Minister for Children Katherine Zappone has been asked to reconfigure elements of her proposed budget package on childcare, amid concerns in Fine Gael that the so-called "squeezed middle" will not benefit from the plans.

The Government is considering a radical new system of subsidised childcare from Ms Zappone that would mean the State pays a portion of a family’s bills directly to childcare providers.

It is likely, however, that the initial rollout of the income- tested scheme, expected to start next September, will focus on lower-income families. In some cases, they could see almost all of their childcare costs covered.

Senior Fine Gael sources and a number of party TDs have said any moves should also benefit the "squeezed middle", which Minister for Finance Michael Noonan has defined as those who earn between €32,800 and €70,000.

An initial indicative figure of €47,000 income per couple was used by Ms Zappone’s officials in a briefing last week - but sources stressed this was only an example and would not be the threshold that would apply when the plan was announced.

Taoiseach Enda Kenny said Ms Zappone has been asked to look again at elements of the proposed scheme.

“Minister Zappone brought a proposition to the Cabinet sub-committee and that set-out a particular development in childcare,” Mr Kenny told political correspondents at a briefing. “Obviously the committee have asked the minister to come back and look at elements of that that could be restructured.

“I would say that we have now started the implementation of paternity leave, which is there, and also the second free pre-school year which is also of assistance to people in the middle sector who have had to pay for these things.

“It’s a work in progress until the minister comes back with to the Cabinet sub-committee or to the government itself with a formal memo, no decision will be taken on that.”

Sources have said the threshold at which subsidies will apply depends on the amount of money given to Ms Zappone by Fine Gael during budget negotiations.

It is acknowledged the full roll out of the scheme across a number of income brackets is likely to take a number of budgets to implement.

The plan will be designed in such a way that the level of subsidies can be easily increased or reduced should a government wish to do so.