Budget 2021 leaves poorest behind

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Budget 2021 has left Ireland’s poorest people behind as Government decided not to increase core social welfare rates. Despite allocating more resources than any previous Budget in the history of the State, the distribution of those resources was such that the gap between the poor and the better off will widen in 2021 and inequality will increase. This is a totally unacceptable outcome.

In calculating how people’s incomes will change in 2021 it is important to realise that people with jobs are likely to see increases in their take-home pay in the coming year.  Public servants will see an increase of 2% while the pay of other sectors is also expected to increase.  In contrast to that, people on core social welfare payments depend on the Budget alone to increase their incomes.

The Department of Finance estimate that compensation per employee rose by 2.9% in 2020 and will rise by 1.3% in 2021. In that context it is not acceptable that core social protection rates remained unchanged, which, given estimates for inflation in 2021, will mean a real term reduction in the value of the core payments” – Michelle Murphy, Research and Policy Analyst, Social Justice Ireland.

The ESRI has commented that Budget 2020 would increase poverty.  We believe Budget 2021 will have a similar impact. While the distributional analysis of the Budgetary measures undertaken by the Department of Public Expenditure and Reform demonstrates the importance of progressive changes to payments such as the Living Alone Allowance, Fuel Allowance and increases for Qualified Children, there will be large numbers of people depending on core social welfare payments who do not qualify for some or all of these allowances who will definitely be left behind.

While TDs will see their salaries rise by close to €2,000 in the coming year (almost €40 a week) many of Ireland’s most vulnerable people will see their incomes remain unchanged for the second year in a row.  Among other things they will face additional increases in the cost of food as a result of Brexit and higher charges for public transport as a result of increased carbon tax. 

Social Justice Ireland recognises that poverty is never just about income.  But it is always about income. Failure to increase core social welfare rates will have a profoundly negative impact on some of Ireland’s most vulnerable people. As a result of Budget 2021 inequality will increase in Ireland, the rich/poor gap will widen and Ireland will continue its journey towards becoming a deeply divided two-tier society.  Deeply divided societies are bad for business, for society and for the environment. Budget 2021 fails to address these divisions.

Budget 2021 - Welcome

• Adoption of a counter-cyclical fiscal stance.
• Financing for the Community Health Networks
• Acknowledgement by Government that tax and welfare are a single system..
• Providing the finance to implement the McMahon Report and end Direct Provision.

Budget 2021 - Regret

• Failure to increase core social welfare rates.
• Failure to make tax credits refundable to address the working poor issue.
• No progress towards just taxation.

Download our comprehensive analysis and critique of Budget 2021 here.