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ON TUESDAY, the government will unveil the budget for 2026.
Unlike other years, where the public were being promised they would be up to €1,000 better off, this year is a much more sombre affair.
It was nearly a year ago that election promises of cheaper childcare, more housing and better healthcare was bursting out of manifesto documents.
But fast-forward to this year’s budget and it is being framed as the most austere in years.
Government has been at pains to emphasise uncertain economic winds that might be coming our way.
This year’s €9.4 billion package includes €1.5 billion in tax cuts and a €7.9 billion spending package, an increase of 7.3% for next year.
So, what can we expect?
In the years gone by, successive governments have tweaked the tax bands and the rates of USC, putting a little more cash back into people’s’ pockets. But not this year.
Despite there being a cost-of-living crisis, there will be no changes to personal taxes in the Budget, Finance Minister Paschal Donohoe has said.
He broke the news on Friday when he said this year’s tax package was focused on “jobs and investment”.
Previously, Public Expenditure Minister Jack Chambers had said due to the planned VAT reduction measure it “leaves a more limited scope for specific changes in income tax”.
There are tough negotiations going on over the weekend regarding the level of increase social welfare payments, including the pension, will see in this year’s budget.
As reported by The Journal previously, social welfare payments, including the pension, are not set to increase by the same amount they did last year.
Last year, the pension and other payments rose by €12 per week, but sources indicate a €10 or €11 rise is more realistic now, unless there is a last minute push to match last year’s increase.
One senior source said that the government would rather a slower, more gradual increase rather than have to cut payments if the economic situation changes in the year to come.
Fine Gael has also been pushing for jobseekers’ payments not to increase this year in step with other social welfare payments – but Fianna Fáil sources indicated today that such a move won’t be countenanced.
Minister for Culture, Communications and Sport, Patrick O’Donovan is understood to be fighting to retain the basic income for the arts scheme, which he said recently has shown huge successes.
The government is yet to re-launch its new Housing for All 2.0 plan but the many of the initiatives will be spelled out in the budget.
There has been much talk about tax breaks for developers, and after a bit of a row over the matter between Fianna Fáil and Fine Gael, it seems like they are all on the same page about rolling them out in some form in a bid to boost housing numbers. It is also expected that there will be a cut to VAT for developers who build new apartments.
While the Rent Tax Credit will be retained, those in rental accommodation will be waiting to see if it gets a boost. Donohoe has said he has seen the benefits of it, with some sources stating that it might only increase nominally this year by €200.
The Help-to-Buy scheme is being retained but will not rise above the current €30,000 cap.
Despite election promises, Taoiseach Micheál Martin told The Journal in New York recently that the First Home Scheme will not be extended to second-hand properties, stating that this year is about focusing on new build homes.
One thing ministers have been very clear about is they plan to bring the VAT rate for the hospitality sector back down to 9% from 13.5%.
The lower rate was introduced to help the sector recover from the pandemic, but was increased in August 2023.
The measure will cost a lot of money and eat up a big chunk of the tax package.
Harris has said the government has no intention of reducing the VAT rate for hotels, with the move instead aimed at restaurants and cafes, despite there being little or no evidence to show its benefit.
The large multinationals such as McDonald’s and Burger King are expected to benefit from the change, which is likely to kick in midway through 2026.
Again, while there were big promises made in the run up to the election to reduce childcare costs to just €200 per month, the mood music from government is the focus this year will be on core funding and boosting the number of childcare places under the the scheme.
“I think that the judgment call for us in this budget is going to be, how much do you invest in the capacity piece versus is there also room to do stuff on the fees?” said Tánaiste Simon Harris.
Speaking to The Journal in Washington DC recently, he said the government will get the cost down to €200 per month, but over the lifetime of the government, rather than in the short-term.
A permanent cut to college fees has been agreed, with the cut likely to be worth about €500.
The government has already confirmed a new tax on vape liquid will take effect on 1 November.
The finance minister said the tax will be applied at a flat rate of 50c per millilitre of e-liquid.
The measure was formally announced as part of Budget 2025, but was delayed in order to give those in the industry adequate time to prepare.
Finance Minister Paschal Donohoe will deliver his inaugural Budget speech at 1pm in the Dáil, with Minister for Public Expenditure and Reform Jack Chambers set to outline public spending immediately afterwards at approximately 1.45pm.
The Dáil schedule is then cleared until 8pm to allow opposition TDs to respond to this year’s Budget.
Voting on the Budget will then begin around 8pm and is scheduled to last until after midnight.
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