Perhaps we expect too much of Budget day. On the old medical maxim of "first, do no harm", the 2004 Budget passes the test.

The addition to inflation is small enough - though arguably it could have been avoided altogether - and the public finance position is highly prudent. The collapse of the dollar on the foreign exchange markets is a much bigger threat to our prospects next year than anything Mr McCreevy has done.

The 2004 package is the classic holding exercise - indeed were it not for the decentralisation rabbit it would have been a dull affair. However by borrowing a bit more, the Minister could have avoided pushing up inflation at all and might have afforded a bit more on capital investment.

The package was minimalist, involving an addition of €450 million to total 2004 Exchequer spending of more than €41,000 million.

On tax the Minister gave around €250 million with one hand, mainly through increasing the employee tax credit, and took back the same with the other, through excise increases. The old Progressive Democrat slogan was "be radical or be redundant", but the Government's current strategy is more "steady as she goes".

Spending has been brought back under control - not without considerable dislocation to services - after the profligate pre-election splurge and Mr McCreevy indicates that it is going to stay that way. Gross spending next year will rise by just under 7 per cent and similar increases are being pencilled in for subsequent years. If the international economic recovery is sustained, then the boost to Irish growth should leave the Exchequer in a comfortable position - and leave the Government with options in the run-in to the next election.

This year the Minister's decision to keep borrowing at a low level determined much of the rest of the package. Before the Budget, his officials estimated that he needed to borrow just over €1 billion to bridge the gap between tax and revenue. The Budget spending rises increased this borrowing target - using the EU general government deficit measure - to €1,635 million.

This target amounts to just 1.1 per cent of GDP, very prudent at a time when Germany and France are merrily breaching the 3 per cent deficit limit. It is all the more cautious as the November tax returns suggest that the Department's forecasts for revenue next year are conservative. The late surge in revenue this year and savings on spending will bring in 2003 borrowing well below target and Goodbody Stockbrokers estimates that borrowing next year could come in €300 million target.

Given this comfortable Exchequer position, the Minister could have left excise duties as they were. The increases will add 0.4 per cent to the consumer price index - now expected to rise by 2.5 per cent next year. He could have avoided the excise increases, points out Mr Pat McArdle, chief economist at Ulster Bank, by adopting a slightly higher borrowing target, spending a bit less in his Budget package or not offering income-tax concessions.

The downside of the inflationary boost is that it will push up the cost to employers, among them the Government itself, of the wage increases being negotiated in mid-2004 for the second 18 months of the new national agreement, Sustaining Progress.

The Minister's determination to hold down borrowing also restrained badly- needed investment spending and dictated a minimalist tax package. The increase in the employee tax credit to exempt weekly earnings of €246 from tax - or 90 per cent of the new minimum wage of €7 an hour - was expected. It benefits all PAYE taxpayers, but gives a proportionately bigger boost to the less well-off.

The self-employed, who do not benefit from the employee credit, will feel a little miffed - it is the second year in a row that they have received no tax concessions. And the failure to even partly index the standard rate income tax band for inflation will push more than 50,000 taxpayers into the top 42 per cent rate next year.

Mr McCreevy gave his usual nod to the importance of maintaining low tax rates. And he has cut rates substantially in his first five budgets. However, by not adjusting the tax system for inflation in his last two budgets, he has increased the marginal tax rate - the amount charged on an extra euro of income - for more than 10,000 taxpayers. As lowering the marginal rate and encouraging enterprise is the key intellectual argument for low tax rates, the Minister is clawing back some of the gains made in earlier years.

Analysis of the Budget shows that the vast bulk of the gains will go to the less well-off. Commitments under the National Anti-Poverty Strategy led to more significant increases in basic welfare payments than seen in recent years.

Combined with the skewing of the tax increases to the less well-off, this leads to estimates, using an ESRI model of the population, which show that the poorest 30 per cent of the population will get a disposable income boost between 5.7 and 7 per cent, while the gains for the richest 30 per cent are a meagre 0.4 and 0.8 per cent.

Given that the commitments under the anti-poverty strategy go to 2007, welfare packages in future Budgets are likely to resemble this year's package. And in turn the Minister's scope for tax largesse will be limited.

Elsewhere, the extension to 2006 of the property-based tax incentives schemes - which Revenue figures show are used by wealthier taxpayers to shelter income - was surprising. But the introduction of the R&D tax credit, championed by the Tánaiste, Ms Harney, is a measure worth trying to boost research activity here, while the changing tax treatment of corporate headquarters could also attract investment.

The Budget does not appear to contain any "morning after" banana skins, though no doubt tricky talks lie ahead in persuading some public servants to move out of Dublin. It signals that in tighter times, the Government is happy to hold the economic line and that the days of major fiscal reform have gone.