Coalition warned on 'regressive' budget cuts

The Government was warned by officials in advance of last December’s budget that some planned cuts were “regressive” and would have a greater impact on lower-paid workers, internal documents show.

They also reveal much steeper cuts were being examined just weeks before the budget compared to what was announced. Documents also show the Government was warned by officials that the abolition of PRSI-free allowances would hit workers on low incomes the hardest.

Under this move, which was announced in December, most PAYE workers were hit with a reduction in take-home pay of about €260 a year. The move affected about 1.2 million workers.

An internal document prepared for a meeting between Minister for Social Protection Joan Burton and Minister for Public Expenditure Brendan Howlin last November states the abolition of the PRSI allowance would yield significant savings. But it also warned: “It should be noted that the overall effect is regressive as it has a relatively greater impact on the lower paid (once earnings are in excess of €352 per week).”

However, Minister for Finance Michael Noonan insisted in his budget speech that the system was “progressive and redistributive because people at the higher end of the income distribution generally get back less than they pay in”.

Those earning least

Subsequent studies have shown the impact of the move was greatest for those earning least.

For example, a single worker on €20,000 faces a percentage reduction in salary this year that is five times greater than an earner on €100,000.

The records, released under the Freedom of Information Act and dated between November 13th and November 20th, indicate Ms Burton successfully argued against steeper cuts to several payments.

The sensitivity of some cuts is evident from a document which classifies respite care reductions as “agreed, but may be problematic”.

In the end, the grant, reduced from €1,700 to €1,500, proved the most controversial of all the spending cuts.

Cutbacks: What was planned

€30 cut to the monthly child benefit, three times greater than the €10 cut announced.

Cuts to the half-rate carer’s allowance, paid to about 25,000 people. No cuts were made to the allowance.

The abolition of the telephone allowance. It was retained but reduced.

The abolition of the back-to-school allowance, worth up to €250. The rate was reduced by €50.