Budget 2026 will lead to a 2 per cent reduction in disposable income for average households, according to a new analysis, reports The Mirror.
The €9.4 billion Budget announced on Tuesday includes a €10 increase in weekly welfare payments, a lowered VAT rate for the hospitality sector, and funding for a basic income scheme aimed at artists.
Unlike previous years, no once-off cost-of-living payments were introduced alongside this Budget, reports The Mirror.
The Economic and Social Research Institute (ESRI) found that the majority of income reductions stem from the phasing out of earlier cost-of-living supports, such as energy credits.
Lower-income households are expected to be more significantly impacted, facing a reduction of roughly 2.5 per cent in their disposable income.
The end of temporary supports will result in a 4.1 per cent loss in income for those at the lower end of the income scale, while higher-income earners will experience a much smaller drop of just 0.3 per cent, reports The Mirror.
For wealthier households, the impact of frozen tax bands and credits, combined with projected wage growth of 3.7 per cent in 2026, effectively results in a tax increase.
The ESRI noted that when looking at the last six budgets combined, disposable incomes are around 1.2 per cent lower than they would be if incomes had been indexed since before the pandemic.
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However, it also pointed out that policy changes since 2020 have helped reduce poverty rates for most groups—except for older people, whose poverty rate is projected to rise by four percentage points in 2026 under these conditions, reports The Mirror.
The ESRI’s findings were released shortly after the Irish Fiscal Advisory Council (IFAC) warned that the Budget was too large and unnecessary for the current state of the economy.
The council said that excluding volatile corporation tax receipts, Ireland would be running a deficit, and urged the Government to issue an updated medium-term fiscal strategy, reports The Mirror.
The Parliamentary Budget Office (PBO), an independent advisory body staffed by civil servants, said the Budget would bring income reductions for all household types.
In its initial report, the PBO projected that the lowest-earning 10 per cent of households would see their income fall by 1.8 per cent, middle-income households would be down 1.2 per cent, and the top 10 per cent would lose 0.6 per cent of their income, reports The Mirror.
The office said that for poorer households, the removal of cost-of-living measures would outweigh gains from welfare increases, especially when inflation is considered.
“Income losses among low-income households leads to a rise in income poverty rates, rising from 11.7 per cent in 2024 to a forecast level of 13.2 per cent in 2025 and 12.6 per cent in 2026,” it said, reports The Mirror.
“A rise in income poverty is evident for the elderly (those aged over 64), rising from 13.3 per cent in 2024, to a forecast 19.0 per cent in 2025 and 17.6 per cent in 2026,” reports The Mirror.
The PBO also backed the Government’s decision to scrap universal energy credits, calling it a “prudent” move given their high cost, reports The Mirror.
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