The Minister for Finance, Mr McCreevy, yesterday shrugged off disappointing data on the Exchequer finances and said he was still on course to return a surplus of €170 million at the end of the year. Mr McCreevy said it would be "inappropriate" to make judgments based on the figures for the first two months of 2002.

He saw no need to make adjustments to Government spending since his revised Estimates published last week.

In January and February, the Exchequer went into the red for the first time since April 1998, with spending outrunning revenues by €67.3 million. But Mr McCreevy, who was attending a meeting of European Union finance ministers, said that if it were not for the imminent general election no one would care about the figures. "Usually no-one comments on the monthly figures at all."

Labour finance spokesman Mr Derek McDowell said the Exchequer returns were just the latest in a series of official figures that raise very serious questions about the competence of the economic management being offered by this Government.

"It surely must be without precedent for any government to turn a surplus of €1.3 billion into a deficit of €67.3 million deficit in the course of just 12 months." Mr McCreevy said that underlying the figures were patterns of spending and raising revenue, which were not evenly spread over the year.

Spending in the health sector had risen by 22 per cent on the same period in 2001. The increase in health spending over the year is budgeted to be 13 per cent.

Changes introduced in the December Budget would also distort the monthly figures, he said. The Exchequer had to pay increases in social welfare benefits with effect from January 1st but increases in VAT did not take effect until March 1st. Similarly, the monthly figures would be distorted by changes to the tax year, with the Exchequer starting its year in January rather than April. The change did not take immediate effect for corporation tax which was not payable until later in the year.

Mr McCreevy said revenue from indirect taxation such as VAT and excise duties had picked up in February. If revenue continued to grow, as forecast, the Exchequer would remain on course for the €170 million surplus he envisaged in his Budget, he said.

He said the rising level of VAT receipts and excise duty receipts suggested the economic slowdown had "bottomed out" but he cautioned that the economy remained very dependent on world conditions.