Budget 2026: Low-pay households set to lose 2.5% of disposable income

Budget 2026 will reduce average household income by 2%, and many opposition TDs are frustrated that more measures were not targeted towards the most vulnerable.

One of the headlines of Budget 2026 was that the Vat rate for food businesses will be reduced to 9% from next summer, at a cost of €681m a year, Opposition parties have criticised this for including large multinational chains, arguing that the significant costs of cutting the Vat rate cannot be justified for all businesses, and should be applied only to smaller ones that need the support more.

Similarly, while an increase in the child-support payment has been welcomed, groups such as the Children’s Rights Alliance and Barnardos had called for a two-tier child-benefit rate, for those in need of greater support.

The cost-of-living measures in previous budgets were blanket boosts, provided to all households regardless of income. There were no such measures this time, with the Government promising, instead, targeted supports.

When announcing the budget, minister for finance Paschal Donohoe said: “For many necessities, including food, prices are still going in the wrong direction. This budget seeks to address this through targeted supports for those most in need in a way that is affordable for our country.”

A general increase in weekly social-welfare payments, minimum-wage increase, a fuel allowance increase and expanded eligibility, an increase in the income disregard for carer’s allowance, and an increase in the working family payment threshold were among targeted measures announced by the Government.

However, according to new research presented by the ESRI, low-income households will see the greatest loss as a result of these measures.

The research revealed that measures announced as part of Budget 2026 will result in small losses next year, averaging 2% of household disposable income.

The withdrawal of temporary cost-of-living measures is responsible for much of this effect. There is variation in how Budget 2026 will affect households of different income levels, with slightly higher losses, of 2.5% of disposable income, expected for low-income households.

Three Cork infrastructure projects were mentioned by name in the budget: The Cork Area Commuter Rail phase 1, the M28 Cork-to-Ringaskiddy road, and the Crawford Art Gallery. However, no details were provided on how much funding these projects will get or in what manner the funding will be used and when.

Nationally, 3,370 healthcare staff, 2,600 teachers and SNAs, and up to 1,000 trainee gardaí were promised, but no regional breakdown was provided, with the Department of Health telling The Echo: “The allocation of resources to regions will form part of the HSE National Service Plan (NSP) for 2026.”