Key elements of the Green policy agenda and a tighter control of spending across all Government departments are expected to be the outstanding elements of the budget, it emerged last night, following a special meeting of the Cabinet.
Government sources said a critical decision by Minister for Finance Brian Cowen on whether to increase borrowing significantly and abandon an election commitment to balance the books had still not been made.
There have already been signals that other election commitments, such as a plan to halve PRSI contributions and reduce the top rate of income tax by 1 per cent, will also go on the back burner. Resources will be used to fund the current level of spending on public services.
Ministers were yesterday given an overview about the range of options facing the Government. There was a consensus that progress on climate change would have to be made. There was also agreement that election commitments on pensions would have to be met, with a sizeable increase in the State pension for next year.
The implementation of the Green agenda is unlikely to extend as far as the introduction of a carbon tax but a substantial increase in motor tax will be part of the package of measures to give a Green tinge to the Budget.
Mr Cowen gave a commitment last year to "rebalance" vehicle registration tax to provide incentives for motorists to drive cleaner cars. In addition, Minister for the Environment John Gormley can increase motor tax and he indicated publicly over the weekend that he intends to use this power to penalise the owners of larger vehicles.
Mr Gormley told a Young Green Party convention in Limerick on Saturday night that it made sense to have a motor tax scale based on the principle that the polluter pays. However, suggestions that the Minister intends to penalise drivers of all cars with engines of 1.6 litres and over rather than focusing on large SUVs could prove unpopular.
The Department of the Environment is working on a more complex emissions-based tax system but in the short term increased car tax rates are expected to be imposed on all vehicles with engine size of 1.6 litres and over.
Money raised from car tax goes to a local government fund which is divided among county councils. Motor tax revenues contribute almost €1 billion a year to the fund.
In tandem with the budget, a "carbon budget" will also be published. This will detail the state of play in relation to CO2 and greenhouse gas emissions and targets adopted by the Government so that voters can appreciate the thrust of the measures in the Budget.
The concessions to the Greens come at a time when all other Ministers are under strong pressure to justify their spending programmes.
The Taoiseach said yesterday the budgetary process was going very well and that the sharing of views was helpful. He said Mr Cowen had nearly finished his bilateral meetings with Ministers and yesterday's meeting had given them a chance to discuss the issues across the board.
A critical choice facing Mr Cowen is whether to undertake a significant increase in borrowing in order to fund Government spending next year. A significant increase in pensions, a rise in other social welfare payments and modest tax concessions to take account of inflation are regarded as essential.
There is also broad agreement at Cabinet that Government commitments under the National Development Plan should be met but this means that the increase in day-to-day spending will have to slow down.
With health and education accounting for most of the extra spending other departments will be under pressure and the chances of the Government delivering on election pledges to cut PRSI and income tax appear remote.