Long-term measures needed to reduce poverty risk, ESRI warns

Substantial €6.4bn budgetary package risks adding to inflationary pressures, according to research institute 

The budgetary package is worth around 2% of household disposable income on average.

Temporary measures in the budget will reduce the risk of people falling into poverty in the next year but long-term solutions are needed to improve household finances, the Economic and Social Research Institute has warned.

In one example, the think tank said that without some of the one-off measures, the rate of  elderly households at risk of poverty would increase by close to one percentage point.

“To accomplish long-lasting, significant improvements to the living standards of lower-income households, a more permanent solution will be needed,” said Dora Tuda, a research officer at the ESRI.

Budgetary tax cuts

The budgetary package of tax cuts, welfare increases, one-off payments, and indirect tax cuts is worth around 2% of household disposable income on average, with higher gains for low-income compared to high-income households.

“For the second year in a row, temporary welfare measures are playing an important role in insulating households from the effects of inflation,” said ESRI senior research officer Karina Doorley.

However, the substantial €6.4bn budgetary package is at risk of adding to inflationary pressures, especially as unemployment remains low at 4% and consumer prices increased by more than 6% in the year to September, figures from the Central Statistics Office showed.

“Budget 2024 is substantial in scale and does incur the risk of further stimulating inflationary pressures already in the economy,” said ESRI research professor Kieran McQuinn.