2025-12-09

1. Deputy Pearse Doherty asked the Tánaiste and Minister for Finance the level of inflation that was projected by his Department as it prepared budget 2026, including the decision not to provide an income tax adjustment for workers; and if he will make a statement on the matter. [64572/25]

Will the Minister outline the level of inflation that was projected when his party decided on the budget of this year? It was a budget that made a decision to pull the cost-of-living supports, such as energy credits and others, and not give any tax break to workers other than a handful of highly paid executives. How does the inflation rate that was projected when the budget was prepared compare to what we are seeing now in real terms? How will this impact on household wages?

At the time of budget 2026, the Department of Finance forecast a headline harmonised indices of consumer prices, HICP, inflation rate of 1.9% for next year. For household incomes, the Department of Finance forecast continued growth in wages per head of 3.9% in 2026. This implies continued growth in real incomes, which will support the purchasing power of households, and is an important indicator of improving living standards. The Department of Finance macroeconomic forecasts were endorsed by the Irish Fiscal Advisory Council, IFAC. In budget 2026, the Government had to make choices. This budget was designed to boost our economic resilience and to support workers and growth in their income by investing in jobs and in their future. However, with the substantial personal income tax packages implemented over the past four years, the previous Government made significant progress on increasing the entry point to income tax for all income earners and increasing the point at which the higher rate of income tax takes effect. Over recent years, the previous Government provided substantial income tax packages to support workers. Over the lifetime of the previous Government, the main tax credits increased from €1,650 to €2,000, representing an increase of €350 or 21.2%. In addition, the standard rate cut-off point was increased from €35,300 to €44,000, representing an increase of €8,700 or 24.6%. The income tax measures implemented over the period of the previous Government are expected to be in line with wage growth. In regard to the universal social charge, USC, over the lifetime of the previous Government, the USC ceiling of the band for the 2% rate was also increased by €6,898 from €20,484 to €27,382, in line with the increases to the national minimum wage. Furthermore, there was a significant reduction in the middle rate charge, from 4.5% to 3%. Broadly, the income tax measures implemented over the period of the previous Government are expected to be in line with wage growth. As the Deputy will be aware, the most recent budget provided a range of support to individuals, families and businesses. In particular, the rent tax credit, introduced in budget 2023, has proved to be a very meaningful support for renters. We have just taken the decision to extend the credit for a further three years to the end of 2028. The ceiling of the second USC rate band is being increased by €1,318 and this will ensure that a full-time worker on the minimum wage who benefits from the increase in the hourly minimum wage rate will remain outside the highest rates of USC.

For the budget in which the Government withdrew supports and broke promise after promise about income tax cuts that were made to workers during in election, the Department expected that inflation would be 1.9% next year and 1.8% this year. Maybe the Minister will outline that inflation is actually way above 1.8%, not far off double that figure. Would the Minister not agree? We understand the flash estimate puts inflation at 3.2%. Does the Minister have any concern that there are people out there who are finding it really difficult to make ends meet? Many of them are not making ends meet. The Government projected a budget based on a projected rate of inflation that is way lower than what is actually happening in the real, lived experience of people's lives. Will the Minister consider a cost-of-living package or is the message "You are on your own, folks"?

That is not the message. The message is that we took a number of measures in this year's budget that will help families, businesses and workers as well. It includes investing - the Deputy and I have different policy views on this - and deciding to extend the renter's tax credit for a further three years. It includes making sure that people who benefit from the minimum wage increase do not find themselves paying a higher rate of USC, but also investing in protecting people's jobs because that is a very important thing to do. This was the first budget in the lifetime of the Government as well. We will now get back into the normal rhythm of income tax packages in future budgets too. We took a decision to deliver on a number of commitments that were made, including some that the Deputy supports, such as the reduced VAT rate for the hospitality sector. The benefit of that decision will be seen even more in the time ahead because we are seeing some softening in the labour force figures. Supporting those jobs is important. That helps workers to ensure they can keep their jobs. It helps to keep the businesses in which they work open at a time when there are significant economic headwinds. As the Deputy knows, there are no plans to reopen the budget. With regard to the Department’s forecasts as, again, the Deputy knows, the Department forecasts a certain rhythm each year and the Irish Fiscal Advisory Council endorses those figures.

Is it not great for someone in the Minister's position to talk about getting back into the "normal rhythm" of something soon? When I go back to Donegal and talk to my constituent who simply cannot heat her home, I will tell her not to worry because the Minister says we are going to get back into the "normal rhythm" of things in a couple of years, closer to an election no doubt. It will be closer to an election because that is what the Minister does. He gives plenty of promises in the run-up to the election but, first thing after an election, promise after promise is broken. The Government brought forward a budget that had inflation rates nearly half of what they are currently. Things are worse off. That is why people in wheelchairs were outside the Dáil today. That is why they are coming up in the middle of a storm saying to the Government and the Minister that they need emergency supports this winter. The Minister needs to hear the pleas of the nearly 500,000 people who cannot heat their homes at this point in time, or is the message to them that they have to buckle up and tighten their belts until, in a couple of years’ time and closer to a general election, it will be okay again and we will get back into the "normal rhythm" of things?

That is not the message at all. The Deputy and I rightly discuss the issues of fuel poverty and energy prices in this House regularly, as we should. What I say to the people is that we have taken a number of measures to assist with the cost of energy, including the reduction of the VAT rate to 9%, a real budgetary cost that we decided to prioritise.

They are higher than ever.

We decided to do that.

But they are higher than ever.

Did we or did we not-----

The Minister promised to reduce energy costs.

We will have lots of time. We are going to have lots of time. It just gets a bit tiresome when the Deputy just shouts me down.

I am not shouting.

Or interjecting.

I am just reminding the Minister of what he said.

For the people watching at home, I get a bit of time to speak and then the Deputy gets a bit of time to speak. I want people to know that we took a decision to reduce the VAT rate on people's energy bills and ensure that is in place for a number of years. We took the decision to make sure more people qualify for the fuel allowance than ever before. We took the decision to increase the fuel allowance. We took the decision to make sure working family payment recipients can benefit from the fuel allowance as well. We also took the decision to invest significantly in things that working people in Donegal and right across the country asked us to do in relation to child, children's services, disability services, education-----

The Minister nearly said "childcare" there.

In childcare, too.

The Government broke that promise too.

We put money into capital, State-led childcare facilities for the first time. We extended the renters’ tax credit which was due to expire. We have taken real decisions and it is just the first of five budgets.