POLITICAL ANALYSIS: The Budget contains plenty of little ruses to extract more money from the ordinary punter. The 1 per cent increase in the standard VAT rate will extract more money from the public, as will the extra "stamp duty" on cheques, bank and credit cards. For most of us, these newlevies are a tax on existence, writes Mark Brennock

For the past five years and during the May election campaign, Mr McCreevy and his colleagues put forward the notion that you can cut taxes and still provide better public services. Yesterday they showed that without a roaring economic boom, you can't.

Last night they still tried to hang onto the conceit that they were not putting up personal taxes. "We have reaffirmed our commitment to workers by keeping PAYE down," the Tánaiste, Ms Harney, claimed gamely.

No they haven't: they are putting it up. Tax credits are rising considerably less than the rate of inflation. For the first time since the Coalition came to office in 1997 most number of earners will pay more income tax in real terms.

For six years the Coalition has denied the existence of the traditional political choice between low taxes and quality public services. The extraordinary economic boom hid the vacuity of that argument, but it has been exposed now.

During the past five years the Government has cut taxes to a level where it now cannot pay for existing services. Even with yesterday's changes, there will be cuts in promised public services next year and extra charges for health and education announced in recent months.

Mr McCreevy insisted last night that his party's manifesto had made no specific promises in terms of tax reductions. But neither did it say that for middle and higher earners, the tax take would rise, albeit modestly. Yesterday's tax changes will take more lower earners out of the tax net, but will push more middle-income earners into the top tax band.

The low personal tax regime trumpeted by the Government throughout the election campaign remains in place, But with difficult budgets to come over the next two years, there may be more chipping away at the personal tax cuts of the past few years.

The Budget also contains plenty of other little ruses to extract more money from the ordinary punter. The 1 per cent increase in the standard VAT rate will extract more money from the public, as will the extra "stamp duty" on cheques, bank and credit cards. Some low income individuals do not have such accoutrements but for most, these new levies are a tax on existence.

After the State has taken a slice from the bank customers, the banks themselves are likely to come looking for more. While the Minister has said he will raise €100 million from profit rich financial institutions through a new levy, it would be entirely unsurprising if the banks will ensure their customers pick up the tab for this.

Mr McCreevy said of the financial institutions that it was "not unreasonable to see some of their good fortune applied to assisting the public finances". It remains to be seen who will end up assisting the public finances.

The next political headache for the Government is the attempt to win pay restraint through a new social partnership agreement. Mr McCreevy yesterday provided for the payment of the first phase of the benchmarking pay awards, backdated to December 1st 2001 as agreed in the PPF.

But this payment, at a cost of €565 million, is conditional on a new partnership agreement. Without one, the benchmarking will be up for grabs, or not, in pay talks between the Government and public service unions.

The cap on civil service employment and the commitment to reduce it by 5,000 over three years will further sour the atmosphere for social partnership talks.

From the broken promises department, the promised substantial rise in child benefit has not materialised. This year was supposed to see the third of three big increases. Instead the rise has been spread over three years.

Mr McCreevy will struggle to control public spending next year. The 2 per cent rise for 2003 outlined in the Book of Estimates has become a 5.7 per cent rise after the Budget. As well as the plethora of new charges and deferred projects revealed in the estimates, successful control of spending Ministers will bring more cuts.

Mr McCreevy yesterday announced various reforms in the management of public spending which will set the scene for robust conflict between him and certain Ministers. Ministers who save money will be able to keep it and spend elsewhere. Those administering "demand led" programmes (hello, Micheál Martin) will have to impose strict monitoring and control.

Bowing to the outrage among first-time house buyers - and the Fianna Fáil backbenchers who represent them - Mr McCreevy has increased the mortgage interest relief for young home buyers. But with the abolition of the first-time buyers' grant and the 1 per cent increase in house prices as a result of the VAT increase, they will not be cheering him in the show houses.

Some of the complex tax reliefs used by high earners are gone. But true to form, Mr McCreevy's pet schemes remain in place. The Special Savings Investment Accounts, the National Pension Reserve Fund contribution and the tax-free status for horse stud fees live on.