Dáil debates

Tuesday, 4 October 2022

Ceisteanna - Questions - Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions

Budget 2023

10:20 pm

Photo of Gerald NashGerald Nash (Louth, Labour)
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79. To ask the Minister for Public Expenditure and Reform if his Department has examined or requested a SWITCH analysis of the budget 2023 measures, excluding the 2022 temporary cost-of-living measures to be carried out; if he will provide a copy of any such analysis reviewed by his Department, for the distributional impact of the permanent expenditure and taxation changes from budget 2023 only; and if he will make a statement on the matter. [48282/22]

Photo of Gerald NashGerald Nash (Louth, Labour)
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This time last week the Minister and his Government colleagues were patting themselves on the back on a job well done on budget day. There is no shortage of graphs and other narrative in the glossy expenditure report claiming how much better off low-income households will be as a result of the once-off measures combined with the budget 2023 measures. However, when we strip away the €4.1 billion in once-off measures, the picture is not as rosy as presented in the expenditure report. Why is there no analysis using the ESRI's simulating welfare, income tax, childcare and health policies, SWITCH, model done for budget 2023 specifically?

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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In addition to a €4.4 billion package of temporary supports to be provided this year, budget 2023 provides for additional core expenditure of €5.8 billion. This significant commitment, which will bring overall core spending next year to €85.9 billion, is designed to support households and businesses in a challenging economic climate, and to invest in public services and critical public infrastructure in a fiscally responsible and sustainable manner.

In order to promote economic equity, equality of opportunity and social solidarity in the budget process the programme for Government commits to developing a complementary process of budget- and policy-proofing, analysing the distributional implications of expenditure and facilitating the targeting of measures to assist those most in need. In accordance with this commitment, my Department, along with the Department of Finance, undertakes distributional analysis of those measures captured in existing models as part of the budgetary process. This analysis provides detail on the expected impact of measures on households and socioeconomic groups and creates an evidence base which is central in informing the overall package.

It should be noted that it is necessarily an understatement of the true impact, as not all measures can be captured with existing models. The distributional analysis of the final package is published on budget day to improve overall transparency.

As part of budget 2023, my Department set out the findings of our distributional analysis on pages 29 to 31 of the expenditure report, published online on the budget 2023 website. The analysis, as provided, was based on the year of impact, with measures that are expected to benefit households in 2022 presented separately from those which will impact in 2023. The distributional impact of the core 2023 package in isolation was an integral part of the analysis carried out by my Department and I will arrange for this to be shared with the Deputy. In a further reply, I can outline some of the figures that strip out the cost-of-living measures in 2023 from the core budget 2023 impact. However, I wish to make the overall point that what matters is the benefits that are provided to people, not whether they are core or cost-of-leaving measures. People wanted to know what the budget meant for them.

10:30 pm

Photo of Gerald NashGerald Nash (Louth, Labour)
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I absolutely get that. It is normal practice that the distributional impact of a budget would provided in the Exchequer report. A bit of a con job was attempted to be perpetrated against the Irish people, quite frankly. I read the documents and I do not see any separate, isolated analysis for the measures and provisions that apply for 2023 exclusively. Of course, when one looks in the round at the once-off package of €4.1 billion and add that to the budget 2023 package, it looks very impressive.

However, the reality is as follows, and I will quote from the Economic and Social Research Institute’s, ESRI’s, post-budget analysis statement. It states: "...below forecast inflation increases to tax credits and welfare payments next year will mean many lower-income households will experience real terms cuts in living standards in the latter half of 2023 without a repeat of the welfare bonuses, lump-sum payments and household energy credits." The reality is that people who are struggling today will continue to struggle next year in the absence of any additional once-off support. It would be very useful, and in the interest of transparency, for the Minister to publish an isolated budget 2023 distributional impact. It is normally done through the SWITCH analysis, which is a very important measure.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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This is the expenditure report. It is not terribly glossy, but it is full of useful information. The way that the distribution analysis is presented is there is the 2022 impact and then, separately, the 2023 impact. The Deputy is asking to strip out the 2023 measures that are cost-of-living related, such as the €400 energy credits that will apply next year, the continued reduction of VAT on utility bills, excise reduction and the continued reduction in public transport fares. I will provide that analysis to the Deputy. We have nothing whatsoever to hide. The overall conclusion of the ESRI was clear: "One-off measures announced [in the budget] will insulate most households from rising prices this winter." It does, of course, go on to talk about the following winter. That is a year away and we do not know what will happen in the intervening 12 months. The ESRI also stated:

Our research shows the government’s approach to insulating households from the recent rise in energy prices has been effective. Targeted welfare measures combined with universal household energy credits will do more for most lower income households this winter than had welfare payment rates risen in line with inflation both this year and next.

I regard that as its central conclusion. However, the Deputy makes a fair point. We do not know what will happen in 12 months’ time. However, this budget is first and foremost about helping people in the coming months and through 2023 insofar as we can foresee how that will that develop at this point.

Photo of Gerald NashGerald Nash (Louth, Labour)
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I welcome the Minister’s commitment on the record of the House to provide that additional analysis. That is very useful, indeed. It is not abstract, either. It is an important analysis to have.

I draw the Minister’s attention to the minimum essential standard of living, MESL, post-budget analysis from the Vincentian Partnership. It essentially concur with some of the conclusions arrived at by the ESRI and makes the point that, in reality, a €12 a week increase to social welfare rates will not sufficiently insulate those who are in lower deciles in terms of income from the worst vicissitudes of the cost-of-living crisis given that inflation will be at about 7% next year. It makes some other points as well on the real value of core rates and some of the secondary supports that are provided for this year that are not provided for next year.

The reality is that we will be back here next spring discussing the need for additional once-off measures. Given the analysis of the likes of the ESRI and the Vincentian Partnership, we know that €12 a week increase to the core social welfare rates is not adequate. We should have gone for something more like €20 to insulate people as best we could.

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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If it were the case that we only provided €12 a week increase in the core weekly rates and did nothing else, then the Deputy’s conclusion would be a fair one. However, of course, that is not the case. The increase in the core weekly social welfare rates is being supplemented by an extensive range of once-off payments that will start to flow within the next short number of weeks. People look at this in the round. They want to know what benefits they are getting from the budget, how much cash they will receive in the coming weeks and what they will get next year. When the Deputy looks at this in the round, on balance, it is a very fair package. It is fiscally sustainable, and we have to have an eye on. It is one thing to use excess corporate tax receipts to make once-off payments but it is a different thing altogether to use excess corporate tax receipts to sign up to permanent expenditure commitments that recur year in, year out. That is a different thing. However, we will review this as the year goes on next year, depending on the prevailing economic circumstance.