Having slammed on the brakes immediately after the last election, the Minister for Finance, Mr McCreevy, has applied another touch to the pedal heading into 2004. Restraint in spending growth is likely to pave the way for a "holding" Budget, with the Minister needing to find only a limited amount of extra revenue from taxes, writes Cliff Taylor, Economics Editor.
The Estimates show a 5 per cent increase in spending next year and this is likely to rise to 6 per cent when Budget day social welfare increases are added. This continues the slowdown from the record 21 per cent spending rise in 2001.
Much of the initial focus is on the so-called "stealth taxes" - the €91 million being raised from new charges. In time it may move to the hidden cutbacks. The vast bulk of the extra spending - €1.1 billion of the extra €1.9 billion allocated - has gone on a rising public sector pay bill. Elsewhere, spending has been either very tightly controlled or actually cut. This is bound to hit service levels to the public.
The tight finances have also left little for extra State investment spending, which will rise by just 1.5 per cent from this year's outturn.
This will mean investment falling as a percentage of GNP for the second year in a row, though the Government will try to close some of the gap with a budgetary announcement of new measures to attract private sector funding in this area. A five-year programme for State investment will also be announced.
Presenting the Estimates yesterday, Mr McCreevy's message was "what we have we hold" , with Government policy seeking to copperfasten the gains of recent years. All the signs are that the Budget will not contain any major departures.
The key issue for taxpayers will be whether Mr McCreevy maintains the creeping tax increases of last year, when non-indexation of the income tax system for inflation led to a higher take. Certainly some excise duty increases can be expected, encouraged by yesterday's news that inflation has fallen to a four-year low of 2.3 per cent.
Already many taxpayers will pay a little extra next year due to the imposition of PRSI and the 2 per cent health levy on benefits-in kind. Yesterday's Estimates also, as normal, announced an increase in the employee PRSI ceiling by over 4 per cent to €42,160.
There is unlikely to be much good news on Budget day to offset this, as Mr McCreevy seeks to raise more to stop borrowing from rising too quickly.