Minister for Finance Brian Cowen ruled out income tax cuts and appeared to reject calls for a cut in stamp duty when he indicated his Government spending targets last night.
In his Indecon Public Policy Lecture in Dublin, Mr Cowen, outlining the direction he foresaw the economy going over the next 10 years, said the emphasis must be on productivity, the environment and equity.
He said day-to-day spending must be reined in to account for economic circumstances and allow for funding the National Development Plan (NDP), which may also require further borrowing.
He said that day-to-day or current spending will rise by 8 per cent next year. Capital spending will increase by 12.5 per cent, he told the meeting.
"Increases in current Government expenditure will have to be lower than in the recent past," Mr Cowen said. "The percentage increases which we have been accustomed to will not be feasible," he said, adding that the Government had to protect "vulnerable groups".
The Minister made clear that he is willing to increase the national debt beyond 2008 to pay for infrastructure projects that can show a clear net return. However, Mr Cowen's spokesman last night indicated that the Exchequer would not need to borrow extra next year for the National Development Plan, "but, perhaps, for the following years".
"In a tighter economic environment it is unrealistic to expect the type of tax cuts which have been a feature of recent years," Mr Cowen said.
Before the election, Mr Cowen said he would cut the top rate of income tax to 40 per cent if economic conditions allowed.
"Only taxation reductions which are consistent with the prudent management of the economy will be considered," he said last night, insisting that the Government would "target its efforts where the need is greatest".
The Government, he claimed, "has not in the past and will not in the future" base its plans on a belief that taxes from construction and house sales would continue to grow.
Replying to questions, Mr Cowen said intending homebuyers had been more affected by interest rate rises, and that a fall now would help to reinvigorate the market.