Lower-income families fare better in budget, study finds

Research suggests most households enjoyed modest lift in disposable income

Prof Tim Callan: “Higher welfare payments helped to ensure that incomes for those relying on social welfare benefits rose in line with general incomes.” Photograph: Dara Mac Dónaill

October’s budget delivered modest gains to most Irish households with those on lower incomes faring marginally better than others, according to an analysis by the Economic and Social Research Institute (ESRI).

The study found that the various welfare and tax measures announced in Budget 2017 resulted in a modest 0.25 per cent hike in aggregate household disposable income.

On average, it was “most favourable” to the 10 per cent of households with the lowest incomes, which gained more than 1 per cent in income, while most other income groups enjoyed small gains of up to 0.5 per cent.

The family types with the largest gains were non-earning lone parents and unemployed couples, which enjoyed income hikes of approximately 2 per cent, the ESRI said.


However, it noted that together these family types represented just 3 per cent of the population.

The economic think tank also assessed how incomes changed on a year-on-year basis as a result of policy measures introduced at various points during the calendar year.

Changes to rent supplement in advance of the budget and the suspension of water charges earlier in the year meant that percentage gains in income were again highest for the lowest income group while the most other income groups were unaffected.

The ESRI’s research also highlighted that retired tax units, either single individuals or couples, made small losses (-0.2 per cent) on a “year-on-year” basis, but make modest gains on a “budget-to-budget” basis.

Commenting on the findings, the ESRI's Tim Callan said: "Higher welfare payments helped to ensure that incomes for those relying on social welfare benefits rose in line with general incomes."

The ESRI said it was conducting new research on how incomes changed over the recession and how policy influenced these changes.

Previous ESRI studies have suggested the poorest section of Irish society suffered the largest contraction in income as a result of the recession.

The findings run counter to the so-called “squeezed middle” narrative which suggests those on middle incomes bore the brunt of the downturn.

The Government has made the phasing out of the universal social charge (USC) one of its core tax policies despite concern such a move could erode the tax base.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times