The Government is to defer ambitious capital building plans and substantially squeeze current spending in an attempt to cut next year's increase in public spending to below 8 per cent.
The spending estimates, approved by the Cabinet yesterday, will require almost all Government departments to postpone major projects. While the Departments of Health and Education are expected to receive increases larger than 8 per cent, "there will be suffering across all Government departments," said one Government source last night.
One of the capital programmes to suffer will be the school-building programme which will be slowed considerably, while housing, transport and road projects are also likely to be slowed or deferred.
The increase of under 8 per cent contrasts with the 14.3 per cent target set for this year in February, after the additional cost of spending measures announced in the budget became clear. The figure must also be judged in the context of the September Exchequer figures, which showed 2002 could end with a 20 per cent increase. The Government has said it hopes to bring the increase down closer to the original projection by the end of the year.
Meanwhile, the 2003 target is likely to be added to by the limited Budget Day spending plans to be announced the Minister for Finance on December 4th. Any commitment to pay some of the benchmarking pay awards to public servants next year will push out the target further.
Despite being less severely cut than other departments, some educational investment will be postponed. One senior education source said: "A number of building projects will be put on hold or slowed down considerably".
It is also thought there will be an effective cut in the capitation grant given to schools for each pupil. The grant normally keeps pace with inflation, but this is unlikely to happen this time. Education sources said there would be a range of other cuts. Details were still being finalised late last night.
There are several hundred schools currently awaiting approval for building work. Some require new buildings, while others are seeking major refurbishments.
Many schools are in a dilapidated state, particularly in the primary sector. The INTO claims over 100 schools fail to meet the most basic accommodation standards. According to the INTO, some are rat-infested and lack basic sanitary facilities.
The department has come under pressure to achieve cuts because of the escalating costs of supervision and substitution in secondary schools. Over €30 million has been spent by the department in paying non-teachers to supervise since the ASTI withdrew from these duties earlier this year.
The estimates also have to allow for the new supervision arrangements, under which some teachers stand to gain €37 per hour for supervision.
The Department of Education is refusing to comment on spending limits for next year until after the Book of Estimates for all areas of public spending is published tomorrow afternoon.
The Minister for Finance, Mr McCreevy, will preside at the unveiling of the spending plans tomorrow, while a series of individual Ministers will explain how their allocations will affect the spending programmes run by their departments.
Meanwhile, Mr McCreevy has ruled out any reduction in the annual payment to the National Pension Reserve Fund, a move that could ease the exchequer difficulties. Answering questions in the Dáil yesterday, Mr McCreevy said: "If discretion were left in the making of the payment of the 1 per cent contribution, it is likely that future governments would come under pressure to prioritise shorter term economic goals at the expense of making the payment.
"It is essential that the mandatory contribution be maintained. Once it is breached for one purpose, it is more likely that it will be breached again."
The Taoiseach last night robustly defended Mr McCreevy against a motion of no confidence tabled in the Dáil. Fine Gael's finance spokesman, Mr Richard Bruton, said Mr McCreevy must resign as he had destroyed confidence in the Irish economy.
Mr Ahern praised Mr McCreevy's "vision and foresight", saying it was responsible for much of what Ireland had achieved.