Macroeconomic Context
- Economic Growth: Modified Gross National Income (GNI*) is forecast to continue robust growth through 2026–2028, reflecting a stable underlying economy.
- Inflation: The Harmonised Index of Consumer Prices (HICP) shows inflation moderating towards 2% by 2026.
- Labour Market:
- Employment exceeds 2.8 million, up nearly 64,000 year-on-year.
- Unemployment is projected to remain low, near 4%.
- Real wages (adjusted for inflation) are expected to rise, signalling improving living standards.
Budgetary Position
- Additional Current Expenditure: €6.1 billion
- Additional Capital Expenditure: €2.0 billion
- Permanent Tax Measures: €1.3 billion
- Total Voted Expenditure for 2026: €117.8 billion
- Total Non-Voted Expenditure: €15.9 billion
Revenue Sources
- Government funding primarily comes from taxation:
- Income Tax: €38.8 billion
- Corporation Tax: €34.0 billion
- VAT: €23.3 billion
- Other smaller contributions come from excise duties, stamp duties, and capital taxes.
Spending Breakdown
- Goods, Services & Welfare Payments: €62.4 billion
- Public Sector Salaries & Pensions: €36.3 billion
- Capital Expenditure: €19.1 billion
The largest departmental allocations go to:
- Social Protection: €28.9 billion
- Health: €27.4 billion
- Education: €13.1 billion
- Housing, Local Government & Heritage: €11.3 billion
Public Services and Social Supports
The Budget continues major public service improvements since 2019:
- Public Sector Staffing: +66,500 workers since 2019 (including 19,000 extra teachers/SNAs and 28,500 health staff).
- Healthcare: Expansion of free GP care (now up to age 8), more hospital and community beds, and 1.7 million extra home support hours.
- Social Protection:
- €10 per week increase in core payments.
- Carer’s Allowance income disregard increased to €1,000 (single) / €2,000 (couple).
- Higher Child Support Payments (€8 for under-12s, €16 for over-12s).
- Working Family Payment threshold up €60 per week.
- Education: 1,717 new SNAs, new DEIS and DEIS Plus schemes, and €500 reduction in student contribution fees.
- Childcare: 285,000 children to benefit from the National Childcare Scheme.
National Development Plan (NDP)
- Updated NDP (July 2025) commits €275.4 billion to infrastructure investment to 2035.
- €102.4 billion will be spent in the next five years.
- Focus areas: Water (€12.2bn), Energy (€3.5bn equity to ESB/EirGrid), and Transport (€24.3bn), including low-carbon projects like Metrolink.
- The Government acknowledges slow project delivery and will implement reforms to planning, legal, and construction processes.
Climate Action and Carbon Tax
- Carbon Tax: Increases by €7.50 per tonne to €71, rising annually to €100 by 2030.
- Petrol/Diesel: +€1.28–€1.48 per 60L fill
- Gas: +€16.98 per 11,000 kWh
- Kerosene: +€19.41 per 900L
Carbon Tax revenues of €1.1 billion will fund:
- €566m for energy efficiency programmes
- €350m for social protection supports
- €173m for sustainable farming
- €20m for transport electrification and greenways
- €5m for peatland restoration
Key Expenditure Initiatives
- Housing: €2.9 billion for new social homes and second-hand acquisitions.
- Transport: €940 million for public transport services.
- Health and Care: 9,000 residential care placements and new disability services.
Enterprise and Skills:
- More funding for apprenticeships, Enterprise Ireland, and IDA.
- Establishment of a National AI Office (€1.4 million).
- Additional €30 million for official development aid.
Key Tax Measures
VAT:
- 9% VAT rate retained on gas and electricity until 2030.
- 9% VAT rate for food, catering, and hairdressing from July 2026.
- 9% VAT rate for the sale of apartments.
Business Incentives:
- R&D Tax Credit increased to 35%.
- Enhanced Corporation Tax deduction for apartment construction.
- Living City Initiative extended and expanded.
Personal Taxation:
- USC middle threshold increased by €1,318.
- Rent Tax Credit extended to 2028.
- Entrepreneur Relief limit raised to €1.5 million.
- Excise Duty on cigarettes up by €0.50 per pack.
Fiscal Transparency and Engagement
The Budget promotes openness through:
- Monthly Fiscal Monitor publications
- The Where Your Money Goes platform
- Performance Budgeting frameworks linking spending to outcomes
- Public input through the National Economic Dialogue
Conclusion
Budget 2026 combines moderate tax reform with strong investment in housing, childcare, and infrastructure, underpinned by environmental commitments and fiscal sustainability. It aims to strengthen Ireland’s economic base, enhance living standards, and prepare the country for long-term challenges — notably climate change, demographic shifts, and digital transformation.