The Budget is no longer about hard choices. Mr McCreevy has so much money at his disposal that he can choose to cut taxes and raise spending. Political choices are hardly necessary - he can please all the people almost all of the time.

The Minister's only problem is inflation. The formerly fiscally prudent Mr McCreevy hardly wants to go down in history as the man who broke the economy. But with an election possibly only six months away he may have little choice but to opt for high spending.

The spending estimates published a few weeks ago gave a clear indication about Mr McCreevy's priorities. He abandoned his 4 per cent spending limit and there was money available for all. Critics pointed to the effect this was likely to have on inflation with more money being poured into the system. But the Minister again dismissed such talk. He continued to insist that inflation in a small open economy like Ireland was primarily generated outside the State.

That is true but the Central Bank and others insist that domestically generated inflation is becoming a larger part of the problem.

The amount of money that is being added to the system as a result of the spending outlined in the estimates is larger than in the Budget. And if he is prepared to tolerate the inflationary impact of this, it is unlikely that he will be unduly concerned about the more limited effects on the consumer price index (CPI) of Budget tax cuts.

The Taoiseach, Mr Ahern, the Tanaiste, Ms Harney, and the Minister for Finance, are to meet again this week to discuss the final elements of the December 6th Budget.

Mr McCreevy has repeatedly insisted that inflation will be a cornerstone of the Budget. That is likely to mean cuts in direct taxes, which would force the consumer price index down, rather than fiscal prudence.

As a result we are likely to see reductions in VAT and possibly excise duties. Both are likely to have to broadly converge with European averages in any case following the Nice summit and this could be convenient for the Minister.

A 1 per cent cut in VAT should take around 0.4 per cent off the CPI and would cost around £190 million (#241 million).

A halving in excise duties on petrol, diesel and home heating oil could take as much as 1 per cent off the CPI. But given the scale of the cost - £500 million - a reduction of that magnitude must be unlikely. The other problem with cutting VAT and excise duties is that it also puts more money into consumers' pockets and thus over the longer run could boost inflation. Some commentators also question whether price cuts are likely to be passed on.

Reductions in stamp duty are on the cards particularly for share transactions.

Other anti-inflation measures which are being examined include a savings bond. This idea was floated by the Taoiseach earlier this year but appears to have fallen off the agenda since then.

Ministers are anxious that no surprise element emerges in the Budget to detract from what they hope will be a popular and vote-winning exercise. One possibly contentious area is childcare which will feature prominently in the Budget. The Government has promised action since it came into office in 1997 and this may be its last chance to deliver. It now appears that the Cabinet will above all play it safe.

The Government appears set to increase child benefit payments for all families, rather than risk political controversy by favouring working couples. As a result child benefit will be increased although it is possible this will be called a childcare payment and will then be taxed.

Nothing specifically will be done to encourage more women to enter the workforce although supply-side measures such as providing capital grants for the development of creches and other childcare may be enhanced. The focus on a universal payment will make this part of the package very expensive. It costs £130 million to increase child benefit payments by just £10 per child.

To increase them by a substantial figure of, say, £40 per month would cost more than £500 million. Childcare payments are currently £42.50 for the first two children and £50 for subsequent children.

Other issues to be included in the Budget package include increased pensions and medical services for the elderly. The Minister seems certain to increase payments to pensioners to more than £100 a week, with £105 mentioned as a target.

The main focus of the personal taxation side will be to take more people out of the tax net, proceed cautiously with individualisation and try to deliver similar percentage gains to lower and higher earners.

The Programme for Government pledged to reduce tax rates to 20 per cent and 40 per cent respectively over the lifetime of this administration if economic circumstances allowed.

The Tanaiste is continuing to press for 2p off the top rate and 2p off the standard rate, costing £164 million and £257 million respectively. This is even more generous than even the employer's group IBEC wants in the short term. The actual cost is not prohibitively high - the problem is the increase in allowances at the other end of the scale to make up for the percentage increase to higher earners of a cut in the top rate.

Most money is likely to be targeted at increasing tax-free allowances to remove many more low-paid workers from the tax net and broadening the standard rate tax band which remove more people from the top rate of tax. A £1,000 increase in the personal allowance costs £374 million, while £1,000 on the PAYE allowance costs £250 million.

Mr McCreevy has said the Government will keep to its ambition that 80 per cent of taxpayers should pay tax at the standard rate only, but he cautioned that further reductions in the tax rates would be dependent on economic circumstances.

Completion of the move to individualisation would cost £522 million but the increase in allowances needed to counter the benefit to relatively high paid earners, is prohibitively expensive. Mr McCreevy is thus likely to go only part of the way down this road, perhaps widening the standard rate band by £2,000 at a cost of £104.5 million.