By Paul Hoskins

DUBLIN, Dec 6 (Reuters) - Irish Finance Minister Brian Cowen resisted emptying brimming state coffers in his pre-election budget on Wednesday but still managed to hike spending and cut taxes while promising voters more if re-elected.

"I think it's a pleasing budget and gives the government a more than even chance of returning to office next year," said Alan McQuaid, chief economist at Bloxham Stockbrokers.

"Cowen managed to be generous and prudent at the same time if that's possible ... He could have gone further but he's well aware that it doesn't take much to turn things around for the worse and I think he did the right thing."

Many had believed that, despite his penchant for buzz-words such as "prudence", Cowen would not be able to resist a spending splurge given there will be a general election next year.

Expectations for a give-away budget heightened last week when finance ministry figures showed that a thriving economy and booming property market meant the government would end the year 4.8 billion euros better off than predicted this time last year.

In the end Cowen appeared to err on the side of caution.

"I am satisfied that, in present economic circumstances, this budget is fiscally sustainable, economically appropriate and socially responsible," he told the Irish parliament.

Cowen also stressed the environmental and social credentials of a budget that proposed tax penalties for high-emission cars and included what he said was "the biggest package of support for those on low incomes in the history of the state".

Friends First Chief Economist Jim Power, who expected bigger spending increases than the 11.5 percent hike in gross current spending to 48.5 billion euros in 2007, described it as a "Santa Claus budget".

"He's scattered a lot of money at a lot of different people. Everybody will get up tomorrow morning feeling slightly better off but very few people feeling dramatically better off."

PRE-ELECTION CARROTS

Cowen raised gross capital spending 13 percent to 7.6 billion euros, predicted a general government surplus next year of 1.2 percent of GDP, and gross debt at under 25 percent of GDP, one of the lowest levels in Europe.

Pat McArdle, Chief Economist at Ulster Bank, said the spending plans were less expansionary than he had feared: "All in all difficult to criticise it from an economic perspective".

The Finance Minister sliced the top rate of income tax to 41 percent from 42 percent and pledged to reduce it further to 40 percent if the government was returned to power following a general election which is due by the middle of next year.

Further cuts to the tax rate will also depend on the strength of the economy although Cowen, presenting his third budget, raised his 2007 growth forecast for the Irish economy to 5.25 percent from a previous forecast of 5.0 percent.

Bigger income tax credits and wider bands mean that in total 1.25 billion euros ($1.66 billion), or 625 euros for each member of Ireland's 2 million strong workforce, will be returned to income tax payers next year.

Despite spending rises and tax cuts, Cowen said he expected inflation, as measured on a harmonised EU basis, to moderate from a 2.7 percent average this year to 2.6 percent in 2007.

He also announced tax relief for small and start-up companies plus incentives to boost research and development.

For hard-pressed first-time home buyers trying to get a foot on Ireland's booming property market, Cowen said he would double the tax relief they get on interest paid on mortgages.

- For highlights of Cowen's 2007 budget, click on [nCOWEN] - For reactions to the budget, please click on [nL06810640] - For stories on the environment and housing, click on [nL06875916] [nL06349672] (Additional reporting by Jodie Ginsberg and Kevin Smith)

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