Holding down inflation and outlining a programme of infrastructure investment are expected to be the central features of today's Budget package. Cliff Taylor and Mark Brennock report.
The Budget is likely to offer modest concessions to income taxpayers, focusing particularly on lower earners, while the most substantial social welfare increases are expected to be in the old age pension and child benefit payments.
The Minister for Finance, Mr McCreevy, yesterday received a pre-Budget boost from Exchequer figures for November, which showed a healthy trend across all the main tax headings.
An extraordinary €1 billion inflow in capital gains tax during last month pushed the overall Exchequer finances into a surplus of €842 million, the first time they have moved into the black this year.
The forecast in last weekend's White Paper that Government borrowing this year would be €605 million - using the EU deficit measure - now looks pessimistic. Mr McCreevy will be reassured that the buoyant tax trends will underpin the Exchequer finances next year.
The Minister is expected to hold borrowing down next year - possibly close to 1 per cent of GDP - which will leave limited room for manoeuvre. He is likely to increase the employee tax credit to exempt up to 90 per cent of the new €7-an- hour minimum wage from the tax.
Other tax credits are also likely to rise and he may increase the standard rate income tax band, though probably not by enough to stop more taxpayers becoming liable at 42 per cent. Excise increases are expected to be limited as the Government seeks to move inflation towards a target level of 2 per cent or less, to which it is committed as part of a new programme agreed with the social partners
There will a be a keen focus on employee PRSI, with the ICTU and IBEC both warning against any major changes. Mr McCreevy already signalled in the Estimates that the ceiling for the 4 per cent employee PRSI charge would rise by more than 4 per cent to €42,160.
While in the past he has said he favoured reform in this area, any move to abolish the ceiling would be likely to meet with fierce criticism, even if accompanied by a cut in the rate. One option would be to signal that he intended to consult the social partners on this issue.
In the area of welfare, most payments are likely to rise by about 3 per cent, with the weekly old age pension increase expected to match or exceed last year's €10 figure.
The Minister is also likely to confirm the allocation of five-year programmes for State investment spending, committing to keep State financing about 5 per cent of national output in this area, with the possibility of a higher figure if sufficient self-financing projects can be found. If all State investment is included in this area, the total Exchequer allocation for the five years could exceed €30 billion, with further funds from the private sector.
Attention will also be focused on Section 481 tax relief for the film industry which may be retained in a revised form.
The Minister for the Arts, Mr O'Donoghue, has pressed Mr McCreevy in recent weeks to retain the relief, which is due to be abolished at the end of next year. While Mr McCreevy believes the relief is open to abuse, this may lead to its being revised rather than abolished.
Meanwhile, the Minister of State for Labour Affairs, Mr Frank Fahey, last night expressed confidence that extra Community Employment Scheme places will be provided by Mr McCreevy.
During heated exchanges with the Labour Party in the Dáil, Mr Fahey said the matter was still under review. "It was not a matter for the Estimates and it is not a budgetary matter. Therefore, this review goes on and I am quite confident that at the end of the day, we will get the improved and expanded CES we are looking for."
Last week, 30 FF TDs urged Mr McCreevy to provide the extra resources for the CES scheme today.