Budget 2026 cuts income of Ireland's poorest households by over 4%, says report

The report from the Parliamentary Budget Office said: 'Child poverty also rises from 15.3% in 2024, to a forecast 16.1% in 2025 and 15.6% in 2026.'

The poorest households in Ireland will see their income fall 4.4% due to the full winding down of cost-of-living supports in Budget 2026, new analysis has suggested.

The independent parliamentary budget office has said that measures in the Budget will also see the annual income of middle-income households decline by 1.3% on average while rates of poverty for children and the elderly will also increase compared to 2024.

It comes as advocates criticised the Government for failing to address “longstanding major societal challenges” and said the measures outlined would mean those dependent on welfare will “fall further and further behind”.

Unveiled by the Government on Tuesday, some of the headline measures from Budget 2026 included Vat cuts for hospitality businesses and apartment developments. There were no major tax cuts for workers and the one-off cost-of-living supports from previous budgets have been phased out.

Alongside that, there was a €10 increase to all core social welfare rates and a 65c rise to the minimum wage.

Analysis from Grant Thornton has suggested that, in last year’s budget, excluding child benefit, a married couple with two children earning €45,000 each, was €1,850 better off. This year that same couple is €75 worse off per annum.

In its report, the Parliamentary Budget Office said it looked at how tax and welfare policies announced in his week’s Budget affects households’ income.

“On average, low-, middle- and high-income households face average income losses from Budget 2026,” it said. 

The withdrawal of cost-of-living measures is forecast to increase income poverty rates, rising from 11.7% in 2024 to 13.2% in 2025 and 12.6% in 2026.

“Our key finding highlights that the full winding down of cost-of-living supports in Budget 2026 will significantly impact low-income households, equivalent to an average decrease in annual income of 4.4% for the poorest 10% of households and 3.9% for the next poorest 10%, while middle-income households see a decrease of 1.3% on average.” 

It also said the freeze on income tax bands and credits affects middle- and high-income households, increasing the average tax rate from 22.5% in 2025 to 23.1% next year.

Alongside that, it said earnings have outpaced welfare rate growth over the past decade when accounting for inflation while poverty rates will increase compared to 2024 under the measures.

“A rise in income poverty is evident for the elderly (those aged over 64), rising from 13.3% in 2024, to a forecast 19.0% in 2025 and 17.6% in 2026,” it said. “Child poverty also rises from 15.3% in 2024, to a forecast 16.1% in 2025 and 15.6% in 2026.” 

Social Justice Ireland analysis

Social Justice Ireland has said while increases to the child support payment in the Budget are to be welcomed, the Government’s overall approach to poverty has not been “strategic”.

Its research and policy analyst Susanne Rogers said the failure to benchmark social welfare rates against average earnings was a concern.

“Although this increase in the income of welfare-dependent households contrasts with a small decrease in income for most others, it is regrettable that the Budget failed to deliver a welfare increase of the scale required,” she said.

“A lesson from past experiences of economic recovery and growth is that the weakest in our society get left behind unless welfare increases keep track with increases elsewhere in the economy. 

"Unfortunately, as public and private sector wage increases continue throughout 2025 and 2026, those dependent on welfare will now fall further and further behind.”