An assessment by the Economic and Social Research Institute has found that the measures announced in Budget 2026 are likely to lead to modest reductions in household income next year. According to the ESRI’s post-Budget analysis, the average loss will be around 2% of disposable income, with the impact varying significantly across income groups.
A key driver of the projected decline is the expiry of temporary cost-of-living supports, which have featured heavily in recent budgets. The ESRI described their withdrawal as unavoidable, but noted that it will have a noticeable effect on living standards in 2026. Lower-income households are expected to experience the largest proportional loss, with an estimated reduction of 4.1% of disposable income compared with 0.3% for higher-income households.
The report highlights that the removal of one-off payments will be partly offset for lower-income families by increases in welfare rates, most of which exceed expected inflation and wage growth. For households on higher incomes, the freeze on tax bands and credits will amount to an effective tax increase if earnings rise by the ESRI’s forecast of 3.7%.
The research also suggests that some consumers may see minor gains from indirect tax changes. If energy and service providers pass them on, the extension of the reduced VAT rate on electricity and gas, along with a temporary VAT cut for hospitality and hairdressing, could offer limited financial relief, particularly for higher-income households.
Budget 2026 includes a range of measures aimed at easing pressure on families with children, such as increases to the Child Support Payment and Working Families Payment. The ESRI described these measures as well targeted, although their overall effect on child poverty will be modest because they are implemented alongside the withdrawal of temporary supports. The institute estimates that around 2,000 children will be lifted out of income poverty as a result of the Budget, but warned that this falls far short of what is needed to meet the Government’s goal of reducing child consistent poverty to 3% or below.
ESRI researchers emphasised that additional investment will be required to make meaningful progress in tackling child poverty and deprivation. They highlighted the strong economic rationale for further action, noting that the long term cost of child poverty to the State is estimated at around 4% of GDP each year.
