The following are edited extracts from the memorandum:
The current and prospective economic situation
GDP was forecast to grow by 3.9 per cent this year (GNP by 3.5 per cent) and . . . we remain hopeful that growth this year will be close to forecast.
In the absence of major external shocks, assuming that the international economic pick-up is sustained and that the dollar and sterling remain broadly stable against the euro, a growth rate of around 5 per cent is possible over the medium term - provided that the economy suffers no appreciable loss of competitiveness over the period ahead.
The budgetary parameters put forward in the memorandum reflect a projected average GDP growth rate over 2003-2005 of slightly more than 5 per cent.
The risks to this projection are on the downside.
The assumption that the international economic pick-up is sustained is critical.
There is no certainty that this will happen and, if it fails to materialise, significant adjustments to expected growth rates in 2002 and 2003 would be required, with a consequent adverse impact on tax receipts. This in turn would require a review of the proposed budgetary aggregates.
5. Another key risk to the economy is the strength of ongoing domestic wage pressures.
Overall budget targets 2003-2005
The targets incorporate:
A slightly "loose" budgetary stance in 2003 - involving a budgetary injection of one-quarter per cent of GDP into the economy - with sufficient fiscal tightening in the two subsequent years to bring the budgetary position into balance.
Average annual tax revenue increases of 8.75 per cent, incorporating the final reduction in the standard rate of Corporation Tax to 12.5 per cent in 2003 and broadly revenue-neutral budget tax packages each year to 2005 with full indexation of excises to consumer prices financing increases in income tax bands and credits in line with consumer price increases.
The latter will involve a slow rise in the average tax rate borne by earners, while the former represents a doubling of the pace of excise increases of 1998-2002.
Average annual increases in gross departmental current expenditure of 6.6 per cent (involving increases of 7.9 per cent in 2003, 6.1 per cent in 2004 and 5.9 per cent in 2005).
A decline of about 2.5 per cent of GNP in non-tax revenue and capital resources receipts over the period, inter alia reflecting this year's once-off transfers from the Social Insurance Fund and (euro-related) from the Central Bank.
Allocations for gross voted capital expenditure sustained at the current ratio of 5.5 per cent of GNP.
These represent average annual increases of 7.1 per cent (7.2 per cent in 2003, 7.3 per cent in 2004 and 6.8 per cent in 2005) on top of an already high base and should more than meet the Exchequer's nominal financial commitments in the Economic and Social Infrastructure Operational Programme (ESIOP) of the National Development Plan.
The Minister accepts, however, that - in large measure because capacity constraints led to higher-than expected building inflation since the NDP's launch - they will not be sufficient to deliver in full on the ESIOP physical outputs within the plan time frame.
Annual provisions of 1 per cent of GNP for the pre-funding of future pension liabilities as required by the National Pensions Reserve Fund Act.
Contingency provisions against risks and uncertainties of 0.4 per cent of GDP in 2004 and 0.8 per cent of GDP in 2005 (zero in 2003).