BY JOHN ELLIS, FINANCIAL ADVISOR
Next Tuesday, Oct 7, will tell all for Budget 2026. Meanwhile the air is thick with anticipation and a healthy dose of realism. Ministers Paschal Donohoe and Jack Chambers are set to unveil a €9.4 billion package, split between €7.9 billion in spending and €1.5 billion in tax cuts.
Coming off last year’s pre-election bonanza, with its €2.2 billion in one-off measures like energy credits and double child benefits, this year’s plan signals a clear shift. Gone are the showy bonuses, in their place a focus on targeted aid, infrastructure, and long-term stability. In my view, this cautious approach is a welcome breath of fresh air amid global economic storms, but it risks leaving too many households shortchanged.
The backdrop is turbulent. US President Donald Trump’s 15% tariffs on EU goods, including Irish exports, threaten jobs and growth. Coupled with warnings from the Economic and Social Research Institute (ESRI) and the Central Bank about overheating the economy it’s clear why the government is moderating expenditure.
Donohoe and Chambers emphasize unity in avoiding risks and “moderating expenditure.” This isn’t a “giveaway” budget, as sources warn, but one prioritizing housing, public services, and core supports. It’s a mature pivot from recent years’ lump-sum handouts, which, while helpful during a crisis, fostered dependency rather than sustainability.
On the taxation front, the headline grabber is the proposed VAT cut for hospitality to 9%, a Fine Gael pledge to rescue struggling pubs and restaurants, potentially excluding hotels to trim the €650 million full-year cost. Delaying implementation could ease the hit on the €1.5 billion tax pot.
The government vows to prevent income tax burdens from rising, likely through raising the higher-rate threshold or tweaking the Universal Social Charge (USC). For the average worker, this could mean a few extra euros in the pocket. Yet, with inflation still biting despite cooling rates, is it enough? Critics argue it favours businesses over families.
Turning to welfare, adjustments reflect similar caution. Social Protection Minister Dara Calleary suggests a €12 weekly hike in core payments, matching last year’s, plus boosts to child support (€4-€8 weekly) and carers’ allowances. The Christmas double bonus payment seems safe, but no second-tier child benefit this year despite promises of “equivalent” aid for low-income families and axing one-offs like energy credits worth €250 per household. Instead, fuel allowance expansions, possibly for Working Family Payment recipients, aim to cushion energy costs.
Environment Minister Darragh O’Brien pushes to extend reduced VAT on energy, bills, saving €20-€26 monthly. Opposition voices like Social Democrats’ Sinéad Gibney calls for tackling energy firms’ profits over endless allowances. This strategy is smarter than blanket payouts, promoting equity, but it demands quick delivery to avoid winter hardships.
Childcare gets the nod as does education. Children’s Minister Norma Foley suggests fee reductions for high-cost areas like Dublin, building on the €295 weekly cap and frozen 2021 rates. Families of third-level students might see grant thresholds rise to €150,000 household income, with awards up to €1,000. A permanent €500 student fee cut sounds good, but it effectively hikes costs by €500 from recent temporary reductions, a bitter pill, as Labour’s Laura Harmon notes, amid €2,055 average rents.
Housing incentives, like potential VAT cuts on new apartments, aim to boost supply, while renters could see the tax credit rise (perhaps to €1,500/€3,000), shielding against rent caps easing in new builds. Minimum wage might climb to €14.05 hourly, a modest 55-cent increase, though calls for €17 highlight continuing gaps.
From what we know Budget 2026 seems to strike a balanced tone: investing in infrastructure over short-term highs. It’s sensible given Trump’s tariffs and domestic overheating fears, potentially safeguarding Ireland’s economic miracle.
But for the average family, it might feel underwhelming. Donohoe insists no one loses out, yet without bolder moves on energy and child poverty vulnerable groups could slip through the net. This budget will build resilience or breed resentment. We’ll know next Tuesday.
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