Budget 2022 will increase poverty and leave vulnerable behind

Failure to link core welfare rates to inflation means many will be worse off

Minister for Finance Paschal Donohoe: The budget shows that Government policy is not focused on achieving the objectives of reducing poverty and promoting social inclusion. Photograph: Gareth Chaney/Collins

Minister for Finance Paschal Donohoe: The budget shows that Government policy is not focused on achieving the objectives of reducing poverty and promoting social inclusion. Photograph: Gareth Chaney/Collins

 

Budget 2022 is the second budget produced by this Government and demonstrates a disappointing and worrying trajectory. It reveals a Government that is not focused on protecting Ireland’s most vulnerable. While Government can itemise which individual national roads are to be built or upgraded, it has not even tried to outline a real and effective pathway towards reducing poverty and social exclusion. Its actions clearly show this Government has failed, to date, to commit to leaving nobody behind. This is most regrettable.

The budget shows that Government policy is not focused on achieving the objectives of reducing poverty and promoting social inclusion. While many of those with jobs will receive a welcome pay increase in the coming year, the failure to raise core social welfare rates by €10 a week means that many of those depending on social welfare payments will fall further behind the rest of society.

While there are some benefits for people who are poor and vulnerable, these are not of sufficient scale to even allow the weakest to stand still. The Government’s claim that an increase of €5 in the fuel allowance makes up for the low increase in welfare rates ignores the fact that large numbers of poor people do not have access to the fuel allowance. Instead, Ireland’s 630,000 people living in poverty – more than a quarter of whom are children – will be worse off in real terms.

The Government also failed to commit to benchmarking core social welfare rates to 27.5 per cent of average weekly earnings over two years. The failure to commit to this benchmark, and to increase core social welfare rates by €10 in Budget 2022 means that the vulnerable have been left behind for a third successive budget and the gap between those living in poverty and those who aren’t will grow. The increase of €5 per week in core social welfare rates shows that the Government is not serious about meeting its own anti-poverty commitments in the Roadmap for Social Inclusion 2020-2025.

Comprehensive research

There is comprehensive research to show that the social welfare system is the key to reducing poverty in Ireland. Welfare payments target those most in need within Irish society. They also play a central role in alleviating poverty. Without the social welfare system four in every 10 of the Irish population would have been living in poverty. However, welfare payments reduced the poverty rate by almost 29 percentage points to 12.8 per cent. Thus, when budget resources are focused on the welfare system they assist those who need most help. Conversely, when a budget provides limited resources to the welfare system it undermines the living standards and needs of the weakest in our society.

The most recent research on poverty in Ireland is based on 2019 data and shows that the numbers in poverty were almost identical to 10 years previously. In the years in between, there had been a spike in poverty but this was followed by a series of budgets which, for the most part, distributed resources more equitably to lower-income households. In the last two budgets, however, the Government reversed this approach and chose not to increase core welfare rates. Due to a failure to act in previous budgets, core social protection rates are less than they were, in real terms, three years ago. Our consistent message to Government ahead of this budget was to ensure that households with the least resources and the greatest needs did not experience further exclusion. But Budget 2022 has failed in this regard.

Regressive option

It is billed as a “cost of living” budget, but in Budget 2022 the Government chose not to benchmark core social welfare payments to average weekly earnings, and instead chose the regressive option of increasing core welfare rates by less than the rate of inflation. Inflation has been 3.9 per cent since January 2020 and is set to rise between 2 and 3 per cent in 2022. This means that an increase of €5 in core welfare rates and pensions fails to maintain the purchasing power of the poorest and most vulnerable people in Irish society. By addressing a little of the needs of these groups, the Government can pretend it is addressing poverty when clearly it is not.

Poverty impacts hardest on those experiencing it in their day-to-day lives. It limits their options and opportunity and narrows their focus to week-to-week survival and the unavoidable trade-offs of living on inadequate incomes. Although Budget 2022 includes measures – including increases to the living alone and fuel allowances and to the qualified child payment – which are welcome, it lacks any serious initiatives to begin to significantly reduce poverty.

A lesson from past experiences of economic recovery and growth is that the weakest in our society get left behind unless welfare increases keep track with increases elsewhere in the economy. If divides open up, as in the late 1990s, poverty for this group will rise.

The fundamental test for every government is whether, when it leaves office, those with the least in our society are in a better position than when it entered office. The choices that this Government has made in Budget 2022 will see the number of people in poverty grow.

Michelle Murphy is research and policy analyst with Social Justice Ireland

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