The Government expects to meet its target to keep public spending growth below 14 per cent this year, following an agreement between ministers to restrain spending by €160 million over the final six months of this year.
"We are absolutely confident that the efforts will be sufficient to ensure that spending comes in on target without having to revisit this issue again," a Department of Finance source insisted last night.
The Department of the Environment has accepted that the number of new houses in the final half of the year will be significantly reduced. The Department of Defence has agreed to cancel the Air Corps' Sikorsky contract, while other departments have agreed to delay a range of spending programmes.
The Minister for Finance, Mr McCreevy, is expected to give more details of the curbs taken when he addresses a Programme for Prosperity and Fairness meeting in Dublin Castle today. In his speech to business and trades union leaders and other social partners, the Minister will emphasise the need for "disciplined public spending", along with the Taoiseach, Mr Ahern, and the Tánaiste, Ms Harney.
Current government spending was €21.1 billion ahead of target between January and June, while tax receipts, which amounted to €13.3 billion, were 7.1 per cent behind the 2001 levels.
In all, the Department of Finance, which had predicted a slight rise in tax revenues, believes that the Exchequer will receive €500 million less than it had predicted.
However, the Cabinet has agreed to offer extra help to the seriously stretched budget of the Department of Health, and to two unidentified departments.
Despite some speculation about Cabinet divisions, ministers accepted with remarkably little opposition the edict laid down by Mr McCreevy that they had to curb spiralling spending.
The Department of Education last week announced that students would have to pay €670, rather than €396, in registration, examinations and student services fees before they enter third-level colleges.
"It is quite clear that we face a difficult year or two. We can take action now and try and deal with it, or wait. This way, we have a chance that the latter half of the Government could be bright," one source told The Irish Times.
The Cabinet will sign off on the package when they meet on Friday for their last meeting before their summer break. "However, most of the agenda has nothing to do with spending," said a Government source.
Meanwhile, Labour TD Mr Tommy Broughan criticised the call on employees by the Irish Business and Employers' Confederation to keep wage demands below inflation this year.
"It is totally unrealistic for IBEC to expect workers to tolerate a further cut in living standards, especially when IBEC itself shows such reluctance to accept any pain from the economic downturn," he said.
