The Minister for Finance now appears unlikely to introduce significant green taxes on fossil fuels in Wednesday's Budget despite strong pressure in recent weeks from the Minister for the Environment, Mr Cullen.
With Mr McCreevy having to raise some €1 billion in extra revenue to pay for social welfare and public service pay increases, Mr Cullen and his officials have argued that environmental taxes would be a popular and effective means of raising money.
However, the Minister for Finance is believed to have decided against such measures for the second year running. Last year he received an independent consultants' report which recommended such taxes, particularly on energy use by industry.
However, Mr McCreevy and his officials remain unconvinced by the argument that such a tax, either on the carbon or energy content of fuel, would be an effective means of reducing greenhouse gas emissions in line with Ireland's commitments under the 1997 Kyoto Protocol. Business interests have also lobbied the Minister for Finance and Tanaiste against the tax.
The Kyoto Protocol requires developed countries to reduce their overall emissions of greenhouse gas by at least 5 per cent below 1990 levels in the period 2008-2012. Ireland has agreed to limit the increase in its net greenhouse emissions to 13 per cent above 1990 levels by the period 2008 to 2012.
Last June's Programme for Government also committed the Government to such taxes but included an escape clause: "We will implement our greenhouse gas taxation policies on a phased incremental basis and in a manner which takes account of national economic, social and environmental objectives." The economic objectives appear to have won out on this occasion.
The Budget will nevertheless see a rise in excise duty on petrol, as well as substantial increases in duty on alcohol and tobacco products. There is some speculation that the extra revenue raised from tobacco and petrol could be earmarked for health and roads spending, but the Minister is understood to be resisting such a diversion of revenue away from the Exchequer.
The Green Party last night urged the Government not simply to increase tax on petrol and label it a green tax. The party leader, Mr Trevor Sargent, said: "Environmental taxes are no more than a smokescreen for higher taxes unless they are ring-fenced and balanced against genuine environmental protection.
"Introducing a tax on petrol, labelling it a green tax and then ring-fencing it for motorway construction is not what the Green Party considers a genuine tax. A genuine green tax is used to enhance and protect the environment."
The Minister may also postpone at least some of the promised increase in child benefit. This Budget was supposed to see the completion of a three-year programme of increases to raise child benefit payments from their 2000 levels of €53.96 to €149.19 for each of the first two children, and from €71.11 to €185.38 for third and subsequent children. The payments now stand at €117.60 and €147.30.
The final phase of the increases was due to be announced in the Budget on December 4th, but their postponement could save some €400 million in 2003.
The Minister is also expected to curtail or end tax reliefs such as the tax-free status of horse stud farming and some reliefs on property investment.
Stealth increases in income tax are also likely through a failure to increase tax bands and credits fully in line with inflation. There is strong speculation that the employees' PRSI ceiling wil be lifted, thus extracting bigger contributions from those on higher incomes.