Buiseád 2026
Ostensibly laying the groundwork for fiscal prudency, Budget 2026 outlines another large increase in public expenditure, and further entrenches overreliance on windfall corporation tax receipts.
Budget 2026, the first since the 2024 general election, comes at time of heightened global economic uncertainty, amidst the shattering of the global free-trade consensus and accompanying tariffs, the continuance of Russia’s invasion of Ukraine, and tentative steps towards peace in Gaza.
Delivered to the Dáil on 7 October 2025, Minister for Finance Paschal Donohoe TD, who swapped places with Minister for Public Expenditure, Infrastructure, Public Service Reform and Digitalisation Jack Chambers TD after the formation of the present government in January 2025, described the Budget as “building up our [economic] resilience” which will “help us to adapt at a time of historic challenge for our economy”.
Amounting to €9.4 billion, the Budget package bucks the trend of recent years in dispensing with temporary measures designed to mitigate the cost-of-living crisis. Instead, the Budget represents a rightward shift toward supply-side economics, using tax incentives to increase private sector supply aimed at alleviating the housing crisis and further stimulate growth in the economy.
Sinn Féin Finance Spokesperson Pearse Doherty TD slammed the Budget as “abandoning workers and families to look after those at the top”.
At the same time, large-scale capital spending is allocated to housing, defence, and transport, with smaller allocations for other departments.
In the shadow of a crumbling global free trade consensus, Ireland’s position as a tax haven economy, home to a multitude of large multinational companies such as Microsoft, Meta, Google, and Pfizer, reinforces the perils of the State’s overreliance on corporation tax receipts; accounting for an estimated 31 per cent (€34.1 billion) of upcoming tax revenue in 2026.
Macroeconomic context
In recent times, the Government has enjoyed substantial budget surpluses, with a general government balance of nearly €8.8 billion estimated for 2026, though this is a sizable decrease on the 2024 figure (€25.4 billion).
When ‘windfall’ corporation tax receipts are removed from this figure, the Department of Finance estimates the underlying government deficit to be €13.6 billion in 2026, an 84 per cent increase from 2025.
In effect, the current fiscal stability is wholly reliant on these corporations. As the Nevin Economic Research Institute (NERI) outlines: “The only thing differentiating Ireland from the deficits and austerity facing France, the UK, and other Western economies is the windfall corporation tax receipts emanating from a tiny group of US multinationals.”
These concerns are echoed by the Irish Fiscal Advisory Council (IFAC). The watchdog says that without these “phenomenal” levels of excess corporation tax, “there would be a substantial deficit, despite a strong economy”.
Speaking to RTÉ in September 2025, Minister Donohoe said: “The rate of current spending needs to moderate, we need to pull it down.”
Contrary to this, current spending will increase to €85.5 billion in 2026, up from €80.5 billion in 2025; itself an overrun of €4.5 billion from Budget 2025 estimates.
Overall government spending is projected to be €117.8 billion, a 9 per cent increase on Budget 2025 estimates. Once again, the Government has violated its own public spending increase limit of 5 per cent that was designed ensure that the public finances remain on a sustainable path.
In September 2025, the Department of Finance’s Annual Report on Public Debt said the State owed €218 billion, or 67.9 per cent of GNI* at the end of 2024.
“This Budget will boost our resilience and protect jobs. It puts us in the best possible position to create a stronger and more competitive economy while meeting the needs of our people today and in the time to come.”
Minister for Finance Paschal Donohoe TD
This amounts to €40,500 per person, high by European standards but a decrease from the peak of €60,800 (inflation-adjusted) in 2013. Although this is a considerable percentage decrease from the 2020 peak of 109 per cent, the numerical value is unchanged (€218 billion) from 2020.
The report highlights that €49 billion of debt, currently locked into pandemic-era low interest rates, will require refinancing in the next five years, significantly increasing the cost of sovereign debt management.
Commenting on the report, Minister Donohoe says it “illustrates the importance of prudent management of the public finances”.
The Consumer Price Index (CPI) rose by 2.7 per cent between September 2024 and September 2025, the highest rate since March 2024, and a substantial increase from 1.7 per cent in the 12 months to August 2024; largely fuelled by notoriously volatile food and energy prices.
The latest inflation figure was revealed on 9 October 2025, two days after the budget announcement.
Global economic uncertainty
In April 2025, the global economic order was thrown into disarray after US President Donald Trump imposed “retaliatory” tariffs on all imports from outside the US. Ireland, as a member state of the EU, found itself in the crossfire of escalating trade tensions between the trading blocs.
After months of uncertainty, the EU and US struck a trade deal in July 2025, imposing a 15 per cent trade “ceiling” on all EU exports the US.
In March 2025, Trump promised to “take back… the wealth” generated by American pharmaceutical companies domiciled in Ireland, directly threatening the State’s preeminent fiscal model.
Acknowledging these concerns, Minister Donohoe says the Budget represents “a plan to strengthen the resilience we have shown in the past”, adding that it underpinned by a sensible budget that “will safeguard our future”.
In a distinct supply-side shift, the Government has decided to prioritise changes to taxation to support business. Most notably, VAT for the hospitality sector, alongside hairdressers, will be reduced from 13 per cent to 9 per cent at a cost of €681 million per year.
