Budget 2023 was focused on providing relief to households experiencing reduced purchasing power due to rapid inflation, which is predicted to persist into 2023. In this Special Article we analyse the distributional impact of these reforms. Budget 2023 was unusual as many reforms were one-off measures specifically addressed at combatting cost of living pressures. Compared to a price-indexed 2022 baseline, Budget 2023 left households across the income distribution better off, with the lowest 10 per cent of households experiencing the largest gain; an increase of 1.4 per cent of disposable income. These income gains are driven by one-off measures, with the majority of permanent tax-benefit parameters either being frozen or increased below forecast inflation. Once inflation stabilises -and the need for further one-off measures diminishes -policymakers may wish to consider the adequacy of welfare payments in providing an appropriate standard of living at current market prices.Estimated yield from the Defective Concrete Product Levy was reduced to €32 million after the levy was reduced to 5 per cent.
Rental affordability challenges for low-to-moderate-income groups have been well documented. Changes to housing supports in recent years, notably the rapid expansion of Housing Assistance Payment (HAP), aim to address affordability challenges for low-income households in the rental sector. Within this context, this report seeks to inform our understanding of the current system of housing supports for low-income renters in Ireland. The report examines tenure patterns and rental affordability. It reviews the range and design of housing supports available to low-income renters and examines how the localised operation of differential rent schemes, which determines supported tenants’ contributions, affects the level of and variation in support received. With the increased reliance on the provision of indirect housing supports (through rental subsidies or supplementary income supports), it also examines the availability of accommodation for low-income renters within the private rental sector. Housing supports – by virtue of being means-tested – affect the financial incentives individuals have with regards to being in paid work or working an additional hour. This report uses SWITCH, which is the ESRI’s tax and benefit microsimulation model, to analyse the impact of these supports on the effective tax rates faced by low-income renters: a key consideration for any means-tested supports.
Ireland is an outlier among EU countries as it does not have a strong link between previous earnings and the level of payment provided to those who have recently lost their job or are on leave from work for the short- to medium-term for reasons of illness or maternity. This paper provides a historical background for earnings-related benefits in Ireland, outlines the rationale behind linking benefits with previous earnings and examines the potential impact of (re)instating them.
Trade-offs exist in protecting those on lower incomes and ensuring an adequate incentive to work. If benefit entitlements and other supports are withdrawn sharply as income rises, there may be a financial disincentive to enter employment or to work more. The same is true for tax and social insurance liabilities -if these jump at certain points or increase sharply they may disincentivise employment. This paper examines cliff edges that exist in the Irish tax and welfare system -such as income thresholds for medical cards and Pay-Related Social Insurance (PRSI) contributions -that can mitigate against the generally strong incentives to work faced by the working-age population. Where possible, it considers options for reforms to these cliff edges.
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