The latest Exchequer returns show that tax revenues continue to run significantly below budget. While the position has not worsened much in recent months, the weak tax trend - combined with pressure on spending - will still ensure that the 2004 Budget, to be delivered in early December, will be tight.
It will be all the more difficult if the Central Bank's prediction of a limited pick-up in growth moving into 2004 proves correct.
Yesterday's Exchequer returns told a familiar story. Income tax remains below target, reflecting the jobs market, and excise duties are weak due to falling sales of tobacco and alcohol. Stamp duties are buoyant, meanwhile, due to the strength of the housing market.
Overall the Department still believes that revenues for the year will be up to €500 million below what was predicted last December. With some savings possible on debt-servicing and spending being held in check, borrowing for the year may still exceed the €1.89 billion Budget target, but not by a huge amount.
Capital investment spending continues to run well below budget. The Department of Finance is confident that the year's capital allocation will be used by the end of the year - it would be a cause for serious concern if this was not to prove the case.
Negotiations on next year's Budget are already well under way. It is clear that while the position is considerably better than in most other countries, there will be little cash to spare. As it makes the key decisions, it is essential that the Government realises that the days of an Exchequer flush with cash are not going to return. What is needed is a strategy which covers the next few years, outlining the Government's plans for key areas such as public services, the evolution of the tax system and the planning and funding of infrastructure projects.
Not all of these are matters for Budget day. However the Budget is a central element of any wider strategy and it is important that rather than just nipping and tucking around the edges to try to balance the books - as happened last year - the Minister for Finance, Mr McCreevy, sets out an agenda to address the key economic issues.
Here, the delivery of infrastructure projects must be central. The Budget must indicate where money will be found to address this - whether through some extra borrowing or through public-private partnerships. However, it is also essential that the issues surrounding the delivery of projects are dealt with. There are some signs that this is starting to happen, but much remains to be done to ensure value for money and speedy delivery.
The other key challenge for the Government is the delivery of public services such as health and education. Achieving value for money is essential, if services are not to suffer at a time of tighter resources, many of which are already committed to public pay benchmarking. Again this requires a strategic approach to budgeting and management which was unfortunately absent during the years when spending was increasing at an annual rate of 20 per cent.