Charlie Weston: Yes, we've gained but there is still a long way to go on Recovery Road
Published 15/10/2015 | 02:30
Families and pensioners were big winners in the Budget, but there is still a long way to go to restore household incomes to where they were before the bust.
Despite this week's €1.5bn Budget giveaway, most middle-income families are still worse off compared with 2007.
Think of what is happening now as a road journey. We have gone a long way on Recovery Road, but we still have a lot of travelling to do before we reach our destination.
It may take decades to get back to the levels consumer finances were at eight years ago, but it is not unreasonable of families to want a recovery dividend.
After all, it was ordinary people who paid for the rescue of this country.
An analysis of household budgets shows that we still have a way to go.
The introduction of the Universal Social Charge (USC), along with property taxes and water charges, means that despite tax and USC cuts in the last two budgets, family incomes are still down.
Director of taxation at Chartered Accountants Ireland Brian Keegan reckons that the recent changes to income taxes, including USC, have brought workers back to the position they were in back in 2011.
"Income taxes are now back to 2011 levels. We are not back at the level they were in the good times but we are about halfway there," he said.
Finance Minister Michael Noonan made major changes to the USC charge, which he said were the equivalent of an extra week's wages for workers. And he admitted that "the last few budgets had been very hard".
But property tax and water charges are now a feature of household expenditure, costs that were not part of life when the Celtic Tiger last roared.
And many other outgoings of the typical family have shot up in the past few years.
College fees have risen in the meantime, along with motor and health insurance costs.
Mortgage costs for those on variable rates had also risen since the financial collapse, he said. Job losses and pay cuts were also hitting many households, he added.
This means that most households have more going out than coming in compared with 2007.
A recent survey conducted by the Irish League of Credit Unions showed that 16pc of households were skipping on food to finance back-to-school costs for children. This shows the pressure some households are under.
Back in 2007, a single-income family on €57,500 was left with €3,845 each month after income tax.
From next year, this family will have €3,688 a month. This is an improvement on this year's take-home pay but it is still less than in the boom times.
But this family now have to find €750 a year to pay both water charges and the property tax.
And rents have risen significantly in the past few years and are back close to where they were during the height of the Celtic Tiger.
The list of other charges and levies is long, and proving financially painful. Among these are changes to the drugs payment scheme, and the reduction in the tax refunds for spending on GPs and prescriptions, the increase in the standard rate of VAT to 23pc, the introduction of the private sector pensions levy, and more.
Many people in the middle-income bracket, most of whom are just muddling through, feel they are due a financial break.
The next election is likely to be decided on the basis of which parties, or combination of parties, can deliver on that.
Middle-income Ireland expects more and is not being unreasonable on that. After all, the financial suffering has been intense.