The Coalition’s first budget will help to set the direction for its period in office. It is an opportunity for voters to see where the Government’s priorities lie. Budgets are all about making choices, and there are some big ones to be made next Tuesday.
Some of the key directions are already clear. The Government’s revised National Development Plan provides for significant increases in State investment, even if where exactly all this will go has yet to be spelled out. Pre-budget documents have outlined the parameters of budget day itself, which will be a €7.9 billion package. What is left to fill in is the vital detail.
It is important that the Coalition sticks to its guns and avoids allocating additional cash to universal once-off payments in a new cost of living package. More than €2 billion went in this direction in last year’s unwise pre-election giveaway. The Coalition thus created a rod for its own back, as households will miss the additional cash this time.
Ministers also stored up trouble for themselves through the commitment to cut the VAT rate on hospitality back down to 9 per cent. In a limited tax package, this has left no scope for personal tax cuts. With no more energy credits or double child benefit weeks either, households will notice the difference.
RM Block
Ending these once-off payments is the right thing to do, but had there been scope to index the income tax system for inflation it would have softened the blow a bit. The Opposition will seek to take advantage here, though Sinn Féin’s call for energy credits even greater than last year’s is a nonsense.
With a lot of additional cash going on State investment, the Coalition also faces some difficult choices on day-to-day spending, particularly in light of election commitments, such as moving over the Government’s term to monthly childcare costs capped at €200, or addressing child poverty. Making progress here, while also delivering a decent increase to those reliant on welfare, will not be easy.
The difficult decisions in Budget 2026 are just a foretaste of what is to come. Extra taxes will be required in the years ahead to pay for the cost of an ageing population and climate change, as well as providing services and key infrastructure to a rising population.
The general election campaign failed to address this . But the Government must, not only next Tuesday but also in a medium-term budget plan due shortly afterwards. If this does not happen, then Ireland may again end up adjusting its public finances in haste, as has happened so often before. The State has one of the healthiest public finances in the EU and has put some cash aside. But it is vital to recognise that the tax base is narrow and is built on the shaky foundations of revenues vulnerable to the whims of Donald Trump.
