Michael D'Arcy (Wexford, Fine Gael)

There is an overall assumption in the budget that the worst of the downturn has become apparent and that there will be an upturn in a year or two. The problem is that while there may be an improvement, it cannot be assumed that the conditions of recent years will return. However, the Government in its budget is content that reducing the deficit a little and pencilling in a 7% deficit for next year is fine as the economy will improve thereafter and there is little need for further action. This is very optimistic.

The budget is optimistic in assuming that inflation will fall to 2.5%, which may happen but is towards the lower end of expectations. As a result, while capital expenditure is not cut too much in nominal terms, if inflation is high then there will be real cuts in this area. Also, the current expenditure assumptions will come under severe strain. Forecasts for current expenditure of 4.5% in 2010 and 2.8% in 2011 which are contained in the tables in the appendix on the Department's website also look optimistic.

The result is that this must be seen as a stopgap enabling budget. It is action of a sort in response to the greatly changed circumstances but the assumption that an upturn will be highly beneficial in the near future means that another tough budget is on the cards within a year. We must not forget this is the second budget in ten months.

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