OTTAWA - Finance Department figures show Ottawa's revenues plunged in December but the federal government still managed to remain in surplus at the end of 2008.

The Finance Department says December, one of the worst months of 2008 for the economy, still produced a $200 million surplus for the government.

That allowed Ottawa to remain in the black by $500 million for the first nine months of its current financial year, although that was well down from the $8.4 billion surplus it had at December 2007.

For the month of December, revenues were down $1.7 billion from the same period last year, while spending was up $300 million.

For the first nine months of the current fiscal year, which ends March 31, revenues are down $1.2 billion, primarily as a result of a cut to the goods and services tax that went into effect last January.

The big spending increase was due to program expenses, which were up by $8 billion, a 5.7 per cent hike, due to higher transfer payments and departmental spending.

Finance said transfers to individuals were up by 4.2 per cent, including 7.7 per cent in higher employment insurance payments, while transfers to provinces rose 6.8 per cent and other transfers, for such things as the Newfoundland and Nova Scotia offshore accords, increased $2.3 billion, or 13.5 per cent.

Offsetting the higher spending were $1.2 billion in savings as a result of lower interest rates, which brought down debt charges.

During the economic update in November, Finance Minister Jim Flaherty had projected an overall surplus for the fiscal year that ends on March 31, but in January's budget forecast the government would experience a $1.1 billion shortfall.

That would constitute the first deficit in a dozen years, but not the last. The latest federal budget predicts massive deficits of $33.7 billion and $29.8 billion in the next two years.