Monday 20 October 2014

Middle Ireland has borne the brunt of our austerity years

Published 03/08/2014 | 02:30

Middle got mashed: And soon it'll be time to face a fresh round of 'back to school' costs

NOT long ago we were told there was no such thing as the squeezed middle in this country. The Economic and Social Research Institute (ESRI) informed us that better-off families and those on welfare were the biggest losers from the multitude of austerity budgets since the downturn in 2008.

Now, just two years later, economists in the same ESRI have reached a rather different conclusion.

They have concluded what we all knew already - that the brunt of the budgetary adjustments have been borne by middle-income earners.

Welfare payments have been protected and high earners have been wiped out, leaving the load to be shifted to Middle Ireland, is the stark conclusion from a report entitled Distribution of Income and the Public Finances by Prof John FitzGerald.

There has been a crash in the number of high earners.

"This means that somebody else has got to pay and in this case it was those in the middle-income range," Prof FitzGerald finds.

The decision to protect the welfare system differs from policies adopted in other EU countries where income inequality increased as a result of the financial crisis, the ESRI report says.

The report estimates an 8pc drop in disposable income per head (what's left after paying taxes), falling from €22,800 in 2008 to around €20,900 in 2014.

But the report also states a "significant number of people" in lower to middle-income categories are suffering financial distress as a result of the housing crisis.

This contradicts previous findings by the think-tank, that found better-off families and those on welfare were the big losers from austerity.

It is extraordinary that such a conclusion was ever reached in the face of the evidence.

Middle Ireland has been battered by Value Added Tax on most items surging to 23pc, one of the highest in the EU.

The Universal Social Charge is a crude and expensive tax, health insurance costs have sky-rocketed mainly due to Government decisions, energy costs are up around a quarter in the last four years, and college costs have jumped.

Add to that the taxes on those trying to fend for themselves - almost half of any interest earned on deposit interest is sequestered by the Government and there is a barbarous levy on private sector pension savings.

No wonder around 100,000 are in mortgage arrears. The extraordinary hike in taxes and levies, cuts in income, unemployment and over-borrowing have pushed those who are middle-aged with children into a mortgage mess.

There has now been long overdue recognition of the disproportionate burden borne by Middle Ireland.

If ever any group deserves a break it is middle earners.

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