The Minister for Finance Mr McCreevy today almost certainly ruled out tax cuts in this year’s budget today by saying lower tax receipts from the slowing economy will reduce his room for manoeuvre on the budgetary front.
In a statement on the Irish economy given to the Seanad, Mr McCreevy said the trade-reliant Irish economy is bound to suffer adverse effects from the September 11th attacks on the US. "We must adapt our expectations to meet the new economic environment," Mr McCreevy said.
"Recent events underline the need for a prudent approach to the public finances, particularly over the coming months in order to ensure that the economy weathers the present stormy conditions" he added.
The latest tax revenues to end-September support the view that the economy is slowing, with tax receipts growing by just 2.2 per cent for the first three quarters of the year compared to a Budget target for the year of a 12.5 per cent.
"The latest expectation for our Exchequer Surplus this year is that it will be at least euro 1.9 billion or £1.5 billion lower than that forecast on Budget Day and quite possibly significantly more" he said.
Commenting on the threat to Irish exports, Mr McCreevy said a sharp fall in the value of the dollar and sterling against the euro at a time when wage increases remain high would be a major threat to competitiveness.
"This is why we must ensure that wage and cost developments generally do not add to our exposure on the competitiveness front," he said.
Referring to a number of vulnerable sectors, Mr McCreevy said tourism and travel would be adversely affected.
Tourism represents 9 per cent of employment and 5 per cent of Irish GNP. After the Gulf War, US visitor numbers fell by 20 per cent and did not recover for three years.
"A similar impact on this occasion would suggest a significant fall in revenue," Mr McCreevy said.
"A prudent approach to the public finances has served us well over the last decade, particularly during those rare periods of uncertainty. It is certainly the best option now." Mr McCreevy said.
He concluded: "Looking slightly further ahead, I have no doubt that the Irish economy is in good health and that with the right approach, we can pass through these short-term difficulties which we have been presented with."