Minister for Finance Michael Noonan has warned October's Budget will be tough, even if the Government decides to use all of the proceeds from the promissory note deal to reduce the level of cuts and tax increases.

Speaking on RTÉ's The Week in Politics, Mr Noonan said there were options as to whether the €1bn from the deal could be used.

The savings could reduce the total level of adjustments for next year from €3bn to €2bn.

He said this could mean fewer cutbacks and fewer tax increases.

Mr Noonan said the proceeds from the deal could be used to ease up on the correction process or it could be used to invest in infrastructure projects.

However, he said the ultimate target of reducing the deficit to 3% by the end of 2015 still had to be met.

Mr Noonan said he would make the decision on what to do in September.