Economic statement shows public finances 'not as healthy as the headline figures suggest'

Summer Economic Statement shows Government will have €7.9bn to spend and a total of €1.5bn with which to make tax cuts in Budget 2026

Tánaiste Simon Harris, Taoiseach Micheál Martin and Minister of State Sean Canney at the launch of the Government's Summer Economic Statement. Picture: Niall Carson/PA Wire

The Government may have to "recalibrate" its €9.4bn budget plans if tariffs are imposed as part of an US-EU trade war, ministers have confirmed.

The Summer Economic Statement, published on Tuesday, however, says that a potential change in the tariff landscape or economic conditions could impact future spending plans.

According to the document, Budget 2026 provides for an overall package of €9.4bn, and will be comprised of both tax reductions and public spending increases. 

The tax package will amount to €1.5bn, while the spending package will be €7.9bn, an increase of 7.3% on the revised 2025 General Expenditure Ceiling.

"If there is a deterioration in the tariff landscape, Government will recalibrate its fiscal strategy — reducing the quantum of the budgetary package — in order to ensure that the public finances remain on a sustainable trajectory."

The document says that Budget 2026 is designed to "address the policy challenges of today without jeopardising fiscal sustainability into the future".

"To this end, Budget 2026 is a budget that focuses on investment rather than consumption – it is designed to address the infrastructure gap and to boost economic resilience."

Speaking at the launch of the statement, Finance Minister Paschal Donohoe said that a decision would be made closer to Budget day.

“We will have to assess again closer to Budget day if the [Budget] package is appropriate to the economy,” said Minister Donohoe.

“Our Budget Day decisions could change depending on the economic environment we find ourselves in during the summer and beyond,” he said.

"It’s very clear that we’re at a moment of significant transition to the economy of the world. But notwithstanding all of this, our economy continues to grow."

Mr Donohoe said the Government’s intention is to be “flexible” in its approach to Budget Day.

Speaking at the same event, Public Expenditure Minister Jack Chambers said the Government is having to navigate “serious economic uncertainty”.

The document says that while the economy is in good condition, the public finances "are not as healthy as the headline figures suggest".

"While the headline budgetary position is in surplus, this is almost entirely due to a handful of large corporate taxpayers.

"Over the medium-term, structural changes – an ageing population, the phasing out of fossil fuels and other greenhouse gas emitters, the need to facilitate the digital transition and the fragmentation of economic activity along geopolitical lines – will have profound implications for the Irish economy and for the public finances."

Speaking on Tuesday, Taoiseach Micheál Martin said that if the economic winds shift, it will be day to day spending which will be hit, rather than capital projects.