The Government is warning of an uncertain economic backdrop as Budget 2026 is framed. Despite a reduction in inflation, prices remain high, resulting in small losses in average incomes due to tax and welfare changes. The ESRI's Dr. Conor O'Toole indicated that temporary support measures have benefited households but will inevitably phase out, potentially increasing poverty and inequality if welfare payments do not keep up. Concerns exist regarding government spending possibly overheating the economy, emphasizing a need for focus on infrastructure improvements.
"ESRI research has shown that from 2020 to 2025, permanent changes to the tax and welfare system have resulted in small average income losses (-0.3pc of disposable income) compared to policy changes pegged to wage growth."
"While temporary measures have been successful in helping households deal with rising prices, their inevitable phasing out will cause affordability issues."
"This is likely to lead to knock-on effects on poverty and inequality, if headline welfare payments fail to keep pace with income growth."
"The Government can choose on specific measures that it wants on both the revenue side or the taxation side... net position needs restraint."
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