Budget 2024 includes a range of measures to address the ongoing cost of living crisis. Structurally, it follows a similar path to that adopted last year, in Budget 2023, with a mixture of immediate measures, one-off payments due before the end of this year, and changes to income tax and welfare payments from January 2024. Given the challenges that so many households face in making ends meet, particularly those on the lowest incomes, much of that assistance is welcome and badly needed.
However, there is a marked difference in the way that the Budget measures are being delivered to households. The Budget includes temporary measures, such as electricity credits and one-off additional welfare and fuel allowance payments, alongside permanent measures such as changes to the value of core welfare payments, changes to tax credits and bands, and changes to the USC. In time, these temporary measures will disappear but the permanent changes will remain.
In the immediate term, counting both the temporary and permanent measures, the Budget gives more resources to lower income households; something we explore further on pages 8 and 9 of our Budget 2024 Analysis and Critique. However, once these temporary measures are discontinued (from April 2024 onwards) what is left are the permanent changes to income taxes and welfare. These Budget 2024 decisions have skewed resources in favour of higher income individuals and households.
Consequently, the presentation by Government of the Budget as progressive is misleading; unfortunately it represents another regressive shift, building on a similar set of outcomes following Budget 2023.
In particular, the Budget has provided least for the large cohort of lower income workers; those earning above the minimum wage but below annual income levels that allow them to experience much of the value of the income tax changes. A group earning around €15 to €20 per hour (€30,000 to €40,000 per annum). Year after year this large group of workers hears of ‘gains’ from the Budget but experiences little if any of them; something that cannot persist both due to its distributive effects and the socio-political reality that we cannot keep ignoring these workers and families. Social Justice Ireland has continually highlighted the relevance of refundable tax credits as a means of making the taxation system fairer and helping this low income group. It is a regret that Budget 2024 did not make this change; it is overdue.
To illustrate the distributive outcomes from Budget 2024, among single people next year the Budget’s permanent changes to taxes and welfare deliver the following average weekly gains:
- An unemployed person: + €12.20
- An earner on €30,000: + €5.46
- An earner on €60,000: + €15.85
- An earner on €100,000: + €16.62
Among couples in 2024 the Budget’s permanent changes to taxes and welfare deliver the following average weekly gains:
- A pensioner couple: + €22.80
- An unemployed couple: + €19.92
- With 1 earner on €30,000: + €1.62
- With 1 earner on €60,000: + €19.69
- With 2 earners on €100,000: + €29.89.
Overall, Budget 2024’s legacy will be to widen further the gap between the better off and those on the lowest welfare and work incomes; given the resources available it is a regrettable outcome.