Significant progress has been made in recent years in reducing the prevalence of poverty in our country. CSO data shows that the proportion of those living in consistent poverty dropped from 9.0% in 2013 to 6.7% in 2017. CSO data on poverty is available at this link: https://www.cso.ie/en/releasesandpublications/ep/p-silc/surveyonincomeandlivingconditionssilc2017/povertyanddeprivation/#d.en.181339
For most people, employment is the primary path out of poverty and we have created thousands of new jobs, with a record 2.3 million people now at work in our economy. Our income tax system is considered progressive by international standards; our tax revenue funds a wide range of services, with an emphasis on providing support to the groups in our society who need it the most.
Budget 2020 was framed in unique circumstances. What might be seen as normal Budgetary elements such as modest income tax reductions and across-the-board welfare rate increases did not feature. What did feature, however, were sizeable targeted expenditure increases in a number of sectors. These will have a positive impact on society to be factored into a balanced assessment of the Budget, rather than focusing solely on the fact that income tax and welfare payments remain largely unchanged.
Employment Affairs and Social Protection
A carefully targeted social welfare package, benefiting the vulnerable elderly, families and carers was introduced in Budget 2020. The Living Alone Allowance, which is targeted at the most vulnerable pensioners, was raised by €5 per week; the Fuel Allowance was also increased, so that the increase for those in the lowest income deciles who receive it will more than cover the cost of the new carbon tax. There were further increases for qualified child dependants in all weekly payments. There was an increase in the earnings disregard for those in receipt of the One Parent Family Payment, and an increase of €10 in Working Family Payment thresholds for recipients with up to three children. In addition there was an increase in the hours that carers can work or study outside the home. Finally, I announced payment of a 100% Christmas Bonus in 2019.
The Department of Finance prepared an analysis on the distributional impacts of the direct tax, indirect tax and welfare measures contained in Budget 2020 using the SWITCH micro-simulation model. This analysis found on average the first three deciles gained from the tax and welfare measures and the rest of the deciles were left broadly unchanged. Gains were largest for the first decile, followed by the second and third which indicates that the tax and welfare measures in Budget 2020 were broadly progressive. The SWITCH analysis cannot take into account other expenditure measures such as increased expenditure in health or education.
Annex B of the Tax Policy Changes document published by the Department of Finance on Budget day also sets out a distributional analysis of Budget 2020 Measures on a variety of household family types across a range of income levels. The document is available at this link: http://budget.gov.ie/Budgets/2020/Documents/Budget/Budget%202020%20Tax%20Policy%20Changes.pdf
As set out in Expenditure Report 2020, the focus of the core element of Budget 2020 is on providing for sustainable increases in public expenditure. This is in recognition of the key role of public services and infrastructure in supporting our citizens and promoting the resilience of our economy, particularly in light of the increasing risks in the global economic environment. Particular focus was placed on maintaining and improving supports for children and families, as well as for elderly people.
In order to protect the most vulnerable in society, Budget 2020 provides an allocation of over €21 billion for the Department of Employment Affairs and Social Protection. The significant provision of supports provided through the Social Protection system represents an important strand of the Government’s commitment to tackling poverty and social inequality in Ireland.
Gross current expenditure for the Department of Children and Youth Affairs will see an increase of over 6% in 2020, rising to almost €1.6 billion. As well as increased funding for Early Years Care and Education, central to this allocation is funding for the continued roll-out of the National Childcare Scheme.
€17.4 billion in current expenditure will be allocated to the Health sector in 2020, a year on year increase of over 6%. This investment reflects the Government’s commitment to create a more responsive, integrated and people-centred Health system. New measures such as a reduction of prescription charges for over 70’s, the expansion of free GP care to all children under 8 and free dental care for children under 6 will all contribute to improving access to health and social services across the country.
The Housing programme in the Department of Housing, Planning and Local Government will see an increase of 11% compared with 2019, bringing the total allocation to almost €2.6 billion (including current and capital expenditure). This allocation will support the Social Housing needs of over 27,500 households in 2020. This includes the delivery of 11,167 new social homes through build, acquisition and leasing programmes as well as supporting 16,350 new households under the HAP and RAS schemes.
