The Budget should ensure the continuation of partnership agreements over the years ahead.
The Minister managed to deliver on significant tax cuts, spending increases and more investment, as well as paying a large chunk of the national debt.
In the process he completed a turnaround from last year's package and has probably managed to keep most of the social partners placated. The radical tax reforming package was clearly aimed at the next national wage agreement and at putting a lid on continuing public sector pay claims over the rest of Partnership 2000.
By so clearly delivering the vast majority of the £581 million in benefits to low and middle income earners, Mr McCreevy was undoubtedly placating the unions, who reacted angrily to last year's Budget.
According to Mr Brian Geoghegan, director of economic affairs at IBEC, the tax package should mean no further slippage on public sector pay next year. The substantial increases for those on lower incomes also focuses attention on the Government's tax cutting pledges in Partnership 2000 and undermines the argument that various sectors need additional funding to catch up. As Mr Colin Hunt, chief economist at Goodbody Stockbrokers, points out, the Government has now delivered £1,500 million in tax cuts, rather than the £600 million promised in Partnership 2000. As a result there is now no argument that the Government has delivered more than fully on its tax-cutting pledges in Partnership 2000.
The commitment to introduce tax-efficient, save-as-you-earn schemes to encourage profit sharing in private business is also a clear marker of the Government's commitment to move to such agreements during the next round of negotiations on the national pay agreement.
The overall size of the projected exchequer surplus at £925 million is lower than expected as a result of the large packages on both the tax and spending sides of the Budget.
But according to Dr Dan McLaughlin, chief economist at ABN-Amro, it still represents a fiscal tightening and there will be little argument that our European partners can make, as the surplus at 1.7 per cent of gross domestic product is significantly higher than in other EU countries.
The overall package will be broadly welcomed by both unions and employers. The move to take the first £100 of earnings out of the tax net should increase the supply of labour to many companies suffering from a severe shortage. It will widen the gap between unemployment benefit and those on minimum wage.
This is the first time that a Government has clearly and radically set out to abolish the disincentives to finding work when on unemployment assistance and the fact that 80,000 people have now been taken out of the tax net altogether shows the extent of the problem.
Mr McCreevy also sent a very clear signal to those who remain on the live register. Despite announcing a large social welfare package of £201 million, the vast majority of social welfare rates were raised by only £3 a week. The Minister's idea was to kill off the idea that welfare could be better than work. However, the rates for those who are completely outside the labour market, like pensioners, were raised by twice that amount.
However, other measures which could increase the supply of labour such as significant allowances for childcare were not forthcoming. The Minister did abolish benefit-in-kind tax on employer-provided creche places, but this affects few women. Capital allowances on creche facilities will also help but in the shorter term there was little to encourage more women, particularly low-wage earners, back into the economy.
Most of the rest of the package was targeted at farmers, carers, pension claims and health and education.
Generally, all low earners will be gaining significantly. Those who gain the most are single people on £11,000 or married couples on £22,000. Those on higher salaries gain proportionately far less than in previous years.
A single person on £11,000 gets a 6.2 per cent rise while someone on £15,000 gets 3 per cent, compared with 3.8 per cent last year.
But the really big difference is for someone earning £40,000 who will be 1.7 per cent better off following the Budget but was 3.7 per cent better off last year.
And in a very radical move, 80,000 people have now been taken out of the tax net and no tax will be paid on the first £100 of income. And while £581 million has been given back to taxpayers the end result will probably not be too inflationary, with the bulk of it going to the low paid who will be less inclined to spend the money on luxury imported items.
The Department is now forecasting that inflation will average 2 per cent next year and for the following two years, while economic growth will slow somewhat. It is predicting that gross national product (GNP) will increase by 6 per cent, from 8.5 per cent in 1998, mostly because of falling foreign investment and rapidly declining exports. It will continue falling off over the following two years to 5.7 per cent in 2000 and 5.2 per cent in 2001.
In an unexpected move the increase in the health levy gave the Minister an extra £100 million to spend yesterday, without affecting his target.
This is because the health levy comes off net spending and is not considered a tax. The amount raised by increasing it can then be used by the Minister to increase spending levels without affecting his limits. The educational levy on the other hand, which he abolished, is counted as tax and any increase in it would have counted towards increased spending.
The Minister also significantly increased spending across a broad range of areas.
Overall the Budget will also prove good for large business despite the talk of the adverse impact of raising the PRSI ceilings for employers. And over the longer term the moves on pensions for the self employed will be welcome.
Many will welcome the 30 per cent increase in the capital budget,????????
But on the housing front he delivered less than many had hoped, although an additional £28 million for social housing and money for homeless hostels will help.
A small amount was targeted at Dublin's traffic problems with £2 million being allocated to park and ride facilities. Employee bus and train passes are no longer taxed while the Minister said he is going to tax employee car parking spaces, despite, he practically admitted, opposition from his own Department.
Moves to improve the telecommunications infrastructure and fund Year 2000 problems were also announced, which should also improve the long-term prospects for the economy.