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Proposed €12 Budget hike in payments rejected

Capping expenditure growth is expected to be a guiding principle of Budget 2026
Capping expenditure growth is expected to be a guiding principle of Budget 2026

The framing of the budget has stepped up a gear in recent days.

The message is already clear that this is going to be a very different set of figures to those of recent years.

It will instead be more akin to the conservative offerings unveiled in the period from 2016 to 2020.

Prudence and a determination to cap current expenditure growth are the guiding principles this year.

It could not contrast more with the open purse strings approach that characterised the budget which was unveiled weeks before the general election last year.

Minister Jack Chambers wants his colleagues to review how they are using their current budget allocations

The Department of Public Expenditure is playing hardball and the opening plays from several departments have been knocked back unceremoniously.

It is understood this included a proposed €12 increase on the State pension and other core Social Protection payments.

It has been pointed out that every €1 increase costs around €80 million, so even a €10 hike would run to €800 million, a figure which seems to be outside the parameters of this Budget.

Minister Jack Chambers is asking colleagues to first examine how they can make better use of their current resources before seeking more funding.

"There is a bit of reverse psychology going on," said one of his colleagues.

Those predicting an increase to the regular Child Benefit Payment have also been told "not to bet on it."

It is expected there will be some targeted measures towards children in poverty which could see a rise in the child support payment.

There will be no cost-of-living package even though food and energy prices continue to rise.

Crucially that means no universal credits to cut the cost of electricity this winter. Right now, there are almost 300,000 households in arrears on their electricity bills.

Instead, the Government is most likely going to focus on increasing the weekly fuel allowance payment which has remained at €33 since 2022.

An upcoming report from the energy taskforce could also propose some targeted support payments.

It's likely that the VAT rate for the food service hospitality sector will be reduced

There will be emphasis on tackling child poverty, supporting those with a disability as well as increasing the qualifying threshold for the Carer's Allowance.

The minimum wage is also set to rise above €14 as the VAT rate for the food services part of the hospitality sector looks likely to be reduced.

More controversially there is a proposal paper on the table which is suggesting a tax break to encourage developers to build more apartments.

There are differing views on this subject in Government but if it did get the green light, it would follow on from the new guidelines around the design of apartments and the extension of existing planning permissions.

Those familiar with this internal Government negotiation insist that the tax measure would be the final incentive for investors in this area.

Such a move would inevitably generate political heat, especially as the existing tax concessions for apartment developments are viewed by many as generous.

Moreover, the scope for any tax changes is quite modest, given the overall figure stands at just €1.5 billion.

This means the Finance Minister Paschal Donohoe will have quite a challenge if there is a political push to ease the income tax burden on some earners.

Whatever the final shape of Budget 2026, it certainly will not be munificent.