The Government will need to borrow in the coming years to fund commitments to two sovereign wealth funds that were originally created to capture windfall corporation tax receipts, as it pursues the fastest spending growth in the European Union, according to the State’s fiscal watchdog. The Department of Finance estimated in April in its so-called annual progress report on the outlook for the economy that the Government’s gross debt is set to rise by more than €30 billion to almost €340 billion by 2030. The Irish Fiscal Advisory Council (Ifac) concluded in its assessment of the report that much of the planned borrowings will be used to meet the Government’s commitment to invest 0.8 per cent of gross domestic product (GDP) annually into the Future Ireland Fund and Infrastructure, Climate and Nature Fund – which were established in 2024 as a way of putting unsustainably high corporation tax revenues to work to help meet long-term liabilities of the State. “Is the concern the borrowing? No. The concern is that the surpluses are too small to make these planned contributions to these funds – and it’s not that the contributions are huge,” Ifac chairman Seamus Coffey told reporters in Dublin. The Government’s spending plans out to 2030 mean that for every €6 of corporation tax, €5 is on track to be spent and only €1 saved, he said. Its forecast 7 per cent average annual increase in net spending between 2025 and 2028 – with the definition also including the impact of tax cuts – is the highest among EU nations. By comparison, planned spending growth elsewhere ranges from just over 1 per cent in France to less than 6 per cent in Malta, he said. Ireland is one of only three EU countries – including Sweden and Denmark – where spending growth over the four years will rise more quickly than the underlying economy. Ifac uses modified gross national income (GNI*) to measure the Irish economy, which strips out the distorting effects of large multinational groups, while GDP is used for other EU states. “Ireland has planned the fastest net spending growth across the EU, and this is also faster than sustainable growth of the economy,” said Coffey. “So, our use of resources is beyond the sustainability of the economy to generate them.”While the Government plans to ramp up capital spending on infrastructure in the coming decade under the National Development Plan, Ifac officials said current spending – covering the day-to-day costs of services and income supports – is on track to account for 80 per cent of the forecast growth in total spending out to 2030. Successive governments have failed to comply with a non-binding rule introduced in 2021 that spending growth should not exceed 5 per cent. Ifac is arguing that a robust domestic spending rule should be established and enshrined in legislation, particularly given that EU fiscal rules are based on GDP – a measure that significantly overstates the size of the State’s underlying domestic economy. Irish GNI* equated to about 53 per cent of GDP last year. [ Irish industrial production slumps after 2025 tariff rushOpens in new window ]The Government plans to run budget surpluses in the years ahead. However, these are expected to decline over time, according to the department’s own projections. Excluding excess corporation tax, a deficit of more than €11 billion is expected in 2026, Ifac said. This is more than 3 per cent of national income. The underlying deficit is projected to rise to more than €20 billion by 2030, it said. Ifac also highlighted that spending overruns are a persistent feature of budgetary policy in Ireland. “Since Budget 2024, they have driven nearly 30 per cent (€6.8 billion) of spending increases. Further overruns are already emerging this year, including in health and education,” it said. Coffey said some of the overruns stemmed from “our inability every year to predict that Christmas will happen, and our failure to include the double payment of most social welfare payments in early December”.