Core social welfare rates need to rise by almost €30 per week to deal with cost of living crisis
€27 per week is the increase required to core social welfare rates and pensions in the next Budget if current trends are maintained. This is simply to bring these payments back to where they were 15 years ago, before the bank crash. This is what is required to protect the most vulnerable as the cost of living rises. The rising cost of living is felt most by those in the bottom twenty per cent of the income distribution. Government decisions regarding measures to address the rising cost of living must be focused on improving the situation of people living on inadequate incomes.
Cost of living and adequate income
These households spend a larger proportion of their income on food and energy. They are low-income individuals and families who have no additional disposable income, people who are already struggling to make ends meet. The cost of living crisis is an income adequacy crisis. These are the households who are most exposed to price increases as they spend a larger proportion of their income on food and energy. The effect of inflation is hitting the living standards of those on the lowest incomes the most. Government policy and resources must be targeted at these low-income households to assist with the growing living cost challenges they face.
Government’s initiatives to tackle the cost of living crisis are welcome but deeply inadequate and not sufficiently targeted to those in greatest need.
Social Justice Ireland has consistently argued that core social welfare rates should be benchmarked to 27.5 per cent of average weekly earnings, to prevent those on the lowest incomes being left behind. As the cost of living continues to rise in 2022 the real value of social payments has been eroded by the failure to benchmark core social welfare rates. 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 ever-increasing cost of energy is eroding the value of these payments further.
In 2021, the gap between core social welfare rates and 27.5 per cent of average weekly earnings was €19 per week. Today, the gap is €27 per week. This is the increase required to core social welfare rates and pensions in the next Budget if current trends are maintained. Simply to keep pace with inflation. Otherwise, the value of social welfare payments will fall and the gap between the most vulnerable and the rest of society will continue to widen.
Government must bridge this €27 per week gap, and any further packages aimed at mitigating rising costs for people must be targeted at those who need it most, those on the lowest incomes. Blanket solutions, such as the VAT reduction on gas and electricity, and those announced earlier in February and March are not going to protect the poorest and most vulnerable
Need for inclusive social dialogue
A robust social dialogue structure involving all stakeholders would help Government to make progress not only in ensuring the resources available to mitigate rising energy costs are directed at those most in need, it would also assist Government in tackling the other major issues we face, delivering housing, healthcare and other vital services to everyone, including those fleeing war. It would also go a long way towards addressing persistently high levels of poverty and social exclusion while meeting our climate targets and protecting those most impacted.
This process will not work if it excludes certain groups such as farmers, the community and voluntary sector and environmental groups. In the absence of a real social dialogue at national level, the strongest can fight their corner in the open market or in the political realm, while the weakest will be left behind. In such a scenario inequality, already at unacceptable levels, will continue to grow and the integrated development that is required to address the challenges in housing, healthcare and meeting our climate targets will not be achieved
A New Social Contract, ensuring wellbeing for all is needed. This is required to deliver the standard of living that people expect, and to comprehensively resolve the problems we have in areas such as low pay, housing, healthcare, energy, public transport, climate and childcare, all of which impact on people’s wellbeing and on their capacity to cope with inflation and its related consequences.
Social Justice Ireland policy proposals include:
- To address persistently high levels of poverty and social exclusion: adopt targets aimed at reducing poverty among particular vulnerable groups such as children, lone parents, jobless households, and those in social rented housing.
- Addressing the labour market challenge of the ‘working poor’: adopt policies to address the working poor issue including a reform of the taxation system to make the two main income tax credits refundable.
- Delivering affordable and appropriate accommodation: set a target of 20 per cent of all housing stock to be social housing and achieve this through directly building more social housing and decentralising responsibility for social housing to Local Authorities.
- Delivering the transformation of the health service in line with Sláintecare: ensure that structural and systematic reform of the health system reflects key principles aimed at achieving high performance, person-centred quality of care and value for money in the health service.
- Achieving our educational goals: make the improvement of educational outcomes for pupils from disadvantaged backgrounds and disadvantaged communities a policy priority, with additional resources focused on addressing the persistence of educational disadvantage.
- Meeting our climate targets in a fair way: develop a comprehensive mitigation and transition programme to support communities and people in the transition to a low carbon society.
- Supporting rural Ireland in the climate and digital transitions: invest in the regions and ensuring the necessary social, infrastructural and human capital supports are in place to manage any upheaval.
- Develop a sustainable taxation system that can fund our social infrastructure: Move towards increasing the total tax-take so that sufficient revenue is collected to provide redistribution and public services at average-European levels.