Overview: Brian Cowen's second Budget was dominated by a new childcare package, and measures to take "tax-free millionaires" back into the tax net from 2007 by restricting tax breaks. Income-tax measures will take 52,000 low earners out of the tax net and remove 90,000 middle earners from the higher tax band.

The effect of the Budget measures is to increase the cost of running the State by 11 per cent to €50.6 billion, the first time that public expenditure will pass the €50 billion threshold. After economic growth this year of more than 4.5 per cent, Mr Cowen said his Budget was framed against the backdrop of a forecast that the economy will expand by 4.5-5 per cent in 2006.

He said inflation will average 2.7 per cent next year, marginally higher than the 2.5 per cent rate in 2005. He said employment was projected to grow by 60,000 in 2006, while the unemployment rate will be unchanged at 4.3 per cent.

Included in the package were measures to end the exemption on stallion and greyhound fees from 2008, a new €250,000 per annum ceiling from 2007 on the artists' tax exemption, and the winding down of most property-based tax incentives in 2008.

There were no increases in the "old reliable" duties on alcohol, tobacco and motor fuels, and betting duty was cut by half to 1 per cent.

The Minister for Finance increased the Vat registration thresholds for small business and abolished 0.5 per cent stamp duty on the issuing of capital by companies.

He made special provisions to incentivise farmers to use alternative energy, set aside €20 million to buy carbon emission credits, and cut by half the excise duty on kerosene and LPG home heating oils.

The main element of the childcare package is an extension of maternity leave and a new annual payment of €1,000 in respect of each child up their sixth birthday.

This is separate to the monthly child benefit payment, which rises to €150 next year for the first and second child. The rate for the third and subsequent children will be €185.

Mr Cowen's package also included an allocation of €150 million for new services for older people.

On personal taxation, Mr Cowen increased the standard rate band for single people by €2,600 to €32,000 and increased the band for a married one-income couple to €41,000. All workers on the average industrial wage next year will pay the lower tax rate.

In addition, Mr Cowen increased the employee tax credit by €220 a year and the basic personal tax credit by €50 per year for single people and €100 per year for married couples.

From 2007, Mr Cowen will reduce by half the amount of income that can be claimed without tax under certain reliefs. This will apply to those with income of more than €250,000. "We cannot stand over a situation in which high-earning tax residents, through the use of incentive reliefs, can reduce their taxable income to nil," he said.

The Minister extended to the end of next year the deadline by which 100 per cent tax reliefs on hotels, multi-storey car-parks, student accommodation and various other property initiatives that are "already in the pipeline".

Such reliefs will be reduced to 75 per cent in 2007 and to 50 per cent by July 2008 and end thereafter. However, the specific reliefs for nursing homes, childcare facilities and private hospitals will continue.

The social welfare package included a €14 rise to €193.30 in the weekly old-age contributory pension and a €16 rise to a maximum of €182 in the non-contributory pension.

Unemployment, disability, lone parent and carers' benefits will rise by €17 per week.

The Minister made no allocation in respect of pay increases for the 290,000 workers in the public sector in any successor to the Sustaining Progress partnership agreement because he did not want to prejudice the Government's negotiating position in pay talks.

He will provide €300 million over five years for a strategic innovation fund to encourage PhD research. "The Government believes such a programme is fundamental to our economic and social development," he said.

This allocation is in addition to an allocation of €900 million over five years for buildings in the third-level sector.

Stamp duty relief and other tax incentives to encourage farm activity were extended, while Mr Cowen described an initial €20 million in excise relief on biofuel as a "new opportunity" for farmers.