Dr. Karina Doorley:

The Chair is referring to those in the middle four deciles slightly losing out due to budget 2022 compared with price index policies. I stress that the magnitude of those effects are small. They range from -0.2% of disposable income to 0.2% of disposable income. What I say next should be taken in light of the fact that there is error in any sort of statistical procedure like that. They are not terribly different from one another but the pattern is clear. Those in the middle income deciles lose out compared with those in lower and higher income deciles. The reason for that is twofold. The lower income households benefited from above inflation increases to certain payments such as the fuel allowance, the living alone allowance and increases for qualified children. Households in the upper half of income distribution are benefiting from tax cuts. The standard rate band was increased by more than forecast inflation while tax credits were also increased by more than forecast inflation. The typical household in the middle income deciles is probably earning too much to be receiving much or anything in social welfare but it might not be earning enough to benefit from an increase in the standard rate band. These households are not in the top tax rate so they do not benefit from a change to the standard rate band. Sometimes they receive the working family payment, which was increased by less than inflation in the budget so that is a real income loss for those families. Child benefit was also frozen in cash terms. Many of those middle income families have children so that amounts to a real income loss for them as well. The last major contributor is the fact that USC and PRSI payments were mostly frozen in nominal terms. That means there was a real increase in the USC and PRSI burden for most households. If they were located in the middle four deciles, those households were not benefiting from tax cuts that would have counteracted that burden. That is what is behind that pattern.