Budget 2015 measures unlikely to change poverty rates

Measures contained in Budget 2015 are unlikely to make significant inroads into poverty levels over the coming year, according to research by the Department of Social Protection.

A social impact assessment of the main tax and welfare measures for 2015 - including the new water charges regime - was drawn up recently by department officials.

The report, based mainly on ESRI data, says better-off families stand to gain most from the changes, while the the smallest gain will be among the least well-off.

While budgetary policies will result in an average increase in household incomes of €6 per week, the introduction of the water charge will impact on all households.

The study states that no significant change in the “at risk of poverty” rate is likely over the course of the year.

Last year, 15 per cent of the population fell into this category because they had an after-tax income of less than €10,425.

Income threshold

The department’s report says the income threshold for those deemed at risk of poverty is likely to increase slightly, so no major changes are expected in this poverty measure.

This, it says, reflects the strong performance of social welfare supports in alleviating poverty.

Latest figures show that welfare payments resulted in reducing the numbers who would otherwise be at risk of poverty from 50 per cent to 15 per cent, lifting a third of the population out of poverty. This figure is set to be maintained in 2015.

The social impact assessment was drawn up as part of the State’s national social target for poverty reduction, which aims to reduce poverty levels between now and 2016.

The report also shows that water charges will hit the poorest households hardest.

Low income households will lose 0.9 per cent of their income to water charges, compared to 0.3 per cent for higher earners.

However, the €100 water conservation grant would halve these losses among poorer households. The losses could be reduced further if households have a water meter and are able to “beat the water cap” by reducing consumption.

Biggest beneficiaries

When the overall budget measures are broken down by family type, they show the biggest beneficiaries are retired single-person households, with an average gain of 1 per cent in income.

Single earners, lone parents at work and double-income couples fare above average, gaining around 0.8 per cent.

Generally, households with children gain more than those without, reflecting the child benefit increase and the capping of the water charges.

But unemployed households do least well, while unemployed couples without children will record a loss of -0.2 per cent.

The report also examines the difference between the 2015 and 2014 budgets. It shows that, overall, there was a gain of 0.7 per cent in 2015 compared to a loss of 0.8 per cent in 2014.

Over the two years combined, however, many households will still show an overall loss in income.

Looking at the entire period since the beginning of the economic crisis (2009- 2015), ESRI analysis shows the average loss in household income is over 10 per cent.