McCreevy dampens any euphoria over giveaway Budget

The Minister for Finance sought yesterday to dispel any suggestion of an enhanced Budget giveaway on foot of Thursday's buoyant Exchequer figures. Instead, he restated his policy of fiscal prudence. "I will not be put off by headlines of a champagne economy," he declared.

Mr McCreevy, who was speaking after launching Dublin City University's M.Sc in taxation, said his Department would be using target levels defined by the Programme for Government, limiting Exchequer borrowing, and striving for surpluses in the medium term.

"The economic conditions are somewhat abnormal, and that being the case, it would be in our longterm interest that we would be running budgetary surpluses in order to prepare for when the downturn - as it will inevitably - comes," he said. He refused to be drawn on whether there was the possibility of delivering £500 million in tax cuts in December.

"The Budget package has not been discussed and will not be for some considerable time yet. But we will honour our commitments set out in Partnership 2000," he said. His message was one of caution, he added, raising the spectre of government mismanagement in the 1970s and 1980s, "when all parties made an unholy mess of the Irish economy". Referring to a recent Combat Poverty report, which stated that the taxation system had become more regressive for average and low earners between 1980 and 1995, he said that it was a matter of considerable debate. In his formal speech at the university, he said his Department had indicated that the Government deficit would be 0.7 per cent of Gross Domestic Product.

New priorities would have to be set within departmental allocations, to get away from the traditional "so-called winners and losers" approach. "In the context of the Government's commitment to limit net current expenditure growth to 4 per cent, this will require a new approach," he said. Earlier, Mr McCreevy spoke at an European Movement conference on the future of the EU where he said that the economy's growth had been exceptional but there was some way to go before it reached the level of the Union's prosperous regions.

The Government would be insisting on funding to meet "continuing needs" when the State lost its Objective 1 status for maximum EU aid. "Post-1999, Ireland will continue to require significant levels of Structural and Cohesion funding," he said. His comments were echoed by the Taoiseach, Mr Ahern, who said the Government would require more precision from the European Commission on its provisions for transition from Objective 1 status.

Mr Jim Cloos, chef de cabinet to the European Commission president, Mr Jacques Santer, said "a brutal" withdrawal of aid to regions over the Objective 1 threshold would be unjust and counter-production, however justified it was in legal terms. However he insisted that structural aid could not become permanent.