Senior Fine Gael figures have warned that the Coalition’s agreed Budget 2027 framework will have to be ‘fundamentally renegotiated’, arguing the current allocation for tax cuts is too low to deliver Tánaiste Simon Harris’s reform agenda.

The warning comes after the Government this week published the Summer Economic Statement, which allocated €8.5billion in additional resources for Budget 2027.

Under the agreed framework, €7billion is earmarked for additional spending, while €1.5billion has been set aside for tax reductions.

The tax package represents a modest rise on last year’s planned allocation of €1.3billion for tax cuts, alongside €8.1billion in additional spending.

However, Fine Gael sources say the increase falls well short of what is needed.

Tax Strategy Group figures reveal that a €2,000 increase in the standard band, where workers pay the lower rate of tax, would cost €525million.

They also say the cost of increasing Primary/Universal Tax Credits (Personal, Employee/PAYE and Earned Income) by the rate of wage inflation (4% – apparently) would be €465 million.

One minister said this weekend: ‘With costs like that, you will be running out of money very quickly and don’t forget, we are a year behind on tax cuts. There weren’t any this year, so he may have to go further.’

To keep pace with expected general inflation next year, the current €44,000 limit would need to rise to about €45,300. However, if it is also to be adjusted to account for this year’s inflation, it would need to rise to above €46,800.

One senior Fine Gael source warned: ‘Increasing the bands by €2,000: it would be a €400-a-year gain for a single person earning more than €46,000. It is not exactly dancing in the streets country.’

In an indication of pre-budget strains between the squabbling Coalition partners, they added: ‘The split between tax and spending will have to be fundamentally renegotiated. Even with Harris increasing the tax share to €1.5 billion, Jack [Chambers] is still getting billions more in current spending.’

One Fine Gael minister noted: ‘This budget is fundamental to the success of the Harris project.

‘It is the budget that will define his legacy, and he only has one shot at it.

‘He will deliver next year’s budget too but, all going well, he will be Taoiseach about a month later.’

‘The Harris plan is to squeeze the pips on the tax take from working people until that load of dilettantes in the Fiscal Advisory Council squeal.

‘The louder those fiscal warriors squeal about those evil tax cuts, the happier Harris will be.’

Another minister warned: ‘There will have to be at least another billion down the sofa. It happens regularly. The figures are massaged and tweaked. It is likely to happen here. The Exchequer is awash with cash. It’s McCreevy economics all over again.’

Meanwhile, Mr Harris’s high-profile seizure of the tax-cutting agenda is generating unease in Fianna Fáil over the Tánaiste’s political guile.

One minister told us yesterday: ‘Harris is running rings around us over the budget. He is as clever as a fox. He has all this nice stuff, children and tax cuts, while Jack Chambers is fighting with 17 departments and the SIAs [Savings and Investment Accounts] are the icing on top of the cake’.