Dáil Éireann Debate, Tuesday - 4 October 2022
225. Deputy Pearse Doherty asked the Minister for Finance the change in household disposable income due to cost-of-living measures across deciles, in percentage terms, as outlined in figure 2 of Budget 2023: Beyond GDP – Quality of Life Assessment, but adjusted for projected inflation. [48327/22]
View answer226. Deputy Pearse Doherty asked the Minister for Finance the change in household disposable income due to Budget 2023 measures, in percentage terms, as outlined in figure 2 of Budget 2023: Beyond GDP – Quality of Life Assessment, but adjusted for projected inflation. [48328/22]
View answerI propose to take Questions Nos. 225 and 226 together.
As the Deputy is aware, my Department’s analyses of the distributional impact of the tax and welfare measures announced at budget time are calculated on a nominal basis. As such, they do not adjust for projected levels of inflation but instead compare a baseline scenario of no-policy change against a reform scenario solely incorporating the budgetary policy changes. This is the case for both the Cost of Living package and the more traditional tax and welfare measures announced in Budget 2023.
However, the analysis published by the ESRI at their Post-Budget Briefing on 30 September does include comparisons with a hypothetical inflation-adjusted scenario. Specifically, the ESRI examined the distributional impact of Budget 2023 compared to the impacts on income if the tax and welfare system was indexed to an inflation rate of 7.1 per cent.
The ESRI Budget 2023 analysis also included additional measures that were not included in the analysis published by my Department and the Department of Public Expenditure and Reform. These measures include: the universal childcare subsidy, GP visit cards, free school books, and reduced VAT on newspapers.
The ESRI’s Post- Budget Briefing, with relevant distributional graphs, is available at:
esri.newsweaver.com/enewsletter/45ywtphvv12ciwo13848jk/external?email=true&a=5&p=62168701&t=26436355.
Overall, the ESRI’s analysis shows that, once Cost of Living measures are allowed for, all households see gains in their inflation-adjusted weekly disposable income as a result of Budget 2023 – see figure 1 attached. Decile 1 sees the largest gain at just under 1½ per cent. Notably, the ESRI conclude that "the Government's approach to insulating households from the recent rise in energy prices has been effective."
Again, my Department’s analysis of the one-off measures that are being introduced during the remainder of 2022, as published in figure 2 of Budget 2023: Beyond GDP – Quality of Life Assessment, was performed on a nominal basis. In terms of the ESRI analysis, it is difficult to undertake inflation-adjusted analysis on a partial-year basis. The ESRI therefore opted to examine the tax and welfare measures in Budgets 2021 and 2022, including the one-off measures introduced this year.
The Institute’s analysis shows that the lowest income deciles were largely insulated against inflation over the period since 2020 – see figure 2 attached . Overall, the distributional impact was progressive, with the first two deciles gaining the most in disposable income. More broadly, the ESRI analysis highlights the impact of the one-off measures both this year and next in cushioning incomes, particularly in low-income households.
