THE cabinet is to hold an all-day meeting at Farmleigh on Wednesday which will kick-start its budgetary deliberations.

The meeting will deal with normal government business but it will also be the first time that ministers really turn their attention to next December's budget when they have to find savings of €3bn.

It is understood there will also be a heavy concentration on Wednesday on jobs in the wake of last week's visit by the Taoiseach to the US which was heavily focused on employment creation. The meeting is expected to involve an examination of the measures taken to date by the government to see how well they are working.

With half-year figures for the public finances now available to ministers, the cabinet will be in a better position to assess the budgetary situation and examine exactly what measures will be required in the December budget.

Last year, the cabinet had dozens of meetings in the run-up to the budget to try to "politically proof" the tough decisions that had to be made to deliver savings of €4bn. This was seen as successful in limiting the political fallout from what was arguably the toughest budget in the history of the state. The same tactic is certain to be used this year. Finance minister Brian Lenihan has signalled that the emphasis in December's budget would be on spending cuts and not taxes. And he added that ending the remaining tax breaks on property would take precedence over new property taxes.

While there is no question of introducing a fully fledged property tax system in advance of December's budget, the option of introducing a temporary flat-rate household services charge does remain as a means of raising revenue and is likely to be explored by the cabinet in the coming months.

Such a measure would be stiffly resisted by government deputies but the difficulty in getting to €3bn means that some unpalatable measures are going to have to be adopted. The success of the €200 tax on second homes in raising revenue with little overheads could point the way for the government in this regard.

There will inevitably be a widening of the tax net to ensure that some of the 50% of workers currently paying no tax will make a contribution. This can be done by the introduction of a new social contribution which will replace PRSI, health and income levies.