Business leaders yesterday used a meeting with Minister for Finance Mr McCreevy to reiterate a call for public sector job cuts.

Warning that a substantial scaling back of Government spending must be a precondition to the implementation of benchmarking pay increases, a delegation from employers' group IBEC told the Minister that reducing public sector numbers by 5,000 could save €500 million.

With the first indications of recovery emerging in the US, this budget is especially crucial as it will shape the business environment for what may prove a pivotal year for the Irish economy said Mr Brian Geoghegan, director of economic affairs for IBEC.

In such circumstances, it is essential that the cost of benchmarking is not passed onto businesses in the form of higher local rates, he said.

The possibility of delaying the introduction of PRSI on benefit in kind to allow time for ironing out what IBEC describes as "technical difficulties" was also raised by the delegation, led by IBEC president Mr Maurice Pratt.

Urging Mr McCreevy to draft a "holding Budget", IBEC cautioned against tax increases and called for discipline in day-to-day spending.

Helping to coax the inflation rate down to 2 per cent must be a key goal as Mr McCreevy puts the final touches to his budget, said Mr Geoghegan.

The Government gave a commitment to shed 5,000 public sector positions last year.

In its recent pre-budget submission IBEC called for a further 5,000 jobs to be phased out over three years.

But IBEC also had positive words for the Minister, welcoming Government proposals for a new planning body to accelerate major infrastructure projects.