Budget benefited lower income groups proportionately more – ESRI
The Economic and Social Research Institute has said Tuesday’s Budget was “progressive”, meaning lower income groups will benefit proportionately more than higher income groups.
However, the ESRI says the reduction in the At Risk Of Poverty (AROP) rate amongst most groups will only be achieved through the once-off measures contained in the Budget.
It points out that without these, the AROP rate amongst pensioners could rise by 1%.
Overall, it estimates the Budget package will increase household disposable income on average by 2%. Low-income households are estimated to benefit more than those on high incomes.
It says the trend for the last four budgets has been for many of the tax and welfare changes to be below wage and price inflation. Budget 2024 reverses this trend “somewhat”.
It finds that households are, on average, worse off by 0.5% of disposable income compared to what might have been if the last four budgets had been index-linked to income inflation.
Middle-income households lose out most compared to this scenario.
Its report also notes that some lower-income households may lose out on extra childcare benefits if their incomes rise because qualifying means test thresholds have been effectively frozen.
It notes that the extension of the Help-to-Buy scheme for home purchases, the addition to the renters’ credit, the introduction of a tax credit for landlords and the mortgage interest tax relief measure will all add to demand in the property market. This, it says, will put pressure on house prices.
It says the overall Budget package is “substantial” and does “risk adding to the inflationary pressures”.
It does, however, welcome the establishment of investment funds to save some of the surpluses generated by windfall receipts of corporation tax.
Karina Doorley, Senior Research Officer with the ESRI said: “With inflation moderating and wages growing strongly, policymakers should now consider benchmarking social welfare payments to provide more certainty to those dependent on them.”
