ESRI says low income households to gain while higher earners see little change from Budget 2027

Budget 2027 will leave low income households better off, while higher income households are set to see little to no change, according to new research produced by the ESRI. The report said that changes made to direct tax, welfare measures and childcare supports in Budget 2027 will result in small incomes gains at the household level. But that there will be a variation in how Budget 2027 will affect households of different income levels, with the lowest-income households set to gain. While higher income households will experience little to no change in their disposable income. 'Policy changes in Budget 2027, and indeed over the last seven budgets, have compensated households on average for price and wage growth,' said Claire Keane, an associate research professor at the ESRI 'In particular, the lowest income households have been most protected,' she said. 'This is positive given we know that lower income groups spend more of their income on home heating and motor fuels.' The report highlighted the new €500 per year cost-of-disability payment as one measure benefiting the lowest-income households. The measure was introduced to help households with disabled members meet their extra consumption needs. Previous ESRI research has shown these costs can reach 50pc of a houses disposable income. The report noted that Budget 2027 saw increased payments to families through rises in the Child Support Payment and the Working Family Payment. It said more measures will be needed to achieve the government target for child consistent poverty to be 3pc or below. Karina Doorley an associate research professor at the ESRI said that the increases in the Child Support Payment and the Working Family Payment are well targeted. But that those increases will result in little change to child poverty rates. 'Reductions to childcare fees may facilitate increased parental employment, but only if the supply of formal childcare increases,' she said. 'A second tier of child benefit remains the most effective way of meaningfully reducing the number of children experiencing poverty and deprivation.' The report described the reduction in carbon tax on home heating oil and gas as an expensive measure that was set to benefit all households, whether they can afford the recent price increases or not. Arguing that it will reduce the incentive for households who can afford to decarbonise to do so. The ESRI said that targeted measures to support low-income households would maintain this incentive while protecting the most vulnerable groups. The report went on to say that the Irish economy continues to grow 'robustly' as a result of expanding investment into artificial intelligence globally. However, the ESRI warned that if AI investment fails to deliver sufficient returns, falling profits in the tech sector could affect Irish jobs and tax receipts. 'While the Irish domestic economy is growing robustly and the government is running budget surpluses, there are underlying risks and vulnerabilities that would suggest larger surpluses are warranted,' said Conor O'Toole, a research professor at the ESRI. 'First, the reliance on potentially transitory corporation taxation is increasing. 'Second, net expenditure increases are faster than required by the domestic economy. Savings buffers should be built up to manage any future downturn.'