Government cost of living package fails to reach many of the most vulnerable

Those who were left behind in Budget 2022 have been left behind again in Government’s cost of living package. Government’s plan to tackle the rising cost of living proves, once again, that this Government is not focused on protecting Ireland’s most vulnerable.The failure to benchmark social welfare rates and to make tax credits refundable means that people on fixed incomes and in low paid employment, who have been most impacted by rising costs will continue to struggle. The real value of their wages or social welfare payments will continue to fall.

The cost of living crisis is an issue of adequate income. While the energy credit, changes to the working family payment, the fuel allowance, drugs payment scheme and changes to school and public transport charges are welcome, they fail to deal with the reality of the unavoidable trade‐offs people living on inadequate incomes have had to make for two years because core social welfare rates were not increased in either Budget 2020 or Budget 2021, and the increase in Budget 2022 was half of what was required. 

Government cost of living package fails to reach many of the most vulnerable

The failure to benchmark core social welfare rates to 27.5 per cent of average weekly earnings means that people on core social welfare payments have been left behind again. At present, there is a shortfall of €14 between the minimum social welfare rates being paid (€208) and this threshold (€222.08). Should wages rise during 2022 this gap will increase further. As a minimum, Government should have committed to benchmarking core social welfare payments to 27.5 per cent average weekly earnings by 2023, starting with an additional increase of €5 to core social welfare rates in 2022. Compared to 2011, the real value of Jobseekers Benefit in 2022 is just over €192 per week, and the real value of the Contributory State Pension in 2022 is just over €234 per week. The measures announced by Government today fail to deal with the key issue of income adequacy. 

Low paid employment

People in low paid employment have also been left struggling. Low to middle income households with jobs, those with incomes below the standard rate income tax threshold, have gained least from the budget measures over the past two years. A couple with one earner at €30,000 has received an additional €0.39 cents per week from Budgets 2021 and 2022 combined. There are 1.2 million individuals or couples who pay tax at the standard rate and who got a maximum of €2.30 per week from Budget 2022 (a €2 income tax reduction and a 30 cent USC reduction). Inflation in recent months has far surpassed these gains. While the minimum wage has been increased and some will have benefited from pay increases, a great many of these are low income workers and families across Ireland who are struggling with increased costs and who have been forgotten.

The failure to make tax credits refundable, and to bring the minimum wage up to the Living Wage, means that Government still does not have efficient mechanisms to support and target lower paid workers as they struggle with the increase cost of living, and while increases to the Working Family Payment are welcome for those who are eligible, it similarly doesn’t cover the cost of living increase and is being introduced too late to have any real impact.

Social Justice Ireland initial response to cost of living package:

Energy credit of €200 to every household

· A one-off energy credit, while welcome, will not solve the cost of living challenges many face, particularly those in energy poverty.

· A more appropriate use of resources would have been to implement the OECD recommendation to redesign the fuel allowance, delink it from heating fuels, update and expand the eligibility criteria and provide it to eligible households during the whole year.

· This would provide a tool for Government to target and support rural and low income households (those impacted most by inflation) now and in the years ahead as policies to meet the targets set out in the carbon budgets are implemented.

· It should be noted that this is not a doubling of the €100 energy credit previously announced, which was exclusive of VAT. The increase, in real terms, is €76.21.

Working family payment – an increase of €10 to come into effect from April

· The decision to bring forward the increase of €10 to the Working Family Payment announced in Budget 2022 from June to April is welcome. However this increase is still not in line with the increased costs of living people are facing and comes too late to be of any real benefit to households whose fuel bills are the main drivers of their cost increases.

· The introduction of a refundable tax credit and moving the minimum wage to the Living Wage are more effective mechanisms to target lower-income workers.

Fuel Allowance – an additional €125 to recipients of the fuel allowance

· While the increased allocation to recipients of the fuel allowance is welcome, the reality is that a large proportion of people reliant on social welfare, or in low paid employment, are not entitled to this payment.

· A more appropriate use of resources would have been to implement the OECD recommendation to redesign the fuel allowance, delink it from heating fuels, update and expand the eligibility criteria and provide it to eligible households during the whole year.

Reduction in public transport fares of 20 per cent to come into effect in April and cap on school transport scheme reduced to €500 per family at post primary level and €150 per family at primary level

· While reduced public transport fees are welcome, they are based on the assumption that people have access to public transport.

· Due to the lack of public transport in rural Ireland and the need to have access to a car for transport not everyone will see an immediate reduction in their transport costs.

· For people living in rural areas the average distance to most everyday services for rural dwellings was at least three times longer than for urban areas. For supermarkets/convenience stores, GPs and pharmacies, the average travel distance was seven times longer for people living in rural areas.

· The reduction in the thresholds for the school transport scheme for recipients is welcome, it is important that sufficient places are available on the scheme for all who require it.

Threshold for Drug Payments Scheme lowered to €80 per month from March

· While the reduction in the threshold for the drug payments scheme for recipients is welcome, the reality is that a large proportion of people reliant on social welfare, or in low paid employment, are not entitled to this payment.

The Need for Social Dialogue

The situation Government now finds itself in, trying to address increased costs of living less than four months after announcing the Budget highlights the need for a new social dialogue. To deliver on the policies and ambitions to support Ireland’s social and economic recovery, our climate ambitions, and to address the existing challenges we face in terms of health and housing for example, a new social dialogue is essential to ensure that no-one is left behind in this transition.