Budget 2027: A Summary:

1. Overall Fiscal Position

Budget 2027 outlines how the Government plans to raise and spend public funds during 2027. The budget continues a strategy of supporting living standards while maintaining substantial investment in public services and infrastructure. Total voted expenditure is set at €125.6 billion, alongside €19.1 billion of non-voted expenditure. 

Key Revenue Sources (2027)

  • Income Tax: €41.4 billion
  • Corporation Tax: €39.1 billion
  • VAT: €25.3 billion
  • Other revenues: €13.3 billion 

This demonstrates the continued importance of corporation tax receipts in funding Irish public expenditure.

2. Economic Outlook

The Government expects:

  • Continued growth in real Modified Gross National Income (GNI*).
  • Low unemployment rates.
  • Continued growth in wages.
  • Moderate inflation compared with recent high-inflation years.

Economic Significance

The budget is framed against a backdrop of:

  • Strong labour market performance (around 2.84 million employed).
  • Rising real wages.
  • Ongoing cost-of-living concerns. 

3. Cost-of-Living Supports

A major objective of Budget 2027 is to protect household incomes.

Social Welfare Measures

  • Weekly social welfare payments increase by €10.
  • New €500 Cost of Disability Payment.
  • Fuel Allowance increases by €5 per week.
  • Child support payments rise by €6 per week.
  • Higher Working Family Payment income thresholds.
  • Living Alone Allowance increases by €3 per week. 

Economic Rationale

These measures aim to:

  • Support lower-income households.
  • Reduce poverty risks.
  • Offset inflation and energy cost pressures.

4. Housing and Childcare

Housing affordability remains a central policy priority.

Housing Measures

  • More than €1 billion for the Starter Homes programme.
  • Goal of supporting delivery of 8,500 affordable homes.
  • €3 billion allocated to social housing.
  • Funding for 11,250 new social homes.
  • Support for approximately 110,000 households through social housing programmes. 

Childcare

  • Maximum childcare fees reduced from €735 to €550 per month.
  • Potential savings of up to €2,220 annually per family. 

Economic Significance

Lower housing and childcare costs can:

  • Increase household disposable income.
  • Improve labour force participation, particularly among parents.
  • Address supply-side constraints in housing.

5. Health and Social Care

Significant resources are allocated to health and disability services.

Key measures include:

  • Additional home support hours for older people and people with disabilities.
  • 930 extra staff for disability services.
  • Expansion of the Free Contraception Scheme to age 37.
  • 33,000 additional counselling hours.
  • 489 additional residential care packages and 1,500 new day-service places. 

6. Education and Skills

Education receives one of the largest expenditure allocations at €14.4 billion. 

Measures

  • 2,339 additional Special Needs Assistants.
  • 1,353 additional teachers.
  • Expansion of DEIS Plus.
  • Permanent reduction of €150 in the student contribution fee.
  • €150 million over three years for workforce development, AI and digital skills.
  • 1,420 additional higher education places in health and social care fields. 

Economic Significance

These measures aim to:

  • Improve human capital.
  • Address skills shortages.
  • Enhance labour productivity and long-run growth. 

7. Infrastructure Investment

A key strategic theme is accelerating infrastructure delivery.

Long-Term Plan

  • €275.4 billion infrastructure commitment over ten years.
  • €102.4 billion planned over the next five years. 

Major Projects

  • MetroLink funding.
  • Water and wastewater infrastructure.
  • Electricity grid expansion.
  • Transport investment nationwide. 

Economic Significance

Infrastructure spending can:

  • Increase productive capacity.
  • Reduce bottlenecks.
  • Support housing delivery.
  • Improve Ireland's long-term competitiveness.

8. Climate Policy

The Government modified its carbon tax policy because of cost-of-living pressures.

Key Changes

  • Carbon tax on home heating fuels reduced to €48.50/tCO₂ and frozen for the lifetime of the Government.
  • Petrol and diesel carbon tax remains at €71/tCO₂ until May 2027, then rises to €78.5/tCO₂.
  • Climate-related spending remains at €1.114 billion. 

Economic Debate

This reflects the tension between:

  • Climate objectives.
  • Protecting households from higher energy costs. 

9. Tax Measures

Personal Taxation

  • Entry point for higher income tax rate increased by €2,500.
  • Main tax credits increased by €125.
  • Home Carer Credit increased by €100.
  • USC threshold increased by €1,600. 

Housing Taxes

  • Rent Tax Credit increased.
  • Help-to-Buy relief increased from €30,000 to €35,000.
  • Rent-a-Room relief expanded and threshold increased. 

Business and Investment

  • Capital Gains Tax reduced from 33% to 31%.
  • Start-up company tax relief extended to 2030.
  • Changes to R&D tax credits.
  • New Investment Account framework introduced. 

Environmental and Health Taxes

  • Cigarette excise duty increased by €1 per pack.
  • Electric vehicle VRT relief extended until 2028. 

Key Economics Takeaway

For economics students, Budget 2027 can be viewed as a balanced expansionary budget that seeks to:

  1. Support household incomes through welfare increases and tax reductions.
  2. Invest heavily in infrastructure and public services to address long-term supply constraints.
  3. Promote housing supply and affordability.
  4. Develop human capital through education and skills investment.
  5. Maintain climate action funding while moderating carbon tax increases due to cost-of-living concerns. 
Video summary available here. There's also a detailed podcast on the budget.
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