The Green Party and progressive budgets

The impact of budgets can be classified as being “progressive”, “regressive” or “proportional”.

In simple terms, progressive budgets ask people to pay proportionally more the richer they are. Regressive budgets ask people to pay proportionately more the poorer they are. Proportional budgets ask everyone to pay proportionately the same.

The findings below are from the ESRI and show the impact of every budget since the crisis, including those when the Green Party was in government. They show that budgets when the Green Party was in government were progressive. In contrast, the impact of budgets under Fine Gael–Labour have been regressive.

The combined effect fits neither “progressive”, “regressive” or “proportional” pattern.

ESRI findings

To measure the impact of the crisis budgets on different income groups, the ESRI analysed the effect of every budget since 2008 on 4,500 real-life Irish households from CSO data. It then grouped each household from the poorest 10% to the richest 10% to see how different income groups were affected. This analysis includes changes to taxes, welfare benefits and new charges, like water charges. It also takes into account changes in individual pay and cuts to public sector pay.

Despite involving massive cuts, the three crisis budgets of 2008 — 09, during the Fianna Fáil–Green Party government, were all progressive. The ESRI concluded:

“…an analysis by the institute has shown that the cumulative effect of the three budgets in the past 14 months was progressive. The highest fifth of households in income terms suffered income loss of approximately 6 per cent as a result of the budgets, while the income of the lowest fifth ‘hardly changed’.”

The April 2009 budget in particular was unprecedented in how progressive it was:

“Overall the budget package is therefore strongly redistributive, with income gains for those with the lowest incomes and the percentage losses rising with income. Shifts of this magnitude take place rarely, and usually over a sequence of budgets: the magnitude of these shifts in a single budget has few if any precedents.”

In February 2012, a year after the Green Party pulled out of government, the ESRI verdict remained chipper. Despite the first regressive budget of the Fine Gael–Labour period, they wrote:

“…over this 4 year period [since the crisis], the distributional impacts show a strongly progressive pattern … The scale of the progressive impact of earlier budgets, which raised income tax, abolished the ceiling on PRSI payments, and introduced the Universal Social Charge is much greater than the regressive impact of [the Fine Gael–Labour] Budget 2012. The net effect over the whole period is therefore strongly progressive.”

However in December 2015, after five Fine Gael–Labour budgets, the best the ESRI could say was that:

“…the results for [budgets since the crisis] cannot be characterised in terms of simple patterns of progressivity or regressivity. Over a substantial range the pattern is broadly proportional, but this does not extend to whole income distribution. The greatest policy-induced losses have been at the top of the income distribution and the next greatest losses at the bottom.”

What changed in the years 2011–2016 was year-after-year of regressive budgets under Fine Gael–Labour. The most regressive of these, Budget 2015, literally took money from the poor and gave it to the rich. As the ESRI noted:

“This pattern of losses in the bottom half of the income distribution, declining as income rises, and gains in the upper reaches, rising with income can clearly be described as regressive.”

Charts illustrating (a) the progressivity of Fianna Fáil–Green Party budgets; (b) the regressivity of Fine Gael–Labour budgets; and (c) the combined effect of these opposing policies over the term of the crisis are below.

Budgets 2008–2012

This chart shows the combined effect of Budgets 2008 to 2012 and the individual effect of Budget 2012. Budget 2008 was the first Fianna Fáil–Green Party budget. Budget 2012 was the first Fine Gael/Labour budget.

Even despite the regressive impact of the Fine Gael–Labour Budget 2012, the overall effect remained strongly progressive.

Budgets 2012–2015

This chart shows Budgets 2012 to 2015. These budgets were all during the Fine Gael–Labour period. The chart shows a strongly regressive impact to budgets over this period.

Budgets 2009–2016

The chart below shows Budgets 2009 to 2016. This takes in the entire crisis period.

The overall effect of the combination of opposing policies (progressive and regressive) produces a pattern that is neither progressive, regressive or proportional. Households at the extremes of income are disproportionately affected, whereas the effect in the across the middle is broadly the same.