The Minister of State at the Department of Finance has said there is not scope for significant tax cuts in the budget next October.

Brian Hayes said the aim of Government was to ensure no increases in income tax as it aims to save around €3.1bn.

The Government has an extra €1bn in savings from the promissory note deal but the Fiscal Advisory Council has urged it to be prudent.

“I think it’s going to be difficult in this budgetary round for any significant reduction in income tax given the financial position that we face.

“I think that is obviously the case in the circumstance where you’ve got to find about €3bn,” the minister said.

Amid report of differences in the coalition about possible tax changes, ministers will learn from the finance and public expenditure ministers early in September the exact savings needed in the budget.

The Government's budget watchdog believes spending cuts and increased taxes should continue.

Professor John McCale of the Irish Fiscal Advisory Council said, “The prudent course is to make sure we have a little bit of a cushion for the moment. I think that means moving ahead with the planned adjustments of €3.1bn.”

Sinn Fein said the time had come for Government to abandon its austerity policy.

Finance Spokesperson, Pearse Doherty said, “Regardless if there’s a billion euro less it still means that the Government is going to impose just over €2bn in austerity measures.”