DUBLIN (Bloomberg) — Irish Finance Minister Brian Cowen will rein in spending and shelve a tax cut to prevent slowing economic growth from hurting government finances when he announces his budget today, economists say.

Cowen said last month growth in spending will slow by a third next year to about eight percent. He has cut his forecast for tax revenue twice since October and expects the economy to expand the least since 1993 next year.

Ireland's decade-long housing boom is cooling after the European Central Bank doubled interest rates in two years, hurting economic growth and cutting government revenue from taxes on property sales. Cowen has said his priority is investing in infrastructure such as roads and rail services and that it's "unrealistic" for consumers to expect tax cuts.

"The arithmetic facing Brian Cowen on budget day is a good deal more demanding than expected," said Robbie Kelleher, chief economist at Dublin-based Davy Stockbrokers, Ireland's largest securities firm.

Cowen, backed by Prime Minister Bertie Ahern as the best candidate to succeed him, last year cut the top rate of income tax to 41 percent from 42 percent in a budget that came six months before the general election. He said he would cut it again this year if economic conditions allowed.

Ireland's government cut its growth forecasts in October and now expects the economy to expand 3.25 percent next year from 4.75 percent in 2007. It previously forecast growth of 4.6 percent and 5.3 percent, respectively. Ahern has said he will stand down as prime minister by the next election, which is due no later than 2012.

Irish house prices may fall as much as 10 percent next year after declining seven percent in 2007, says insurance company Friends First.

Based on a European Union measure, the government expects a budget deficit of at least 0.2 percent of gross domestic product next year, its first shortfall since 2002.

That changes the backdrop for the government, which has presided over one of Europe's fastest-growing economies for the last decade. Growth has averaged seven percent a year, allowing the government to raise spending by as much as 22 percent and still run budget surpluses for nine of the last 10 years.

Income from stamp duty, a tax on home purchases, will probably fall eight percent next year after a 14 percent drop in 2007, according to the government. Revenue from the tax soared as Ireland's property market boomed, generating 8.2 percent of total taxes last year, more than twice the proportion in 2002.

Cowen may today announce changes to the tax, which amounts to as much as nine percent of the value of a property, broadcaster RTE reported.

While Cowen in June ended the tax for all first-time buyers, opposition politicians are demanding more help for families by limiting the rate of stamp duty when they move home.

Support for Ahern's Fianna Fail party has declined since the May election, falling to 32 percent from 42 percent, according to a poll published November 25 by the Sunday Business Post.

Support for the main opposition party, Fine Gael, has risen to 31 percent from 27 percent in the same period. The poll of 1,000 people was carried out on November 19 and 21, with a margin for error of three percent.

The prospect of spending curbs comes six weeks after Ahern and other ministers were awarded pay increases of as much as 16 percent.

"This rapid deterioration in the financial outlook for government shows just how inappropriate it was for ministers to pay themselves and senior managers huge increases," said Fine Gael deputy leader Richard Bruton.

Cowen will probably raise the thresholds before workers begin paying income tax at the higher rate and lift the maximum contribution workers can make to a social insurance fund so higher earners will pay more, said Power of Friends First.