For the first time in almost 10 years the Department of Finance has reported that the Exchequer surplus will not be as large as it previously forecast. At the end of the year, the surplus of receipts over spending will be £500 million (#635 million) less than expected, but will still be in the order of £2 billion.

Tax receipts had been expected to grow by 12.5 per cent this year as the economy continued to boom but figures released by the Department yesterday show the growth rate so far has been a disappointing 5.3 per cent.

Foot-and-mouth restrictions and a more cautious stance in terms of people's spending patterns were blamed for depressing the growth in tax revenues so far this year.

VAT receipts came in £140 million below the Department's target. Of this, £100 million was attributed to foot-and-mouth restrictions, as the cancellation of events and fewer people travelling to and within the Republic reduced the tax take. A further reduction of £50 million was attributed to a drop in new car sales as people showed more restraint in their spending after last year's Y2Krelated bonanza.

Excise duties were also down with vehicle registration tax a large factor combined with a drop in consumption of alcohol and tobacco.

However, VAT receipts contained in the half-yearly Exchequer figures only record proceeds to April which means it will be a couple of months yet before the Department can determine whether the lifting of foot-and-mouth restrictions triggered a bounce in consumer spending. Betting tax receipts, for instance, have improved strongly since racing recommenced, according to Department of Finance second secretary general, Mr Donal McNally.

The Department acknowledges that an overall slow down in economic growth has been influencing spending patterns. Many people are concerned about the fall-out in the high-tech sector, given the raft of job cuts at many multinational corporations.

The Department's figures also show a slow take-up of the Government-backed Special Savings Investment Accounts which became available from May 1st. In that month some £1.5 million has been lodged at the State's financial institutions. Mr McNally said the financial services sector is indicating these levels have trebled in June.

Another tax showing strong growth so far this year was stamp duty - up 21.4 per cent compared with Department forecasts of 15.3 per cent growth.