Budget will have ‘negligible’ long-term benefit for many at risk of poverty, says ESRI

The benefit of permanent spending changes set out in Budget 2024 for those most at risk of poverty is “negligible”, according to the Economic and Social Research Institute (ESRI) but one-off measures announced on Tuesday will help cushion the impact of rising prices.

There is also “very little evidence” that the budget will tackle child poverty in the long run, ESRI economist Karina Doorley said at the think tank’s post-budget briefing on Friday, despite political commentary to the contrary.

The ESRI said in its annual assessment of the Government’s plans that Budget 2024 was broadly “progressive”. The package of tax and spending measures will see average real household income rise by about 2 per cent next year, “with higher gains for low-income compared to high-income households”.

However, Ms Doorley said that when noncore spending – one-off measures such as lump sum social welfare payments – is stripped out of the equation those at risk of poverty will see a very moderate improvement in their situation next year assuming prices continue to rise at an average rate of 3.2 per cent in 2024.

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“If you look at the temporary measures you see very large decreases in ‘at risk of poverty’ rates for certain groups in particular: the elderly and people with disabilities,” she said. “This is all driven by these big lump sum payments to these groups before Christmas. If you focus only on the permanent measures...we’ve got very negligible changes to ‘at risk of poverty’ rates.”

The elderly will actually see a small increase in their ‘at risk of poverty’ rate, Ms Doorley said, while child poverty will decline by a small margin and all of the other groups, including people living with disabilities, are statistically unchanged.

Child poverty was a particular priority for the Coalition in the build up to the budget. Earlier this year the Government set up a dedicated child poverty unit within the Department of the Taoiseach. Upon replacing Micheál Martin as Taoiseach at the end of 2022, Leo Varadkar said his ambition was “to make Ireland the best country in Europe to be a child”.

“In advance of Budget 2024 there was a lot of talk that this would be one that would tackle child poverty,” Ms Doorley said. “And there’s not a lot of evidence of that in this package. There are many measures targeted at children and not to underplay their significance. But if there has to be any substantial reduction in child poverty over the next couple of years more substantial permanent measures will be needed.”

Taking the past four budgets together the ESRI’s study found that many tax and welfare changes since 2020 had been below wage and price inflation over the same period.

“This trend is somewhat reversed by Budget 2024. However, compared to a scenario of income-indexed budgets since 2020, households will have lower purchasing power in 2024,” it said, noting this amounted to 0.5 per cent of disposable income on average, with larger losses for middle-income households.