The government deficit exceeded 3% of GDP in 2004. If fiscal developments disappoint relative to the 2005 Budget projections, beyond what can be explained by weaker-than-expected growth, then the Government will need to take further measures to achieve a decisive reduction in the deficit. With inflation having surprised on the upside and the prospect of a gradual return towards trend growth early next year, there is currently no compelling case for a further cut in interest rates. To raise potential growth a priority is to roll out nationally the reform of the disability scheme, while taking measures over the longer term to improve workforce skills.