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ESRI Report confirms Budget 2015 regressive

Social Justice Ireland welcomes the publication of the ESRI Special Article examining the ‘Distributional Impact of Tax, Welfare and Public Service Pay Policies: Budget 2015 and Budgets 2009-2015’.  The ESRI report confirms Social Justice Ireland’s analysis that Budget 2015 was the fourth regressive budget in a row and a budget which widened the rich-poor gap.

The ESRI results show that Budget 2015 will have its greatest impact – a reduction of 1 per cent in net household income – on the 10 per cent of households with lowest incomes. Smaller losses will be experienced by most middle income households, with small percentage gains for higher income households. The greatest gain will be close to half of one per cent for the top 10 per cent of households.

The paper finds that the combined impact of budgetary policy changes since October 2008 has resulted in reduced incomes for all income groups but that the percentage losses were greatest for those with the highest and lowest incomes.

  • Households with the highest incomes (the top 10 per cent) saw losses of about 15½ per cent, mainly from tax increases and reductions in public service pay.
  • Households on the lowest incomes (households with incomes in the lowest 10 per cent) saw their incomes fall by close to 13 per cent.

Analysis at family unit level reveals that the greatest proportionate losses imposed by Budgets 2009 to 2015 were for single unemployed people, while the lowest losses were for pensioners. This reflects the substantial cuts in welfare payment rates for the young unemployed in particular, and the fact that pension payment rates, unlike working age payment rates, were not reduced.

Budget 2015 was a missed opportunity for Government.  Instead of taking a long-term focus on real recovery, investing in public services and addressing the long-term unemployment problem Government gave priority to reducing the top income tax rate which disproportionately benefits those on higher incomes. 

Choices were available to Government that would have produced a fairer outcome.  In terms of taxation Government could have reformed the income tax system so that everyone gets the full value of their tax credits whilst at the same time increasing tax credits for all earners.

Choices were available to Government that would have produced the same borrowing requirement but would have invested in social housing, rural development, healthcare, education, older people, ODA.  Choices were available that would have improved the situation of the working poor and of those living in poverty.  Government chose not to consider these choices and produced yet another regressive budget. 

It is critical that Government policy in 2015 and beyond is focussed on investing in frontline services, making tax credits refundable, increasing welfare rates and investment in our social and physical infrastructure in order to compensate for the cumulative impact of four regressive Budgets in a row borne by households across Ireland.