The Taoiseach has said the upcoming Budget would include a tax and welfare package that puts a little into everyone's pockets.

Leo Varadkar said any revenue-raising measures would be used to reduce taxes particularly taxes on income.

"We've taken the vast majority of low paid workers out of the income tax net altogether in the last couple of years," he said.

The Taoiseach said that the Government wanted to focus on middle-income taxpayers to make sure they do not continue to pay the highest rate of income tax on modest incomes.

Mr Varadkar also said that a call to give grandparents a grant for minding children was also under consideration.

He said that he would speak to Minister Katherine Zappone to hear what she thinks would be the best way to prioritise spending on childcare.

It is expected that talks between Fine Gael and Fianna Fáil about the Budget will begin the week after next.

Given their close proximity to the 9 October Budget date, these talks are likely to be "fast and furious", according to senior sources.

It is anticipated the Budget will again include raising the entry point at which earners pay the 40% tax rate, which currently stands at €34,500.

Calls for a "modest" reduction in the Universal Social Charge will form a key part of the discussions.

As things stand, there will be €800m available for spending increases and tax cuts given that €2.6bn of the available money has already been accounted for.

However, it seems certain that there will be revenue-raising measures, including possibly increasing the low 9% VAT rate for hotels and a hike in carbon taxes.

The talks between the parties are set to focus on using any extra money to address the housing crisis, increase services for those with extra needs and boosting funding for home care package for the elderly.

These discussions will take place against the backdrop of renewed calls from Mr Varadkar to extend the Confidence and Supply Agreement between Fianna Fáil and Fine Gael for another two years.

Mr Varadkar and Fianna Fáil leader Micheál Martin will meet early next month.

Fianna Fáil deputy leader Dara Calleary has already indicated that he would be open to the idea of a one-year extension.

When asked yesterday if he would consider a one-year add on to the arrangement, the Taoiseach said he would not be negotiating on the airwaves.