Patrick Costello (Dublin South Central, Green Party)
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287. To ask the Minister for Finance if his Department will undertake an impact analysis indexed to prices, to illustrate the impact of measures on households in real terms, rather than nominal terms, thereby addressing the inaccurate analysis that lone parents will be better-off following Budget 2023. [55041/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy is aware, my Department’s analysis of the distributional impact of Budget 2023 is calculated on a nominal basis. It compares a baseline scenario of no-policy change against a reform scenario solely incorporating the budgetary policy changes. As such, it examines the discrete impact of the tax and welfare measures announced in the Budget.

On this basis, lone parents are estimated to see a 2.8 per cent gain in disposable income as a result of the Budget’s Cost-of-Living measures and a further 4.2 per cent gain in 2023 as a result of the main tax and welfare changes.

In contrast, the ESRI approach as outlined at their Post-Budget Briefing on 30 September, is based on comparisons with a hypothetical inflation-adjusted scenario. The results of this approach, by its nature, are dependent on the projected rate of inflation and will vary should that forecast be revised or the outcome differ from the forecast. Specifically, the ESRI examine the distributional impact of Budget 2023 compared to the impact on income if the tax and welfare system was indexed to an inflation rate of 7.1 per cent.

As the ESRI have stated, both approaches are valid but are answering different questions.

The ESRI’s analysis estimates that lone parents’ inflation-adjusted weekly disposable income is slightly lower in 2023 by around 0.2 per cent. However, from an overall perspective, the ESRI states that “welfare increases in 2022 and 2023, together with one-off measures, are large enough to leave the lowest-income households better-off on average than they would have been had welfare payments risen in line with inflation both this year and next.” Furthermore, this leads the ESRI to conclude that "the Government's approach to insulating households from the recent rise in energy prices has been effective."

The ESRI’s Post- Budget Briefing, with relevant distributional graphs, is available at:

esri.newsweaver.com/enewsletter/45ywtphvv12ciwo13848jk/external?email=true&a=5&p=62168701&t=26436355