Support is growing across Fianna Fáil and Fine Gael for car tax to be axed as part of a package of measures to help hard-pressed families.

The Coalition is now desperately seeking ways and means to assuage a rising tide of public discontent over the cost of living.

The calls come as an Irish Daily Mail study shows that commuters could spend up to €2,000 more a year travelling to work in Dublin if petrol prices stay at current levels.

This is set to escalate further in the wake of a comprehensive rejection of a 5% increase over two years for public sector workers.

Among the measures being considered are a summer version of the Christmas bonus and the extension of fuel allowances.

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However, concern is growing across the Coalition partners that these measures will not benefit a "squeezed middle" of workers who do not qualify for welfare benefits but are struggling financially.

Unease is especially high within Fine Gael who are, in the run-up to the much anticipated Summer Economic Statement (SES), prioritising tax cuts and cuts in costs for the squeezed middle.

Taoiseach Micheál Martin told Newstalk the statement will set out the key parameters for "what will be a cost of living budget".

Fianna Fáil, in opposition to Fine Gael, are prioritising welfare increases such as a summer bonus.

One senior Fine Gael figure said: "We are doing it again. There is not a penny in this for our voters, this is a Fianna Fáil/Sinn Féin win."

The car tax proposal was originally raised by Senator Tim Lombard at a Fine Gael Parliamentary Party meeting.

Mr Lombard said it would be particularly impactful in rural Ireland, noting "cuts in bus fares are of no use. The only bus services we have run twice a day and take four hours to get to the city".

He added: "If we are being guided by fairness, the most equitable thing to do is cancel road tax. Cuts in bus fares are of no use to swathes of rural Ireland."

The senator received strong support across the party with former Social Protection Minister Regina Doherty and Joe Carey weighing in strongly on the issue, while the proposal is also attracting cautious ministerial interest.

Fianna Fáil's Willie O'Dea said: "The Government is collecting a pile of extra money from VAT and levies because of inflation. That windfall should be taken and applied to those who are struggling. Motor tax should be included, provided we can do it in a targeted way. We don't want fellows in Lamborghinis throwing away their discs."

Senior Fianna Fáil backbencher John Lahart said: "The emphasis in responding to inflation must be on stopping money going out of people's pockets. We should be looking at things like tolls for the holiday season and a softening of the impact of motor taxes."

Deferral or abolition of car tax would be a major fiscal commitment with the tax bringing in €940million in 2020 and €860,599,622 in Revenue in 2021.

The support for a move comes amid a perceived U-turn where Finance Minister Paschal Donohoe is now believed to favour some form of action to deal with the pressures on the economy prior to the summer recess.

It had been previously believed Mr Donohoe favoured the minimalist approach of Mr Martin.

Mr Martin told Gavin Reilly's On The Record show yesterday: "We can't chase inflation from month to month. It is far better we do comprehensive measures which will be sustained throughout the winter."

In a significant U-turn, senior Fine Gael sources now claim the opposite is the case.

One minister said: "There was never a question of us not doing something. We are not going to give Sinn Féin a stick to beat us with for the summer.

"Even Paschal has said there will be bits and bobs, we're just not going to call it a mini-budget."

A senior Coalition minister said: "All of the respectable people, the ESRI and the Irish Financial Advisory Council are calling for a package. It's OK to do it now.

"It is not very clear what we can do at this point. We have gone as far as we can on VAT and excise, Leo has asked the party for time to reflect on what can be done."

Support is growing for something more dramatic, with one minister warning "we need a big ticket item".

The minister said: "Politically and in terms of the morale of the public we have to be seen to be doing something good. People see the changes in gas and electricity. They see it marked on the bill, 'Government subsidy'."

When it comes to car tax, one Minister said: "I'd love to see it. I'd be in favour of abolishing it. France doesn't have a road tax and they survive.

"All the costs and administration would be done away with. Why just take 5 cent off a litre when you can do something memorable: something we can say the Government is doing this for you."

Another Minister said: "The simple fact is that there is a desire for a big-ticket item. We have to do it before the recess."

The Dáil is due to go into recess on July 14. Prior to that, the Government's first post-Covid SES is expected to be held in early July.

Separately, Fianna Fáil will have a "clear the air" one-day meeting on the economy on July 1.

The parameters of any change are expected to be hammered out over a series of meetings between the Coalition leaders and the Ministers for Finance and Public Expenditure. It is unlikely the Greens would welcome reductions in car tax.

Party leader Eamon Ryan is on record earlier this year as being supportive of measures such as the even heavier taxation of SUV-style vehicles in the budget.

A Greens spokesman said: "The Green Party has been centrally involved in the introduction of a series of cost-of-living measures since last October that have helped ease the burden of inflation on households."

A Coalition heavyweight noted: "The Green Party want the motor taxes to fund all their bicycle lanes and greenways. If they want to get re-elected though they might soften their cough."

The U-turn over a mini-budget comes against a backdrop of gathering concern over a series of up to five proposed interest rate rises by the end of the year. The minister said of the proposed increases: "People have forgotten what it is like in dealing with rising interest rates on your home.

"Anyone under 40 has no memory of the time where interest and mortgage rates were 15%.

"Dealing with rising mortgage payments will come as an enormous shock to most people, 10% over ten years. They are used to the mortgage bill being static for a decade, that will change fast."