New analysis by ESRI researchers shows that Budget 2017 led to small gains for all income groups, with the greatest gains for those on the lowest incomes. The findings are based on SWITCH, the ESRI tax-benefit model, which now uses data on almost 8,000 households from the CSO’s nationally representative Survey on Income and Living Conditions.
The impact of policy is measured against a “distributionally neutral benchmark” which would see incomes rise at the same rate for all income groups. A budget which indexes the money value of tax credits and welfare payment rates in line with expected growth in wages (2.4 per cent) would lead to this neutral result.
The overall impact of Budget 2017 when compared with this neutral benchmark is a small rise in average income – no more than ¼ of one per cent. The greatest gains are focused on the lowest income groups. Average gains for the one-tenth of households with the lowest incomes are close to 1 per cent, while for most income groups gains are closer to one quarter of one per cent.
Analysis at family unit level shows that the majority of family types will also have small gains – between ¼ and ½ of one per cent. The family types with the largest gains are non-earning lone parents and unemployed couples, for whom the budgetary changes are set to lead to a rise of approximately 2 per cent of income. These family types represent just 3 per cent of the population.
Commenting on the results, Professor Tim Callan said “Higher welfare payments helped to ensure that incomes for those relying on social welfare benefits rose in line with general incomes. Changes to Rent Supplement in advance of the budget, and the suspension of water charges mean that percentage gains in income were highest for the lowest income group.”
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