Rising costs affect everyone in Irish society. We know that low-income households, those on low hourly wages or those on fixed incomes (welfare) are the hardest hit.
These are households in the bottom 20 percent of the income distribution.
Your support requires targeted action, not one-off payments.
An immediate €20-per-week increase in all basic welfare benefits to support people on fixed incomes, the introduction of refundable tax credits and a requirement to provide a living wage of €12.90 an hour for low earners must be introduced in the 2023 budget.
There’s also no denying that the current cost-of-living crisis is affecting everyone.
Higher-income households have a buffer against recent increases.
But what about those in the middle — the households that don’t qualify for benefits like the fuel subsidy, the Working Family Payment, or the school clothes and footwear program? The government rightly wants to support these households as well, but is taking the wrong approach with its tax breaks.
Under the government’s plan to introduce a new 30 per cent tax band, a worker making €40,000 a year would get an increase of €26 a month or €6 a week – at a cost to the exchequer of €310m. It is unlikely that the government will limit this rate to those earning €40,000. An extension to employees up to 50,000 euros would cost more than 1 billion euros.
So what if we invested that instead? One of the biggest costs for families with young children is childcare. Ireland has the second highest cost of childcare in the EU. Data from the Organization for Economic Co-operation and Development (OECD) shows that a couple earning an average wage spends 31 percent of that wage on childcare, compared to an OECD average of just 13 percent.
According to the latest figures from the Early Years Sector Profile Report, the average childcare cost for families is €810 per month per child nationally and varies widely across the country, with full-day care in the Dún-Laoghaire-Rathdown area of Dublin, which costs an average of €1,058 per child.
The government has announced that it will extend the current childcare allowances. But despite these subsidies, the costs for parents continue to rise.
What if, instead of providing demand-side subsidies and tax cuts, the government paid some of that $1 billion?
This model is used in countries like Sweden, where childcare costs for an average-income couple are six times lower than in Ireland.
Another important area is housing. The cost of buying a home rose 14.4 percent nationally through May 2022, and private rents rose 11.2 percent over the same period.
Again, this is an area where demand-side subsidies persist despite overwhelming evidence that they increase housing costs. And here, too, the solution is investment.
The government’s Housing for All plan pledges €4 billion a year through 2030, including the Shared Equity Home Loan subsidy, the Help-to-Buy grant for first-time buyers and a target of 90,000 public housing units.
The recently introduced Shared Equity Home Loan goes so far as to impose an additional burden of debt on households who cannot afford the mortgage needed for their home.
The Help-to-Buy program has been shown to disproportionately favor those who don’t need it, with a third of grant recipients having a down payment of more than 80 percent of the purchase price.
And the promised 90,000 social housing units by 2030 account for less than three quarters of today’s needs.
With more than 60,000 social housing tenants rented by the private sector, the most logical solution would be to invest in expanding the supply of social housing, thereby making private rental properties available to renters.
This would not only have a positive effect on rental costs, but would also be cheaper for the state in the medium to long term.
If the 2023 budget is to deliver on the promise of a “cost-of-living budget,” the government must put long-term investment ahead of short-term subsidies, potentially saving households hundreds of children a month on childcare and rent.
Colette Bennett is an Economic and Social Analyst at Social Justice Ireland.
https://www.independent.ie/opinion/comment/budget-2023-must-focus-on-supporting-low-income-families-with-targeted-measures-not-one-off-payments-41927107.html The 2023 budget must focus on supporting low-income families with targeted measures – not one-off payments