A €1bn cut in the government's planned capital expenditure for next year was discussed at yesterday's special cabinet meeting in Government Buildings.

The Sunday Tribune has learned finance minister Brian Lenihan has told ministers that government spending next year on capital projects is to be cut by 10% – from €9.5bn, as originally planned, to €8.5bn.

The serious collapse in tax returns has forced the government to be more flexible on its initial stance that the National Development Plan would remain largely untouched by the decline in government finances.

Sources stressed that projects were not necessarily being chopped but that some of them would be deferred or delivered over a longer time frame.

However, it seems inevi-table that some major capital projects will be dropped.

"There's going to be prioritisation," said one government figure.

This revelation about a €1bn cut in capital spending comes on top of likely reductions in current or day-to-day spending of over €2bn.

Combining the cut in current spending from last year with the reduction in planned 2009 capital spending, the combined spending cuts for next year are now likely to be close to 5%, or around 8% when inflation is factored in.