2 days ago
Exclusive: Budget 2026 to cut several key payments in austerity move
The country is facing its first austerity budget in a decade, top Coalition sources told this weekend.
And Fine Gael's much-trumpeted 9% VAT rate cut for the hospitality sector will not be decided until Budget Day and may not happen at all, given the worsening economic situation, a Government minister told Extra.
The slashing of the Universal Energy Credit, double child and social welfare bonuses at Christmas and reinstating university tuition fees to €3,000 are all being considered. Tánaiste Simon Harris and Taoiseach Micheál Martin speaking at a press conference for the launch of the Government's Summer Economic Statement and the National Development Plan for the next five years. Pic: Niall Carson/PA Wire
It sets the scene for a destabilising summer of discontent over the tighter spending rules being imposed by Public Expenditure Minister Jack Chambers.
Senior Government sources have publicly denied claims that the next budget will be an austerity budget but, privately, sources at the top of the Coalition say otherwise.
Despite this week's announcement of the biggest capital spending programme in Irish history, ordinary families will feel the squeeze due to the elimination of one-off payments which for some are worth as much as €1,000.
After years of record spending increases, one minister told Extra: 'The plan is simple. Wait Trump out with a couple of austerity budgets and return to power via a series of generous budgets in the latter half of our term.
'A deal [on tariffs between the EU and the US] is still possible but the overall scenario is frightening. It is all very uncertain. The spat between Trump and Macron [over France recognising the Palestinian state] could add 5% to tariffs.'
A Fine Gael minister said last night: 'Let Fianna Fáil and Micheál take the hit for cuts in the first three years and then Simon will take the credit for extra spending in the last two years.
'When we don't have it (money) at the start of a new government we won't spend it. When we have money just before the next election, we'll spend it.'
Tensions about the cuts came to the fore this week after a ferocious row broke out between Fianna Fáil and Fine Gael over the issue of VAT reductions.
Commenting on the public exchanges between the Coalition partners, one source said: 'Willie O'Dea is already on Morning Ireland causing discontent and it is only July.'
Cuts in the first three years and then Simon will take the credit for extra spending in the last two years. When we don't have it (money) at the start of a new government we won't spend it. When we have money just before the next election, we'll spend it.' Public Expenditure Minister Jack Chambers. Pic: Fran Veale
Tensions about the cuts came to the fore this week after a ferocious row broke out between Fianna Fáil and Fine Gael over the issue of VAT reductions.
Commenting on the public exchanges between the Coalition partners, one source said: 'Willie O'Dea is already on Morning Ireland causing discontent and it is only July.'
A senior Coalition source said last night the impending cuts are 'very necessary. There's concern over the long-term consequences of the 37% growth in spending since 2021.'
'The blunt truth is, there has been a lot of waste. We have to spend on political necessities. No more luxuries. There is a need to bring discipline back into spending. Covid led to necessary loosening of the reins, but we need to restore traditional controls. We need to do a few big things well. There is a brave new world out there. We need to ensure spending is efficient,' they said.
Another minister noted: 'The Government had no other option. Spending was getting out of control. Every department was starting to resemble the Department of Health. It had to stop.'
Another minister last night tried to minimise the scale of any proposed cuts.
'This is not austerity, it's normality. We have to walk our way back from a system of economics that was first driven by Coronavirus and then the first large-scale land war between two states since 1945,' they said, referring to Russia's invasion of Ukraine.
Another Fine Gael minister noted: 'When it comes to cutting, do you want to be unpopular now or would you prefer to be unpopular in five years' time?' One Fianna Fáil minister warned their Coalition partners: 'Fianna Fáil has no intention of taking the hit for one-off cuts. Fine Gael would be wise to not be too clever. We will not be austerity patsies. The proposed economic challenges we face require a Government that works together or both parties will sink.' Finance Minister Paschal Donohoe speaks to the media outside Leinster House. Pic: Niall Carson/PA Wire/PA Images
In an indication of the uncertain international landscape, understands an Oireachtas Committee report into the Occupied Territories Bill will recommend the banning of both the importation of goods and services from territories illegally occupied by Israel in Palestine.
The judgment, to be delivered next week, is likely to provoke fury in both the United States and Israel and leaves the Coalition facing a very difficult diplomatic position.
Both Fianna Fáil and Fine Gael have said they are committed to the passage of the Bill but, up to recently, the Coalition's preference was to confine any ban on imports from Israeli settlements to goods.
Sinn Féin and the soft left, by contrast, have consistently called for a ban on both.
A Bill, forwarded to the Committee for pre-legislative scrutiny in June confining the ban to goods, was called an act of 'diplomatic intoxication' by the US ambassador to Israel Mike Huckabee, who said Ireland should 'sober up' and apologise to the Israeli Ministry of Foreign Affairs.
The Committee now wants the Coalition to go further and ban both goods and services. It is believed such a ban was backed by all members, including Fianna Fáil and Fine Gael. The Committee is expected to note it had to proceed without the advice of the Attorney General on the issue of services.
It will add to the growing concerns that triggered a major pre-summer Economic Statement clampdown by the Department of Public Expenditure and Reform.
