Opening Statement by Minister for Finance, Paschal Donohoe T.D. at the Meeting of the Budgetary Oversight Committee, Budget 2026

Introduction

Chair, members of the Committee, thank you for the opportunity to discuss Budget 2026.

Economic Context

To begin, I will set out the economic and fiscal backdrop to the Budget which Minister Chambers and I will present to the Oireachtas in less than two weeks’ time.

Free and rules-based trade has been a pillar of the Irish economy for many decades. The disruption to internationally settled trade rules will damage Ireland’s economic growth.

Since I last met you in June, the European Union and the United States made a deal on reciprocal trade. 15 per cent tariffs on EU imports is regrettable, but at least we have more certainty.

Not to mention that the higher tariffs that had been threatened will not take effect, and the EU will not impose its own countermeasures.

Government is still acutely aware of the concern across many sectors. We are engaging with everyone affected by these tariffs, as well as the EU and our American counterparts. And we are taking action to maintain Ireland’s standing as a competitive and supportive environment for investment and employment.

Despite the challenges, the Irish economy remains in a relatively strong position.

This is most evident in the labour market with record high employment in Ireland in the second quarter of 2025 - over 2.8 million people. Our economy added almost 64,000 jobs on last year.

Modified domestic demand - which measures activity in the domestic economy - recorded growth of almost 4 per cent in the first half of 2025 on an annual basis.

• Overall, growth is expected to remain relatively solid over the coming period.
• Tariffs and elevated uncertainty will weigh on activity, but the increase in capital expenditure will help support economic growth.

This is no time for complacency. Budget 2026 must continue to pursue a sustainable and balanced budgetary policy which drives long-term economic growth.

Fiscal Background

Minister Chambers and I announced the parameters for Budget 2026 in July, in the Summer Economic Statement.

My Department will publish updated economic and fiscal forecasts alongside Budget 2026, taking into account the changing global environment.

It remains appropriate in our view that we pursue a total budget package of €9.4 billion, made up of €1.5 billion in tax and €7.9 billion in expenditure measures.

It is Government’s objective to enhance living standards, support business and improve overall wellbeing for the entire country.

Minister Chambers and I are committed to working with colleagues across Government to achieve our goals within those parameters. And this year, as I have said before, there will be no repeat of the “once-off” measures.

To allow for the increase in capital spending and the National Development Plan, we must moderate current spending growth to a level that is affordable and safe over the medium-term.

Government is fully aware of the impact inflation has had on businesses and households throughout the country over recent years. Inflation has now returned to normal rates, but we are acutely conscious that the price level has risen in recent years, especially for necessities such as food.

In this Budget, we will provide cost of living supports that are sustainable and permanent.

At headline level, public finances are in good shape. Our economy has been remarkably resilient, with steady growth in income tax and VAT revenues.

But our economy’s reliance on the FDI sector has also come into sharp focus.

Ireland must remain a top destination for multinational firms. These corporation tax revenues helped fund Government’s extraordinary response to the pandemic and the cost of living challenge.

Nonetheless, I have warned on many occasions about the risks of overreliance on corporation tax. A highly concentrated tax base presents an inherent risk to sustainable public finances. Ten companies account for well over half of all corporate tax receipts. A negative shock to these companies would also negatively impact VAT and income tax revenues.

Overall, corporation tax receipts are only marginally ahead of the same time last year.

Government has acted to mitigate this risk:

• We will continue to run budgetary surpluses.
• We are building up the Future Ireland Fund and the Infrastructure, Climate and Nature Fund to €16 billion by end 2025.
  • These funds set aside some of the more transient revenues instead of using the money to fund current spending - and invest to prepare for the structural challenges on the horizon, like the costs of demographic change and the more uncertain global order.

This is the right balance to improve public services, increase competitiveness, and safeguard the public finances.

Conclusion

Budget 2026 comes at a time of great uncertainty. There has been a seismic shift in the external environment.

Our economy is fundamentally resilient. We have made huge progress in successive Governments to return our public finances to health, and we are in a strong position to confront the challenges ahead.

Thank you.

Ends