The Minister tasked with drafting the Government’s childcare plan was kept in the dark as alternatives to her proposed scheme, which was criticised for neglecting middle-income earners, were mooted in budget talks.

Minister for Children Katherine Zappone had put forward a plan for a subsidised childcare scheme initially aimed at lower income families.

However, a number of Fine Gael members were unhappy as the proposal did not help the 'squeezed middle' – those earning between €32,800 and €70,000 – and wanted the subsidies to be given to parents across all income groups.

Alternative options to the Minister’s proposals were discussed elsewhere in Government – unbeknown to her – as recently as late last week, when concerns about the plan were being raised.

The Minister’s scheme, as outlined to a Cabinet sub-committee, suggested the initial steps would focus on families with a combined parental income of €47,000 or less, with the income thresholds rising over a number of years.

One of the alternative options discussed was rolling out subsidised childcare over a number of years based on the age of the child. For example, in the first year it would cover children aged up to one before being broadened over time to cover those aged up to three, when they can begin to avail of free pre-school care.

Sources said such a proposal would have income limits, meaning it would not apply to the State’s wealthiest people.

Such a proposal is likely to be more favourable to Fine Gael backbenchers but a spokesman for Ms Zappone last night stressed it had not been discussed with her or the Department of Children.

The spokesman also said Ms Zappone fully intended to stick to her plan.

A spokesman for Ms Zappone said: “These anonymous sources in no way reflect the content of the ongoing budget negotiations.”

While Taoiseach Enda Kenny last week said Ms Zappone had been asked to restructure elements of the scheme, he yesterday indicated it would focus on low incomes and “expand as the economy improves and more money becomes available”.

Meanwhile, Minister for Finance Michael Noonan outlined a range of likely tax cuts at yesterday's Cabinet meeting. The Government has around €1 billion to spend in the budget, which Ministers have said will be split on a 2:1 basis between spending increases and tax cuts.

Mr Noonan told his colleagues he was likely to reduce the lowest two USC rates by half a point each – from 1 per cent and 3 per cent to 0.5 per cent and 2.5 per cent respectively.

Threshold

He will also raise the €13,000 threshold at which people enter the lowest USC rate, effectively taking more out of the USC net.

The threshold for inheritance tax on gifts between parents and children is also expected to be raised from €280,000 to €320,000.

A tax credit for self-employed people will also be extended. An “earned income tax credit” worth up to €550 was announced last year and it is likely to be doubled in a fortnight’s time. Mr Noonan also told his colleagues he intended to help first-time house buyers but did not give any specifics, and said he would give further support to start-up firms.