GOVERNMENT DEPARTMENTS are bracing themselves for cutbacks before the end of the year if the public finances continue to deteriorate, The Irish Timeshas learned.
Senior sources in a number of quarters said there was increasing concern that it might prove necessary to curtail some items of expenditure in the coming months if tax receipts continue to fall.
With senior officials in certain departments already instructed to reduce ancillary spending this year, the concern centres on a marked deterioration in exchequer returns for the first two months of the year.
Tax revenues were 8.3 per cent lower in January and February than in the same period last year, while day-to-day Government spending rose by 24 per cent.
If this trend continues into later months, informed sources believe the Government will have to take action to protect its position by reducing expenditure.
In that case, the Government would be faced with a choice of reducing the amount of money it spends on front-line services or reducing capital expenditure.
"There's no doubt that there is a growing worry around," said one person.
After Taoiseach Bertie Ahern warned three days ago of a "hard year" ahead for the economy as a result of the downturn in the US, the sources said there was an increasing belief that it might not be possible to proceed through the year without reviewing some expenditure.
On foot of an "efficiency review" initiated in December by Minister for Finance Brian Cowen, every department was obliged a fortnight ago to submit proposals to reduce administrative spending in 2009.
Departments were asked to examine all their administrative spending and spending by State bodies that answer to them with particular reference to "possible inefficiencies" due to the multiplicity of boards and agencies and the need for better sharing of certain services.
Efficiencies in "management, travel and consumables in general" were also cited.
Their proposals are now being examined by the Department of Finance. However, the department dismissed suggestions from well-placed sources within the Government system that this review had already resulted in measures being taken this year.
"The Tánaiste has set overall expenditure resources for 2008. The most up-to-date amounts are set out in the Revised Estimates, published last month. He proposes no change to the overall amount set out," said a spokesman for the Department of Finance.
Amid signs that the decline in the housing market is spreading gradually into other parts of the economy, sources said great attention will be given to exchequer returns for this month as they will provide a picture of tax receipts in the first quarter.
While the figures for February typically provide a bounce, there was no improvement. Tax returns in the first two months were €516 million, or 6.4 per cent, less than the level forecast by the Department of Finance.
