The Minister for Finance was warned by one of his most senior officials last year that the extension of tax incentives to owner-occupiers building or renovating houses in the upper Shannon region would prove "very costly" to the Exchequer.
According to documents released by his Department under the Freedom of Information Act, Mr Michael Tutty, deputy secretary, advised Mr McCreevy in January 1999 that such a move would "inevitably increase the pressure" to extend the pilot rural renewal scheme throughout the State.
Though similar reliefs were available under the urban renewal scheme, Mr Tutty noted it was aimed at "limited rundown areas", whereas the rural renewal scheme applied to "two entire counties, half of another county and significant portions of two further counties".
"Extending the incentives to owner-occupiers would mean that significant tax relief would be available on `all' new or re furbished houses," he said. His advice was that it should be confined to refurbishment because this would be "easier to justify and defend".
As originally envisaged by Mr McCreevy when he announced the upper Shannon scheme in 1998, tax incentives on the residential front were to be limited to investors, a provision with which the Minister for the Environment, Mr Dempsey, disagreed, saying it would have "a negative effect on sustainable rural development".
Mr McCreevy maintained that extending "such very generous treatment" to home owners would be "resented by the inhabitants of other counties who would inevitably demand a similar concession".
Throughout 1998, he repeated the same line to others who lobbied for the inclusion of owner-occupiers in the scheme. The Heritage Council and the Western Development Commission recommended extending the incentives to owner-occupiers, to encourage the restoration of "an inordinate number of derelict and unoccupied residential property", especially in Leitrim. Soon after the upper Shannon scheme was first flagged in the 1998 Budget, Mr McCreevy said his Department was "inundated with representations" to designate other areas, including north Mayo, south Galway, north Sligo, south Roscommon and even north Cork.
In March 1999, against the advice of his Department, he responded to the lobbying by extending the tax incentives to owner-occupiers, though he declined to alter the boundaries of the designated area or to apply a similar package of reliefs to other parts of the State.
The Upper Shannon Scheme implements a commitment made in Fianna Fail's manifesto in the 1997 general election to "initiate a comprehensive programme of rural development". Depending on the results of this "pilot scheme", it could ultimately be extended elsewhere.
In February 1999, a separate scheme of tax incentives was announced for the restoration of townscapes in smaller towns, subject to Department of Environment guidelines.