At around 3.45 pm this afternoon the Minister for Finance, Mr McCreevy, will rise to deliver his sixth Budget. The following is the order in which he will address the main topics, with indications of what the Budget may contain.
INTRODUCTION
In his introduction, the Minister will set out the priorities for Budget day. This year he is likely to outline these as fiscal
prudence, protecting the less well-off and maintaining investment. Last year he proudly announced: " In 2002, I won't be borrowing," Don't expect him to repeat that particular line this year.
ECONOMIC AND BUDGETARY OUTLOOK
Not good. There will be some interest in the Department of Finance forecast for economic growth – likely to be in the 3-4 per cent region in terms of GNP growth. Mr McCreevy is likely to aim to borrow well under 1 per cent of GDP, using the EU borrowing measure. The debt to GDP ratio should not rise as a result.
SOCIAL PARTNERSHIP
At this stage the Minister may refer to the talks underway to replace the Programme for Prosperity and Fairness. He may indicate the allocation of around . 550 million to pay one quarter of the benchmarking award to public
servants, as the Government has promised.
ADDITIONAL SPENDING
The Minister is likely to indicate day to day spending totalling over . 1.25 billion more than announced in last month's estimates ( including benchmarking). Several hundred million will be added to capital spending, mainly for road investment. The Minister is likely to indicate his
plans for funding infrastructure through the National Development Finance Agency and public private partnerships.
SOCIAL WELFARE
After nodding to social inclusion and the National Anti-Poverty Strategy, the Minister will get down to business. How much to increase welfare rates? Despite the hardship of the exchequer finances, he will have to at least index these for inflation, with bigger increases possible in specific areas, such as old age pensions.
However the Government is unlikely to have enough money to pay all the increase in child benefit promised during the election.
PERSONAL TAX
The bit when the employees sit up and listen. There will be no change in the 20 and 42% income tax rates. Tax credits ( which replaced allowances) will rise, but not as fast as wage inflation. The same is likely to apply to the standard rate income tax band, This means some extra tax for most next year. The employee PRSI ceiling is also likely to rise, though it would
be a surprise if it was abolished altogether.
CAPITAL TAXES
Changes in the payment arrangements for capital gains tax could give the Minister some once-off cash. A small increase in some capital tax rates is also possible, as is a move to get extra money from stamp duties.
INDIRECT TAX
Never have big increases in the " old reliables" been so clearly flagged. This means that they may be not that big when they happen, mainly because Mr McCreevy does not want to push up inflation too much. So some increases in alcohol, tobacco and petrol. A 1% rise in the standard VAT rate to 22% is also possible
BUSINESS TAX
The promised reduction in the standard corporation tax rate to 12.5% will go ahead. Business is also hoping for a new tax relief on research and development spending, which was being actively discussed in the run up
to Budget day.
CLOSING LOOPHOLES AND ALLOWANCES
Somewhere in his script on personal and corporate tax, the Minister will make a big play of closing down loopholes and cutting back allowances. Watch out for moves on business interest relief and a range of property schemes.
LOOKING TO THE FUTURE
The Minister will end with some concluding comments. As he sits down, he will be surely hoping that next year will be easier.
