One-off budget measures will 'insulate' families from price rises

One-off budget measures will 'insulate' families from price rises

ESRI says welfare rises in 2022 and 2023, with one-off measures, are enough to leave low-income households better off than they would have been had welfare rates risen in line with inflation this year and next.

One-off measures announced as part of Budget 2023 will insulate most households from rising prices this winter, according to research from the Economic and Social Research Institute (ESRI).

The ESRI has said that welfare increases in 2022 and 2023, together with one-off measures, are large enough to leave the lowest-income households better off on average than they would have been had welfare payment rates risen in line with inflation both this year and next.

However, below-forecast inflation increases to tax credits and welfare payments next year will mean many lower-income households will experience real-term cuts in living standards in the latter half of 2023 without a repeat of the welfare bonuses, lump-sum payments, and household energy credits.

While above-inflation increases to the income tax standard rate cut-off will mitigate the effect of inflation on higher-income households, most Universal Social Charge and PRSI bands were frozen, and tax credits indexed below inflation, said the ESRI.

The effect of this is to reduce the after-tax purchasing power of lower earners who do not earn enough to pay income tax, though some of these will gain from an increase to the minimum wage.

The increase in the universal component of the national childcare scheme of 90c per hour will reduce the out-of-pocket childcare costs of those using full-time formal childcare but will not initially reduce childcare costs for informal childcare arrangements such as childminders, used by a third of parents paying for childcare.

Jim Ronayne of McDonald's, ESRI research professor Kieran McQuinn, and Nicola Quinn, tax partner at PwC Cork, at PwC Cork's budget seminar at the Metropole Hotel, Cork. Picture: Gerard McCarthy
Jim Ronayne of McDonald's, ESRI research professor Kieran McQuinn, and Nicola Quinn, tax partner at PwC Cork, at PwC Cork's budget seminar at the Metropole Hotel, Cork. Picture: Gerard McCarthy

The ESRI also noted the Government announced a range of interventions in the housing market, including some supply-side measures such as a triple rate of Local Property Tax on certain vacant residential dwellings.

It also announced the extension of the Help to Buy scheme for another two years at a cost of €350m, as well as the introduction of a new levy on certain concrete products to part-fund the (Mica) defective concrete blocks redress scheme.

“Given robust demand for housing, combined with long-standing supply constraints, the burden of this new levy is likely to fall on the residents of newly-built homes rather than on industry," said the ESRI.

ESRI research officer Barra Roantree also said: “Our research shows the Government’s approach to insulating households from the recent rise in energy prices has been effective. 

Targeted welfare measures combined with universal household energy credits will do more for most lower-income households this winter than had welfare payment rates risen in line with inflation both this year and next. 

ESRI senior researcher Karina Doorley said the one-off measures announced as part of Budget 2023 will “substantially cushion real incomes”.

“However, most of the permanent changes to tax and welfare measures benefit those on higher incomes," she said.

“Policymakers may need to consider benchmarking social welfare payments once the inflation crisis has passed, to ensure that they provide adequate income for recipients."

ESRI research professor Kieran McQuinn said: “By providing support for household incomes and for businesses, the budgetary package should mitigate the impact of impending energy costs on domestic economic activity.”

More in this section

Puzzles logo
IE-logo

Puzzles hub


Text header

From florist to fraudster, leaving a trail of destruction from North Cork, to Waterford, to Clare, to Wexford and through the midlands ... learn how mistress of re-invention, Catherine O'Brien, scammed her way around rural Ireland.

War_map
Execution Time: 0.283 s