Instead of Ireland being the poster child for austerity, what is happening in reality should be a warning to all about the dangers of such policies, the report states.

In a pre-budget warning, Oxfam said Ireland and the EU are ignoring the evidence of similar policies elsewhere that condemned millions to decades of hardship and failed to resolve debt problems. “Ireland’s return to growth is often held up as an exception to the above. Yet Ireland potentially offers a window into the future for other EU countries, with reports of high levels of regional income inequality, insecure employment, and significantly decreased spending power.

“Moreover, Ireland is highly dependent upon the State redistributing income through taxes and transfers, a feat which is likely to diminish as austerity measures continue to bite.”

The warning was echoed by Barnardos chief executive Fergus Finlay, who said children were bearing the brunt of austerity. He said since austerity began, the Government had taken €450m from child income supports.

St Vincent de Paul said the Government needed to live up to its promises not to cut welfare payments and to continue levels of family income supports.

The think-tank Tasc demanded wealth and additional capital taxes.

The National Women’s Council said previous budgets had severely impacted on women, families, and children.

The Oxfam report, aimed at EU finance ministers who meet in Lithuania tomorrow, wants an immediate change in policies, reversing cuts to education, health, social supports, and investment. Otherwise, it says, the gap between rich and poor will continue to widen. Europe will have up to 25m new poor by 2025, while the rich will get richer.

The head of Oxfam in Ireland, Jim Clarken, said: “This report clearly shows that if Ireland and Europe continue down the austerity route, we are damning future generations to a life of poverty and lost opportunity. European and Irish governments must row back on austerity policies now and redirect efforts towards stimulus packages to kickstart the economy, create jobs, and improve education and living standards.”

The report states income inequality in Ireland is now four times the OECD average, long-term unemployment had quadrupled in the four years to 2012, with record poverty rates. It says one in ten working households in Europe is now living in poverty and predicted it will take up to 25 years to reduce poverty to pre-2008 levels if current policies are not changed.

“The only people benefiting from austerity are the richest 10% of Europeans who alone have seen their wealth rise,” Mr Clarken said. “Ireland, Greece, Italy, Portugal, Spain, and the UK — countries that are most aggressively pursuing austerity measures — will soon rank among the most unequal in the world if their leaders don’t change course.”

The last Irish budget increased taxes by 1.3% on those earning €20,000 — seven times more than the 0.2% tax increase on those with €100,000 a year while those on €200,000 paid a mere 0.1% more.

Oxfam estimates that of the €14.3 trillion held by individuals in 52 tax havens around the globe, almost 5%, or €707bn, is sitting in Irish accounts. “It’s time to take the side or ordinary people rather than the privileged few”, he said. Oxfam does not suggest changing the 12.5% tax rate on companies and Mr Clarken said there was no flight of funds from other countries that introduced an FTT.

The EU must also recognise that unsustainable debt — such as that of Ireland at around 120% — is unsustainable, unpayable, and requires restructuring or cancellation, the report said.