Increases to welfare rates arising from the budget may be paid from March as part of a compromise being discussed by Fianna Fáil and the Government.

Negotiations are continuing between the sides ahead of the announcement of the budget by Minister for Finance Michael Noonan and Minister for Public Expenditure Paschal Donohoe at 1pm on Tuesday.

All State benefits, including the old-age pension, disability allowance and carers’ allowance, are to receive a €5 increase in the budget.

The sides have been haggling over the dates from which the increased benefits would be paid, but the Irish Times understands they are now close to an agreement.

Fianna Fáil has insisted that the expected increase in the old-age pension should be paid from January 1st, rather than from June or July, which were the planned dates for the welfare increases.

However, Minister for Social Protection Leo Varadkar had said that all those due to receive an increase to their State payments should be treated the same as pensioners.

A proposal to give all those set for increased payments a rise from March 1st has been now tabled.

Fianna Fáil is likely to abstain from the vote on the budget, which would still see it pass in the Oireachtas.

Prescription charges

Meanwhile, the Independent Alliance has secured a reduction in prescription charges in the budget after a last-minute request.

The group had sought a cut in the levies and the request was accepted after meetings with Taoiseach Enda Kenny and Minister for Public Expenditure Paschal Donohoe on Monday evening.

The monthly cost will be capped at €20, a reduction of €5.

However, the Irish Times understands that this cap will only apply to pensioners.

Ahead of the meetings, the Independent Alliance had said it would push for a “substantial” reduction in prescription charges.

Minister for Transport Shane Ross said there were a number of issues to be discussed with Fine Gael and gaps were still to be filled.

Mr Ross denied this request was a last-minute attempt to secure a “win” for the Alliance in the budget.

Independent Minister of State at the Department of Health Finian McGrath said the issue was something that had been raised with Fine Gael since early summer.

He also insisted the Alliance is not seeking to collapse the Government or vote against the budget.

Tax cuts

The Government has about €1.2 billion for tax cuts and spending increases in Budget 2017.

More than two-thirds is likely to go to spending increases, leaving not much more than €300 million for tax cuts.

A reduction to the two lowest rates of the USC in the budget has been flagged, as have other tax measures, such as moves to help the self-employed and raise the threshold at which inheritance tax is paid.

Brexit-themed changes to capital gains and capital acquisitions tax are also predicted.

It has been signalled that some form of incentive is on the way for first-time home buyers.

An increase in tax on tobacco products is expected to be the only revenue-raising measure in Budget 2017.