Tánaiste Micheál Martin has pushed back against an analysis by the Economic and Social Research Institute (ESRI), which warned that Budget 2026 could leave Irish households facing income losses next year.
In a post-Budget report, the ESRI said households would see an average fall of around 2% in disposable income, largely due to the phasing out of temporary cost-of-living supports introduced in recent years. The think tank added that lower-income families were likely to be hit hardest, with potential losses of up to 4.1% compared to just 0.3% for higher-income households.
Speaking during a visit to County Cork, Mr Martin disputed the ESRI’s findings, citing Department of Finance data that suggested the opposite outcome. “Our modelling shows that those in the two lowest income brackets will actually gain between 4% and 5% as a result of this Budget,” he told RTÉ News.
Mr Martin argued that the ESRI’s focus on household income provided only a narrow view of the Budget’s impact. “You can’t look at the Budget purely through that lens,” he said. “People want better infrastructure — better water and wastewater systems, better roads, better rail. We’re investing in enterprise, research, and job protection. Without that investment, people would be hit far harder.”
The ESRI acknowledged that the withdrawal of temporary supports — such as one-off energy credits and cost-of-living payments — would inevitably reduce living standards but described the move as necessary. “This loss will be felt across the income distribution, with low-income households losing significantly more as a proportion of their disposable income,” the report stated.
According to the analysis, higher-income families may also experience minor setbacks due to the freeze on tax bands and credits, which could act as an “effective tax rise” if wages increase at the forecasted rate of 3.7% next year.
The ESRI said welfare increases would partially offset losses for low-income households, as they exceed both inflation and wage growth projections. It also noted that VAT cuts on electricity, gas, hospitality, and hairdressing could lead to modest gains if passed on to consumers.
Associate Research Professor Claire Keane said the removal of temporary supports would inevitably impact those on lower incomes, though increases in welfare payments would cushion some of the losses.
On child poverty, the ESRI described Budget 2026 as a step in the right direction but said its effects would be limited. Associate Research Professor Karina Doorley noted that while measures such as higher Child Benefit and Working Family Payments were well-targeted, they would lift only around 2,000 children out of poverty — far short of the government’s target of reducing child poverty to below 3%.
She added, “More investment will be needed to meet these goals, but the economic case for doing so is strong, as child poverty costs the State an estimated 4% of GDP annually.”
