Families 10% worse off since crisis despite gains in last budget

Bounce from Budget 2016 has given modest gains in the short term only

The ESRI examined the “cash” impact of Budget 2016, and the combined impact of budgets for the years 2009 to 2016 inclusive

The ESRI examined the “cash” impact of Budget 2016, and the combined impact of budgets for the years 2009 to 2016 inclusive

 

Budget 2016 led to a modest increase of just under 0.7 per cent in total household disposable income, according to a new paper published today by the Economic and Social Research Institute (ESRI). However, families are still on average about 10 per cent worse off due to the combined impacts of the budgets since the crisis began in 2008.

The ESRI examined the “cash” impact of Budget 2016, and the combined impact of budgets for the years 2009 to 2016 inclusive. Initial findings were reported in The Irish Times just after the Budget last October.

The ESRI analysis used data from the Central Statistics Office’s survey on income and living conditions, a nationally representative sample of more than 4,500 households.

No change

The institute compared the impact of the budget against a situation in which tax bands, tax credits and welfare payments increase in line with expected wage growth – 2.3 per cent next year. The figures show that the lowest income households were left in a “no change” situation, while increases of between 0.5 and 1 per cent went to higher income households.

The relatively small increase is due to the fact that some level of tax relief is needed if higher wages are not to lead automatically to higher taxes.

While Budget 2016 led to an increase in household disposable income for most families, the budgets between 2009 and 2016 gave rise to substantial income losses at all income levels.

Policy-induced losses

Termed “policy-induced losses” to distinguish them from falls in income arising from unemployment, lower wages or falling self-employment incomes, these losses were between 7.5 per cent and 10 per cent for most income groups, according to the ESRI.

The greatest policy-induced losses were for the top income group, at just over 14 per cent, and the lowest income group, at 12.75 per cent. Those in the middle generally lost less. ESRI analysis of typical family units found policy-induced losses ranged between 9 and 11 per cent for most family types from the combined effects of Budgets 2009 to 2016.

The greatest proportionate losses, close to 20 per cent, were for single unemployed people without children, who lost out heavily from cuts in payment rates to the young unemployed introduced to make savings in the welfare budget.

The lowest losses (ranging from 5 to 6 per cent) were for those in receipt of old age pensions, as pension payment rates were increased in the budgets of 2009 and 2016, leaving them higher than in 2008.