Tánaiste Leo Varadkar has said he is not concerned that the cost of a "pandemic bonus" could threaten his party's plans for a tax and welfare package in the upcoming budget.

He also said the Government is exploring the possibility that tax credits, along with an extra bank holiday, could be used to reward retail staff for their work during the Covid-19 emergency.

Mr Varadkar said a mooted extra bank holiday would also be linked to remembrance of the more than 5,000 people who died from Covid-19 in Ireland.

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Mr Varadkar, Minister for Enterprise and Trade, made the remarks during a trip to Washington DC where he is meeting his Biden administration counterparts and promoting Ireland as a location for inward investment.

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Health workers and gardaí have sought inclusion in any pandemic bonus scheme and Mr Varadkar suggested last week that the wider civil service should benefit too.

Minister for Public Expenditure Michael McGrath has warned that the cost of a bonus for all public sector workers in the shape of two weeks’ extra holidays could be in excess of €1 billion.

Asked if he has any concern that Fine Gael’s wish to see tax and welfare packages included in the budget could be threatened by the cost of a pandemic bonus, Mr Varadkar replied: “No, I don’t.”

He said: “I think if there is going to be a pandemic bonus – and I think there should be – it’s likely to fall into this financial year in terms of cost.

“It would ideally be paid before the end of this year, therefore would not impact on the budget for next year.”

Speaking on Monday, Minister for Housing Darragh O'Brien said the bonus could take "various forms".

“We don’t want a situation whereby public and private are pitted against each other. That’s not what it is; this is about recognising incredible work that happened in this country right the way through the pandemic. And many people right the way through from health to transport to retail really, really stepped up and went above and beyond, so that’s something that will be discussed further at Cabinet this week.”

Meanwhile, Green Party leader Eamon Ryan suggested bus and retail workers should be considered for any pandemic bonus.