Varadkar welcomes evidence of positive social impact of Budget 2017

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Monday, 28 November 2016: Minister for Social Protection Leo Varadkar has welcomed the findings of a Social Impact Assessment which found that tax and welfare measures in Budget 2017 will have a positive and progressive impact.

The assessment is based on SWITCH, the tax/welfare microsimulation model developed by the Economic and Social Research Institute (ESRI), and is published online today.

Minister Varadkar said: “The Social Impact Assessment confirms that Budget 2017 succeeds in its goal for everyone to benefit from the recovery. It shows that the main tax and social welfare budget measures will increase average household incomes [by about €9.20 per week] in 2017, and it finds a strong progressive pattern with bigger gains for those on the lowest incomes.

Social impact assessment (SIA) is an evidence-based approach which estimates the likely distributive impact of policies on income and social inequality. The study conducted by the Department of Social Protection, based on the SWITCH model, captures the impact of the main tax and welfare policy measures in Budget 2017 on household incomes, family types and poverty.

The 2017 SIA also includes the higher rent limits introduced to provide increased stability to tenants, the increase in the national minimum wage and the increased Christmas Bonus payable in December 2016.

The assessment found that average household incomes will increase by 1% as a result of Budget 2017. Lower income groups gain 2.2%, over three times the gain of higher income groups at 0.7%. There were gains in income across all family types, with non-earning lone parents and couples with children gaining most. Other family types with above average gains are non-earning couples and singles without children, retired couples and singles, and earning lone parents.

The analysis finds that relative income poverty will fall as a result of the Budget, thus continuing the strong performance of social welfare payments in reducing poverty.

Minister Varadkar said: “The over-riding objective for the Government is to increase employment and ensure that work pays, build real and sustainable economic growth, and protect the most disadvantaged people. Further economic growth, rising employment and recent budgetary measures are likely to result in further improvements in poverty levels, household incomes and living standards.


Note for Editors:

The Social Impact Assessment (SIA) is an evidence-based methodology which estimates the likely effects of policies on household incomes, family types, poverty and access to employment.

The assessment uses a tax-welfare simulation model developed by the Economic and Social Research Institute (ESRI) known as SWITCH. The model simulates the impact of changes in welfare and income tax for a representative sample of 8,000 households, drawn from the 2013/2014 CSO Survey on Income and Living Conditions, with the data updated to reflect trends in population, employment and incomes.*  Government departments are working with the ESRI to improve the capacity of the model to support other components (e.g. services, indirect taxes).

The SIA was prepared by the Department of Social Protection, after consultation with the Department of Finance on the income tax elements of Budget 2017. It builds on ex-ante analyses to inform ministerial deliberations on the tax and welfare elements of the Budget. It is intended to inform public understanding of the distributive impact of budgetary policy.


Relative income poverty (or at-risk-of-poverty)
Persons are regarded as being at-risk-of-poverty or in relative income poverty if their equivalised income is below 60% of the median income. In 2014, the at-risk-of-poverty threshold was €10,926 per annum or €209.39 per week for a single person. It was €25,348 or €485.79 a week for a family of 2 adults and 2 children.

Impact of social transfers
Social transfers are extremely effective at lifting people out of poverty in Ireland. Using the latest data from Eurostat for 2014, Ireland’s performance in reducing poverty through the tax and transfer system, at 58.1% was far in excess of the EU average of 34.1%. Ireland was the best performing EU member state in reducing poverty through social transfers in 2014, as had been the case in previous years.

Social Inclusion
Ensuring marginalised people and those living in poverty have greater participation in decision making which affects their lives.

National Action Plan for Social Inclusion 2007 – 2016
The 10-year plan of the Irish Government aimed at tackling poverty. The Plan was recently updated for the period 2015 - 2017 to reflect current issues and interventions to tackle poverty.



Budget 2017 measures covered in the Social Impact Assessment


Social welfare

  • €5 weekly rate increase for pensioners with proportionate increases for qualified adult dependants
  • €5 weekly rate increase for working-age adults with proportionate increases for qualified adult dependants and other recipients on reduced rates
  • Additional €10 increase in Guardian’s Contributory and Non-Contributory payments
  • €20 increase in the weekly income disregard for parents getting the One Parent Family Payment and Jobseeker’s Transition
  • An 85% Christmas Bonus paid in December 2016 to recipients of long-term social welfare payments
  • Increase in the rent limits for housing support payments


Income tax

  • €100 increase in the Home Carer Tax Credit to €1,100
  • €400 increase in the Earned Income Credit to €950
  • Reduce the USC rates from 1% to 0.5%, from 3% to 2.5% and from 5.5% to 5%. Also, increase in the ceiling band for the 2.5% USC rate to €18,772.** 


National minimum wage

  • Increase the national minimum wage for adults from €9.15 to €9.25 per hour


 *Simulating Welfare and Income Tax Changes. Information on the design, underlying data and model construction can be found at:

**This increase ensures the salary of a full-time worker on the minimum wage remains outside the top rates of USC.

Last modified:28/11/2016