Wednesday, 19 December 2018
Ceisteanna Eile - Other Questions
51. To ask the Minister for Employment Affairs and Social Protection her views on a recent ESRI report which found that as a result of budget 2019, lower income households will face proportionately greater losses than higher income households that benefit more from cuts to the universal social charge and an increase in the higher rate threshold for income tax; and if she will make a statement on the matter. [53321/18]
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.
There are different ways of measuring income, and there is no rule that says one way is better, more equitable or correct than another. The ESRI, using its measurement system, concluded that the budget represents a small net loss for households on average, with larger than proportional losses for lone parents, retirees and lower income households. Page 14 of the report states:
losses of disposable income are on average largest for the third lowest income decile (0.94 per cent) and smallest for the highest income decile (0.37 per cent). With the exception of the very lowest income decile, households in the bottom half of the income distribution ... lose by more than those in the upper half ...
Is that not a very compelling case for the budget to be poverty proofed, or equality proofed? Various commitments were made publicly that it would be done. What is the position in that regard?
The budget is poverty proofed every single year because the aim in giving back workers more of the tax the Government takes out of their pockets is to improve their financial status. The aim in increasing financial payments under every single scheme in the Department of Employment Affairs and Social Protection is to improve the financial status of those who are entirely reliant on social welfare. When we look at the recent poverty data from the 2017 survey of income and living conditions which was published in recent weeks, they show significant reductions in the two main poverty rates. The consistent poverty rate for 2017 was finally down, which I was not expecting because I felt the qualified child increases and the changes we had made to payments for lone parents in last year's budget would not have had as much of an impact as they did. We have moved from a consistent poverty rate of 8.2% to 6.7%, which is nowhere close to the targets we have set for 2020, but given that we increased significantly the qualified child increases in this year's budget, I am hopeful that next year's figures will be even better. The deprivation rate is 18.8%, down from 21% in 2016. We have a long way to go, but what is most important is that there is a continuing downwards trend in the rates of consistent and persistent poverty and that there is a continuing upwards trend in employment, which is the single and most effective route out of poverty for any person or family.
I have also studied the recent figures and what the Minister did not say was that some of the movements were extremely slow, while others have moved in the opposite direction. However, I do concede that the position is generally improving. Nevertheless, I put it to the Minister that many people have still been left behind. One in five children is living below the poverty line. Some 10,000 people, 4,000 of whom are children, will be forced to spend this Christmas in emergency accommodation. The Society of St. Vincent de Paul tell us that it is receiving 1,000 calls per day in the run-up to Christmas. Is the Minister optimistic that she will achieve her stated targets to reduce the rates of consistent poverty and child poverty? When is it proposed to publish the national action plan for social inclusion 2018 to 2021?
I am especially mindful of the draw on people's pockets at this time of year, not just of the the people about whom the Deputy is talking who are entirely reliant on social welfare, and it was the main driver of my seeking an increase in the Christmas bonus, a term I do not like. I think we should call it something else. The extra payment given to families who are entirely reliant on social welfare payments was increased to 100%, having been drastically cut in recent years because we did not have the money to make it. That is a small indication of the Government's intention to try to address the extra costs people face at this time of year.
The funny thing about statistics is that different people read and interpret them in different ways. The only way I can determine the survey of income and living conditions, SILC, and the ESRI's determinations is that the levels of consistent and persistent poverty for families, especially children, are reducing. They might not be reducing as fast as the Deputy and I would like, but they are definitely reducing, which is incredibly positive.
The small increase in qualified child increases to which we agreed in this House last year in budget 2018, in addition to the changes in employment practices and circumstances, the income disregards introduced for both the working family payment which has been designed to help people with families who are in employment and lone family and working transition payments, have had a significant impact on the rate of consistent poverty which has reduced from 8.2% to 6.7%. Given that we have introduced multiple disregards and increases this year, I hope they will have a significant impact on the figures at the end of 2019, but we will not know that until next year. However, I am genuinely positive. For me, the single biggest driver and the fastest route out of poverty for a person or family is a job. That is the reason I fight with Deputy John Brady week in and week over JobPath-----
-----because it is the most significant and impactful scheme we have ever had in the history of the State in helping those who are long-term unemployed to get back into employment. I am sorry, a Cheann Comhairle.