in December. They pointed out December was usually a strong period for Excise returns but the sector had not performed well this year.

However, the sources accepted yesterday’s figures would probably mean a deficit of less than €1.5bn.

It is unlikely the more positive figures will hold much sway with Mr McCreevy. While remaining tight-lipped about proposals, he has indicated strongly all year that today’s Budget will be a relatively harsh one.

When introducing the Estimates last month he referred to the pessimistic forecasts in his 2002 Budget Statement and said, “that difficult position remains and sets the backdrop for 2004”.

There has been much speculation, unconfirmed so far, that Mr McCreevy will introduce wholesale changes in the PRSI system. Given his cautious approach to the Estimates, social welfare increases are expected to be kept at or near to inflation.

Minister for Labour Frank Fahey, who led the charge for additional funding for extra CE places, also appeared to climb down from his previous trenchant position, and praised Mr McCreevy’s financial controls in a speech in Dáil Éireann.

FF backbenchers were further appeased last night by Minister for the Environment Martin Cullen announcing he would soon bring forward planning guidelines on once off rural housing.