Summer Economic Statement 2026
Social Justice Ireland welcomes the publication of the Summer Economic Statement and the outline of the fiscal parameters for Budget 2027 with an additional €8.5bn for additional taxation, current and capital expenditure measures.
The Summer Economic Statement suggests Government is planning a tax reduction package of €1.5bn with €5.9bn additional current expenditure and €1.1bn additional capital expenditure funding to meet the needs of a growing and ageing population and to deliver additional services. It is of concern that, whilst noting the precariousness of Ireland’s tax base in the document, no detail is provided as to how Government plans on broadening Ireland’s tax base or increasing the overall tax take. Whilst the documentation gives details of expected available resources and projected revenue, it fails to address the key question of what reforms are required now to secure our public finances into the future and meet the challenges set out in ‘Future Forty’ – the theme of this year’s National Economic Dialogue.
Income tax
The Summer Economic Statement gives a broad outline of a tax package of €1.5bn. It notes the narrowness of Ireland’s tax base, and the dangers this poses, but gives no detail as to how this will be addressed in Budget 2027.
Our analysis of income tax changes from 2014-2026 provides evidence of the scale of the income tax reductions delivered over the last 12 years. These are often overlooked yet are substantial at the individual/household level and at the exchequer level. Our analysis also illustrates the distribution of these income tax decreases. As we have consistently highlighted in our annual budget documents the gains have been notably skewed to higher income earners and households
Budgets since the end of the last economic crisis have frequently given emphasis to providing reductions in income tax. Recent commentary has also suggested that income taxes are abnormally high and that some further income tax cuts are needed. However, the evidence suggests otherwise.
Many earners have received substantial income tax reductions over recent years. For example, a single earner with a gross income of €40,000 has seen a €3,480 reduction in income taxes, employee PRSI and USC since 2014. Similarly, a single earner with a gross income of €60,000 has seen a €5,280 reduction, with a single earner on €100,000 seeing a reduction to the value of €5,600.
Social Welfare
There is no mention of income adequacy in the Summer Economic Statement and there is little to no detail as to how Government plans to close ever widening income gaps between well-off and poorer households. This risks embedding inequality into our society and fails to protect vulnerable households.
Rather than focusing on tax cuts and reducing an already narrow and precarious tax base, Government must use Budget 2027 to fulfil the Programme for Government commitment to deliver progressive budgets by prioritising fairness and the common good. This requires benchmarking social welfare rates to average earnings; delivering on Programme for Government commitments on a cost of disability payment and reforming Carer’s Allowance; and progressive taxation policies and measures in a fair tax system.
At a minimum, in Budget 2027 Government should:
- Outline a medium-term plan of one-off investments in our social and physical infrastructure funded from one-off windfall corporate taxation revenues.
- Adopt recurring taxation and expenditure measures which prioritise the protection of the most vulnerable groups in our society while addressing the unsustainability of current fiscal policy approaches.
- Set a new tax take target on a per capita basis as a first step towards planning for a sustainable tax take and developing a broad tax base.
- Prioritise vulnerable groups by committing to the principle of benchmarking core social welfare rates to 27.5 per cent of average weekly earnings over two budget cycles. This requires a €15 increase in core weekly social welfare rates in 2027 and a further €10 increase in Budget 2028.
- Introduce a system of refundable tax credits to make the tax system fairer for low income workers and increase the PAYE and Personal tax credits by €5 per week. This should be the focus of any proposed income tax changes in Budget 2027.
- Deliver on its promise to fund adequate levels of current and capital expenditure growth to meet the needs of our growing population and its commitment to increase public sector investment to address infrastructural deficits through appropriate and ambitious investment of windfall revenues, and the adoption recurring taxation and expenditure measures which prioritise fairness and protection of the vulnerable.
In Budget 2027, through appropriate and ambitious investment of windfall revenues, and the adoption recurring taxation and expenditure measures which prioritise fairness and protection of the vulnerable, Government can begin to deliver on its promise to fund adequate levels of current and capital expenditure growth to meet the needs of our growing population and its commitment to increase public sector investment to address infrastructural deficits.
‘Tracking the Distributional Effects of Budget Policy – 2026 edition’ is available to download here.