Significant increases in Government spending on health, infrastructural projects and defence are set to be included in the Budget on December 2nd.
However, as the Cabinet meets today to finalise its estimates for increases in day-to-day spending, the Department of Education is at loggerheads with the Department of Finance amid indications that it will not receive additional funding.
Sources said last night that discussions between the two departments had broken down as a result of a "very significant financial disagreement" on the future funding requirements of the education sector.
The Minister for Finance, Mr McCreevy, is said to be firmly holding the overall rise in spending at 4 per cent, although the robust state of the Exchequer finances will allow substantial increases in spending in sectors such as health and tax cuts of up to £400 million in the Budget.
All government departments will secure sufficient funding to continue existing programmes and the arguments around the Cabinet table today will be over which will get additional cash in 1999.
Bilateral discussions between Mr McCreevy and the departments on the spending requirements for next year have now concluded.
The Departments of Health, Environment and Defence are believed to have been among the most successful in advancing a case for funding in excess of the 4 per cent cap. This will be channelled into cutting hospital waiting lists and into additional recruitment to the Defence Forces.
Additional spending by the Department of the Environment comes under the capital investment heading and increases here are likely to be substantial. With the impending loss of EU structural funding, capital investment spending is expected to rise much faster than in previous years, with money directed towards infra structural projects such as roads.
The Budget estimates are the main item on the agenda for today's Cabinet meeting and the Department of Finance expects to publish the Book of Estimates in mid-November.
Government spending on social welfare next year will be announced on Budget day and agreement has still to be reached on the scale and specifics of any tax cuts.
In framing the estimates the Government will have to consider the increased public-sector pay bill. However, it will also be able to factor in the continuing drop in the number of people out of work.
The reduction in national debt repayment also provides scope for increases in Government spending without breaching the 4 per cent limit. Repayments are declining due to falling interest rates and the nominal reduction in the value of the national debt, with the Exchequer finances currently running a surplus of about £1 billion.