Energy Poverty and Affordability in Ireland

1. Overview and Context

Energy poverty refers to a household’s inability to access essential energy services (heating, lighting, electricity) at an affordable cost. It is not just about high bills—it also includes under-consumption of energy due to financial constraints, which can harm health and wellbeing.

The issue is becoming more important due to:

• Rising energy price volatility
• Climate transition costs
• Geopolitical instability
• Structural inequalities in income and housing

The report emphasises that energy poverty is multidimensional, shaped by:

• Income levels
• Energy prices
• Housing quality and energy efficiency
• Broader socio-economic inequalities

It is therefore both an economic and social justice issue.

2. Scale of Energy Poverty in Ireland

• Around 14% of households self-reported energy poverty in 2024
• Using broader measures, over 30% of households experience some form of energy affordability issue
• In 2015, ~600,000 households (over one-third) met at least one energy poverty criterion

➡️ Key point:
The scale varies dramatically depending on how you measure it.

3. Measurement: Why It Matters

Ireland’s official measure:

• HSEEI-10% → households spending >10% of income on energy

Problems with this measure:

• Data only collected every 5 years
• Misses households that under-consume energy (hidden poverty)
• Underestimates the true scale

Alternative measures:

1. Self-reported indicators
   • Inability to afford adequate warmth (IAAW)
   • Arrears on utility bills (AUB)
   • Available annually → useful for short-term monitoring
2. Expenditure-based indicators
   • High energy share, low income–high cost, low expenditure, etc.
   • Better for structural analysis
3. Union Indicators (combined measures)
   • Count households meeting any criterion
   • Provide the most realistic estimate of overall energy hardship

➡️ Conclusion:
No single indicator is sufficient. A multi-indicator system is essential.

4. Multidimensional Nature of Energy Poverty

Different indicators capture different groups:

• Some households:
  • Spend too much on energy
• Others:
  • Spend too little (due to deprivation)
• Others:
  • Report hardship but don’t show high expenditure

➡️ Result:

• Limited overlap between indicators
• Each measure reveals a different “slice” of the problem

Union indicators show:

• Energy poverty is far more widespread than any single measure suggests

5. Vulnerable Groups (Who Is Most at Risk?)

The report identifies consistent high-risk profiles:

Most vulnerable:

• Low-income households
• Renters (especially private sector)
• Single-parent households
• Unemployed individuals
• Households with poor health or disability
• Rural households
• People in older, inefficient housing

Additional patterns:

• Female-headed households face higher risk
• Younger households rely more on supports
• Vulnerabilities often overlap and reinforce each other

➡️ Key insight:
Energy poverty is clustered disadvantage, not isolated hardship.

6. Affordability Risk Framework

The report proposes a framework based on three factors:

• Income level
• Energy costs
• Share of income spent on energy

Households are mapped into risk zones, identifying:

• Current energy poverty
• Future vulnerability (important for climate transition)

Structural vulnerability is defined as:

• Income poverty plus additional risk factors (e.g. renting + single parenthood)

7. Severity: The Energy Poverty Gap

A major contribution of the report is estimating how severe energy poverty is.

Findings:

• Households need:
  • €11–€45 per week to escape energy poverty
• Average annual gap:
  • ~€480 per household

Policy implication:

• Closing the gap for all vulnerable households would cost:
  • ~€370 million

Compare:

• Universal electricity credit (2024): €550–575 million

➡️ Conclusion:
Targeted supports could achieve the same outcome at ~40% lower cost.

