THE Government has reached final agreement on the main elements of a Budget designed to pave the way for a general election. The main changes will be a cut in the standard income tax rate from 27 to 26 per cent and a similar one-point cut in employees PRSI to 4.5 per cent.
The headline changes in tax and PRSI will mean almost £400 extra for a single person on average earnings, a rise of £8 a week.
Other tax cuts will be made to help business, and a comprehensive package to aid farmers hit by the BSE crisis will also feature.
The total income tax package will come to some £290 million in 1997, or £400 million for the full year from April.
The Cabinet was told yesterday that the proposals, hammered out at a special meeting of the Budget sub-committee, had been broadly agreed. The three party leaders, as well as the Minister for Finance, Mr Quinn, the Minister of State, Mr Hugh Coveney, and the Minister for Enterprise and Employment, Mr Bruton, have now only to iron out details on various welfare allowances and some excise duties.
With the publication of the Partnership 2000 programme yesterday - offering between £900 million and £1 billion in income and corporation tax cuts over three years - all were agreed on the need to boost its impact in the first year.
The other key feature of next Wednesday's Budget will be the £115 million package won by the Department of Social Welfare, below the £150 million initially sought by the Minister for Social Welfare Mr De Rossa.
Other changes agreed include a £1 rise in child benefit for first and second children, rising to £6 for the third child and above.
More people will be eligible to claim the family income supplement which tops up the incomes for low-paid workers. Qualification for the scheme is now based on a family's gross income - before tax and PRSI - and the Budget will make the first move towards calculating the payment on a basis which takes account of net pay.
On income tax, it is not yet clear exactly what the rise in personal allowances will be. However, a substantial increase to cut the amount of income exposed to tax is likely, with an expected rise of about £200 in the single person's allowance and a £400 rise in the married couple's allowance.
There will also be an increase in the exemption limit below which no tax is paid and a widening of the standard 27 per cent income tax band so that less tax will be paid at the higher 48 per cent rate.
However, the continuing reduction in mortgage tax relief will cut the gains for many homeowners.
For the second year in a row, Mr Quinn is unlikely to put up the price of alcohol. Cigarettes will go up, but by less than last year's lop rise. Petrol is also set to increase.
Farmers will be targeted with a special package. It will include increased capital allowances; a cut in stamp duty; the extension of a scheme aimed at young farmers; and a rebate on the VAT relief on livestock.
Businesses will also benefit. The main corporation tax rate is to be reduced from 38 per cent to 36 per cent.
There will be no reduction in employers' PRSI with the Department of Social Welfare. However, the lower threshold at which employers' PRSI is payable will be raised to £13,500 from £13,000 with two further £500 increases expected in the next two budgets.