The Government will look to its "track record" on reducing VAT and introducing tax incentive schemes when framing its upcoming Budget, according to Minister for Transport Paschal Donohoe.

He indicated the Coalition would help middle income workers paying the top income tax rate and consider changes to the tax code to maximise job creation as work on the Budget intensified in the coming weeks.

“The first thing we need to recognise is the marginal rate of tax for many people in our country is exceptionally high,” he said.

“The second thing we need to do is look at what we can do with our tax code to further ensure that jobs are being created. We would look to the track record in relation to the lower rates of VAT, nine per cent for our services industry.

“We would look at, for example, the very targeted focus that was put in place to make it easier for people to be able to afford to renovate their homes as the kind of measure that has led to more jobs being created.”

The home renovation incentive scheme was introduced by Minister for Finance Michael Noonan in Budget 2014, when the nine per cent VAT rate for the tourism and hospitality sector, brought in 2011, was retained.

However, Mr Donohoe warned the Government would do nothing that might jeopardise progress in the national finances. He cautioned that any unfunded tax cuts would represent “the savage tax increases of tomorrow”.

He stressed no decisions had yet been taken on spending or tax options, as Taoiseach Enda Kenny had “made clear” last week. “I know that all of the work in relation to the Budget will begin to intensify now in the coming weeks,” he added.

Mr Donohoe was speaking in Dublin at the launch of a Tourism Ireland strategy to boost tourist numbers from Canada.