Government spending is likely to increase sharply this year as the costs of fighting BSE and foot-and-mouth disease as well as education and health overruns rise.

The Department of Finance is now in tough negotiations with other Government Departments on the amount of additional spending which will be considered for 2001 and the revised book of spending estimates for this year is likely to show large overruns.

In the initial negotiations preceding the revised estimates, Departments are looking for hundreds of millions more than they agreed towards the end of last year - when the estimates for 2001 were first published.

With the European Commission keeping a particularly close eye on the public finances, the Minister for Finance Mr McCreevy is under more pressure than normal to rein in his Cabinet colleagues prior to the publication of the revised book.

However, that is going to be difficult. The Department of Agriculture for example has asked for an additional £280 million (€355.5 million) for this year, mainly to cover the costs of BSE. And that is not counting the potential cost of foot-and-mouth disease. In the initial negotiations, the Department of Finance has asked the Minister for Agriculture Mr Walsh to make savings of about £68 million on this. That would mean an overall increase of £212 million in its vote for 2001 bringing the total to more than £730 million from an initial estimate of almost £519 million.

However, the Department is currently working on the potential cost of foot-and-mouth and will be going back to the Department of Finance with fresh demands to cover the cost of its inspectors patrolling the Border.

There will be other costs of foot-and-mouth through losses to exports and the tourist industry, although it can be hoped that most of these will simply be delayed rather than lost. There is also the ongoing cost of Garda overtime incurred by Border patrols.

Other Departments are also seeking large increases. The high spending Departments of health and education are seeking substantial extra money. However, the negotiations with Finance are not yet complete and the extent of the likely overrun is not yet decided.

The potential cost of the ASTI dispute is not included in these figures. The Department of Finance has estimated that simply paying 30 per cent to secondary teachers would come to £200 million with primary teachers costing a similar amount. However, if the teachers go into benchmarking these will not be costs for this year.

The Minister is reportedly looking for savings of around £500 million. The overrun, however, may be larger than this. Total of day-to-day spending voted by the Dail to various departments came to £17.92 billion for 2001, a 9 per cent increase over 2000. However, at the end of February, day-to-day spending was running around 25 per cent ahead of the same time last year, pointing to huge pressures as the first two months of the year are not usually a high spending period.