8. Structural Drivers

The main drivers of energy poverty are:

1. Income (most important factor)

• Low disposable income = highest risk

2. Housing conditions

• Poor insulation
• Old buildings
• Energy inefficiency

3. Broader cost pressures

• Rent
• Healthcare costs
• Household composition

4. Energy prices

• Short-term shocks can rapidly worsen affordability

Key finding:

• Rising incomes in recent years helped offset:
  • Higher energy prices
  • Cost-of-living pressures

9. Policy Recommendations

A. Measurement Reform

Adopt a multi-indicator monitoring system, including:

• IAAW (short-term shocks)
• HSEEI-2M (structural burden)
• LAEE (hidden deprivation)

B. Short-Term Policies

Use responsive tools during shocks:

• Targeted energy credits
• Bill supports
• Deferred payment schemes
• Emergency protections

⚠️ Must be targeted, not universal.

C. Long-Term Policies

Address structural causes:

• Home retrofitting
• Energy efficiency upgrades
• Clean energy investment
• Income supports

D. Better Targeting

Align energy policy with:

• Social protection system
• Welfare payments
• Housing policy

10. Welfare and Energy Poverty

Energy-poor households typically rely on:

• Housing supports
• Child-related benefits
• Fuel allowance
• Disability supports

Less reliance on:

• Old-age pensions (due to younger demographic profile)

➡️ Insight:
Energy poverty is closely tied to existing welfare dependency patterns.

11. Overall Conclusions

• Energy poverty in Ireland is widespread, complex, and underestimated
• It is driven primarily by income inequality and structural housing issues
• Measurement using a single indicator is inadequate
• Targeted policies are significantly more cost-effective than universal supports
• Addressing energy poverty requires:
  • Coordination across energy, housing, and social policy

Bottom Line (for students)

Energy poverty isn’t just about high bills—it’s about how income, housing, and energy systems interact. If policymakers measure it badly, they target it badly, and that leads to wasted spending and missed households.

Ireland’s Economy in 2026 – Central Bank Quarterly Bulletin Q1 Summary

Headline Insights

- Global energy price surge (Middle East conflict) drives higher inflation and slower growth.  

- Ireland’s economy remains resilient but exposed to external shocks.  

- Inflation revised up: 2.9% (2026), 2.6% (2027).  

- Growth moderates: Modified Domestic Demand (MDD) 2.9% (2026), 2.5% (2027).  

- Unemployment rising slightly toward 5%.

Economic Performance

- 2025: Strong investment and exports lifted MDD by 4.9%.  

- 2026–27: Growth slows as inflation erodes real incomes.  

- Exports: Pharma and ICT remain key drivers; volatility expected as stockpiles unwind.  

- Investment: Construction, machinery, and R&D continue to expand.

Inflation & Prices

- Energy and services costs push inflation higher.  

- Headline HICP: 2.9% (2026) → 2.6% (2027) → 1.9% (2028).  

- Food and energy pressures re‑emerge; services inflation remains sticky.

Labour Market

- Employment growth easing: 2.2% (2025) → 1.9% (2026).  

- Unemployment: 4.7% → 4.9% → 5.1%.  

- Youth job‑finding rates weakening slightly.

Households & Savings

- Consumption growth slows to 1.9% (2026).  

- Real disposable income squeezed by inflation.  

- Savings rate remains high (~14%), above long‑run average.

Risks & Scenarios

- Downside risks dominate — energy price uncertainty.  

- Adverse scenario: inflation >4%, growth down 0.5 pp annually.  

- External environment fragile: euro area slowing, China decelerating, US resilient.

Policy Outlook

- Monetary: ECB holds rates steady; stance remains data‑dependent.  

- Fiscal:  

  - Target supports to vulnerable households.  

  - Reduce reliance on volatile corporation tax.  

  - Broaden tax base (property, consumption).  

  - Maintain capital investment in housing, infrastructure, and climate transition.

ESRI Quarterly Economic Commentary – Spring 2026

The ESRI’s Quarterly Economic Commentary (QEC), Spring 2026 provides a detailed assessment of Ireland’s economic performance in 2025 and the outlook for 2026–2027. The report is shaped heavily by the emerging Iran–Middle East crisis, which has triggered a sharp rise in global energy prices and introduced significant uncertainty into the international economic environment.

