Budget 2026: Government increases spending and scales back planned tax measures

The Government has pledged to “secure jobs and stability at a time of global challenge” as it announced its annual Budget.

Among the suite of new measures announced include €2.9 billion for the delivery of new-build social homes and second-hand acquisitions, €10 increases to weekly social protection payments, and the commencement of a new Dublin-Derry airlink.

There will also be funding for additional Defence Forces members, gardaí, and education workers as well as funding for a contentious cut on student contribution fees, millions of euro for soccer and Gaelic games development, and progression on infrastructure projects such as the M28 in Cork.

Budget 2026 was announced by finance minister Paschal Donohoe and public expenditure minister Jack Chambers in the Dáil earlier.

Mr Donohoe said: “This budget builds up our resilience and will help us to adopt at a time of historic challenge and change for our economy and our society.” 

He said it was “regrettable” that US tariffs were introduced and said they would impact upon growth in the coming years.

“This year saw greater fragmentation as widespread tariffs were introduced. The world has been pulling away from its near universal commitment to free and open trade, a commitment that benefited many, and our fortunes are connected to the world around us.”

Mr Chambers said for a long time Ireland traded on its advantages as a “small, open, agile” economy and how it chooses to invest, plan and manage its economic affairs now “will shape our country’s future”.

“Our vision is to create a thriving country where enterprise can flourish and people feel valued regardless of background, ethnicity, sexuality or gender.

“This is our opportunity to be a caring country defined by stability, tolerance and progress, for those who were born here and those who have chosen to make Ireland their home.”

The budget was immediately criticised by opposition parties, with Sinn Féin finance spokesman Pearse Doherty claiming the Budget “gave nothing” for those impacted by the cost-of-living crisis in Ireland.

He said: “When all the clapping is done, when all the back-slapping is over and the Government benches die down, when all of the spin that we have heard, the bluster, the deluded arrogance that has come dripping from both ministers’ speeches – ordinary people, where are they?

“They are left in the cold.” He added: “Your big message in this budget, and people have heard it loud and clear today, is that ‘you are on your own’.

“This is a budget which abandons workers and families to look after those at the top. No help with the cost-of-living crisis … no break from taxes, a blueprint for the continuation for the never-ending crises in our housing and health.

“Election promises one after the other, torn up and thrown in the bin.” 

The coalition Government has strayed somewhat from parameters it outlined for itself in the pre-Budget period, where it said the total package should be €9.4 billion – broken down into €7.9 billion in additional public spending and a €1.5 billion envelope for tax measures.

While the size of the package still falls at €9.4 billion, the Government has scaled back the size of proposed tax measures by €150 million and pivoted that into further public spending – now at €8.1 billion.

Elsewhere in the measures, a full week’s “Christmas Bonus” will also be paid for social protection payment recipients.

The renters’ tax credit, which had been due to expire this year, will be extended for a further three years to the end of 2028.

Vat for food and catering businesses, as well as hairdressing services, will be reduced from 13.5% to 9% from July 1 2026 – at a cost of €232 million next year and €681 million in a full year.

The 9% Vat rate on gas and electricity bills will be extended until the end of 2030, while that rate will also apply to construction of new apartments.

Meanwhile, the national minimum wage is to increase by 65c per hour to 14.15 euro per hour and the Government said the 2% Universal Social Charge band will be increased to avoid minimum wage workers falling out of the top rates of USC.

Additionally, the Budget includes a typical increase on the cost of cigarettes (50c more for a pack of 20), a new Defence Forces uniform, and a carbon tax increase for auto fuels from Wednesday – applying to other fuels from May.

Mr Donohoe also announced a new Derelict Property Tax, to replace the Derelict Sites Levy, stating that dereliction is “a blight on our towns and cities”.

He said he does “not intend” for the new tax to be charged at a lower rate than the levy, which is currently set at 7% of the site market value.

Mr Chambers also said there would be a “record level of investment” in the Department of Health.

It is the first Budget delivered by the Government since the election which returned Fianna Fail and Fine Gael to power, supported by several independents.

Mr Chambers said funding for the Department of Education would provide for 1,717 additional special needs assistants and an increase of 1,042 teacher posts.

Elsewhere, a successor scheme to the piloted basic income for artists is to be introduced next year, Minister Jack Chambers has said.