This week's Budget is not likely to indicate any major new policy directions. The Minister for Finance, Mr McCreevy, will seek to balance a number of conflicting demands with relatively limited resources.
Pre-Budget figures, published this weekend, show that the Exchequer position is a good deal better than was feared up to recently, but the Minister's room for manoeuvre is still tight enough. He must set his priorities carefully.
Mr McCreevy has indicated that the only significant item of extra spending on Budget day will be the traditional increases in social welfare. With some limited cash to spare, it is important that he demonstrates a commitment to look after the less well-off by relatively generous increases. The Budget should also reverse welfare cutbacks announced in the Estimates which will hit the living standards of some of the most vulnerable in society. Many of these were ill thought-out and regressive and Budget day is a chance to undo the damage.
The other disappointment in the Estimates was the limited increase in spending on infrastructure. On Budget day, or shortly afterwards, the Government intends to announce five-year spending plans in this area and it is important that these allocate sufficient resources to address the huge investment needs of the economy. Promises of new approaches to project planning, evaluation and management - and to the involvement of the private sector - must also be delivered. However there is a case for limited borrowing to fund investment on infrastructure.
On taxes, Mr McCreevy should be under less pressure than last year to raise additional revenue. He should be able to go much of the way to adjusting tax credits and the standard rate income tax band for inflation. By not doing so last year he ensured that the tax burden increased for many people, as rising incomes meant more of their earnings were taxed at the higher 42 per cent rate. This was the most significant single tax increase this year.
To pay for some income tax measures, Mr McCreevy will no doubt again hit the "old reliables" by pushing up excise duties. Despite a rapid fall-off in the rate of inflation however, it is essential that the Budget does not unduly fuel inflationary pressures next year. The Government has committed, as part of the anti-inflation programme agreed with the social partners, to reduce inflation to the EU average of around 2 per cent and the Budget must be finalised with this in mind.
The Minister has promised a strategic budget. If he is to deliver on this, it must be a Budget with a social conscience and one which addresses key economic targets such as infrastructure provision, low inflation and a tax system which continues to encourage employment and investment.
Mr McCreevy cannot solve all our problems next Wednesday, but he can take steps to further social equity and to prepare our economy to share in the international upturn, now under way.