Budget 2027: Government likely to remove carbon tax increases on kerosene and home heating oil

The Taoiseach also confirmed that there will be double Christmas payments for those in receipt of social welfare

Micheál Martin speaking at the Fianna Fáil Cairde Fáil dinner. Picture: Brian Lawless/PA Wire

Taoiseach Micheál Martin has confirmed that the Government is likely to remove all carbon tax increases on kerosene and home heating oil for the rest of the Government’s term as part of Tuesday’s budget.

Speaking at the Fianna Fáil Cairde Fáil dinner in Dublin on Saturday evening, Mr Martin also confirmed that there will be double Christmas payments for those in receipt of social welfare.

Fraught budget negotiations are expected to continue this weekend, with the Government leaders expected to meet on Sunday from 12.30pm in Government Buildings.

Speaking to the media ahead of the dinner, Mr Martin confirmed that the coalition is leaning towards removing carbon tax on kerosene.

“In respect of the home heating dimension of the carbon tax, yes, that's the direction of travel [to stop increases in this term of Government],” the Taoiseach confirmed.

“Although, and again, there's a limit to that in terms of its impact. But yes, we are conscious of home heating this winter, and given the nature of the crisis now, the view is that there is no real sign of an easing of the pressure on energy.

“We would hope that the decision of the G7 may result in some reduction, but what really is required is the end of the conflict and the sustainable ruin between Iran and the United States, and also the end to the Russian-Ukrainian war, because, as you know, a lot of oil stocks are being destroyed in respect of that war also.” 

When asked if there would be other money put into retrofitting measures that are funded by carbon tax money, Mr Martin said that it is an “issue”, and that there are bilateral meetings going on between ministers to discuss this.

However, he said the yield from carbon tax on home heating oil is “relatively low”, so it is “doable” to find money elsewhere.

Christmas bonus

Mr Martin also confirmed that those in receipt of social welfare can expect a Christmas bonus this year, saying that is not a “big surprise”, noting that it is done every year and the Government can do it this year.

The Taoiseach also stopped short of ruling out energy credits as part of Budget 2027, noting that while it has not been discussed, he “can't anticipate what new measures people might put forward at the 11th hour”.

Ministers and their teams across Government have been reporting fraught meetings with the Department of Public Expenditure and minister Jack Chambers, with many saying that the slow expansion of their budgets is tantamount to cuts.

However, Mr Martin denied this, and insisted that there will be a 6% growth in spending and there “certainly aren't cuts to public expenditure”.

“The outturn for this year will be high in terms of public expenditure, so we have an obligation to have a public expenditure program that is sustainable,” the Taoiseach said.

“I mentioned income tax reductions. I mentioned improvements in terms of disability payments and the cost of disability payment will be there. The childcare initiative and package in this budget. There will also be a public service pay agreement, which would be significant and substantial.

“No one can talk about cuts, but what you can say that the rate of growth is not similar in 2027 to 2026.” 

The Taoiseach noted that following the covid period, there is “higher existing levels of service” before any new budget measures are announced, mentioning that the Department of Social Protection needs €1bn to “standstill”.

Social protection rates are expected to grow by €10 a week as part of Tuesday’s budget. The Irish Examiner understands that the fuel allowance increase is more likely to be a weekly payment, rather than a lump sum that can be quickly swallowed up.

Several Government departments completed their budget negotiations on Saturday, including the Department of Culture, Communication, and Sport.

While the highly touted Culture Card for 16-year-olds was thought to be off the table following a row between Patrick O’Donovan and Mr Chambers, the Irish Examiner now understands that Monday has been secured to “develop” the idea further.

However, it is expected that sports bodies will receive at most a “minimal” increase, with a small uplift to ensure hurling and camogie academies are funded. There is not expected to be much money for other matters.