The Minister for Finance, Mr McCreevy, is coming under strong pressure to agree Government spending plans for next year which breach the coalition's own 4 per cent spending limit. A number of Ministers are understood to have argued strongly for spending increases which exceed the 4 per cent ceiling in head to head meetings with Mr McCreevy and his officials this week. However, the Minister is understood to be insisting that the spending limit must be kept.

Among those seeking big increases are the major spending Ministries of Health and Education, with the Minister for Health, Mr Cowen, said to be in particularly combative form. A number of Ministers are understood to be arguing that they require significantly more cash in order to meet the commitments set down in the Programme for Government.

Pressure may be less in the major spending area of social welfare, as the falling unemployment register helps the Government to keep spending in check. However, sources say that there will have to be a generous increase in welfare payments on Budget day to show that welfare recipients will gain as well as taxpayers.

Over half the Ministers in the Cabinet are said to be disgruntled with the tight line being taken Mr McCreevy and his officials. However, the spending issue has still not come up at full Cabinet level. So far it appears that Mr McCreevy is holding to his target, under which spending is not to increase by any more than 4 per cent over this year's level. The Minister has repeated this week that he would not allow it to be breached.

The Tanaiste, Ms Harney, also insisted yesterday that there is no room for the 4 per cent target to be breached. So far Health, Education and Justice have had their bi-lateral meetings. The Ministers from Agriculture, Arts Culture and the Gaeltacht, Public Enterprise and the Marine were all expected to make the trip to Merrion Street yesterday. The consideration of the 1998 spending plans should be finished within the next week or so, when serious consideration will be given to the tax-cutting element of the forthcoming Budget.

Sources say little has yet been agreed by the tax strategy group of senior civil servants. Some insist that a cut in the top 48 per cent rate of income tax will be included in the Budget.