The Minister for Finance's second Budget, to be delivered next Wednesday, will be radically different from his first.

The precise terms have been kept under wraps - some have still to be finalised - but Mr McCreevy is expected to deliver tax cuts worth some £500 million in a full year, social welfare rises for the elderly, a package targeted at the housing markets and additional support for low income farmers.

At the same time he will be able to pay at least £800 million off the national debt this year and aim for a further repayment of about £1 billion next year. However, he may choose to cut the 1999 figure by making substantial payments into various State funds.

In contrast to the 1998 Budget, where Mr McCreevy favoured the better-off, the tax package will be targeted at low and middle income earners. But even the broad details of the personal tax package have still to be decided. The idea of introducing tax credits, or the standard-rating of the PAYE allowance and personal allowances, is still on the cards. Standard-rating the allowances would mean they could be claimed only at the standard income tax rate - now 24 per cent. However, sources say the most likely outcome is a compromise where the smaller PAYE tax allowance (now worth £800 a year to a single person) will be standard-rated and the much larger personal allowances (valued at £3,150 annually for a single person) will be left for another year.

Whatever option the Government takes, much of the focus will be on widening the standard rate income tax band - ensuring fewer taxpayers pay at the higher rate - and increasing personal allowances as well as the tax exemption limit - measures which will remove income from the tax net and increase the number of taxpayers exempt from tax.

A cut in the standard 24 per cent rate of income tax is also expected, but the top 46 per cent will probably be left unchanged.

Such a Budget income tax package would be broadly in line with the demands of both the unions and of IBEC to target lower and middle income earners. According to Mr Manus O'Riordan, chief research officer with SIPTU, just over £700 million spent on increasing personal allowances would mean a worker on the standard rate would not pay any tax until he earned £100 per week and would not move to the top rate until that figure reached £292, the average industrial wage.

"The Minister has to do a somersault," he said. "We are insisting that far greater resources must be devoted to the tax package agreed by NESC for the 21st century."

According to Mr Eoin Fahy, chief economist at Ulster Bank, the tax cut package is more likely to cost between £500 million and £600 million in a full year, although most of it will be delivered in increasing personal tax allowances.

According to Mr Fahy, there is likely to be some standard-rating of allowances. This may not extend to the personal allowance but it is possible that the PAYE allowance could be standard-rated as a first step.

With most resources being focused on increasing allowances, a lot of progress could be made towards the target of the first £100 of income being tax-free. The Minister could also afford a cut of about one percentage point off the standard 24 per cent rate, although a cut of two percentage points is possible, according to Mr Fahy.

Mr McCreevy will also target pensioners with a rise of about £7 a week, bringing the weekly pension to £90, just £10 short of the £100 target the Government set itself coming into office. He is also likely to target the outstanding social inclusion measures from Partnership 2000. This will mean spending more on carers and on unemployment blackspots.

Corporation tax will also come down. The expected cut is four percentage points to 28 per cent, which would be in line with meeting the 12.5 per cent rate agreed with the EU for early in the next century. However, there has been some speculation that the Minister may choose to bring this down more quickly before opposition from other EU finance ministers to Ireland's low corporate tax rates intensifies.

But a swifter cut in the amount of tax paid by companies might generate a poor public reaction against a background of long hospital waiting lists and the need to find cash to tackle other social issues. On top of that it could also imply the Government is seriously worried about EU moves towards tax harmonisation. A legislative commitment to cut the business tax rate is thus more likely.

There is also some speculation the Minister will try to minimise the benefits to the banking sector of any reduction in the amount of tax they must pay. SIPTU has called for a withholding tax or some other decisive measure to recoup what is being lost from the likes of the banks, according to Mr O'Riordan. But this is now looking unlikely and extra charges for a security levy or for stamp duty on cheques are possibilities, although the Minister believes the banks may simply pass these straight back to customers. The Minister is also expected to introduce a profit-sharing option with an eye to the negotiations on the next partnership agreement. A save-as-you-earn option, floated by IBEC, looks the most likely choice. This would give tax and interest breaks to employees saving to buy shares in their own companies.

The Minister is also likely to announce that both housing and transport need to be dealt with differently. While there will be some mention of large-scale capital projects already flagged in the spending estimates, such as major council house building in north Dublin and additional money for Dublin Bus, other initiatives are likely.

There are likely to be changes to capital gains tax for selling land as well as a restructuring of incentives to get around the problem of builders simply taking up the benefit in the form of higher prices.

The agriculture sector is also likely to be fairly pleased with the Budget. The Minister appears set to deliver a large package targeted at low income farmers. Up to an additional 8,000 or 10,000 farmers are likely to be able to qualify for the Smallholders' Assistance, the farming version of the Family Income Supplement. This will be done by increasing the allowance for children and by disallowing a portion of farming income from the means test on the basis that the farmers contribute to the national economy through the sale of produce. At the moment it costs £33 million to support 8,000 farmers and the additional measures could cost as much as £25 to £30 million a year.

The IFA has also been lobbying for better capital allowances for farm machinery, allowing it to be written off over four rather than six years. However, this looks unlikely to be delivered as civil servants in the Department of Finance have opposed it.

Mr Con Lucy, chief economist with the IFA, said its number one priority was the introduction of an adequate income safety net for low income families. "It would be a means-tested system similar to FIS which applies to employees and it would require an additional expenditure of £30 million to make any real impression on the problem," he said.

The Minister is also considering scrapping special savings accounts. The tax advantage of holding these accounts has already been cut to 20 per cent, only marginally below the 24 per cent tax rate. However, this may prove very unpopular politically as thousands of pensioners rely on them and their income from interest is already falling dramatically.

A cap on earnings from pension schemes is also possible. This would make it more difficult for directors of limited companies to artificially boost their income coming up to retirement to maximise their pension. Pressure has also been mounting from Brussels for Mr McCreevy to announce a green Budget. This is very unlikely to happen this year, although a Green Paper looking at the options is being mooted as is the possibility of taxing car-parking spaces and some increase on the tax-take from diesel.

The Government is also unlikely to deliver on its child care pledges. The Minister is likely to point to the paper from the working group which is examining the issue and which is due shortly. Any measures which are announced around higher child benefit or allowances are thus likely to be very small and not significant in terms of getting more women back into the workforce.

Mr McCreevy will unveil some further initiatives on capital spending on roads and other infrastructure. The £70 million for the CityWest Business Park to turn it into an e-commerce hub has already been disclosed but the Minister is thought to have a major investment using both public and private money up his sleeve.