All eyes will be on Charlie McCreevy on December 6th to see how he will follow through on the controversial income tax individualisation plan introduced in Budget 2000.

A further one or two percentage point reduction in the standard tax rate is likely but the real focus this year will be on Mr McCreevy's three-year individualisation plan.

Will he proceed with the plan he set out last year and, if he does, what will he have to do to appease up to 100,000 stay-at-home spouses?

This time last year he caused a political storm with his announcement that the income band taxed at the standard tax rate would be £34,000 (€43,202) for married couples where both were employed but would remain at £28,000 for a married couple with only one income. Mr McCreevy was accused of discriminating against single income families in order to encourage women into employment.

So intense were the objections that Mr McCreevy had to introduce a special tax allowance of £3,000 for families where one spouse works at home caring for children, the aged or incapacitated persons.

It is granted at the standard income tax rate and effectively gives back to single income couples half of the £6,000 difference between their £28,000 standard tax band and the £34,000 band applying to double income couples.

In Budget 2000 Mr McCreevy outlined his plan to move towards "individualised allowances" over a three-year period. His intention was to move over that time towards a system where each partner in a married couple with two spouses in employment would have their own individual income band taxed at the standard rate. That would mean that the income band taxed at the standard rate for a double income couple could be twice that of a single income couple.

While the plan itself is straightforward the process of transferring to an individualised system from the current system is complicated. Before Budget 2000 the standard rate income band was £28,000 for all married couples whether they had one or two incomes. Where there were two incomes the £28,000 could be transferred between them as they wished for tax purposes.

Under full individualisation, based on current figures, each partner in a dual income married couple would have a £28,000 standard rate income band. This would give a dual income couple a maximum of £56,000 of income taxed at the standard rate compared with £28,000 for a single income couple.

But each partner in the couple will only be able to avail of the band up to the level of their income and neither could have more than £28,000 taxed at the standard rate.

Full individualisation, as proposed, will benefit all higher earning dual income couples where the second income is £28,000 or more, with those earning £56,000 getting the maximum benefit.

The first move towards individualisation, announced in Budget 2000, froze the level of income transferability between dual income couples at £28,000, but increased their standard rate income band to £34,000. So a dual income couple with one income of £28,000 and one income of £6,000 got maximum benefit.

There was no change for couples earning £28,000 or less. And a dual income couple with one income of £40,000 and one income of £20,000 would get the advantage of an extra £6,000 of their income taxed at the standard rate.

Mr McCreevy's aim may have been to tackle one of the main problems facing the economy - labour shortages - and to reduce the numbers paying tax at the top rate. But the plan was a radical change to the tax system and it proved highly controversial.

If he follows through on his original plan, based on current figures a double income couple should after two more years have income of £56,000 taxed at the standard rate. A single income couple would remain at the £28,000 level.

To close the £22,000 difference between the double income couple's current and planned standard rate band over the next two budgets, assuming it is done in equal phases, their standard rate band could be increased by £11,000 in Budget 2001 to £45,000. That would break down into the maximum band of £28,000 plus an additional £17,000.

Who would benefit? If Mr McCreevy goes down this route and there are no further compensatory measures for single income families, the biggest beneficiaries will be dual income couples with incomes of £45,000 where the income breakdown is £28,000 and £17,000 respectively.

Dual income couples on incomes of £34,000 or less will get no benefit.

Those on incomes of more than £45,000 will benefit from having more of their income taxed at the lower rate. Single income couples will be no better off and would lose out relatively.

But a full £11,000 jump in the standard band is unlikely this year given the political need to balance the individualisation plan with measures to help single income families and the costs involved.

What is more likely is another small increase in the dual income standard rate band together with increases in the personal allowances and significant improvements in child benefit payments.

In Budget 2001 the Minister for Finance can afford to cut the 22 per cent standard income tax rate and the top 44 per cent tax rate.

A one or two percentage point reduction in the standard rate is likely as the Government moves towards its target rate of 20 per cent by 2002. The Government has also set a target top rate of 42 per cent by 2002, or 40 per cent "if economic circumstances permit".

While cuts in tax rates and wider income bands are an integral part of the move to improve workers' take home pay, Mr McCreevy now has to strike a balance between achieving his target tax rates and ensuring that he does not fuel inflation through tax cuts.

Last year Mr McCreevy cut the standard and the top income tax rates by two percentage points. In the current 2000/01 tax year a single person can earn up to £17,000 before moving on to the higher tax rate - a £3,000 increase on the previous year.

A married couple where both are in employment can earn up to £34,000 before moving on to the higher tax rate - an increase of £8,000. But the position of a single income couple was unchanged - they can earn up to £28,000 before moving on to the top tax rate.

Budget 2001 will be Mr McCreevy's fourth budget. Since his first budget in December 1997, he has cut income tax rates, moved away from the old system of allowances towards credits at the standard tax rate, cut corporation and capital taxes and increased income exemption limits and launched the controversial individualisation plan.

His first budget was seen as mainly helping the better off sections of society through cuts in the top tax rate.

Delivering on election promises in budget 1997, Mr McCreevy cut the standard tax rate from 26 per cent to 24 per cent and the top rate from 48 per cent to 46 per cent.

While the cut in the tax rates benefited all taxpayers, the relatively small increase in the standard rate income bands from £9,900 to £10,000 (£19,800 to £20,000 for a married couple) meant that top tax rate payers gained most.

His second budget redressed the imbalance, moved more people out of the tax net and benefited lower paid workers.

There were no cuts in the tax rates but there was a substantial improvement in the standard rate income band from £10,000 to £14,000 for a single person and from £20,000 to £28,000 for a married couple.

Personal allowances were increased and in an important redistributive move, it was announced that allowances would only be granted at the standard rate.

Budget 2000 brought the individualisation plan, cut two percentage points off the standard and the top tax rates and was seen as disproportionately benefiting dual income higher-earning married couples.

To follow the trend, Budget 2001 should redistributed towards the lower paid and take more people out of the tax net.

Tomorrow: Padraig O'Morain on the health spending