Government Budgets failing low income households

The fundamental test for every Government is whether, when it leaves office, those with the least in our society are in a better position than when it entered office. The choices that Government has made in recent Budgets will see the number of people in poverty grow. Our analysis, 'Tracking the Distributional Effects of Budget Policy - 2022 edition', shows that Government policy is not yet focused on achieving the objectives of reducing poverty and promoting social inclusion. 

 

Key Findings

Households with Jobs

Among households with jobs, the gains range from a mere 39 cent per week (for low income couples on €30,000) to €16.11 per week for couples with incomes over €80,000. Earners on the living wage gain more on account of the increase in the level of that payment.

Households dependent on Social Welfare

Among households dependent on welfare, the gains have ranged from €5 per week for single unemployed individuals to €24.65 per week for unemployed couples with 2 children over 12 years of age. The gains experienced by welfare dependent households in Budgetary policy over recent years explain much of the reason why the levels of income inequality and poverty have fallen in recent years.

Impact on low income households

Our analysis highlights how low income families, those with incomes below the standard rate income tax threshold gain least from the budget measures over the past two years. The households analysed are spread across all areas of society and include those with a job, families with children, those unemployed and pensioner households. This is a snapshot of Irish society. Within those households that have income from a job, we include workers on the minimum wage, on the living wage, workers on average earnings and earners with incomes ranging from €30,000 to €200,000.

Rich-Poor and Middle-Poor Gaps

In real money terms, we are seeing an increase in the rich-poor gap. As a result of the taxation and welfare measures adopted in Budget 2022, the rich-poor gap increased by €2.96 per week, or €154 per year. The overall rich-poor gap stood at €975 per week (€50,800 per annum) in 2022 and it has grown by a total of €30 per week (€1,550 per annum) over the period 2014-2022. 

Our analysis also monitored what we call the “middle-poor gap”, that is the difference in the distributional impact of recent Budgets on households dependent on jobseekers payments (poor) and PAYE workers on €40,000 per year (middle). Overall, the middle-poor gap has grown by a total of €21 per week (€1,070 per annum) over the period 2014-2022.

The cumulative middle-poor gap stood at €572 per week (€29,800 per annum) in 2022. The gap has marginally decreased by 16 cent per week following the Budgetary policies of the current Government (Budgets 2021 and 2022), this can be explained by the full payment of the Christmas Bonus to jobseekers in 2020/21 and no other changes to income taxation or welfare payments for these individuals.

Social Justice Ireland has consistently argued for the prioritisation of low income welfare dependent families in Budgetary policy and welcomes these outcomes. However, we are concerned that recent Budgets have shifted away from this approach and regrettably expect that much of this recent progress will be reversed.

Tracking the Distributional Effects of Budget Policy – 2022 edition is available to download now.