BY JOHN ELLIS, FINANCIAL ADVISOR
As we gear up for Budget 2026 on October 7, the government faces a tricky tightrope walk as it tries to support the vulnerable while avoiding overheating an already bubbling economy.
It is time to prioritize smart, sustainable changes over flashy giveaways. We’ve enjoyed years of lump-sum payments, tax cuts, and welfare hikes amid crises like Covid and the Ukraine war. Experts have long been sounding alarms that continuing this loose fiscal stance could spell trouble. The average families juggling rising costs deserve a budget that’s prudent, not populist.
Let’s start with social welfare, where inconsistencies are deterring jobseekers from re-entering the workforce. The Tax Strategy Group, in its pre-budget report, highlights how means-tested thresholds, those portions of income ignored when calculating entitlements, haven’t kept pace with the national minimum wage or earnings. This creates a ‘penal approach,’ as the group calls it, where picking up extra or part-time shifts can slash benefits, leaving people who want to work worse off.
Especially timely now, with a proposed 65-cent minimum wage increase to €14.15 on the table (though the government may settle lower), the group recommends annually aligning thresholds with wages to motivate work without penalty, thereby aligning with Ireland’s goal of inclusive growth.
Tánaiste Simon Harris has floated skipping increases to jobseekers’ allowances altogether. He is arguing for bigger increases to pensions and disability payments instead. This makes sense in a full-employment economy, but it risks alienating those on the margins. This comes amid reports that a proposed €12 hike in weekly welfare payments reportedly facing rejection, pushing ministers to rethink resource allocation.
This targeted approach extends to the broader budget, where expectations are tempered. Finance Minister Paschal Donohoe and Public Expenditure Minister Jack Chambers have ruled out repeating last year’s bonanza, no €125 energy credits, no double child benefits, and no more once-off payments like the €400 boosts to schemes such as Working Family Payment or Living Alone Increase.
The much-touted two-tier Child Benefit, potentially worth €285 for lower-income families, won’t materialize this year either. Donohoe told RTÉ it’s under review but requires a “complete rejig” to ensure no one loses out. Instead, focus shifts to infrastructure, housing, and public services, with VAT tweaks for hospitality eating into funds. Chambers couldn’t quantify household gains but emphasized improving daily life through social protection and investments.
Fair enough, especially given stark warnings from the Economic and Social Research Institute (ESRI), Central Bank, and Irish Fiscal Advisory Council (IFAC). The proposed €9.4 billion package risks adding “unnecessary stimulus” to an economy near full capacity, stated the Central Bank, which upgraded 2025 growth to 2.9% but forecasts slowdowns ahead due to trade fragmentation and US tariffs.
ESRI’s Alan Barrett urged “sound fiscal management,” noting recent spending overruns topping €2.5 billion and a “procyclical policy” that fuels overheating, not just inflation, but capacity strains hampering housing targets.
IFAC’s Seamus Coffey echoed this, calling for a “more modest” package since spending outpaces sustainable growth. The Central Bank warns we can’t sustain this without tax hikes or infrastructure cuts, highlighting vulnerability from windfall corporate taxes reliant on a few multinationals amid global shifts.
History, like the 2008 crash, reminds us how quickly things can unravel. The government should heed these calls. While some argue for bolder spending amid cost-of-living pressures, the risks of overheating outweigh the short-term gains.
Reform welfare thresholds to encourage work. Target hikes to pensioners and people with disabilities. Broaden the tax base for long-term stability. And no more election-year splurges. We need to build resilience, families need reliable support, not boom-and-bust cycles.
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