The budget package to be announced by Minister for Finance Paschal Donohoe next week will be up to €1 billion, far greater than had been initially expected.

The Irish Times understands Mr Donohoe will outline a package of new spending and tax cuts between €900 million and €1 billion next Tuesday.

The first budget of Taoiseach Leo Varadkar’s administration will rely heavily on hundreds of millions in revenue-raising measures, with a substantial increase in stamp duty on commercial buildings expected.

Recent years have seen such stamp duty fall from 9 per cent to 6 per cent, and eventually to 2 per cent. A 1 per cent increase would bring in almost €100 million.

Sources said the tax package to be agreed between Fianna Fáil and Fine Gael – which will be a mix of reductions to the Universal Social Charge and an increase in the threshold at which people hit the higher 40 per cent rate of income tax – would have to be about €300 million to be in any way meaningful.

In line with Fine Gael’s confidence-and-supply agreement with Fianna Fáil which underpins the minority Government, the allocation of resources has to be split on a two-to-one basis in favour of expenditure, meaning there will be €600 million of new spending.

It is understood this is aside from money allocated for the public sector pay deal, with some sources saying the final package will be between €900 million and €1 billion, far more than the €350 million that would have been available without any revenue-raising measures.

Spending measures

The majority of Government departments, including the Department of Health, are believed to have signed off on their overall budgetary measures.

Talks between Mr Donohoe and Fianna Fáil will continue over the weekend, both on the composition of the income tax package and on spending measures.

The welfare package in particular is understood to be contentious, with Fianna Fáil asking for a €5 increase in most payments. The timing of the welfare increases is also under negotiation.

While significant revenue-raising measures are expected – such as increases in excise on alcohol and tobacco, as well as a sugar tax – any change to the special 9 per cent VAT rate for the hospitality sector is seen as unlikely.

Mr Donohoe has also to finalise his talks with the Independent Alliance, with Finian McGrath, the Minister of State with responsibility for disabilities, calling the negotiations “extremely difficult”. He called on Mr Donohoe to seriously consider the alliance’s requests.

Land hoarding

Mr Donohoe is also understood to be considering measures aimed at tackling land hoarding by examining capital gains tax arrangements, such as the exemption for investors who have availed of a seven-year exemption introduced in 2012.

He has secured an additional €300 million from government coffers to pay for this year’s Christmas bonus to social welfare recipients and the water refund payments.

The White Paper on Estimates of Receipts and Expenditure, published on Friday night, contains the department’s projections for tax and spending this year and next ahead of the budget.

Meanwhile, the latest Irish Times/Ipsos MRBI poll finds most voters want available cash spent on capital projects such as housing, schools and hospitals. More than twice as many voters favour this option over tax cuts.