1. International Context: Energy Shock Dominates

The global economy had already been navigating trade tensions and tariff uncertainty. The outbreak of conflict in Iran has now added a major energy‑price shock, with oil and gas futures indicating prices 40% higher in 2026 and 25% higher in 2027 than previously expected.

The ESRI notes:

“It is already clear that energy prices have risen sharply and that higher prices are likely to persist for some time…” 

This shock is expected to push inflation higher across advanced economies and dampen investment and consumption.

2. Irish Economic Performance in 2025

Despite global headwinds, Ireland recorded strong growth in 2025:

- GDP grew by 12.3%, driven by a surge in goods exports—especially pharmaceuticals.  

- Modified Domestic Demand (MDD), the ESRI’s preferred measure of underlying activity, grew 4.9%.  

- Employment increased by 56,700, with unemployment remaining low at 4.4%.

However, some of this export strength was distorted by pre‑tariff stockpiling, particularly in pharma shipments to the US.

3. Outlook for 2026–2027

The ESRI expects growth to continue but at a slower pace:

Growth Forecasts

- MDD:  

  - 2026: 2.1%  

  - 2027: 2.8%

- GDP:  

  - 2026: 1.0%  

  - 2027: 5.5%

Inflation

Inflation projections have been revised sharply upward due to the energy shock:

“We now expect [CPI inflation] to be 3.2% in 2026 and 2.7% in 2027.” 

4.  Output Rising but Still Below Target

Housing completions increased to 36,248 units in 2025, up from 30,000 in 2024.  

However, Ireland remains far from the 50,000 annual completions required to meet national targets.

Forward indicators—planning permissions and commencements—show no clear upward momentum, leading the ESRI to forecast:

- 37,400 completions in 2026  

- 38,000 in 2027

The report warns that rising construction costs from the energy shock could further constrain supply.

5. Labour Market: Strong but Signs of Softening

- Unemployment remains low at 4.6% (early 2026).  

- Youth unemployment shows a possible uptick, though the ESRI cautions that more data is needed.  

- Employment in ICT has fallen from 190,000 to 175,000, driven mainly by declines in female employment.

Public‑sector vacancies have surged, now exceeding market‑sector vacancies for the first time.

6. Public Finances: Surpluses but Significant Risks

Ireland recorded a €3.8bn Exchequer surplus in 2025 (excluding Apple‑related receipts).  

However, the ESRI reiterates concerns about:

- Heavy reliance on corporation tax, with three firms accounting for almost half of receipts.  

- Windfall nature of much of this revenue.  

- Persistent spending overruns.

The Medium‑Term Fiscal Plan sets expenditure ceilings to 2030, but the ESRI questions whether these will effectively constrain spending.

7. Policy Recommendations

The ESRI highlights several priorities:

A. Responding to the Energy Shock

The report strongly advises against cutting indirect energy taxes, noting:

“Flat‑rated energy credits are better targeted… but welfare changes are the most effective means” of protecting vulnerable households. 

B. Infrastructure Prioritisation

Ireland faces simultaneous demands for:

- Housing  

- Transport  

- Energy infrastructure  

- Climate‑related retrofitting

The ESRI warns that attempting to deliver everything at once risks capacity bottlenecks and inflation.

C. Domestic Enterprise Policy

Tariff uncertainty remains unresolved. Strengthening the domestic SME base is essential for resilience.

8. Special Article: Residential Heat Decarbonisation

A major accompanying article reviews Ireland’s progress toward 2030 heating targets:

- Only 11.5% of deep retrofit targets achieved  

- Only 3.5% of heat pump targets achieved  

- District heating far behind schedule

The authors conclude that Ireland is materially off‑track, and that BER‑based energy savings may overstate actual decarbonisation.

