The economic outlook is worse than previously feared, the Minister for Finance Mr McCreevy confirmed today.
And while press reports say spending cuts will need to be increased from €800 million to €1.7 billion because of a lower-than-expected tax take, Mr McCreevy today refused to be specific about what effect the shortfall would have. He dismissed the reports as "speculation" based on known figures.
He said the latest projections for tax take in 2002 showed a €1.3 billion shortfall on estimates published last year and that December's budget would reflect the worsening economic situation.
He also said that growth for the next three years would be less than previously expected but refused to speculate on a figure for future growth rates ahead of the Budget. "There'll be a lower base and lower growth so that will mean that the budget situation next year will be more difficult," he said.
In a speech to the Leinster Society of Chartered Accountants in Dublin today, Mr McCreevy said the expected recovery both nationally and internationally had not materialised and that spending priorities would be set in accordance to "new and constrained revenue expectations".
He hinted that spending cuts would not be the only way of making up for the fall-off in tax revenue. "I will be looking carefully at preserving our current revenue base," he said and when asked by reporters refused to rule out income tax increases. "No sane Minister for Finance ever signals before he gets up on Budget Day what he might do in terms of tax changes," he said.
He also said he was considering using some of the Central Bank's reserves but said the move would require the sanction of the European Central Bank.
In his speech to the Society, he said a "balanced approach" to dealing with the worsening outlook would be required. "Budget day will present us with important choices that will affect prospects for the next few years. Firm action now will enhance those prospects considerably.
"A balanced approach is required taking into account our economic needs, the fact that as a small open economy we must retain competitiveness, the much changed financial parameters and the desire to protect the vulnerable," the Minister said.
Labour Finance spokesman, Mr Brendan Howlin criticised the Minsiter's speech, describing it as "glib".
He said that Mr McCreevy spoke as though he was not responsible for managing the economy for the past five years and hit out the Minister's assertion that "we can only spend it when we have it". Mr Howlin said: "Had Mr McCreevy not undermined the tax base over successive budgets, getting his sums wrong in the process, we might now have more of 'it' to spend."