December 2014        

The budget, water tax, and inflation

Kieran Crilly

A household’s income will be affected by the recent budget (2015), and the water tax will reduce the household’s ability to spend. Inflation, expected to be 1.1 per cent in 2015, will reduce the amount of goods and services that a given income will buy in 2015 compared with 2014. Table 1 shows the position of single households in 2015.

Table 1. Effect of budget, water tax, and inflation, single person

PensionJobseeker’s allowanceMinimum wageAverage wageWage
Weekly income€230.30€188.00€346.00€673.08€1,346.15
Annual income€11,975.60€9,776.00€17,992.00€35,000.00€70,000.00
Effect of budget measures¹€57.56€47.00€174.20€396.20€746.20
Water tax–€160.00–€160.00–€160.00–€160.00–€160.00
Water charge rebate€100.00€100.00€100.00€100.00€100.00
Budget less water tax–€2.44–€13.00€114.20€336.20€686.20
Inflation adjustment²–€131.73–€107.53–€189.35–€304.36–€489.16
Budget measures adjusted for water tax and inflation–€134.17–€120.53–€66.15+€31.84+€197.04
1. Budget measures except those relating to water tax.
2. Inflation adjustment occurs because when prices rise, take-home pay will buy fewer consumer goods and services. According to the Department of Finance, prices are forecast to rise by 1.1 per cent in 2015, so net incomes would need to rise by 1.1 per cent for the person to be able to buy the same amount of goods and services in 2015 as they did in 2014. This is the inflation adjustment in the table.
     In the budget, the benefits increased as income increased. All the figures were positive. When the water tax is factored in, the pensioner and the person on jobseeker’s allowance will have a fall in nominal income. Other income earners will have increases in nominal income, with those on the highest income getting the most.
     When inflation is factored in, the person on a pension, on jobseeker’s allowance or on the minimum wage will suffer a fall in real income: they will be able to buy less in 2015 than in 2014. People on the average wage of €35,000 and on €70,000 will have higher real incomes (€31.84 and €197.04, respectively). Again, the high-earner gains most.

Table 2. Effect of budget, water tax and inflation changes, couple with two children

PensionSocial assistanceMinimum wageAverage wageWage
Weekly income€383.60€312.80€346.00€673.08€1,346.15
Annual income€19,957.60€16,265.60€1,7992.00€35,000.00€70,000.00
Effect of budget measures¹€95.90€198.20€189.68€294.20€776.20
Water tax–€260.00–€260.00–€260.00–€260.00–€260.00
Water charge rebate€100.00€100.00€100.00€100.00€100.00
Budget less water tax–€64.10€38.20€29.68€134.20€616.20
Inflation adjustment²–€253.85–€217.20–€320.68–€346.95–€562.42
Budget measures adjusted for water tax and inflation–€317.95–€179.00–€291.00–€212.75+€53.78
1. See notes to table 1.
2. See notes to table 1.
     In the budget, the benefits increased as income increased. All the figures were positive. Those on the highest incomes got most. The person on the minimum wage is adversely affected because of the claw-back of family income supplement.
     When the water tax is factored in, the pensioner will have a fall in nominal income. Other earners will have increases in nominal income, with those on the highest income getting the most.
     When inflation is factored in, those people on a pension, on jobseeker’s allowance, on the minimum wage or on the average wage will suffer a fall in real income: they will be able to buy less in 2015 than in 2014. People on the average wage of €70,000 will have higher real incomes by €53.78. Again the high-earner gains most.
     Note: Inflation adjustment for a single household is 1.1 per cent of net pay in 2014. Inflation adjustment for a family with children is 1.1 per cent of net pay plus children’s allowance in 2014.
     2015 is going to be a year of lower living standards for most people. No wonder the water tax was the straw that broke the camel’s back! There is still is no end to “austerity.”

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