Pension hikes of €12 still a ‘target' even as ministers walk back tax cut promises
Despite warnings of tighter purse strings and little to no tax cuts, ministers believe a €12 weekly increase in the pension 'has to be a target' and should announced as part of Budget 2026 in October.
Government leaders are warning rising tensions in the Middle East and tariff threats from US president Donald Trump will mean a cautious approach is needed in the coming months.
But both Fianna Fáil and Fine Gael promised before the election that they would increase the pension to €350 per week over the next five years. That means annual increases of €12 on average.
And while ministers appear prepared to backtrack on promised income tax cuts, a boost for pensioners is still very much in play.
'It has to be the target, because it'll be thrown against us if it's not. But at this stage, I doubt we'll be going against that,' one minister said.
'Everything we're being told at this stage is the envelope is going to be much tighter.'
A weekly pension hike would spark a debate about what other social welfare payments, such as jobseeker's allowance, would also go up.
Taoiseach Micheál Martin is understood to be keen on payments targeting children in poverty and the disabled.
While splitting child benefit into two tiers is being considered, it is viewed as a difficult and costly exercise.
Targeted payments for less well-off families, such as the Working Family Payment, are viewed by some within the Government as being a more likely system of providing extra cash to families who need it most.
Yet a second tier of child benefit would be the 'most effective' way to tackle child poverty, the Economic and Social Research Institute (ESRI) will tell the Oireachtas social protection committee today.
At a cost of €773m per year to the taxpayer, it would reduce the child at risk of poverty rate by 4.6 percentage points, the child material deprivation rate by 0.7 percentage points and the child consistent poverty rate by 2.1 percentage points.
'Our analysis suggests that any such reform should be designed carefully to avoid income losses for some households,' the ESRI's Karina Doorley will tell TDs and senators. 'The effects of a second tier of child benefit on work incentives should also be investigated to ensure they do not overly discourage employment.'
Ministers do not expect any once-off cost-of-living payments under Budget 2026 but it is almost certain to include a 9pc Vat rate for hospitality.
'This will see people buying the second coffee, eating out and spending more and keeping jobs,' one minister said.
'The Budget will recognise there is no longer a cost-of-living crisis. The €12 weekly increase to pensions and other welfare rates is in line with inflation.'
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