Dr. Tom McDonnell:

There are a number of ways to approach this. The fundamental problem is that the cost of living is too high. In effect, we have the highest cost of living in Europe or at least in the EU. What can the Government do to reduce the cost of living quickly and in a way that helps people at the bottom and not just those in the top half of the distribution? If we increase the standard rate cut-off point for income tax, it is really just helping those in the top half of the earnings distribution. Even if USC is cut, it is a very badly targeted way to help people. However, there are other things that can be done. Our view is that we should focus on the user cost of public services, including education, health, public transport and so on. It is about focusing really on appropriations-in-aid. We know that lower-income households tend disproportionately to use public services, and a lot of these costs are fixed costs. Therefore, focusing in that way is more progressive and will help the households that are more in need.

I accept the point about housing. It is very much a wicked problem at the moment that will take years to solve. We perhaps need a change of strategy. Overall, we would say we should focus on universal basic services and also on benchmarking fixed incomes to protect households at the lower end of the income distribution. This would involve things like reforming the working family payment to include single individuals, making it much more generous, tapering it and making it non-conditional upon particular hours worked or whatever it might be. That kind of strategy would be helpful and better targeted than universal payments or income tax cuts.

We all accept we have choices. We cannot have our debt go too high and get too bad. We must make choices. That is the reason we are concerned about tax cuts and the picture in the longer term. At some point, we will have to start increasing taxes. The more we reduce them now, the harder that problem will be as we get into the late 2020s and the 2030s, when it will start to become a very big issue. That is how we would respond to the person on €50,000.