Budget will mean lower household income with worse in store for poorer families, says ESRI

THE GOVERNMENT’S BUDGET will result in lower household income next year on average, with slightly higher losses for poorer households as they battle to pay bills, according to the Economic and Social Research Institute (ESRI).

In addition, the ESRI said the Budget will also have little effect on child poverty, in large part because of the removal of government measures that had been in place to help in paying the bills previously.

According to new research, at the household level, measures announced as part of Budget 2026 will result an average 2% loss of disposable income.

But the losses increase for low-income households, with the “withdrawal of temporary cost-of-living measures” cited as a key factor in the ESRI’s statement analyising the Budget announced on Tuesday.

The ESRI said these losses will be “partly cushioned” by this week’s welfare package that will see weekly social welfare payments increase by €10 next year.

It added that these payments are mostly above expected inflation and wage growth, it will still see likely losses of 4.1% of disposable income for the lowest income households.

In contrast, the ESRI said higher income households will see a loss of 0.3% of their disposable income.

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While it acknowledged that the phasing out of temporary cost-of-living policies was inevitable, the ESEI said this will result in a reduction in households’ standard of living in 2026.

Child poverty

Budget measures targeted at children, such as increases to the Child Support Payment and the Working Families Payment, are considered “well-targeted” in the ESRI analysis.

However, their effect on children who are at risk of poverty will be “relatively small” as they are accompanied by the withdrawal of many temporary measures, according to Associate Research Professor at the ESRI Karina Doorley.

“More investment will be needed to achieve government targets,” Doorley said.

The ESRI estimated that the government’s measures will lift around 2,000 children out of income poverty, with many more targeted measures necessary to achieve the government target for child consistent poverty of 3% or below.

It added that the introduction of a cut to VAT on hospitality and hairdressing may result in small income gains if they are passed on to consumers. These gains will be larger for high income households, the ESRI reported.

Overall, the researchers criticised the Government’s spending and taxation policies as “arguably too loose”, with the “reliance on unpredictable corporation tax receipts” regarded as a vulnerability.

“This means hard choices must be made between measures in order to have sufficient scope to support the economy in a downturn,” the ESRI said.

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