Budget Fails to Prioritise Most in Need in Face of Rising Cost of Living

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Budget

Any cost of living budget had to prioritise those most vulnerable to high prices – low-income households. Any workers’ budget had to support low and middle-income workers and ensure a more equitable distribution of the nation’s resources.  Budget 2027 failed on both counts.  

Our analysis of Budget 2027 measures shows that overall, the budget failed to prioritise households most in need.  It finds that the rich poor gap and middle poor gap are both going in the wrong direction, and that Budget 2027 has moved away from the broadly progressive approach of Budget 2026 – a cause of significant concern.

Despite being dubbed as a budget which would build the foundations of tomorrow, and balance todays needs with tomorrows musts, it instead further eroded the security a precarious tax base, raising questions about fiscal prudence and the ability of this Government to future proof our society and economy to meet future challenges.

Some welcome progress has been made, particularly in the areas of cost of disability, child support payment increase, changes to income thresholds for particular social welfare supports, increases to tax credits and an increase to the minimum wage.  However, broader reforms to payments such as the Carer's Allowance were absent, meaning any changes will have limited impact. The overall analysis of all measures indicates a lack of ambition to address current challenges in housing and climate adaptation, a failure to target resources to the households that need them most, a narrowing of the tax base and a failure to sustainably prepare for a growing and ageing population.

Income tax

  • Instead of delivering broadly similar gains to  almost all working households, Government has chosen to exclude many low- and middle-income earners from a substantial portion of the gains in this Budget’s tax package.
  • Notwithstanding the gains provided to low and middle income households, there is no escaping the fundamental unfairness in Government’s decision to provide 200% more in income tax gains to higher earners than to low and middle income earners.
  • It is unclear what Government’s rationale is for giving one cohort of workers greater gains than another cohort. More importantly, in making its distinction, it is unclear how Government can justify choosing to favour the better off over those on lower incomes who are most in need of support. 

Social Protection

  • It is deeply disappointing that Budget 2027 has only provided an additional €10 per week to core welfare payments. Such an inadequate increase in the weekly rate condemns vulnerable households to a winter of prolonged hardship with persistently high food and energy prices. 
  • This decision has been made both in the context of significant cost of living pressures and in the knowledge that wages will continue to rise this year and next. An increase of €15 per week in core welfare payments was the minimum needed to move towards a benchmark to average earnings at a rate that would provide adequacy. 
  • Tracking earnings is crucial if inequalities are not to further widen between earners and households reliant on social welfare. Families who rely on social welfare will fall further behind as a result.
  • The delivery of a Cost of Disability payment is welcome, and long overdue.  While the annual €500 payment is a positive first step, a weekly payment would be preferable to allow recipients to budget appropriately for the additional costs they incur with increases informed by the recommendations of the ‘Cost of Disability in Ireland – Research Report’.
  • The increases in the Child Support Payment and income thresholds for Carers Allowance, Working Family Payment and Fuel Allowance are welcome, but fail to address the core issue of income adequacy for vulnerable households. 

Overall fiscal stance

  • Budget 2027 signals that the exchequer will record a substantial budget surplus in 2027 of €6.7bn. While there are large inflows of tax revenue from an economy with record levels of employment and consumer spending, the contribution from corporation tax is notable.
  • In 2027 corporation tax revenue will total €39bn; for comparison this figure was €7.9bn ten years ago. It includes windfall corporate taxation revenues from a small number of firms, estimated as at least €20bn-€23bn by the Department of Finance. 
  • Removing the expected windfall revenues from corporation tax, the underlying budget position is one where the State is expected to record a significant budget deficit of €12bn in 2026 and €13.4bn in 2027. The unsustainability of this position is of major concern; at a time of full-employment, strong consumption and continued growth the existence of an underlying budget deficit raises major questions. 
  • Overall, Ireland’s current fiscal policy is unsustainable and in the longer-term it is a recipe for austerity. Social Justice Ireland regrets that Budget 2027 did not make substantial moves to decrease this significant risk; in particular addressing the inadequacy of our recurring and sustainable tax take.