The Impact of Social Protection Payments on Income Distribution John FitzGerald, TCD and ESRI

Composition of Government Expenditure

Government Transfers as % of GDP Change Germany France Netherlands UK Ireland Greece Spain Portugal Source: EU AMECO database. GNP is used for Ireland, not GDP.

Revenue Commissioners’ Data, Change between 2007 and 2011 Income RangeNumber of TaxpayersAverage IncomeTotal Income All Taxpayers

Gini coefficient before tax and welfare payments

Gini coefficient after direct taxation and welfare payments

Conclusions - 1 Big fall in everyone’s income because of crisis Governments decided to increase expenditure on welfare, especially relative to GDP For those on high incomes: numbers fell dramatically; their tax rate increased. A consequence of the fall in tax take from high income earners was that the rest of those with taxable incomes had to pay more tax

Conclusions - 2 A consequence of the changes was that: – Without tax and welfare payments there would have been a big increase in inequality, but – Because of the increase in welfare expenditure and taxes there has been a small fall in inequality – This has not been enough to prevent a rise in those at risk of poverty – Unemployment has had a major impact, which public policy on welfare has only partially offset

Conclusions - 3 While individual policy changes announced in successive budgets, taken together have not been particularly progressive, the overall impact of government policy on expenditure and taxation has had a progressive impact, reducing inequality