Dáil Éireann Debate, Tuesday - 12 May 2026
458. Deputy Michael Cahill asked the Tánaiste and Minister for Finance to provide a detailed response to correspondence that summarises the seriousness of the cost of living crisis, where a family with two good jobs are finding it increasingly difficult to make ends meet; the action he is taking to address these issues; the action he is taking to address prices spiralling out of control; and if he will make a statement on the matter. [34268/26]
Amharc ar fhreagraThis Government is acutely aware of the challenges people are facing as a result of the energy price shock and has acted with supports worth over €750 million to help insulate households and businesses from the worst impacts of rising costs.
The first intervention by Government to address rising energy prices occurred at the end of the March. Government reduced the excise on fuel, cut the NORA levy to a nominal amount, enhanced the diesel rebate scheme and extended the fuel allowance season by an additional four weeks.
A further package of measures was introduced in April to provide greater support to those most affected by rising fuel prices, and to key sectors of our economy. These measures included a further reduction in the excise duty on fuel. This now means that cost of diesel has been reduced by 32 cent per litre, and by 27 cent per litre for petrol and 7.4 cent per litre for green diesel.
Government has also decided to delay the scheduled increase in carbon tax to later in the year and established support schemes for the haulage and agricultural sectors.
These temporary, targeted and proportionate measures build on the permanent, sustainable supports introduced as part of Budget 2026, such as the extension of the reduced rate of VAT on gas and electricity, the extension of the Rent Tax Credit, increases to social welfare and child support payments, and increases to the Fuel Allowance.
As the Deputy will be aware, the ‘Programme for Government 2025: Securing Ireland’s Future’, contains specific undertakings with regard to personal taxation, it commits to “implementing progressive changes in taxation if the economy remains strong, including indexing credits and bands to prevent an increase in the real burden of Income Tax while in the event of an economic downturn and unexpected deterioration in the public finances we would postpone changes to Income Tax credits or bands, as we did in Budget 2021”.
To ease the burden facing average and middle-income earners, over successive Budgets the previous Government substantially increased the entry point to the higher rate of income tax for all earners by €8,700 or c. 25 per cent. The main tax credits have also been increased by €350, or c. 21 per cent. In line with the Government policy of ensuring full-time workers on the minimum wage remain outside the charge to the top rates of USC the ceiling of the 2 per cent USC rate band was increased by €6,898, or 34 per cent, from 2020 to 2025. Budgets 2024 and 2025 also cumulatively reduced the 4.5 per cent rate of USC to 3 per cent.
Broadly, the income tax measures implemented over the period of the last Government are expected to be in line with wage growth.
Budget 2026 was designed to boost our economic resilience and protect jobs in a deeply uncertain international economic environment. However, it also provided a range of supports to individuals, families and businesses. In particular, the Rent Tax Credit, introduced in Budget 2023, has proven to be a very meaningful support for renters. The credit was extended for a further three years to the end of 2028. The ceiling of the second USC rate band was increased by €1,318, from €27,382 to €28,700. This has ensured that a full-time worker on the minimum wage who benefits from the increase in the hourly minimum wage rate from €13.50 to €14.15 remains outside the highest rates of USC, while it also has provided a modest benefit to all workers whose income is above that amount. The 9 per cent VAT on gas and electricity bills was extended until the 31 December 2030, recognising that energy prices remain high and to help alleviate energy cost pressures for households.
All of these measures will have a positive impact.
It is because of our proven record sound management of the public finances that we have the capacity to respond in a proactive and flexible way to the energy price shock. We have demonstrated that we stand ready to adjust our response, as the situation requires, while also ensuring our approach to overall budgetary policy remains balanced and sustainable in the medium-term.
