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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

16/16 Again, this assessment is preliminary. The Council will give its full assessment of Budget 2026 in its Fiscal Assessment Report. By then, typically more information will be available, which will allow a more complete analysis.

Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

15/16 Even after accounting for inflation, spending net of tax changes is growing at a rapid pace, over 9% in 2025 5.3% in 2026. This is much faster than the sustainable growth rate of the Irish economy.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

14/16 Our first read is that this means that nominal spending net of tax measures is set to grow by more than 11% in 2025 and 7.3% for 2026.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

13/16 Budget 2026 includes more realistic forecasts for corporation tax receipts. The Department now expects a €3bn positive impact from OECD BEPS reforms in 2026—an improvement on earlier estimates of a €2bn negative impact. This is consistent with Fiscal Council projections.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

12/16 While the tax package announced today appears to be relatively modest, it will have a bigger impact in future years. The full-year costs will be much higher than the cost in 2026 (€2.3 billion vs €1.3 billion). This is due to measures introduced midway through 2026.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

11/16 These increases above what was set out on Budget Day are due to a combination of repeated expenditure overruns and within-year policy changes. Spending in 2025 could be even higher than currently forecast, if spending trends seen so far this year continue.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

10/16 Budget 2024 set out a base of €96.6 billion of Gross Voted Expenditure for 2024. As things stand, Gross Voted spending in 2025 is set to be €109 billion. This is an increase in spending in 2025 of €12.5 billion (12.9%) relative to what was originally set out for 2024.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

9/16 While much of the focus today is on the budget day package, there is no guarantee that spending will evolve as outlined today. Spending increases this year are likely to be more than double what was announced in the budget last October.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

8/16 The package announced by the Government this afternoon amounts to at least €7.4 billion (adjusted for tax measures). This is larger than the package of permanent measures introduced in recent budgets.

chart showing the budget package for 2026

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

7/16 The Budget outlined €6.1 billion for current spending increases, €2 billion for capital spending increases, and €1.3 billion of tax changes. Unlike recent budgets, all of the measures announced are permanent, and will recur every year.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

6/16 While the Government is running a surplus, this is driven by the extraordinary amount of corporation tax that is being collected. Without these revenues, the Government’s own figures show a deficit of almost €14 billion could emerge next year, a deterioration of €6.2 billion.

chart showing the government is running large and increasing underlying budget deficits

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

5/16 Standard economic advice would suggest that budgetary policy should provide less support when the economy is strong (like right now) and more when it is weak (were the economy to suffer a downturn).

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

4/16 The Budget comes at a time when the Irish economy is performing well. Employment is at a record high and wage growth is exceeding inflation.

chart showing employment has increased rapidly in recent years

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

3/16 The Government has yet to submit an updated Medium-Term Plan to the European Commission. This five-year plan, which sets out an expenditure path, was due to be submitted over the summer but this is yet to happen. This suggests the process is not being taken seriously.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

2/16 Budgetary forecasts in Budget 2026 only cover 2026, unlike recent budgets. Good planning and budgeting requires forecasts that go more than 15 months ahead. The Council has consistently stressed the need for budgetary forecasts that go at least five years ahead.

chart showing the forecast horizon for recent budgets

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 1d

1/16 This “Flash Release” gives the Council’s first read on Budget 2026. It explores some of the key areas that the Council will assess in its next Fiscal Assessment Report, due out in November.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 4d

4/4 The White Paper itself could vastly improve transparency by focusing on general government, rather than the narrower Exchequer. It could also improve transparency by showing gross rather than net spending to allow forecast comparisons.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 4d

3/4 The White Paper suggests large and growing underlying deficits in 2025 and 2026. Excluding excess corporation tax, the White Paper estimates a deficit of almost €10 billion next year. This is before any new budgetary measures are introduced.

chart showing the underlying balance is deteriorating

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 4d

2/4 Projected taxes have been revised up for 2026. In particular, forecasts of corporation tax in 2026 have been revised up by €3.8 billion from what was projected in last year’s budget. This likely reflects a more realistic assumption around the impact of BEPS reforms.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 4d

1/4 This morning, the Government released its “White Paper” ahead of Budget 2026. The White Paper is routinely published the weekend before Budget Day. It gives a glimpse of tax and spending forecasts before the impacts of next Tuesday’s Budget measures are incorporated.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 5d

4/4 This higher baseline for spending in 2025 will need to be factored into the budgetary figures for 2026, otherwise spending forecasts will be wrong from the start.

Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 5d

3/4 Current spending continues to grow at a fast pace. Even if there are no cost-of-living measures, with this pace of spending growth, current spending in 2025 is likely to be more than €1 billion higher than assumed in the Summer Economic Statement in July.

Chart showing fast spending growth, beyond what was planned for this year.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 5d

2/4 Underlying tax revenue in 2025 is ahead of Budget 2025 forecasts. This reflects the economy performing well despite global uncertainty.

Chart showing revenue is performing well, better than was forecast in Budget 2025.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 5d

1/4 Today’s final fiscal monitor ahead of Budget 2026 shows tax revenue ahead of forecast and current spending continuing to rise quickly.

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Irish Fiscal Advisory Council @fiscalcouncil.bsky.social · 7d

4/4 You can read the full paper here: www.fiscalcouncil.ie/vat-rate-cha...

VAT rate changes and pass-through – Irish Fiscal Advisory Council

www.fiscalcouncil.ie