Overview:The day-to-day cost of running the State will rise by 4.8 per cent next year to €50.98 billion before Brian Cowen, the Tánaiste and Minister for Finance, introduces any new services in his Budget on December 5th, writes Arthur Beelsey, Senior Business Correspondent

In his Pre-Budget Outlook statement - the first to replace the traditional Estimates package - Mr Cowen said the overall level of expenditure on existing projects and services will amount to €58.57 billion when including capital spending of €7.59 billion.

This is the starting point from which the Minister and his colleagues in the Cabinet will hammer out the final Budget package in the coming weeks.

While additional services may bring the cost of running the State above €60 billion next year, Mr Cowen said that 2007 marked a "turning point" for the economy, with lower levels of growth forecast next year and a higher level of unemployment.

Current spending will rise by €2.3 billion next year to maintain the existing level of services, the Outlook document said.

Some 36 per cent of this additional money will fund pay increases for 308,000 public servants under the Towards 2016 partnership agreement. Public sector pay will increase by 2.5 per cent in March under that deal and by a further 2.5 per cent in September.

A further 35 per cent of the overall increase will meet the cost of expanding existing services and programmes to meet demographic pressure or increased demand for services.

For example, the Government expects to recruit an additional 1,100 teachers next September in anticipation of higher enrolments at primary school.

Some 17 per cent of the increase will pay the full-year cost in 2008 of services introduced during 2007. That includes the cost of continuing to pay the salaries of some 9,200 staff who joined the public service last year, many of whom did not start work on January 1st.

In all, 5,700 staff joined the health service last year, 2,300 staff started work in the education sector and 600 new gardaí joined the force. Non-pay inflation accounts for 12 per cent of the increase in current expenditure in the no-change scenario.

Social welfare accounts for the biggest single allocation to maintain existing services next year, with 30 per cent of gross voted current spending. The €16.1 billion pre-Budget allocation is €778.78 million - or 5.1 per cent - higher than in 2007. However, capital spending in the social welfare area will decline by 23.7 per cent to €15.47 million.

Health accounts for the second-largest allocation to maintain existing services, with 29 per cent of gross current spending.

The €15.12 billion allocation for current services will be higher by €772.03 million next year, or 5.4 per cent. Capital spending on health next year will be unchanged at €664.05 million, according to the Outlook document.

The third-largest allocation of current expenditure will be for education services, which will cost €8.39 billion next year. This is €495.24 million - or 6.3 per cent - higher than in 2007. Capital spending on education will decline by 3.7 per cent next year to €714.4 million, the document said.

The justice sector, which includes the Garda and the Prison Service, will receive 5 per cent of gross current expenditure next year. The €2.46 billion allocation for such services will be 7.3 per cent higher than in 2007.

Current expenditure on agriculture will increase by €7.33 million to €1.4 billion, a level that will amount to 3 per cent of gross expenditure before the addition of any new services.

The provision of all other Government services will take up the remaining 17 per cent of gross current expenditure in the no-change scenario. This includes: €1 billion on current defence spending (up 2.8 per cent); an allocation of €888.83 million for current environmental services (down 1.4 per cent) and €559.64 million for current transport spending (up 2.6 per cent).