The Government has about €200 million more than expected to spend in the budget, with an estimated €1.2 billion package to be revealed next week.
The extra €200 million to expand the so-called "fiscal space", is understood to have been found through "savings", allowing Minister for Finance Michael Noonan and Minister for Public Expenditure Paschal Donohoe to spend more money on higher than expected cuts to the Universal Social Charge.
The Cabinet met on Thursday evening to discuss next Tuesday’s budget. The total USC package is expected to cost about €330 million.
Mr Noonan will also introduce a number of other tax initiatives, such as €50 million for the income tax refund scheme to help first-time buyers save for a mortgage deposit. It is understood €10 million of this will be backdated to July.
The scheme will be set at 5 per cent of the value of a home up to €400,000, with a maximum refund of €20,000.
It is understood that while the refund can be claimed on homes costing more than €400,000, the total refund will not exceed €20,000.
Other tax measures, such as moves to help the self-employed, raise the threshold at which inheritance tax is paid, and Brexit-themed changes to capital gains and capital acquisitions tax are also predicted. An increase in tax on tobacco products is expected to be the only revenue raising measure.
Sources said Mr Noonan's final tax package will be about €400 million and, in order to maintain the 2:1 ratio of spending increases to tax cuts agreed with Fianna Fáil in the confidence and supply deal, the fiscal space will rise to about €1.2 billion.
Discussions are continuing on the level of increase to the State pension and increases in payments to carers, as well as funding for schools. Minister for Health Simon Harris has secured an extra €275 million.
The Central Bank’s chief economist on Thursday questioned the need for additional stimulus. “In view of the current state of the economy, it’s very hard to argue the case that the economy needs fiscal stimulus,” Gabriel Fagan said at the publication of the bank’s latest quarterly bulletin.
