Government spending in many social areas will be curtailed because of the state of the public finances, the Tβnaiste, Ms Harney, has said.

Speaking in Sligo yesterday on the general economic outlook, she said the scope for reducing the top rate of tax and for some spending plans was limited. The Budget would have to be "very prudent, very cautious".

"In the context of the forthcoming Budget, we certainly haven't huge scope to engage in spending projects that many people have been advocating in recent years.

"The need to spend in many social areas will be curtailed because of the state of the public finances and we need to watch that," Ms Harney said.

She said spending on key infrastructure projects would not be affected.

The capital programme had to continue, as it was key to maintaining competitiveness and to developing the regions, she said.

"It would be very short-sighted to abandon the capital programme but, on current spending, we have to be much more cautious than we were in recent years, because the resources will not be there to do many of the things we would all like to see happen," Ms Harney said.

She believed tax-cutting policies should be concentrated on those earning less than the minimum wage. Ms Harney was in Sligo to announce 230 new jobs at software company Transware, which was set up in Dublin in 1996 and opened offices in Sligo in 1999. The Tβnaiste said she hoped other Dublin-based companies would follow the example of Transware and expand to the regions. The company specialises in translation and localisation of e-learning software, and hopes to grow employment from 60 to 290 over the next five years.

Ms Harney said she could not comment directly on the ESRI report because she had not seen it - but she did not think anybody could yet predict what was definitely going to happen next year.

On this year's growth rate, she believed it would be down on the predicted 5 to 6 per cent as a result of the attacks in the US.

If growth next year were to drop to 2 per cent, there would "clearly be consequences for unemployment".

But there was the safety valve of 60,000 foreign workers in the Republic and if there was any evidence of growth falling dramatically and unemployment rising, the Government would not be as liberal in granting work permits to people outside the Republic.

"Our first priority is to ensure that we have employment for our own citizens," she said.

Ms Harney said the fundamentals in the Irish economy were still strong and the evidence around the country seemed to be that employment growth was still very strong. Firms in Sligo are continuing to recruit.

She hoped yesterday's jobs announcement was the start of other good news and said there were "indications that other companies in the technology sector will also be expanding". The key for the Government, she said, was to make sure a lot of that expansion took place in the regions, notwithstanding the downturn.