A regular topic in recent discussion of the policies Government is (finally) adopting to address insolvency issues is: How much of a household's income should be put towards debt repayment and how much should households be left with to live on? Despite all the recent discussion, there is a simple research based solution to these questions - one derived from the Minimum Income Standards research published by myself and the Vincentian Partnership for Social Justice last year (Collins et al, 2012).
That research established the cost of a modest standard of living for various Irish household types, in urban and rural areas. Given this, it further established the income a household would need to be able to afford such a standard of living. Recently, the VPSJ have updated the figures to 2013 levels (adjusting for inflation and Budget changes). These updates have been incorporated into the on-line calculator developed from the Minimum Income Standards Research and available at http://www.misc.ie/
For example, a household of 2 adults and 2 primary school age children living in an owner-occupied property in an urban area needs an income of €43,095 per annum to afford a modest standard of living. This figure includes €1,000 in mortgage payments each month.
As I understand it, unofficially a number of the banks have being using these minimum income figures plus 10% as a basis of establishing retention money for households undertaking debt restructuring. The aforementioned 2 adult 2 children household would therefore be allocated a gross income of approximately €47,500 to live from and would use the remainder of their income to pay down their borrowings over and above the €1,000 per month they would already be paying as a mortgage. Hopefully, the forthcoming official guidelines will adopt a similar approach.
Finally, credit should be given to the Department of Social Protection and the Irish Research Council for Social Sciences who funded and awarded the research project in 2011 which serves as the basis of these figures. MABS also supported the development of the on-line calculator. While the study, and its subsequent updates, offer many other insights into living standards, it is satisfying to see this research feed into policy formation.
The Report on Minimum Incomes is here: Collins, M.L., B. Mac Mahon, G. Weld and R. Thornton (2012), A Minimum Income Standard for Ireland - a consensual budget standards study examining household types across the lifecycle - Studies in Public Policy No. 27, Dublin, Policy Institute, Trinity College Dublin.
The Online calculator and link to other updates from the Vincentian Partnership is here: http://www.misc.ie/
The Vincentian Partnership website is here: http://www.budgeting.ie/