Tough Budget 2026 decisions ahead with tax cuts for workers on chopping block
Finance Minister Paschal Donohoe and Public Expenditure Minister Jack Chambers have warned that tough decisions will need to be made during the Budget 2026 process.
It came amid indications that a reduced VAT rate for hospitality will take precedence over tax cuts for workers.
Tánaiste Simon Harris, meanwhile, warned that there is a "dark cloud on the horizon", and suggested US tariffs could impact budget decisions.
The National Economic Dialogue was held in Dublin Castle on Monday, marking the start of the budgetary process. It brought together stakeholders and senior Government ministers to discuss Budget 2026, which is due to be unveiled in October.
It comes ahead of the publication of the Summer Economic Statement next month. This sets the parameters of the budget and how much money will be allocated.
A new National Development Plan will also be unveiled by Minister Chambers next month.
Government sources told the Irish Mirror that Budget 2026 will be "much different" to the generous budgets that have been the norm in recent years.
They warned that it will be much tighter given concerns about the ongoing uncertainty over US President Donald Trump's tariff regime. It also comes amid a backdrop of concern over the increasing public spending.
Speaking at the NED, Minister Donohoe stated that there will have to be a "safe and sensible" budget.
He also indicated that reducing the VAT rate for hospitality from 13.5 per cent to 9 per cent could take precedence over tax cuts for workers.
He said: "We made it very clear in the general election that choices have to be made and choices have to be made in how we use the country's money.
"There are commitments that I know all parties and Government are committed to delivering from the VAT perspective.
"But as we make decisions in relation to that, that means there are other things that we can't do.
"I am confident that if we are in a position of stability within our public finances in the time ahead, the commitments that we have laid out in the Programme for Government that we can deliver them.
"But I think and I know that our first priority leading up to this budget is to look at how we can support jobs, invest in infrastructure and keep our public finances safe.
"Decisions always have to be made. Minister Chambers is in the middle of an enormously difficult process with regard to the National Development Plan, where the demands that he has to manage are always ahead of the resources that are available.
"The same applies to taxation. If we decide that we are going to make a particular set of decisions and investments in tax, that means there are other things that we will not do."
When it was put to Minister Donohoe that the priority in Budget 2026 will be on VAT and hospitality rather than on tax cuts for workers, the Fine Gael TD said that the VAT rate was a "shared priority across Government".
He said there is a need to "invest in our future" and "keep and grow jobs in Ireland" as he noted there had been "big changes to the cost of doing business" for those in the hospitality sector.
The Tánaiste, meanwhile, said the National Economic Dialogue on Monday marked 23 days until the end of Trump's 90-day tariff pause and what Mr Harris described as a "very high level of tariffs".
He warned that the Summer Economic Statement and indeed the budget "will be framed with the best possible information available to us at the time in terms of any economic challenge caused by trade and tariffs".
He argued that the final tariffs are still unknown and pharmaceuticals could still be hit.
Mr Harris added: "What is absolutely clear, though, is you would want to continue a budgetary strategy in October that is sensible in planning for a variety of eventualities."
When asked about the prospect of tax cuts for workers being shelved, Mr Harris said no decision had been made, but the Government made "very clear and specific commitments in certain areas, and those commitments have to be paid for." This included, he said, reduced VAT rates for hospitality.
He added: "The country's in a healthy economic space. That'll be one of the messages of the National Economic Dialogue, but with dark clouds on the horizon. Therefore, we have to manage that situation."
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