The Irish government’s Coalition parties are locked in a bitter dispute ahead of Wednesday’s latest austerity budget.

A report in the Sunday Independent newspaper says that Fine Gael and their junior Labour Party partners are ‘at war’ before the ‘most feared’ budget in the history of the state.

The paper also reports that senior Labour deputy Ruairi Quinn told party colleagues at a private meeting last week that Health Minister James Reilly is ‘not up to the job and should go’.

A cabinet meeting on Saturday failed to agree on the final terms of Wednesday’s budget.

The Labour Party want a three per cent increase in the universal service charge for those on an income of over $130,000 a year.

But Fine Gael leader and PM Enda Kenny has vowed there will be no increase in direct taxation for workers.

Instead his party will agree to a ‘mansion tax’ on properties worth over a million Euro.

Fine Gael are also demanding a cut in social welfare payments – but Labour Party leader Eamon Gilmore is adamant there will be no such cuts.

A source told the Sunday Independent that the government will now introduce a ‘property-related wealth tax’ in a bid to defuse the row over social welfare cuts and USC hikes.

The source said: “These are now no longer on the table.”

Labour Party minister Joan Burton admitted: “This is the most difficult Budget to date - it has been a very difficult process for me.”