The exchequer figures published yesterday will be uppermost in the mind of Minister for Finance as he heads to Copenhagen this weekend. In the Danish capital he will join the growing band of European Finance minister for whom breaching the terms of the Growth and Stability pact is fast becoming an inevitability. On the face of it Mr McCreevy appears to have little to worry about.
Yesterday's figures show that the Government finances are still strongly in the black with revenues exceeding expenditure by some €951 million. Unfortunately the figures are flattered by two once off transfers to the exchequer of funds from the Central Bank and the surplus on the Social Insurance fund. These come to €885 million and without them the exchequer finances would be precariously close to the red.
As Mr McCreevy knows, such once off transfers are excluded from the set of books that he submits to Brussels and in the Commission's eyes he will risk falling into the same category as Germany, Italy and Portugal. All three are expected to run deficits this year and may breach the EU limit of 3 per cent of Gross Domestic Product.
Leaving aside the issue of what Brussels may or may not think, the headline figures released yesterday also serve to hide the deteriorating trends affecting the Government's finances. Income tax receipts remain significantly below Budget day forecasts - although the figure is distorted by the decision to treat the cost of the Special Savings and Investment Accounts as an income tax refund. The short fall in income tax is also compensated for by the better than expected performance of VAT and excise duties. But even taking these factors into account, it is clear the Government miscalculated the cost of its own tax cuts.
What is also clear is that the growth in Government spending is still running well ahead of Budget forecasts, even though there are signs that the rate of growth is falling, indicating that the post election cuts are starting to have an impact. However, the Government will still have some way to go if it is to achieve it target of 14.5 per cent spending growth for the year, with only four months of the year left.
There is some comfort to be had from the fact that both revenue and spending are moving in the right direction. Similarly the strong economic growth forecast for the last quarter of the year by Bank of Ireland Group Treasury holds out the prospect of an improvement on the revenue side. If the Government is resolute in seeing through its plans to restrain spending growth, then the finances may get back on track. However this will be no easy task. There is pressure both to improve public services and to invest in key infrastructure projects. Difficult decisions thus lie ahead in framing the 2003 Budget.