9. Research Note: The Irish Economy in the 2020s

This note highlights:

- Strong national income growth since 2019  

- A significant contribution from windfall corporation tax  

- A larger‑than‑expected role for the domestic professional services sector  

- Ireland’s rapid convergence toward US living‑standard levels (NNI per capita)

Overall Conclusion

The Spring 2026 QEC paints a picture of an economy that remains fundamentally strong but is entering a period of heightened uncertainty. The energy shock, housing constraints, and reliance on volatile tax revenues pose real risks. The ESRI calls for targeted supports, fiscal discipline, and strategic prioritisation of infrastructure and climate investments.

Irish Economic Review of the Year 2025:

In 2025, the Irish economy was characterised by exceptional GDP growth driven by multinational exports, contrasted with more moderate domestic growth and persistent structural challenges like housing and infrastructure. 

Macroeconomic Performance

GDP Growth: Forecasts for 2025 GDP growth ranged from 10.2% to 12.8%. This surge was largely attributed to exceptional pharmaceutical exports, particularly to the US, as firms "frontloaded" shipments in early 2025 to anticipate potential new tariffs.

Modified Domestic Demand (MDD): A more accurate measure of the internal economy, MDD was projected to grow by approximately 3.4% to 3.9%. This reflected resilient consumer spending and public capital investment, though it trailed the inflated GDP figures.

Inflation: Headline inflation (HICP) remained relatively stable, averaging around 1.9% to 2.1% for the year. While energy prices declined, services inflation (notably in education, restaurants, and hotels) remained a primary upward pressure.

Labour Market: Ireland maintained near-full employment, with the total number of people in work reaching a record high of over 2.8 million. However, the unemployment rate edged upward from historical lows to approximately 4.9% to 5.0% by late 2025. 

Key Economic Drivers

Export Surge: The pharmaceutical and med-tech sectors saw massive growth, notably in ingredients for weight-loss drugs. Goods exports rose by roughly 46% in the first quarter alone.

Public Finances: Ireland recorded a general government surplus of approximately 1.5% of GDP, buoyed by corporate tax receipts. The state significantly increased capital spending on the National Development Plan to address infrastructure gaps.

FDI Resilience: Despite global geopolitical uncertainty, Ireland hosted over 1,800 multinational firms employing more than 300,000 people. 

Challenges and Risks

Infrastructure Deficit: Severe bottlenecks in housing, water, and energy remained "the Achilles' heel" of Irish competitiveness. Housing completions for 2025 were forecast at roughly 32,500 units, still well below the estimated annual demand of 50,000+.

Concentration Risk: The economy and tax base remained heavily reliant on a small number of multinational companies, making it vulnerable to shifts in US trade policy and global tax rules.

Consumer Sentiment: Despite rising real wages, consumer confidence waned toward the end of the year due to high living costs and the erosion of disposable income by high rents and grocery prices. 

You can listen to a podcast on this topic here.

Alternatively, you can watch a video here.

Summary of the Accelerating Infrastructure Report and Action Plan

Ireland is investing record amounts in infrastructure, but major projects—roads, energy, water systems—are taking far too long to deliver. Delays of 7–10 years for even modest projects are now common. This slows down housing, raises costs, restricts energy supply, and damages Ireland’s competitiveness.

The Government’s report identifies 12 key reasons for these delays. They fall into three groups:

1. Regulatory & Community Barriers

• Too many layers of regulation

• Agencies working slowly and in sequence

• Rising levels of public objections

• A surge in legal challenges (judicial reviews)

2. Planning & Legal Issues

• Long, complicated environmental assessments

• Inconsistent planning decisions

• No fast-track system for nationally important projects

3. System & Capacity Problems

• Poor coordination between government bodies

• Weak procurement competition

• Construction sector capacity shortages

• Uncertain long-term funding plan

To fix this, the Government proposes reforms grouped under four pillars:

The Four-Pillar Plan

1. Legal Reform

Make court challenges faster and more predictable, and prevent small technical errors from blocking major national projects.

