The first key decision for the Minister for Finance and his colleagues is how much they want to borrow, writes Cliff Taylor, Economics Editor

Let the Budget season begin. Over the next week the speculation on what is in Mr Cowen's briefcase will build. Over the next week, Irish Times writers and outside contributors will examine the options facing the Minister and the dilemmas he faces in framing his first package.

In broad terms, what can we expect. The Budget will include three main items of interest - or three that we can anticipate anyway. These are a generous social welfare package, some increases in investment spending above and beyond that included in last week's Estimates and a reasonably generous tax package.

The precise arithmetic facing the Minister will not be clear until the pre-Budget estimates for tax revenue are published at the weekend. This will establish his so-called " opening position", the amount of money he will have to borrow before taking account of Budget Day measures.

The money "given away" in the Budget - through tax cuts and spending increases - will then be added to this opening position to give the final borrowing target for the year.

The first key decision for Mr Cowen and his colleagues is how much they want to borrow. In last year's budget, the then minister, Mr McCreevy, predicted that Exchequer borrowing would be €2.8 billion this year, rising to €3.4 billion in 2005. However a surge in tax revenues this year - including once-off receipts of €670 million for the offshore scheme - has reduced 2004 borrowing sharply to an estimated €700 million.

Mr Cowen's opening borrowing requirement for 2005 is likely to be higher than this, probably somewhere in the €1 billion to €1.5 billion region. But he will not want to increase the total to the €3.4 billion pencilled in for 2005 - the likely final target would probably be in the €2.5 billion to €2.8 billion region.

If these sums are correct, then Mr Cowen will have €1 billion to €1.3 billion to " give away."

A few hundred million of this will go on increasing capital investment spending, as discussed in the article below. The other major spending item will be social welfare.

Mr Cowen will want to hold the overall increase in current spending to around 8 per cent, to accord with commitments in the Sustaining Progress national agreement. This would leave him with up to €700 million to spend, in addition to what was allocated in the Estimates.

A welfare package costing €500 million to €600 million in 2005 - or €800 million to €1 billion in a full year may be provided. This would be well ahead of anything seen in recent years.

The final element will be the tax package. Pre-Budget documents show that it would cost €260 million in a full year - or €180 million in 2005 - to adjust tax bands to ensure that a higher percentage of taxpayers does not become subject to the 42 per cent tax rate. The other priority will be increasing tax credits, which particularly benefit lower paid workers, removing some entirely from the tax net.