Minister for Finance Paschal Donohoe has said refunding water charges will cost the exchequer €178 million, including €5m in administrative costs.

He told the Oireachtas Budget Oversight Committee that the money for refunding water charges could be drawn from underspending.

The minister told the committee that the Summer Economic Statement said the refunding water charges will be dealt with later in the year.

He said the Taoiseach has outlined that he wants to deliver a full refund.

"The full cost in relation to that is that there will be an administrative charge of €5m and we will have to deal with the issue of how we will support Group Water Schemes, that will bring the full cost to €178m", Mr Donohoe said.

He told the committee that underspends across all departments by the end of June is projected at between "€280 and €300m, which indicates that we will be able to deliver that cost out of overall overspends for the year."

Mr Donohoe also said he will be in a position to give a departmental breakdown of that figure later this year "when I have two to three months of expenditure under my belt."

Sinn Féin's finance spokesperson Pearse Doherty asked the minister: "Are you suggesting that €57m of capital spending is in the pot to pay back water charges?"

Mr Donohoe said the total underspend is in the region of €280 to €300m.

Earlier, the minister said that "overall public spending will be around €60 billion next year - it is crucial that we focus on the totality of expenditure and not just incremental changes.

"We must also focus on the fiscal stance and not just the fiscal space.

"In other words, we will ensure that budgetary policy is appropriate in supporting sound macroeconomic conditions and boosting potential growth."

Speaking on RTÉ's News At One, Mr Donohoe conceded that things could have been done differently during the Irish Water saga.

However, he insisted that he will make refunds happen in a way that will ensure public service commitments are not affected.

"If we look to treat this as a form of expenditure paid for out of general taxation, that also has consequences too.

"The way in which I am handling this is to mitigate those consequences. We are handling this issue in 2017. I am saying we can do this without having to increase taxation or without having to make changes or cutbacks or how we deliver public services.

"My understanding is the Fianna Fáil position is they want people who have paid and who have not paid to be treated equally. I would expect they want us to deal with this in a prompt manner."

Speaking on RTÉ's Drivetime, Sinn Féin housing spokesperson Eoin Ó Broin welcomed the Government's commitment to refund water charges, but said he the funding should not come from housing or health spending.

He said it is Mr Donohoe's responsibility to outline where the underspend is.

On the same programme, Green Party leader Eamon Ryan said he is still looking for a referendum on the ownership of Irish Water.

He said he believes the Government is on a "PR exercise", by committing to refunds.

Cowen expresses concern over approach to refunds

Meanwhile, Fianna Fáil TD Barry Cowen has written to Minister for Housing, Planning and Local Government Eoghan Murphy expressing "genuine concern" about the Government's handling of water charge refunds.

The letter, seen by RTÉ News, details how Fianna Fáil is angry over Taoiseach Leo Varadkar speaking about water refunds in a Sunday newspaper interview without prior consultation with Dáil colleagues.

"The lack of detail on where the money is to be found is quite surprising," reads the letter.

Mr Cowen's letter also states: "It beggars belief that there seems to be no mechanism available to prevent people from keeping the conservation grant even though they may never have paid any water charges.

"It is important that people know the extent of how this proposal was actually examined."

He wrote: "While we both had a brief discussion in early July about the delays in the substantive legislation required to implement the recommendations of the all-party Oireachtas committee there was never any discussion on how or when water charges would be paid back to people.

"It was therefore quite surprising to read that this funding is going to be found from unspent monies this year or indeed excess income from tax receipts.

"It is also surprising to learn that unspent monies to that extent will be found in 2017 given the extensive pressure on services and given that the fiscal space was so very tight. It would appear from publicly available information that all Government department's spending profiles seem to be on target

"I hope you are in a position to confirm that services will not be impacted upon in order to allow this premature announcement to come to fruition".

Mr Cowen concluded: "It is disappointing that this announcement was made without much thought or any discussion at Cabinet or political level."