The Small Firms' Association has strongly urged the Minister for Finance not to return to budget deficits, saying such a move "is the road back to the mismanaged economy of the 1980s".

In its pre-Budget submission, the SFA said economic slowdown increased the need for urgent and focused management in the public sector and not increases in public spending.

The SFA told the Minister the December Budget must be about maintaining existing employment levels and price competitiveness. This requires action across a number of barriers and threats to the sustainability of the economic success.

These include labour costs, housing and rents, personal taxation, infrastructure and public spending, the SFA said.

It added: "The scope for tax reduction is therefore directly dependent on controlling Government expenditure.

"The SFA have consistently expressed concern regarding the level of increase in Government spending and stressed the need for the Government to take a firm hand on expenditure.

"Expenditure growth of 25 per cent against revenue growth of 4 per cent will lead to financial disaster if allowed to continue," the association stated.

It has also warned that any changes in employers' PRSI must not be at the expense of those companies in the labour intensive sectors which pay the lower rate of 8.5 per cent.

"This would have the effect of passing the burden from large firms to small firms," the SFA said.

"The Budget should rebalance the cost of existing PRSI contributions between employers and the State by reducing the employers' contribution rate by 2 per cent or by re-introducing a ceiling on employers' contributions at 1999 levels," the SFA said. It has also called for a cut in health levies by 1 per cent each year in 2001 and 2002.