Finance Minister Michael Noonan has said that he plans to cut the Universal Social Charge by 1%, if not more, in the next Budget.

The Government has previously said it has room for a Budget adjustment of between €1.2bn-€1.5bn, due to improving economic conditions and increased tax-take.

Minister Noonan said that he will cut personal taxes to raise take-home pay for everyone and encourage more people to work.

"I'm going to cut personal taxes in this Budget," he said.

"I'm going to cut Universal Social Charge by at least 1%, and maybe by a bit more.

"But to target all the people that I want to target - low-paid people, middle-income people - I'll need to use PRSI, income tax and USC, because there are three different personal taxes.

"But I'm doing it so that work pays better than it pays now, and that there's more take-home pay, and that I'm incentivising more people to go to work."

Minister Noonan also said retired ministers who are in line for an increase in their pensions should voluntarily give that money back to the exchequer.

Former Taoisigh Brian Cowen and Bertie Ahern are among those eligible for "top-ups" over the next three years, as part of a side deal struck during negotiations ahead of the Lansdowne Road Agreement.

Minister Noonan said the Government cannot exclude former ministers from the legislation on public sector pay, as it would be knowingly acting illegally.

"As a temporary measure … they should voluntarily give the increase to the exchequer," Noonan said.

"It has been done [before], the group here is quite small, and I think in the public interest, and because of the offices they held, it would be a good idea."