Government risks another regressive budget if it continues to prioritise one-off payments
Posted on Monday, 11 September 2023
Government will repeat the mistakes of last year and deliver a regressive budget if does not prioritise income adequacy over one-off payments. Instead of again relying on one-off payments, Government must make income adequacy and the benchmarking of social welfare rates to average earnings a key focus of Budget 2024. If not, those in society who need the greatest assistance with making ends meet will be left behind again.
One off measures led to regressive outcomes for vulnerable groups in Budget 2023
The reliance on one-off measures to support low-income households in last year’s budget increased the Rich-Poor gap by €199 in the year, a gap which now stands at almost €1,000 per week and contributed to the regressive outcomes. The inadequate increase in core social welfare rates and a reliance on temporary one off payments left Ireland’s poorest worse off in 2023 compared to their situation in 2022. In contrast, Government allocated €1.26bn to tax initiatives in last year’s budget, two-thirds of which were allocated to permanent income tax changes which benefitted only those paying tax at the higher rate. Workers paying tax at the standard rate did not benefit from these changes. Budgetary policy should aim to alleviate the pressures on households who can least absorb cost of living increases, rather than increase the disposable income of wealthier households. Income adequacy cannot be addressed by one-off measures. Budget 2024 must prioritise adequate increases in core social welfare rates, and the benchmarking of social welfare rates to average earnings over one-off payments. Temporarymeasures, such as electricity credits and one-off additional welfare and fuel allowance payments provide welcome short-term assistance to households on the lowest incomes, but they fail to address the core issue of income adequacy.
Priorities for Budget 2024
In Budget 2024 Government should adopt recurring taxation and expenditure measures which prioritise the protection of the most vulnerable groups in our society and further protect them, if needed, from ongoing aspects of the cost-of-living crisis. The Budget should also outline a clear plan for the management of one-off windfall revenues in the context of the long-term interests of Irish society.
IF Government is serious about meeting its own poverty targets and supporting households on the lowest incomes who, through good and bad economic times, struggle to make ends meet, then core welfare rates must increase by a minimum of €25 in Budget 2024. A €50 increase in the monthly Child Benefit payment is also required to address Ireland’s levels of child poverty. Children are one of the most vulnerable groups in any society and child poverty in Ireland remains persistently high. Child benefit is a key route to tackling child poverty and is of particular value to those families on the lowest incomes.
One-off windfall revenues
The Budget arises in the context of large windfall corporation tax revenues flowing to the exchequer from a very small number of multi-national companies. In the medium-term these revenues will shift from Ireland to other states where the activity and profits arise. The challenge of strategically managing these windfall tax receipts is one that is relevant for Budget 2024 and a number of future Budgets. Budget 2024 needs to articulate a clear strategy for the management of these funds framed in the context of the long-term interests of Irish society.
Meeting current and future challenges
Looking at the many multi-faceted and integrated challenges that Ireland faces, there is a strong case for a new social dialogue and a new social contract. The cost-of-living crisis, the housing crisis and the energy crisis are just three of the challenges facing Government, albeit the ones having the most immediate and dramatic impact on people’s everyday lives. There are other huge challenges that Ireland faces in areas such as low pay, access to healthcare, childcare, public transport, how to deliver vital services to everyone including those fleeing war and how to meet our very challenging climate targets whilst protecting those most impacted. A robust social dialogue process is urgently required.
As a country we face some significant challenges, but we are also in the unprecedented position where we are in receipt of windfall gains from corporate tax revenue. With careful management, prioritising the long-term interests of Irish society, and strategic investment in one-off infrastructure projects, Government, through a social dialogue process could use this as the foundation of a new social contract which would commit the state and social partners to improving economic management with a view to enhancing the standard of living, quality of life and wellbeing of all the republic’s residents. Budget Choices 2024 is available to download here