BUDGET 2024 MEASURES will likely “increase real income next year” but inflation means purchasing power will be lower than in 2020, according to the ESRI.

It said the package of tax cuts, welfare increases, one-off payments and indirect tax cuts is worth around 2% of household disposable income on average.

However, price inflation means households will have lower purchasing power in 2024 than in 2020.

The Economic & Social Research Institute added that there will be higher gains for low-income households when compared to high-income households.

It also described the budget as “progressive” and estimated that it will reduce the at-risk-of-poverty rates.

However, the ESRI cautioned that this reduction is gained mainly through once-off measures and that without these, the at-risk-of-poverty rates for elderly households would increase by around 1%.

These include, three electricity credits worth €450; a winter fuel allowance lump sum of €300; a €200 winter living alone allowance; a Christmas bonus for welfare recipients; and €250 million in one-off business supports.

The ESRI also welcomed the increase to the National Childcare Scheme, commenting that it will “reduce the out-of-pocket childcare costs of those using formal childcare.

From September, the National Childcare Scheme subsidy is increasing from €1.40 per hour to €2.14, an increase of 74c.

Last year, it increased from 50c to €1.50, which was a 90c increase – therefore, the increase in the subsidy is less than what was implemented last year.

The ESRI said this “effective freeze” may result in lower-income households receiving less support with their childcare costs.

Karina Doorley, a senior research officer at the ESRI, noted that for the second year running, “temporary welfare measures are playing an important role in insulating households from the effects of inflation”. 

“With inflation moderating and wages growing strongly, policymakers should now consider benchmarking social welfare payments to provide more certainty to those dependent on them,” said Doorley.

ESRI research officer Dora Tuda also called for a “more permanent solution” to accomplish “long-lasting, significant improvements to the living standards of lower-income households”.

Cost-of-living crisis

Speaking to RTÉ last night, Taoiseach Leo Varadkar said the main objective behind the Budget was to help people cope with the cost-of-living crisis.

The one-off payments were criticised by opposition parties for lacking “vision” and “ambition”.

“The real thinking behind this Budget was that, this is a Budget that was about helping people with the cost of living, helping people to have more money in their pockets,” Varadkar told RTÉ.

“The objective, really of any government, is that people’s living standard should rise every year that their income should rise faster than inflation, than the cost of living.

“That didn’t happen last year, because inflation was so high, it was 10%. I think this year, we’ll probably see incomes and inflation match.

“Next year we want that to be the year where people’s incomes rise faster than prices again, and that’s how you secure a real improvement in living standards.”

The budget also set up two new funds that will use Ireland’s multibillion-euro windfall from corporation tax receipts, mostly derived from multinational companies, to invest in future priorities, including support for the response to climate change.

Varadkar said the funds will be what people remember from the 2024 Budget.

“I think when people look back on this budget in 10 or 20 years time, that will be the reform that I think will be the most significant,” he said.

An overspend in the Department of Health was flagged as a pinch point ahead of Budget 2024.

Varadkar said the Budget allocation for health was “huge”.

“Since this government came to office we have 1000 more hospital beds, 20,000 more staff in our health service,” he said.

He added: “Look at how our health service is outperforming the NHS for example, better outcomes in stroke and cancer, longer life expectancy now in Ireland than almost anywhere in Europe and also healthcare is more affordable than it was before.”

-With additional reporting from Press Association