The Government is examining an offer from Nama to build as many as 20,000 new homes by 2020 as preparations for Budget 2016 move into the final stretch.

The discussion comes as ministers debate a special package for elderly people next Tuesday.

An assortment of allowances would be increased next year and “top-up” payments to the fuel allowance would be made before Christmas.

In a further development, contentious talks on an increase to the budget for health services are said to have made progress on Wednesday.

A €200 million settlement is now in play, said a Government source.

The National Asset Management Agency is understood to have written to Minister for Finance Michael Noonan with a formal indication of its willingness to step up construction activity early next year on property it controls.

Housing supply

A separate source said the proposal is viewed favourably in Government circles, where it is recognised that specific measures to confront the shortage in housing supply are required as a matter of political urgency.

The “bad bank” has indicated to the Minister that it can proceed with the plan without any necessity to amend its legal mandate or alter the legislation under which it operates.

This is seen as a clear advantage as the Government would need to clear the Dáil schedule if an early election is called.

Such a move would make it difficult to proceed with any amendments to the Nama Act in the event of a November election, as is increasingly speculated in political circles.

Pension

At this point in the budget negotiation, an increase in the State pension is considered unlikely.

However, the package under discussion for elderly people embraces increases next year to the living alone allowance, the fuel allowance and to the household benefits allowance for elderly people who do not live alone.

Also under discussion is the restoration of the telephone allowance or measures akin to it.

In addition, ministers are discussing whether to expand a supplementary estimate for social protection in the period to the end of this year.

A supplementary allocation is already expected to proceed with another step in the restoration of the Christmas bonus in December.

Citing the surge in tax returns last month, the Government source said a fuel allowance “top-up”, to be paid this month and in November and December, was in play.

This would be followed with increases to the allowance in January and February.

Discussion of a supplementary estimate for social protection comes amid an additional allocation to the Department of Health, which is likely to reach €600 million.

Parallel talks are taking place on the allocation of health in Budget 2016. The Health Service Executive sought €2 billion, but that was widely viewed as “unrealistic” within the Cabinet.

A €200 million settlement would be in addition to a separate allocation for pay increases next year within the ambit of the Lansdowne Road agreement.