The Government is unlikely to meet its surplus target this year as spending growth slows down.

Lower-than-expected tax revenues are putting pressure on the Government's projections at the same time as the European Union looks for even higher Exchequer surpluses.

The latest Exchequer figures show that growth in tax revenues continued to decelerate as consumers continued to cut back on expenditure.

In the year to May, tax revenues grew at only 7.4 per cent compared with 9.7 per cent in April and a Government target of 12.5 per cent for the year.

Excise duties in particular were very weak, down 10 per cent from last year. In March, following the dramatic impact on tourism and sport from foot-and-mouth disease, receipts were down 8 per cent but recovered slightly in April.

Yesterday's figures from the Department of Finance suggest that the revenue losses from foot-and-mouth will not be made up over the course of the year, despite anecdotal evidence that the tourism sector has made a full recovery, according to Dr Dan McLaughlin, chief economist at Bank of Ireland.

Lower car sales following the 00 frenzy of last year are also impacting on revenues.

Underlining the slowdown in spending, VAT receipts are down quite dramatically. VAT is growing at only 9 per cent compared with a target of 17 per cent. Other areas of taxation are growing in the direction of the target. Income tax in the first full month of tax cuts is up 9.2 per cent over the same period last year. The target for the year is 8.4 per cent.

Corporation tax is ahead of target, although the target was not ambitious at just under 11 per cent. In the first five months of the year, receipts are running 29 per cent ahead of last year. Payments are not uniform across the year and too much should not be read into these figures. Spending is also up but is still broadly in line with a target of 24 per cent for day-to-day spending for Government Departments. Debt service spending is below target but this depends hugely on when coupons fall due.

According to Dr McLaughlin the Government will not now be able to meet its target for a surplus of £2.5 billion (#3.17 billion). However, it does have £246 million from the sale of TSB, which was not included in the Budget-day arithmetic.

According to Dr McLaughlin this money would have gone into the pension fund in previous years. However, this year the Government may be tempted to use it to boost the surplus and pay off the national debt to assuage criticism from Brussels and demands from there for a higher surplus.