Today's Budget will give significant benefits to young families and the elderly, take more of the lower-paid out of the top tax band and end some controversial tax reliefs. Minister for Finance Brian Cowen was due to brief fellow Cabinet members at 8am today on his Budget, which is designed to revive the Government's standing with voters. Marc Coleman and Mark Brennock report.
Mr Cowen is expected to introduce an innovative new pension funding scheme through which the Government will provide "top-up" funding for regular pension savers - the same mechanism that applies in the Special Savings Investment Account scheme.
Details of this scheme, which aims to address the low number of people who invest in a pension, may not emerge until the Finance Bill is published next February.
He is also expected to extend the 42 per cent tax relief on pension contributions to those on the lower rate of income tax, while capping pension contributions for higher earners.
He will raise the standard rate bands for income tax by about 6 per cent.
The standard rate band of tax for a single person will, therefore, rise from a present level of €29,400 to just over €31,000. Proportionate increases are expected for married couples, lone parents and widowed parents.
Mr Cowen is also expected to announce the end of the tax exemption for profits earned from stallion stud fees, but tax reliefs on property are not expected to face major pruning. It is not known whether he will announce any replacement measure to benefit the horse breeding industry.
He will also seek to neutralise the resentment among many voters over how some high earners use tax reliefs to ensure they pay little or even no income tax.
He will announce a mechanism to ensure all high earners pay some income tax, although he will not introduce a flat minimum tax rate. It could not be ascertained last night what means the Minister would use.
Speculation continues that the tax exemption for artists' incomes will be retained, but that a cap may be put on the amount of earnings that can be exempted. This would have the effect of continuing to benefit artists but not giving tax-free status to artists earning vast incomes from creative work.
In macro-economic terms Mr Cowen will announce a slight downward revision of the Government's economic growth forecast for 2006.
The forecast for real gross domestic product (GDP) - the volume of goods and services produced in the economy - will be reduced from 5 per cent to 4.75 per cent, reflecting the impact of higher oil prices and interest rates.
In nominal terms, accounting for expected inflation of 2 per cent, the economy is forecast to grow by 6.7 per cent next year. This is broadly equal to the forecast for revenue growth published by the Government last week.
While Government spending would rise by 6.6 per cent anyway next year, even if there were no policy changes, budgetary measures will be consistent with an increase of 9 per cent in spending - and this excludes the cost of refunding those individuals and their families who were illegally charged for nursing home care.
Several significant measures will target key sectors of the electorate.
A payment of some €100 a month for pre-school children is designed to appeal to young parents, while the continued steady rise in the old-age pension will please older voters. Some €1 billion of welfare increases will be announced, including a rise in the existing child benefit payment.
An increase of about €3 a week in the fuel allowance, bringing it up to between €12 and €15, is also being signalled.
The Budget will provide funding for greater delivery of nursing, physiotherapy and other services to elderly people in their homes in an attempt to keep them out of nursing homes and public hospital beds.
This freeing up of beds is intended to ease the pressure on accident and emergency wards.