2. Regulatory Reform

Simplify approvals, set firm deadlines for regulators, and allow parallel (not sequential) assessments to shorten timelines.

3. Better Coordination & Delivery

Strengthen central oversight, improve procurement, increase construction sector capacity, and use digital tools (including AI) to streamline processes.

4. Increasing Public Acceptance

Communicate national benefits more clearly, create a benefits-tracking framework, and improve cooperation on land access.

Why It Matters

Without major reform, Ireland will struggle to build the infrastructure needed for:

• housing delivery

• renewable energy expansion

• climate targets

• transport upgrades

• future economic competitiveness

The report is blunt: funding isn’t the problem—delivery is. Ireland must overhaul its systems, laws, and processes or face continued delays, rising costs, and national bottlenecks.

There's a podcast on this report here.

The new tenancy laws in Ireland:

The government of Ireland has introduced significant reforms to tenancy laws that affect existing and new tenancies, primarily coming into effect from March 1, 2026. The changes aim to strengthen tenant protections while encouraging investment in the rental market. 

Key aspects of the new laws include:

Nationwide Rent Controls

• Current Law (since June 20, 2025): The entire country has been designated a Rent Pressure Zone (RPZ), meaning rent increases for all tenancies are capped at the lower of general inflation (CPI) or 2% per year pro rata.
• From March 1, 2026:
  • Rent increases will remain linked to inflation (CPI), capped at 2% during periods of high inflation for most tenancies.
  • Landlords can reset the rent to market value between tenancies if the previous tenant left voluntarily or breached their obligations, or at the end of each six-year tenancy period (unless a "no-fault" eviction occurred).
  • Newly built apartments (commenced after June 10, 2025) are exempt from the 2% cap; their rent increases will be tied only to the CPI. 

Enhanced Security of Tenure 

• Existing Tenancies: Tenancies in place before March 1, 2026, will continue under the current rules, which already provide for tenancies of unlimited duration once the tenant is in occupation for 6 months without a valid termination notice.
• New Tenancies (from March 1, 2026):
  • New tenancies will be "Tenancies of Minimum Duration" (TMD) with rolling six-year terms, providing tenants with greater stability.
  • During the six-year term, a landlord can only end the tenancy under specific, limited circumstances, such as a tenant's breach of obligations, or if the property no longer suits the tenant's needs.
  • Tenants can still end a TMD by providing the required notice.

Restrictions on "No-Fault" Evictions

The reforms introduce a distinction between landlords with varying numbers of tenancies.

• Larger Landlords (four or more tenancies): Will effectively be banned from using "no-fault" eviction grounds (such as selling the property, major renovations, or personal/family use) except in very limited, undefined circumstances. They can still terminate for tenant breaches or unsuitability of the property.
• Smaller Landlords (three or fewer tenancies): Will have more flexibility but are still restricted. During a six-year TMD, they can only evict for limited reasons, such as defined "hardship" (e.g., homelessness, bankruptcy, separation) or if an immediate family member needs the property. At the end of each six-year cycle, they may terminate the tenancy for reasons including selling the property, major renovations, or family use. 

The legislation to implement these changes is in the process of being prepared and will be published later in 2025. For the most up-to-date, official information, refer to the Residential Tenancies Board or the Department of Housing, Local Government and Heritage websites. 

Click here to listen to a podcast on this topic.

Delivering Homes, Building Communities (2025–2030): Summary

Overview
Prepared by Ireland’s Department of Housing, Local Government and Heritage, Delivering Homes, Building Communities sets out the Government’s housing strategy for 2025–2030. It aims to deliver 300,000 new homes by 2030 through a mix of public and private sector collaboration, addressing both supply and affordability challenges. The plan builds on Housing for All and represents the largest housing investment in the history of the State.

