Budget a delicate balancing act for Minister

With so many appeals for funding, Brian Cowen will have to disappoint some, writes Claire Shoesmith

With so many appeals for funding, Brian Cowen will have to disappoint some, writes Claire Shoesmith

If you have been reading the newspapers or watching the news over the past few months, you will have heard plenty about what people want to get out of this year's Budget. It's a difficult job to satisfy everyone.

Decisions on what to do with the money and who deserves the increases falls to Brian Cowen, the Minister for Finance. Helped by officials in the Department of Finance and prompted by appeals from Government ministers to award the greatest increases to their departments, Mr Cowen will announce the 2006 Budget in five days time.

However, to imply that he is today sitting at his desk with a calculator deciding whose requests he should and can meet is probably exaggerating. Each year, a few weeks before the announcement, the Department releases its pre-Budget estimates - an outline of the increases in spending for the following year and rough guidelines of which department will get what. We still have to wait until Budget day, December 7th, to find out how the increases will be funded, for details on individual projects and increases to social welfare payments.

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"The Budget is an important event, but there is a lot of hype that surrounds it each year," says Alan McQuaid, an economist at investment managers Bloxham. "Each year there is one key issue and this time round it seems to be childcare. The Finance Minister will have a difficult job trying to please everyone as it's a subject that affects a lot of people in different circumstances."

On November 18th, Mr Cowen announced a 7 per cent increase in spending, bringing the amount allocated for 2006 to €48.5 billion. This will rise further on Budget day after social welfare and other increases are added. This compares with an increase of 6 per cent in the 2005 budget.

According to the Department, the aim of the Budget is to protect and increase jobs in a more competitive business environment, to modernise the economy through capital investment programmes and to distribute the fruits of growth to everyone through better services and a sharing of resources. Since the creation of the euro zone, the Budget has had to be in line with the EU's stability and growth pact, aimed at facilitating investment and growth in the EU.

Describing Mr Cowen as less gung ho than his predecessor, Charlie McCreevy, Mr McQuaid says he isn't expecting any big surprises. If the estimates are anything to go by, the main beneficiaries of the Budget will be the Departments of Health, Education and Social Welfare. If you ask the public, the main concern for many is childcare, an area where the Republic lags behind its European counterparts.

Speaking at the pre-Budget announcement, Mr Cowen said "no one can wave a magic wand" to sort out childcare.

The size of the budget depends on the performance of the economy. Following several years of exceptional growth, the Republic is moving back to a sustainable level of annual growth. It is forecast to grow by 4-5 per cent next year which, though lower than recent years, is strong by international standards.

The money available to Mr Cowen for the Estimates reflects robust revenues from VAT, stamp duty and income tax receipts. The expenditure is split into two areas of capital spending: infrastructure and building projects, and current expenditure, ie the day-to-day costs of public services.

Of the proposed €48.5 billion Budget, more than €12 billion is to be allocated to the health service, up 9 per cent on last year. Spending on education will rise by €530 million to €7.2 billion, enabling the Government to honour its pledge of recruiting more than 400 new teachers over the next two years.

The estimates also set out increased capitation grants for schools, a 17 per cent increase in research funding for third level, and funds to allow for the taskforce on student behaviour to be implemented.

As much as €12.4 billion has been set aside for Social and Family Affairs before any extra Budget-day increases.