Ministers debate health strategy funding

Charlie McCreevy and Micheβl Martin were in talks late last night to iron out differences over the shape of the upcoming Budget and health strategy. The Ministers for Finance and Health were attempting to agree the package to finance the health strategy next year, due to be launched on Monday.

Mr McCreevy has made it clear that the amount he can deliver in the Budget on further capital spending as well as social welfare increases and tax cuts depends on the amounts agreed with Mr Martin and other Ministers.

However, it is already clear that there will be no cuts in the rates of tax and only a small increase in the standard rate tax band, perhaps to around £21,000 (€26,660). A doubling of PAYE credits, which would take the bulk of minimum wage earners out of the tax net, are also being considered. Increases in contributory social welfare benefits such as pensions of above the rate of inflation are also likely, as are rises in child benefit.

A meeting of the Cabinet sub-committee on health, involving the Taoiseach, Mr Ahern, the Tβnaiste, Ms Harney, Mr Martin and Mr McCreevy, signed off on the broad seven-year plan last Thursday week. However, the detail - including the amount to be spent next year - had not been agreed.

Mr McCreevy has been publicly sceptical about further funding increases for the health services, saying he wanted to see more value for money delivered. One possibility is to use an increase in excise duty on cigarettes to part-fund the health strategy.

At a Cabinet meeting earlier this year, the Department of Health advised that day-to-day spending on health needed to rise to £7 billion annually. A good deal of this was delivered last week when the Department won an increase to around £6.3 billion. Senior officials have estimated that the health service requires £6 billion in capital investment on top of the £2 billion already allocated in the National Development Plan. Only £78 million of this was delivered last week.

A spokeswoman for the Minister for Finance said last night she was not aware of any negotiations.

It is understood negotiations with other Ministers on capital projects and likely social welfare rises have not been finalised. Once the health and capital spending allocations have been decided, Mr McCreevy will be able to frame the rest of the tax package.

Also under discussion is a cut in the rate of employers' PRSI to compensate for the removal of the ceiling last year. The Tβnaiste is keen that all measures which would encourage job creation be taken in the current environment.

The Minister is also likely to welcome research which suggests falling tax revenue is the result of past tax cuts - and not a recession.

NCB Stockbrokers has found that tax revenues should have declined by 3 per cent this year simply on the basis of the tax cuts in last year's Budget. "Against this background it is not clear why the Budget estimate was pitched at over 8 per cent for income tax," NCB economist Mr Eunan King said in a note to clients.