Tax cuts for hard-working families will trump social welfare increases in next year's budget, Taoiseach Leo Varadkar has indicated.
The Taoiseach is "determined" to find money for tax cuts in the next budget but is "not sure" if it will be possible to increase weekly payments for people with disabilities and carers.
Mr Varadkar spoke as the European Commission warned the Government it faced a "trilemma" in relation to its plans to slash tax. The commission's latest post surveillance report says Ireland's tax base is relatively narrow but suggests the USC should be maintained. It suggests a broadening of the tax base.
However, in the clearest sign yet of his plans for Budget 2018, Mr Varadkar said the Government would "find some space to increase the take home pay of two million people who work really hard in this country, who get up every day, go to work, pay the taxes that make everything else possible".
Separately he confirmed that he expected there to be "room for a further increase in funding for disability services for next year, not least in the area of respite, which I think is hugely important in giving people a break, and carers in particular".
However, noting that there was a social welfare package which brought the first increases to weekly payments in more than eight years to people with disabilities and carers, he said: "I am not sure if that is going to be possible again next year, but I hope that it will be."
The monies available for the Budget will be extremely tight - with the current estimate set around €550m, including promised increases in public sector pay.
However, the Taoiseach suggested some revenue raising measures such as increases in excise duty on cigarettes will be considered to give more wriggle room.
"It is always the case in almost every budget that there are revenue raising measures. For example, in the last budget there were increases in cigarettes for example, but again no specific decisions on any revenue raising measures have been taken but I am certainly not ruling them out," he said.
Mr Varadkar also revealed that the Government was considering cutting current public spending in certain areas to free up cash. The Taoiseach questioned whether existing spending programmes represent the best use of resources.
"If 1pc or 2pc of that could be re-allocated, we would have another billion. This is the hidden 'fiscal space'.
"It is something we need to examine. The opportunity cost of not doing so is too great," he told the National Economic Dialogue.
"In the run-up to each budget, a lot of emphasis is often placed on the 'extra' resources that are available, the so-called fiscal space," Mr Varadkar said.
"It is important to bear in mind that this represents only a small increment of the total resources available. What we should focus on is the totality of expenditure and taxation."
Finance Minister Paschal Donohoe said all decisions would be made to ensure a balanced budget.