Key Objectives

• Deliver 300,000 new homes by 2030, including 72,000 social homes and 90,000 Starter Home supports.
• Commit €20 billion annually in development finance, with over €9 billion from State sources and the remainder from private investment.
• Ensure a fair, sustainable housing system that promotes homeownership, affordable rents, and social inclusion.
• Tackle vacancy, dereliction, and homelessness, while regenerating communities across urban and rural Ireland.

Core Structure

• The plan is organised under two main pillars, each containing four priority areas.
• Pillar 1 – Activating Supply
• Activating Land and Infrastructure
• Ensure a strong pipeline of zoned and serviced land.
• Deliver key infrastructure (water, transport, energy) to make sites “shovel ready”.
• Implement the Planning and Development Act 2024 to streamline planning and judicial review.

Facilitating Investment and Viability

• Attract domestic and international capital for housing development.
• Reform apartment standards and introduce tax incentives (e.g., 9% VAT rate).
• Capitalise the Land Development Agency (LDA) and Housing Finance Agency to expand their role.
• Launch a €1 billion Infrastructure Fund to remove delivery bottlenecks.
• Increasing Skills and Modern Construction Methods (MMC)
• Use Modern Methods of Construction (e.g., modular building) in at least 25% of new social and affordable housing.
• Expand training and apprenticeships in construction.
• Promote innovation through Enterprise Ireland’s Built to Innovate programme.

Securing Additional Supply, Ending Dereliction & Vacancy

• Expand the Vacant Property Refurbishment Grant and Derelict Property Tax.
• Support regeneration through the Urban Regeneration and Development Fund (URDF) and Living City Initiative.
• Enable local authorities to use Compulsory Purchase Orders (CPOs) more efficiently.

Pillar 2 – Supporting People
Ending Homelessness and Promoting Inclusion

• Introduce a National Homeless Prevention Framework.
• Expand the Housing First Programme and strengthen homelessness legislation.
• Increase housing for older people, disabled persons, and the Traveller community.

Providing More Social Homes

• Deliver an average of 12,000 new social homes per year.
• Streamline approval processes and standardise designs.
• Enhance local authority delivery capacity and improve maintenance of existing housing stock.

Increasing Affordable Homeownership and Protecting Renters

• Deliver 15,000 affordable housing supports annually through the Starter Homes Programme.
• Extend schemes such as Help to Buy and First Home.
• Introduce national rent controls, a rent price register, and stronger tenant protections.
• Regulate short-term lets and expand purpose-built student accommodation.

Investing in Villages, Towns, and Cities

• Focus on urban regeneration and compact, sustainable development.
• Support rural housing and revitalisation through the Town Centre First initiative.
• Fund remediation for defective concrete blocks and apartments.
• Support the Dublin City Taskforce and An Ghaeltacht development plans.

Funding and Implementation

• Backed by record State and private investment, including:
• €102 billion in critical infrastructure.
• €3.5 billion for electricity grid upgrades.
• €12.2 billion for water services.
• €2.5 billion additional capital for the Land Development Agency.
• A new Housing Activation Office will coordinate national delivery.
• The Cabinet Committee on Housing will oversee progress with measurable metrics.

Conclusion
The plan presents a comprehensive, delivery-focused framework to address Ireland’s housing shortage through large-scale construction, affordability measures, and community regeneration. It combines state-led investment, private sector participation, and modern construction innovation to achieve sustainable housing for all.

The full document is available here.

Podcast available here.

My take on the government's plan:

Ireland’s latest housing plan is impressive on paper but hopeless in practice. Delivering Homes, Building Communities promises 300,000 homes by 2030, 72,000 of them social but anyone familiar with Ireland’s housing machine knows these targets exist more for headlines than for homes.

The same problems that hobbled Housing for All remain untouched: endless planning delays, a shorthanded construction sector, and bureaucratic drift that kills urgency. Ministers can talk about “modern methods of construction” and “activation offices” all they like but rebranding inefficiency doesn’t fix it.

