Major cutbacks in existing government spending, along with some taxation increases, are likely in the next Budget if the Exchequer finances remain under threat, the Minister for Finance, Mr McCreevy has indicated.
Though increases in tax rates are highly unlikely, the Minister hinted that other tax changes could be possible: "There is nothing ruled in, or out, to keep the public finances in line," said Mr McCreevy.
Promising tough action on spending, he said the remit of a three-strong team of outside experts could be expanded - just days after it was made clear that they would examine new projects only. "We have had major increases in recent years. There must be a fair amount of fat in particular Departments. No Department wants to have existing programmes cut. I have set up an outside body to look at it," he told RTE Radio's This Week.
Already, the Government believes it will be €2.9 billion in the red next year - though recent figures from the Economic and Social Research Institute and other economists indicate that the position will actually be much worse. The Minister's decision not to rule out the possibility of future tax rises will fuel the Opposition's charge that Fianna Fáil and the Progressive Democrats deceived the public prior to the election.
However, Mr McCreevy once more insisted that no changes would be made to the Special Savings Incentive Accounts (SSIAs) and the rate of Exchequer payments into the National Pension Reserve Fund.
The Labour Party deputy leader, Mr Brendan Howlin, last night accused both coalition parties of "lying" to the public during the election and demanded that the Taoiseach, Mr Ahern, issue an immediate explanation to voters.
The coalition's tax priorities, outlined in the Programme for Government, are to remove all minimum pay workers out of the tax net by 2007, to ensure that 80 per cent of all workers pay standard rate tax and to use the tax credits system fully. Challenging the Taoiseach to explain the Government's figures, Mr Howlin said Mr McCreevy had failed to reveal during the campaign that his figures were €610m worse off than predicted on Budget Day.
The fall followed the European Union's decision to block all member-states from using profits made by their central bank from the euro's introduction to boost their national accounts.
The Minister last week said the Department of Finance had anticipated the ruling by the EU's statistical agency, Eurostat, and had not taken the Central Bank monies into account since last March.
His spokesperson said then: "There can be no question of any information in relation to the national budget arithmetic being withheld or concealed, either deliberately or otherwise."
Challenging this as "untrue", Mr Howlin said Fianna Fáil's election figures matched almost exactly the figures given by Mr McCreevy on Budget Day. "The effect of the Eurostat ruling was totally ignored. It is clear that FF is having difficulty recognising the truth about the public finances. The level of duplicity being revealed about Mr McCreevy's manoeuvrings are staggering."
He claimed the Government sought to make political capital out of adherence to the Stability and Growth Pact agreed among eurozone countries on the basis of figures they (the Government) knew were false. He demanded an explanation from the Taoiseach.