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.'
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Irish Examiner
a few seconds ago
- Irish Examiner
Ireland avoids ‘catastrophic' US tariffs as pharma duties decision due within two weeks
American tariffs on pharmaceuticals could be finalised within the next fortnight, as Tánaiste Simon Harris insisted Ireland avoided a 'moment of catastrophe' thanks to an EU-US tariff deal. Mr Harris, who also serves as minister for trade, convened the Government Trade Forum at Government Buildings on Friday morning to discuss the agreement reached between US president Donald Trump and European Commission president Ursula von der Leyen. Tariffs of 15% on EU goods entering the US will take effect on August 7. The forum heard 'preliminary analysis' from the Department of Finance on the implications of the deal. The Tánaiste said the 'initial expectation' is that the Irish economy and job creation will 'continue to grow,' though he cautioned that 'a number of variables that just aren't known yet.' These include tariff-exempt products, US trade deals with other countries, and the timeline for finalising tariffs on the pharmaceutical sector. Pharmaceuticals are currently subject to a Section 232 inquiry in the US. Mr Harris said Brussels has advised that the process should conclude within two weeks, with pharmaceutical tariffs remaining at 0% until then. He added: 'We have an assurance from the US that pharma will not get a tariff of any higher than 15%.' Mr Harris stressed that without the EU deal, 30% tariffs would have applied to goods entering the US from Friday, with EU countermeasures also expected next week. 'There's absolutely no doubt that that would have been a moment of catastrophe in terms of our economic well-being as a country,' Mr Harris said. The Tánaiste said the 'initial expectation' is that the Irish economy and job creation will 'continue to grow.' 'We are in a position which is challenged, but a position where the Department of Finance expects our economy to continue to grow, albeit at a slower rate, and expects more new jobs to be created next year, albeit at a slower rate. He noted that while a trade deal is now in place, it is 'no more than a framework agreement' and that many issues remain unresolved. 'The agreement in principle hasn't yet been published, and one hopes that that's because there's still work going on and clarifying further sectors.' Mr Harris also disputed early commentary suggesting the UK secured a better deal than the EU. He pointed out that although 10% tariffs will apply to UK goods, the EU's 15% cap includes any additional duties, whereas the UK's 10% rate is in addition to existing tariffs. He argued that it 'may well mean that some UK tariff rates end up being higher than EU tariff rates'. As an example, he noted that Irish butter exporters were previously paying a 16% tariff, which rose to 26% when a new 10% duty was introduced in April. That rate will now fall back to 16% under the EU deal, as tariffs won't be stacked. However, under the UK deal, where stacking is permitted, British butter exporters could still face a 26% tariff. He added: 'The EU seems to have a commitment in writing to no more than 15% for pharma. 'The UK language is much more vague. It doesn't have a number beside it, so we'll need to see where that brings us in the weeks ahead.' Elsewhere, Mr Harris declined to comment on the upcoming Budget 2026. He said the Government remains 'committed' to reducing childcare costs to €200 per month 'over its lifetime', but added that whether fees will decrease this year is 'a matter for budget day.' He also declined to comment on suggestions that VAT cuts for the hospitality sector may not be implemented until mid-2026.
Irish Examiner
30 minutes ago
- Irish Examiner
Irish consumers to see lower electricity bills as levy to fund renewable energy to fall 38%
Irish households will have €24 added on to their electricity bills over the next year to help fund renewable energy projects and meet climate goals, the energy regulator has said. The Commission for Regulation of Utilities (CRU) set out the final decision for the public service obligation (PSO) levy for 2025/26, which is shared across all electricity customers to help support projects such as wind and solar across the country. 'For the PSO year starting on 1 October 2025, the CRU has calculated that the monthly PSO levy will be €2.01 and €7.77 for domestic and small commercial customers, respectively,' it said. 'This compares to the current (2024/25) PSO levy, which is set to €3.23 and €12.91, and will result in a 38% and 39% decrease respectively.' While it is a decrease on the previous year, it comes as households continue to face strain on their finances, particularly when it comes to essentials like groceries and energy bills. A flash estimate on inflation for July from the CSO earlier this week suggested the cost of food is rising at nearly three times the rate of general inflation. When it comes to energy bills, a recent price hike announced by Flogas has raised fears other energy companies will follow suit heading into the winter. It also comes ahead of this Government's first budget, which has ruled out the kind of cost-of-living supports that marked previous years. The PSO levy charged to customers each year is based on the wholesale price of electricity. When wholesale prices are higher, the PSO levy for households is lower because renewable energy generators are earning more for electricity they produce and do not require that level of subsidy. During the huge surge in energy bills following Russia's invasion of Ukraine, the PSO levy was set to zero. However, households have begun to be charged more on their bills through the levy again, as wholesale prices have come down. CRU said the levy supports significant amounts of renewable energy generation in Ireland, and the country 'continues to make significant progress in advancing renewable energy'. 'The PSO levy is important in supporting clean energy and in helping Ireland meets its Climate Action Plan targets in 2030,' it added.
RTÉ News
an hour ago
- RTÉ News
Smithsonian museum removes Trump impeachment references, WSJ reports
The Smithsonian's National Museum of American History removed a label referencing Donald Trump's two impeachments last month following pressure from the White House, The Washington Post reported. Mr Trump is the only US president to have been impeached twice - first in 2019 for abuse of power and obstruction of Congress, then in 2021 for inciting an insurrection. He was acquitted by the Senate both times. The label referencing his impeachments was introduced in 2021 to an exhibition about the American presidency at the Smithsonian, according to The Washington Post. The removal of the label "came about as part of a content review that the Smithsonian agreed to undertake following pressure from the White House to remove an art museum director," the Post wrote, citing a source not authorised to discuss the matter publicly. The exhibit has reverted to a 2008 label stating that "only three presidents have seriously faced removal" -- referring to Andrew Johnson, Bill Clinton, and Richard Nixon, who resigned in 1974 before he could be impeached. The Smithsonian later said in a statement that "a future and updated exhibit will include all impeachments," the paper reported, without specifying when. Since starting his second term in January, the Republican president has moved to control major cultural institutions - slashing arts and humanities funding, and cutting the National Park Service's budget. In March, Mr Trump signed an executive order to "restore the Smithsonian Institution to its rightful place as a symbol of inspiration and American greatness" and "remove improper ideology." The order accused the institution of having "come under the influence of a divisive, race-centreed ideology" and argued the shift has promoted narratives that portray US values as "inherently harmful and oppressive." In the order, Mr Trump instructed Vice President JD Vance - who sits on the Smithsonian's board - to coordinate with Congress to ban funding for exhibits or programmes that "degrade shared American values, divide Americans by race, or promote ideologies inconsistent with Federal law." He has also accused Washington's John F Kennedy Center of being too "woke," fired its board members, and appointed himself chairman.
