THE CABINET meets today to discuss current and capital expenditure items in the forthcoming budget, with the possibility that the discussion could extend into tomorrow. At least four meetings are expected to take place between now and budget day on October 14th.
An increase in income tax rates is not ruled out although observers believe the Government may choose the easier option of adjusting or even abolishing the present €50,700 ceiling PRSI.
Although this week's emergency measures to shore up the banking system acted as an unavoidable distraction from consideration of the budget, the Cabinet still found time for an extra meeting at 3pm last Thursday afternoon.
Asked if today's Cabinet meeting could extend into tomorrow, a Government spokesman said "anything's possible".
Meanwhile, speaking in Cork yesterday, the Taoiseach said the room for manoeuvre was very limited. "We've seen the outcome of the Central Bank forecast for this year; we've seen the contraction of the economy . . . this year and next year will be a difficult year as well.
"Our job in Cabinet is to work out the policy option in terms of expenditure and taxation and in terms of our public capital programme and to ensure that we begin to chart a course for the economy of the country on a more sustainable path."
In his budget speech on Tuesday week, Minister for Finance Brian Lenihan is expected by observers to set out a programme of savings amounting to approximately €4 billion. The existing target of a 2.5 per cent reduction in gross expenditure from its present level of €52.8 billion is seen as likely to be increased.
The final budget package has not yet been agreed. Ministers are suggesting ways in which their departmental expenditure could be cut while preserving programmes they regard as essential. Departments are expected to achieve a 3 per cent reduction in payroll costs.
Asked if income tax rates could go up, a Government source replied: "I don't think anything is off the table."
"Everything is up for grabs," according to one Government source. "Some of the cutbacks are going to be deep."
In addition to today's Cabinet meeting and the regular Government meeting on Tuesday, sources said Ministers were likely to meet again next weekend.
Observers say the Government will need to borrow €10 billion next year with a further €4 billion to be recouped in cuts and savings. This could consist of a €2 billion reduction in current spending, a €1.5 billion cut in capital expenditure and €500 million in tax or PRSI increases.
Although a carbon tax appears an obvious source of added income as well as being part of the Green agenda, there were no official indications that it was likely to be imposed at this stage.
Doubts continue over the future of the Metro North rail project in Dublin. Other ideas being floated by observers include means testing for the allocation of medical cards to persons over 70 years.
Taxing child benefits is another "hardy annual". A property tax is not seen as likely to emerge from the budget deliberations although it might be considered at a future date. Some re-organisation of State agencies is expected although this could be troublesome in political and/or industrial relations terms for relatively modest savings.