Next week’s budget will put around €1,000 back in the average worker's pocket, the Taoiseach has claimed.

The Government is hinting at cuts to income tax and USC in Tuesday’s package – alongside a package of one-off payments to help with electricity bills and rent.

Reports this morning suggest Finance Minister Michael McGrath is also drafting plans for a mortgage interest relief package for people on tracker and variable mortgages.

Speaking to the Irish Independent, Leo Varadkar said he was pushing for “as generous a tax package” as possible.

“One thing I want to do is reward work, and make sure that people keep money in their pockets,” he said.

He said the measures will add up to more than €1,000 for the average middle-income worker.

The Taoiseach also told the paper that cost-of-living measures included in the package would kick in ‘before and after Christmas’ – but suggested they would not be as extensive as the €600 energy credits announced last year.

Cranes showing construction boom in Dublin City Centre. Image: fluffandshutter / Alamy

It comes after the ESRI warned Ireland is facing a 'sharp' and 'widespread' fall in growth in the final months of this year and urged Government not to cut taxes beyond what is absolutely necessary to keep wages in line with inflation.

Meanwhile, Exchequer returns announced earlier this week showed a dip in corporation tax receipts, significantly cutting into the potential budget surplus Government has to play with.

Labour's education spokesperson Aodhán Ó Riordáin told Newstalk tax cuts are not necessary or the way forward.

“Certainly, we don’t believe you can have a sort of a tax cut agenda but at the same time pretending you can invest in public services,” he said.

“You need to make a choice and the choice for us is making childcare affordable, delivering on housing, delivering on education, delivering on services.”

The Minister for Public Expenditure and Reform Michael McGrath and Minister for Finance Paschal Donohoe outside Government Buildings, 12-10-2021. Image: Sasko Lazarov / RollingNews

Labour yesterday announced its own budget priorities – calling for major investment in families and infrastructure, with €1.6bn set aside for housing.

The Labour plan also includes a €3bn cost-of-living package and measures aimed at capping childcare fees at €200 per month.

Deputy Ó Riordáin said the budget should also focus on education.

“We are advocating for the eradication of voluntary contributions – so that schoolbooks would be free at second level,” he said.

“But we are also calling for a major investment in Deis and we are also calling for investment in ‘Deis Plus’ for those most disadvantaged schools in the system that really need investment from Government.”

The Budget will be announced in Leinster House next Tuesday.

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