Though welcomed by the sectors concerned, the General Secretary of the Irish Congress of Trade Unions, Owen Reidy slammed the move as “nothing less than economic vandalism.
The research and development tax credit will be increased from 30 per cent to 35 per cent, alongside increasing the first-year payment threshold from €75,000 to €87,500.
To support small and medium-sized enterprises (SMEs), the Budget introduces a new market cap exemption stamp duty threshold of €1 billion for Irish SMEs and start-ups.
The Irish SME Association has welcomed the budget, calling it “a stable and responsible package that broadly maintains fiscal discipline in uncertain times”.
Cost-of-living
The Government has allocated €28.9 billion to the Department of Social Protection, a 7.6 per cent increase from Budget 2025, though in Budget 2026, there is a notable absence of one-off cost-of-living measures, a prominent feature of recent times.
“The people will remember this one, because [the Government] have shafted them royally.”
Pearse Doherty TD
In September 2025, Minister Donohoe said it is essential to “replace those kinds of measures with more permanent, targeted measures”.
During his Budget 2026 speech, Minister Chambers said: “This Government cares about our people and has designed a progressive Budget that delivers permanent and targeted social welfare measures that will shield the most vulnerable against cost-of-living rises.”
The minimum wage will rise by 65 cents to €14.15 per hour from 1 January 2026, a 4 per cent increase in real terms, though tax bands and credits will be frozen, amounting to a real-terms tax rise if wages increase at their currently forecasted rate of 3.7 per cent.
The Carer’s Allowance income disregard is increased to €1,000 for a single person and €2000 for a couple. Domiciliary Care Allowance is increased by €20 per month, to €380 per month.
In the lead up to the 2024 General Election, Fine Gael’s manifesto contained a commitment to abolish the disregard, at a cost of €600 million.
The decision to retain the disregard drew the ire of Sinn Féin’s spokeswoman on Social Protection Louise O’Reilly TD, who said: “Now that the election is over, we see that they are putting less money into it than last year and with a mere €10 million for a half-year. It will take 30 years to abolish the means test for carers.”
The weekly rate of Child Support Payment has been increased by €8 for children under 12, and €15 for children over 12, bringing total weekly payments to €58 and €78 respectively.
The Fuel Allowance rate is increased by €5 to €38 and the 9 per cent rate of VAT on gas and electricity will be extended to 31 December 2030.
The Government has allocated €27.4 billion to the Department of Health, a 6.2 per cent increase from Budget 2025.
As part of the package, diagnostic health services are to be expanded, and acute hospital capacity will increase by 220 beds. Alongside this, 500 extra nurses and an additional 1.7 million Home Support Hours will be funded.
Infrastructure and climate
To build greater capacity, Uisce Éireann will receive an allocation of €1.4 billion. This is alongside €12.2 billion of capital spending allocated in the National Development Plan to expand water and wastewater services.
ESB and EirGrid will collectively receive an allocation of €3.5 billion. Minister Chambers says this is to “strengthen energy security and accelerate the transition to renewable energy”.
Despite wide-ranging environmental challenges, the Government has allocated €1.1 billion to the Department of Climate, Energy and the Environment, a 21 per cent reduction from Budget 2025’s allocation to the then-Department of the Environment, Climate and Communications.
Residential and commercial energy upgrade schemes will receive €558 million in carbon tax revenue, and the climate action and environmental leadership programme will receive €209 million.
The Government has allocated €4.7 billion to the Department of Transport, a substantial 20.5 per cent increase from Budget 2025.
This amount includes €940 million for the Government’s Public Transport Public Services Obligation and further funds for DART+, Cork Area Commuter Rail Phase 1, and road projects such as the Adare Bypass; N5 Ballaghaderreen to Scramouge; and M28 Cork to Ringaskiddy.
Broad analysis
At first glance, Ireland’s fiscal position is remarkable, but beneath the surface, a different picture emerges.
The rise of ‘America first’ economic nationalism, expressing itself through ‘retaliatory’ tariffs against trading partners, has laid bare Ireland’s overreliance on windfall corporation tax receipts.
When these receipts are excluded from revenue estimates, a plausible scenario given the rhetoric of Trump, the Government is running an underlying deficit of €13.6 billion, an 84 per cent rise in just one year.
In comparison, between 2008 and 2009, the State’s overall deficit rose by 79 per cent.
In this climate, the decision to reduce the tax take by €1.3 billion, and increase public expenditure by €8.1 billion is outright reckless.
Conor O’Toole, associate research professor at the ESRI says the budget “risks overheating the domestic economy and leaves less space to act if a downturn occurs.”
“A pathway to close the underlying deficit, by making difficult choices and trade-offs, should be developed.”
Writing in The Irish Times, John FitzGerald said: “It was a serious mistake in the budget to plan for big increases in health and education spending without ensuring a stable revenue base to pay for them through appropriate new tax measures.”
On the cost-of-living, the ESRI estimates that average household disposable incomes will drop by 2 per cent, with low-income families seeing a drop of 4.1 per cent, partly because of the sunsetting of temporary cost-of-living payments.
