The Exchequer returns for the first half of the year make for grim reading. Tax and other revenues for the year are expected to come in some €500 million under Mr McCreevy's Budget day target.
As a consequence, the amount the Government will have to borrow this year to balance its books is expected to rise from €1.9 billion to nearer €2.4 billion.
This in itself is not cause for undue alarm. The national debt is low by comparison with our European peers and even this new borrowing figure will fall well within the limits specified under the Growth and Stability Pact which governs the euro-zone economies.
Of more concern are the trends that underlie the headline figures. When timing factors are excluded the trend for both income tax and corporation tax is downward. This indicates that the economy is still slowing, and ties in with data released earlier this week showing that manufacturing industry continues to shrink.
One of the few bright spots on the revenue side is stamp duty, which is strongly ahead of last year. But this is not without its downside, as the discordance between the property market and the rest of the economy can only fuel fears that a bubble is about to burst.
On the spending side, the various Government departments do seem to be keeping within their budgets. Expenditure is up 6.1 per cent on the same period last year, within the target set on Budget day of a 6.7 per cent increase. But keeping within this target over the full course of the year will be difficult given the demands being placed on the Government, particularly in the areas of health and education.
The half-year Exchequer returns form the backdrop to the process of framing the next Budget. Over the summer months the 2004 estimates process will begin in earnest. The very tight position in which the Government finds itself at this juncture, presages a tough round of estimates and an equally tight Budget.
In previous years, the Minister for Finance has been able to raid a number of piggy banks such as the surplus funds in the Central Bank, to ease the overall position. No such fillip seems to be on the cards this year or next.
With the outlook for the global economy still gloomy, Mr McCreevy would be foolish to bank on a pick-up in revenues. As a consequence, the only way that the Government can hope to meet demands for better public services is by contemplating even larger deficits or getting better value for existing levels of expenditure, particularly in health and infrastructure.
The single biggest test in this regard is benchmarking. It is vital that the pay increases granted to public-sector workers under this process that will be paid this year and next are translated into better public services. The call by IBEC yesterday for benchmarking to be scrapped indicated that they are less than confident that the Government will deliver in this regard.