Quinn moves to reassure on public sector spending

GOVERNMENT borrowing this year will be little more than half what was expected on Budget day due to booming tax revenues, according to the Minister for Finance, Mr Quinn. The Opposition, however, has again criticised the Government's control of the public finances and said none of the coalition parties had committed itself to tight spending control.

Mr Quinn, speaking at the IBEC annual conference yesterday, said overall borrowing this year (as measured by the general Government deficit) would come to about 0.8 per cent of national output compared to the 1.5 per cent forecast on Budget day. Thus, the current budget surplus on the day to day running of the State would be around £450 million, twice the Budget forecast.

Mr Quinn's forecasts, if realised, would mean the level of borrowing here this year would be one of the lowest in the EU and would be well within the 3 per cent ceiling set in the Maastricht Treaty for states wishing to qualify for monetary union.

He said strong economic growth was leading to strong growth in tax revenues, which should now come in £400 million ahead of the Budget forecast.

This would be offset to some extent by an overrun of less than £100 million on spending, mainly accounted for by compensation to hepatitis C victims and other "unavoidable spending pressures".

Mr Quinn's statement was a clear move to underline the Government's record on the public finances ahead of the election.

However, the chairman of IBEC, Mr Tony Barry, warned in a speech that there were " worrying trends emerging", particularly rising public sector pay demands.

He added that "a risk of drift into a pre1987 situation is very real".

Later, the leaders of Fianna Fail and the Progressive Democrats' said in a statement they "share IBEC's concern at lack of control on public spending". Mr Ahern and Ms Harney said it was "disturbing that none of the Rainbow parties has committed themselves to clear spending targets for the next five years". Fianna Fail and the PDs have pledged to keep a tight rein on spending, limiting its increase to close to 2 per cent in real terms and endeavouring to eliminate borrowing altogether. The Government parties have also committed themselves to keeping the rise in real spending as close as possible to 2 per cent in Partnership 2000, but this commitment does not appear in their election manifestos. Labour has said it favours keeping the rise in real spending to less than the level of economic growth, while Fine Gael has said it wants to see spending fall as a percentage of national output and it wants borrowing eliminated altogether over the lifetime of the next government.

Mr Ahern and Ms Harney said a new partnership between their two parties was the only way to provide stable government. The Minister for Enterprise and Employment, Mr Bruton, retaliated, saying "a return to the dark days of Fianna Fail/PD government would leave the taxpayer smarting" because neither party understood the "principle of stable, partnership government and economic prudence".

He added: "Bertie Ahern was the Minister for Finance who levied PAYE workers with the 1 per cent income levy" and said the two parties would not be slow to abandon tax cutting plans if the economy slowed.