The Government has signalled a new approach to funding major investment projects through the proposed establishment by early next year of the National Development Finance Agency (NDFA). It will advise on how to manage the finances of big projects and can raise funds itself.

The NDFA legislation may not be passed until the New Year, but the agency could be established in the interim on a non-statutory basis, allowing Mr McCreevy to factor it into his plans.

The Government has a number of options to pay for investment.

Borrowing: The Government can borrow directly to fund such projects, or the NDFA could effectively borrow through issuing special bonds (long-term borrowings) for major projects. Most NDFA borrowing would count as Government borrowing for EU purposes The NDFA will be allowed borrowing of up to €5 billion, though it is unclear how much it can usefully raise itself, as it could cost more than normal Government loans.

Public/private partnerships: Joint ventures between the public and private sectors are already in place in some road, school, health and other projects. The private sector shares the risk and gets it return through tolling or other charging mechanisms. Private investors say the Government needs to clarify how it wants such projects to work.

Special purpose companies: Under the NDFA bill, special companies can be set up to finance specific projects. This may happen in some public/private partnerships, where specific revenues such as road tolls can be identified to pay off the debt. Some of this borrowing could be kept off the Government balance sheet.

Pension Money: The National Pension Reserve Fund - the State's pension manager - could put some of its investment into projects that would generate a return. This is being considered actively by the fund's managers.