The funding looks vast, but much of the €275 billion figure is repackaged spending or long-term capital that won’t translate into actual roofs any time soon. Developers face higher borrowing costs, local resistance remains entrenched, and the State still can’t build quickly without tripping over its own regulations.

Ireland doesn’t lack ambition; it lacks execution. The document reads more like political theatre than a credible delivery plan heavy on verbs, light on realism. 

Unless there’s a fundamental shift in how planning, labour, and finance are coordinated, this plan will end up exactly where most of its predecessors have: filed neatly under “aspiration”.

Future Forty: Mapping Ireland’s Economic Trajectory to 2065

The Future Forty: A Fiscal and Economic Outlook to 2065, prepared by the Department of Finance and Future Forty: Mapping Ireland’s Economic Trajectory to 2065 published in November 2025, presents a crucial long-term perspective on the Irish economy, grounded in anticipatory governance. The analysis assesses challenges and opportunities across seven critical "Deep Dives": Climate Change and the Green Transition, Demographic Trends, Housing, Healthcare, Digitalisation, De-globalisation, and EU Enlargement.

The report employs a scenario-based approach, analysing 2,187 possible outcomes using a Solow growth accounting framework based on labour, capital, and Total Factor Productivity (TFP).

Central Scenario Projections (No Policy Change)

Under the Central Scenario, Ireland is projected to continue growing, with Modified Gross National Income (GNI*) reaching €537 billion by 2065 (in 2020 prices). However, the rate of overall economic growth is projected to slow over time. Living standards (GNI* per-capita) are expected to decelerate throughout the 2030s and 2040s, stabilising at approximately 0.5 per cent annual growth thereafter.

The fiscal outlook anticipates significant deterioration driven by global trends and specific domestic pressures:

1. Fiscal Deficit: The annual general government deficit is projected to reach 7.9 per cent of GNI* by 2065.

2. Public Debt: National Gross Debt is forecast to rise sharply to 148 per cent of GNI*, or €117,000 per-capita, by 2065.

3. Expenditure Pressures: Ageing-related expenditure (healthcare, long-term care, and pensions) is projected to account for 46 per cent of all voted expenditure by 2065, up from 34 per cent in 2025. The increasing fiscal deficit is compounded by the projected decline of "windfall" corporate tax receipts during the 2030s.

Key Strategic Drivers

The overall distribution of scenarios is tilted to the downside, with 62 per cent of outcomes projecting a higher National Debt than the Central Scenario. The most critical long-term challenges identified that drive negative outcomes are the extreme impacts of climate change and the green transition, followed closely by the poorest outcomes in the healthcare system and low future population growth (demographics). Conversely, productivity growth (TFP), often driven by digitalisation, is identified as the ultimate source of sustainable long-run growth and fiscal improvement.

The report highlights that a critical window of opportunity exists in the coming decade to implement necessary reforms, such as enhancing long-run productivity, addressing the housing shortfall, and improving cost-efficiency in health and aged care systems, before demographic shifts constrain economic growth and fiscal flexibility diminishes in the mid-to-late 2030s.

The full document is available here.

Click here to listen to the podcast.

Summary of Budget 2026

Budget 2026, titled “Strengthening our Foundations for the Future,” outlines the Irish Government’s spending, taxation, and investment plans for the coming year. It aims to balance economic stability, social inclusion, and infrastructure expansion while maintaining fiscal discipline.

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:

1. Employment exceeds 2.8 million, up nearly 64,000 year-on-year.
2. Unemployment is projected to remain low, near 4%.
3. 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:

1. €10 per week increase in core payments.
2. Carer’s Allowance income disregard increased to €1,000 (single) / €2,000 (couple).
3. Higher Child Support Payments (€8 for under-12s, €16 for over-12s).
4. Working Family Payment threshold up €60 per week.
5. Education: 1,717 new SNAs, new DEIS and DEIS Plus schemes, and €500 reduction in student contribution fees.
6. 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.

Click here to listen to a podcast on Budget 2026.