The Government is set to honour its pre-election commitments in the forthcoming Budget. The Minister for Finance, Mr McCreevy, will announce cuts in both the standard and the top rates of tax as well as a substantial cut in corporation tax on December 3rd.

The details have yet to be finalised with further meetings to come between Mr McCreevy, the Tanaiste Mary Harney and the Taoiseach Mr Ahern.

Mr McCreevy is said to be pushing very hard for a maximum of £350 million to be given away, and is in almost constant contact with Ms Harney. However the details remain to be finalised.

Nevertheless, the coalition's Programme for Government is understood to be the blueprint for their deliberations. Speculation that the unions and economic commentators such as the ESRI may have swung the Government towards the Rainbow policy of widening bands and allowances are said to be broadly unfounded.

Most recent contact has been between Ms Harney and Mr McCreevy, although Mr Ahern will attend a vital meeting next week on his return from Luxembourg.

It has not yet been decided whether to cut the top rate of tax by one or two percentage points, each percentage would cost the Exchequer £54 million.

Ms Harney has been pressing for 2 percentage points off each rate, lowering the standard rate band to 24 per cent and the top rate to 46 per cent. That would cost the Exchequer £310 million in a full-year.

It is not yet clear whether the Government will introduce a lower rate of 20 per cent for lower earners in this Budget - such a move would be seen as quid pro quo for giving away more to the PDs' core supporters by cutting the top rate of tax.

In the Action Programme for the Millennium the Government promised to reduce the basic rate to 20 per cent and the higher rate to 42 per cent over the course of their term. With two bye-elections coming up the party leaders will be keen to kick-start the process next month.

They also promised to increase the basic allowances by at least the rate of inflation and to broaden the standard rate tax band.

The Government also made firm commitments to the small business sector in particular, coming up to the election. Corporation tax rate cuts can also be expected, with the Government committed to a 25 per cent tax rate on all profits below £100,000 and a flat rate of 30 per cent on all profits up to £250,000.

Some resources may also introduce a PAYE allowance for owner-directors and possibly an increase in the roll-over relief of capital acquisitions tax to 100 per cent from 90 per cent.