Regina Doherty (Meath East, Fine Gael) | Oireachtas source

The ESRI report assesses the impact of the tax and social welfare measures in budget 2019, using SWITCH, the ESRI tax and benefit microsimulation model. As the Deputy will be aware, my Department also uses SWITCH to produce an annual social impact assessment of the main tax and welfare budgetary measures every year. In general, SWITCH analysis shows that households at the lower end of the income distribution benefit from increases to welfare payments while income tax measures are more beneficial for those who earn much higher salaries.

There is a difference between the conclusions reached by the ESRI and my Department's assessment. This is because the ESRI analysis benchmarks the budget measures against a scenario where all social welfare payment rates, tax bands and tax credits are increased in line with a forecast 2019 average wage inflation rate of 2.9%. Therefore, rather than comparing changes against the reality, or the "as is" situation, the ESRI compares the changes with an anticipated future state, but that is often not achieved. The ESRI report states that the budget 2019 measures will result in household incomes being 0.66% lower than estimated in this projected future state, with households at the lower end of the income distribution being more affected than those at the higher end of the income distribution.

By contrast, my Department's social impact assessment provides a straightforward year-on-year comparison which shows an increase in the average household income of 0.7%, with households at the lower end of the distribution showing above average gains. The main welfare rate increases of €5 per week announced in budget 2019 are well ahead of the forecast inflation of 1.2% next year, resulting in increases of between 2.5% and 4.6% for people of working age and 2.1% for pensioners compared with 2018 rates.

My Department will publish the budget 2019 social impact assessment before the end of this year.

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