Plans for €100bn wealth fund announced in budget to ‘future-proof’ public finances

The Government is planning to establish a €100 billion war chest to “future-proof” the public finances and pay for the additional health and pensions costs associated with an ageing population.

As part of the budget, Minister for Finance Michael McGrath announced that approximately €4.3 billion or 0.8 per cent of gross domestic product (GDP) generated from excess corporate tax receipts would be diverted each year – starting in 2024 – to a new sovereign wealth fund called the Future Ireland Fund.

With contributions and return from investments over the longer term, the fund is likely to grow to €100 billion by 2035, Mr McGrath said.

The fund will not be accessible until 2040 and an initial €4.1 billion, on top of the first annual tranche, will come from the dissolution of the National Reserve Fund.

‘You couldn’t make it up’: David McWilliams gives his verdict on Budget 2024

---

Inside ‘the weirdest budget ever’: Climate bust-ups, a mortgage surprise and the Stephen Donnelly saga

---

We cannot aspire to EU-style public services and US levels of tax

---

Budget 2024 calculator: How this year’s budget will affect your income

---

The Republic’s ageing population combined with other financial pressures related to climate and digitisation are expected to cost the exchequer an additional €7-€8 billion in “standstill” costs by 2030.

“We have a window of opportunity now that we must grasp,” Mr McGrath said. “Budget 2024 marks a step change in how we plan for the future, by putting in place a long-term plan that will make the economic future safer for all,” he said.

Mr McGrath also announced plans for a separate infrastructural fund – the Infrastructure, Climate and Nature Fund – designed to ensure that capital spending is maintained in the event of a future economic shock.

The cost of climate change: ‘almost like driving another budget through public finances’

Listen | 38:51

An investment of €2 billion will be added to this fund each year from 2024 to 2030, building to a total of €14 billion by 2030.

The Department of Finance confirmed that up to 22.5 per cent of the fund may be drawn down to support climate and nature-related capital projects in any given year from 2026, up to a cumulative maximum of €3.15 billion by 2030.

Both funds, which will be managed and invested by the National Treasury Management Agency (NTMA), are to be put on a statutory footing, meaning governments will be compelled to divert the specified amounts into each of them, unless they change the law. The legislation will be published later this week.

[ Ask our experts: your Budget 2024 questions here ]

Taken together, it means that approximately €6 billion of the windfall corporate tax receipts are to be saved. The Department of Finance estimated that €12 billion of the €22.6 billion generated by the business tax last year could be classified as windfall or potentially temporary in nature.

[ Budget 2024 calculator: How this year’s budget will affect your disposable income ]

Department officials said the €6 billion earmarked for both funds was deemed to be a “prudent” amount to put away in the context of the current economic climate and given the uncertainty around corporate tax trends.

The additional surplus generated by corporate tax and other items will be used to reduce the State’s national debt, they said. The department said it expected general government debt to fall from €225 billion today to below €200 billion by 2030.

Employers’ group Ibec welcomed the establishment of the funds.

“The fund will ensure the protection of public capital projects during cyclical downturns, reduce the need for ‘catch-up’ spending, provide improved value for money, and offer greater certainty to sectors downstream of infrastructure delivery. This, in turn, would enable organisations to build capacity and retain skills in both the public and private sectors,” Ibec chief executive Danny McCoy said.