BUDGET 2026: Mixed reactions
Budget 2026 has been released into the wild with significant boosts to social welfare and the minimum wage amongst the positives.
Finance minister Paschal Donohoe and Public Expenditure minister Jack Chambers delivered next year’s budget in Dáil Éireann on Tuesday.
In his speech, Minister Donoghue said the new budget will invest in Ireland’s future “while securing the jobs, prosperity, and stability of today”.
He said: “It will tackle the serious challenges of meeting our housing and investment needs. At the same time, we are preparing for tomorrow.”
Coming into effect on 1 January, the national minimum wage will increase by €0.65 per hour to €14.15 per hour. Though a welcome step for workers, the move was criticised by David Blevings of the Irish Petrol Retailers Association (IPRA). He said the rise will force forecourt retail employers already struggling to pay the current minimum wage to cut hours for staff.
“It is unfair for employees to have to choose between keeping the lights on and offering additional hours to their staff,” said Mr Blevings.
The IPRA is also unhappy with increased diesel and petrol costs by due to a carbon tax increase to €71 per tonne of CO2 emitted which will be applied to auto fuels immediately and to all other fuels from the 1 May 2026.
Mr Blevings said: “A further increase in transport costs is just not feasible for some at the present time given the cost-of-living crisis.”
Social welfare
In social protection, Budget 2026 brings a €10 increase in weekly payments, including for pensioners, people with disabilities, carers, jobseekers, and lone parents, with proportionate increases for qualified adults. The Working Family Payment income thresholds will increase by €60 per week for all families.
There will also be an increase in the Carer’s Allowance income disregard of €375 to €1,000 for a single person and of €750 to €2,000 for a couple. Weekly Child Support Payment rates will increase by €8 for children under 12 and by €16 for children over 12.
Catherine Cox, Head of Communications and Policy, Family Carers Ireland said: “(This) announcement shifts the numbers but not the reality for many family carers. Budget 2026 will expand who can access Carer’s Allowance, but the payment remains completely inadequate, and today’s announcements will do little for those already in receipt of the full rate which will rise by just €10 to €270 per week. This increase equates to less than six cents per hour for someone providing 24 hour care. This is nowhere near a fair or adequate income.”
VAT rate cut
In tax announcements, the price of a box of 20 cigarettes will rise by 50c with immediate effect, while VAT for food and catering businesses and hairdressers will be cut from 13.5% to 9% from 1 July 2026. The existing 9% VAT on gas and electricity will be extended to 31 December 2030.
Fine Gael TD for Cork North West John Paul O’Shea described the VAT cut as a “lifeline” for small businesses that have been under growing financial pressure.
He said: “This VAT reduction is a clear statement of confidence in our small and medium-sized enterprises, which are the backbone of our economy. The cut, which takes effect next year, will make it easier for local businesses to grow, remain competitive, and sustain and create jobs.”
One point of contention was the lack of one-off energy credits in next year’s budget. Between 2022 to 2025, households received credits worth a total of €1,500 to their electricity bills. This will not be the case going forward. However, measures such as extending the Rent Tax Credit to 31 December 2028 will aim to offset household expenses on a more long-term basis.
Minister Donoghue said: “Where our renters are concerned, I am conscious of the cost pressures faced by many of the individuals and families in this space.”
The minister also extended the Mortgage Interest Tax Relief for a further two years with a reduced value applying in the final year.
In housing, €2.9bn has been allocated to deliver thousands of new build social homes and to support the second-hand acquisitions programme. The VAT rate on the sale of completed apartments has been reduced to 9% from 13.5%.
Other highlights included €940m for Public Transport services and a pledge to increase acute hospital capacity by at least 220 beds across the country. Over 285,000 children are set to benefit from the National Childcare Scheme, an increase of approximately 35,000 children on this year, while over 105,000 children will benefit from universal Early Childhood Care and Education.