Minister for Finance Michael Noonan has signalled "less cut backs and less tax increases" than previously expected in October's budget.

Speaking on his way into this morning’s Cabinet meeting, Mr Noonan said the Government would beat its financial target because the first six months of the year had gone better than expected in economic terms.

“We thought it would be necessary to increase tax and cut expenditure by €2 billion. We’ll get under three per cent now by making less cut backs and less tax increases,” he said.

However, he said it was too early in the year to say “by how much”.

Separately, Minister for Public Expenditure and Reform Brendan Howlin has confirmed that Cabinet will learn the "over-arching approach" to a "less demanding" budget this morning.

Speaking on his way into Government Buildings, Mr Howlin said he and Mr Noonan would bring a joint memo to Government today.

“The economy has grown, the tax revenue has increased, the number of unemployed has fallen. So these are all good auguries, they’re assistances,” Mr Howlin said.

He confirmed the budget would “certainly” not include €2 billion in cuts to bring the deficit to the three per cent target or below.

So while he said people would be facing a “less demanding budget than that”, he also warned: “We’re not out of the woods”.

Fianna Fáil finance spokesman Michael McGrath has said the Budgetary adjustment could be less than €1 billion.

He was speaking after Mr Noonan confirmed it would no longer be neccesary to increase tax and cut expenditure by €2 billion

“I welcome very much the confirmation now from Government that the Budget adjustment will be less than €2 billion. I hope it will be considerably less than €2 billion. Some of the emerging data is quite positive,” Mr McGrath said.

“I think it could well be the case that the adjustment is less than €1 billion in fact. I think we’re all hoping that six years into this crisis and €30 billion of a budget adjustment later that this budget will be as painless as possible,” he added.

“The Government has promised now to give something back in this budget.”

However, he warned it would be “deeply unfair and regrettable” if the Government excluded those on low and middle incomes from benefiting from “the first tax cut in a good number of years”.

Mr McGrath said he expected the Labour Party to advocate strongly in this regard.