THE government is preparing to introduce €400m of direct cuts to health services in the upcoming budget.

The cabinet this morning holds the first of its weekend meetings in advance of the budget, with ministers due to begin their deliberations at 10am at government buildings.

Although the budget is over a fortnight away, informed sources say the "choices facing the government are becoming increasingly clear".

The €400m health savings will come directly from programmes and is exclusive of reductions in pay that are likely to bring savings in the health sector up to around €1bn for next year.

As part of the savings, the government will press ahead with a 50c prescription charge for medical card holders, which was first revealed in last weekend's Sunday Tribune.

Although the measure has been strongly criticised, there is a strong view within government that not only is the measure necessary to raise money, but there is significant abuse of the system and the introduction of a charging system will help reduce this abuse.

A cut of €1.3bn in the public sector pay bill is a given but there is unlikely to be a move in this budget to bring more of the 50% of workers who pay no tax into the tax net.

Sources close to government admit this issue will have to be addressed at some point but, with cuts in social welfare also inevitable, ministers want to avoid accusations that they are exclusively targeting the lower paid.

Whether or not a reduction in actual social welfare rates can be avoided is dependent on how much ministers are willing to cut child benefit. The latest figure being mooted of around €220m off the child benefit outlay of €2.5bn would make it impossible to avoid cuts in other social welfare rates other than old-age pensions.