The government appears set to increase child benefit payments for all families, rather than risk political controversy by favouring working couples only, in its childcare package to be finalised in the next fortnight.
Following Saturday's five-hour special Cabinet meeting to discuss the Budget, the issue of whether and by how much to cut the top rate of income tax, as favoured by the Tanaiste, Ms Harney, also remains to be resolved.
Final decisions on childcare, tax cuts and increased pensions and medical services for the elderly will be made at a series of meetings between the Taoiseach, Tanaiste and Minister for Finance before December 6th.
However, the childcare package to be contained in the Budget now appears unlikely to include a tax break in respect of childcare costs, or a special payment given only to working parents who use childcare services, according to Government sources.
Instead, child benefit - paid in respect of all children, regardless of whether one parent stays at home to care for them - is expected to be increased by a significant figure. One idea being discussed would involve calling this increase a special childcare payment, but it would be paid to all parents regardless of whether they used childcare.
Ministers fear that payments to working couples only would be seen by stay-at-home parents as further discrimination against them.
In the face of demands from employers for improvements in childcare services - to encourage more women to enter the workforce to ease labour shortages - supply-side measures such as providing capital grants for the development of creches and other childcare facilities will also be continued and may be enhanced.
The cost of the childcare package may have a significant impact on the size of the tax cuts to be given by Mr McCreevy this year. The Department of Finance has told Ministers that it would cost £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 over £500 million. Childcare payments are currently at £42.50 for the first two children and £50 for subsequent children.
The Tanaiste is understood to have pressed her case again for cuts in the top tax rate and the standard rate at Saturday's meeting. However, most Ministers are understood to have echoed the Taoiseach's public statements that the Budget must be seen clearly to benefit those on lower and middle incomes.
Government sources said yesterday that a top tax rate cut was still likely, but that it could be a small reduction from the present 44 per cent. The bulk of the changes would go to increasing tax-free allowances, thus removing many more low-paid workers from the tax net, and to broadening the standard rate tax band and cutting the standard tax rate - possibly by two percentage points to 20 per cent. These measures are all supported by Ms Harney and the PDs as well.
Mr McCreevy will also announce that medical cards will be made available to a much larger number of pensioners. This will be done through completing a three-year programme of doubling the means test limit for people over 70.
In addition, the Government is understood to be considering exempting a significant amount of pensioners' savings from the calculation of pensioners' means. At the moment, interest earned from savings is included in the calculation of pensioners' income.
The change under consideration is designed to end the situation where some pensioners are reluctant to sell their homes and move into secure rented accommodation because the capital sum they earn from the sale will militate against their qualification for a medical card.
The benefit for pensioners will be in addition to the raising of the weekly old-age pension from £96 to over £100 per week.