THE Department of Finance wants a tougher Budget next month to make up for lost tax revenues as a result of lower growth, its chief said yesterday.
Secretary General John Moran told an Oireachtas committee that, while decisions were a matter for Cabinet, the Department's view was that the 2013 target deficit of 7.5pc of output should be met.
"This is clearly subject to cabinet approval so I don't think that I should be second guessing what the Cabinet will actually want to say. But the department's view is that we should stay with the targets that we set," Mr Moran said.
It is expected that the Department's new Medium Term Fiscal Review, which had been due for publication this week, will cut economic growth for next year from 2.4pc to 1.5pc.
This is half the growth anticipated in the original plan. Yesterday the EU Commission produced an even lower forecast of 1.1pc.
Mr Moran said downward growth would lead to downward pressures on revenue and the "need to adjust accordingly".
Economists calculate that a reduction of growth on this scale could reduce revenues by around €200m.
Asked if he was suggesting that downward growth projections could impact on the Budget, Mr Moran replied: "That's right."
While reiterating that the Government would have to make its own predictions for the economy, Mr Moran stressed that the department's view is to stay within the Budget targets that have been set.
There has been a new emphasis, especially from the International Monetary Fund on "structural" targets, which try to ignore the impact of abnormally low growth, but official troika policy is still that the actual targets must be maintained.
The Government is planning on raising about €3.5bn in the Budget, with the bulk coming from spending cuts and the remainder through tax hikes.
Mr Moran also told TDs and senators that he believed Ireland's debt was sustainable -- despite claims from Junior Minister Brian Hayes last month, who said the debt level was unsustainable.
Mr Moran said he did not expect any movement on Ireland's legacy debt until towards the end of next year.
The top civil servant confirmed comments from Finance Minister Michael Noonan that the bank guarantee would be withdrawn early next year.
But he said there would not be a hole in the State's coffers despite the fact that the banks will no longer have to pay a fee for the guarantee.
The guarantee was issued in September 2008 to give comfort to investors concerned about the stability of the banking sector. It is understood that the fees are not included in Budget projections.