Further details of these measures and all Budget 2020 allocations can be found in Expenditure Report 2020, which can be found on budget.gov.ie.
Budget 2020 included an increase in carbon tax of €6 per tonne, which is expected to raise €90 million in 2020. The funding raised is to be directed to support increases to existing climate related schemes or new schemes that would not have been provided in the absence of this increase. Government has been clear that the importance of clear action in this regard must be balanced with measures to promote equity during the transition. The revenue raised in 2020 will support:
- €34 million in funding to protect the vulnerable through an increase in the fuel allowance and energy efficiency upgrades;
- €31 million for schemes to ensure a just transition to a low carbon economy, including measures with a particular focus on the midlands;
- €25 million for programmes that can help all citizens to reduce their carbon footprint.
These measures are set out in more detail in the paper published alongside the Budget on 8 October, ‘The Carbon Tax Increase – What it Will be Spent On’. This paper can be found on the Budget website:
An Equality Budgeting pilot was adopted for the 2018 budgetary cycle, built on the existing performance budgeting framework. Equality Budgeting aims to provide greater information on the likely impacts of proposed and ongoing budgetary measures, which, in turn, enhances the potential to better facilitate the integration of equality concerns into the budgetary process, avoid unintended adverse outcomes and enhance the Government’s decision making framework. It involves Departments setting concrete measurable targets for equality objectives in the Revised Estimates Volume and reporting on progress in the Public Service Performance Report. For the pilot exercise, a number of diverse policy areas were selected with associated objectives and indicators. The learnings from the pilot were used to inform the expansion of the equality budgeting initiative to further develop the gender budgeting elements, and to broaden its scope to other dimensions of equality including poverty, socioeconomic inequality and disability. An Equality Budgeting Expert Advisory Group has also been established. This group is comprised of a broad range of relevant stakeholders and policy experts to provide advice on the most effective way to advance Equality Budgeting policy and progress the initiative.
Future direction will now be assisted by the recent publication of the OECD Scan of Equality Budgeting in Ireland which sets out a path forward with a number of recommendations for consideration. This work was commissioned by both the Department of Public Expenditure & Reform and the Department of Justice & Equality. The scan recommendations are aligned with international experiences of best practice in this field. Implementation of the Report’s recommendations will be carried forward in close consultation with the Equality Budgeting Expert Advisory Group. The OECD report can be found at http://oe.cd/equality-budgeting-ireland.
Social Impact Assessment
The Social Impact Assessment (SIA) series of papers aims to provide an evidence based methodology to examine the impact of public expenditure on households. This framework is designed to examine the demographic profile of public service users, and how they are impacted by budgetary policy decisions. This approach complements the budgetary impact assessments carried out using the SWITCH (Simulating Welfare and Income Tax Changes) model by the Department of Finance and the Department of Employment Affairs and Social Protection, and externally by the Economic and Social Research Institute (ESRI). SIA papers published with Budget 2020 focused on topics such as the Domiciliary Care Allowance and Public Service Obligation (PSO) funding for Public Transport. More information about the SIA series is available at https://www.gov.ie/en/policy-information/615fe5-social-impact-assessment-framework/.
National Childcare Scheme
The importance and value of quality early years care and education is well-documented. The international evidence shows a wide range of benefits for children, families and society at large. High quality services provide long-lasting cognitive, social and emotional benefits for children, supporting children to enjoy their childhood and realise the full potential of their future. However, affordability and accessibility of quality childcare is a major concern for many parents and can act as a barrier to employment which, in turn, increases the risk of poverty. The National Childcare Scheme (NCS) aims to improve children's outcomes, support lifelong learning, make work pay, reduce child poverty and tangibly reduce the cost of quality childcare for thousands of families across Ireland.
A Focused Policy Assessment (FPA) on the NCS published by DCYA in October 2018 presented the impacts as:
- Increased labour force participation amongst parents with children ages 0-15 (incl. female participation)
- Higher quality childcare provision than currently available
- Positive outcomes for children
- Reduced poverty among families with children.
Taken as a whole, therefore, there is a wealth of information published in the context of Budget 2020 which provides important insights into the wide range of targeted benefits and public service improvements that have been delivered, and to their impact on citizens' lives and wellbeing.