It is understood education minister Mary Hanafin has been the most vocal in "taking on" Cowen, questioning how the huge increases in pupil numbers entering school can be accommodated under guidelines that will limit increases in current spending to 3-4% plus inflation. "Cowen is quite definite about how things are to be.

Mary [Hanafin] had a go and questioned it. But Cowen has been very tough. He is quite determined. His emphasis is on capital spending and the National Development Plan, " one well-placed source said.

Some sources sought to play down suggestions of conflict between the finance and education ministers, but agreed:

"Mary will fight her corner at every level."

In that context, the timing of last Friday's announcement by the Department of Education that 13 new schools in Dublin's fast-growing communities will be ready by next September has raised eyebrows in government circles. "The PDs used to do that thing of announcing something and then it becomes a fait accompli. I wonder is there a bit of that going on?" one source said.

Cowen will publish the government's pre-budget outlook next Thursday, setting out the cost of keeping the existing level of public services in place for next year. Any new spending will be announced on budget day as part of a new unified budgetary approach, with intense lobbying expected in the coming weeks.

Day to day government spending rose by 12% last year, but the increase is expected to be around 6-7% for next year. It is understood the issue provoked a long debate at last week's cabinet meeting.

"There is tightening up going on everywhere. Everbody is fighting hard. It's the toughest it's been in five years, " another government source said.

The big spending departments of Health, Social Affairs and Education have been bluntly told that the days of hefty annual increases in current spending are over. "The double-digit increases in health [of recent years] are not going to happen.

It's back to more normal times, " one source said.

There will be across-the-board increases in social welfare payments but sources say these will not be on the scale of recent years, when the social welfare budget was annually increased by around 1bn.