Tariff uncertainty means 'tighter' spending for Budget 2026
The Government will today release the summer economic statement, which will outline the broad parameters of this year's budget. While Government sources say there will be money to spend and it will roll out a €30bn national development plan update, economic uncertainty means that current spending will need to be managed.
A Government source said the ongoing uncertainty on the impacts of the Trump administration's tariffs on EU goods as well as any potential EU countermeasures means that the future of Irish finances is harder to predict and will necessitate a 'tighter' budget this year.
It is expected that Tánaiste Simon Harris will tell Cabinet this year's document will be 'different' from previous years, given the continued uncertainty with tariffs, and that decisions made in the budget will 'have to focus on protecting jobs and investment during what could be an economically turbulent period ahead'.
Government sources have said that the increase in protectionism, rising tariffs, and the 'fragmentation of global supply chains' pose a threat to Ireland's economic model, but that Budget 2026 will see additional spending and taxation measures delivered.
Privately, some ministers have pointed to existing level of service (ELS) commitments as a concern in meeting additional demands. ELS is often referred to as 'standing still money' and covers previous commitments and demographic growth.
In last year's summer statement, the projection for this year's budget was that there would be around €2bn for additional expenditure and €1.2bn for tax-related changes. Sources said that they believed these figures would be close to the final package available later this year. Sources said there will be a surplus, but that future budgets could be impacted by tariffs and their fallout.
The Government will today reiterate three strands to its budget approach by committing to investment in infrastructure, as well as pledging funds for public services, and contributing to two long-term funds aimed at mitigating external shocks such as tariffs.
Finance minister Paschal Donohoe is expected to tell Cabinet that increased investments in the likes of health and education will be made on a permanent basis and that the Government is also focused on 'maintaining the stability of the public finances'.
The Government will continue to put money away in the infrastructure, climate, and nature fund, as well as the future Ireland fund. Sources said the focus has been on finding 'the right balance between enhancing our public infrastructure, improving public services, and maintaining the long-term sustainability of the public finances'.
The summer economic statement is designed to 'form the basis for political discussions on the budgetary process and increase transparency in the Government's approach to planning for the provision of key public services' and 'outlines the broad parameters that will underpin discussions of economic and fiscal policy over the medium term'.
In recent parliamentary question responses, Mr Donohoe has said that the SES 'will incorporate all available information and data including the latest developments in the trade policy landscape'.
'That said, it is clear that we are now in a fast-evolving and more challenging global environment, with elevated levels of uncertainty; this is the reality of the situation we face.'
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