Support from readers like you keeps The Journal open.
You are visiting us because we have something you value. Independent, unbiased news that tells the truth. Advertising revenue goes some way to support our mission, but this year it has not been enough.
If you've seen value in our reporting, please contribute what you can, so we can continue to produce accurate and meaningful journalism. For everyone who needs it.
RAISING SOCIAL WELFARE rates, even on a temporary basis, is the best way to cushion the most vulnerable from the impact of rampant inflation, campaigners and economists say.
With low-income households “disproportionately affected” by rising prices, economists from the Central Bank of Ireland and the Economic and Social Research Institute (ESRI) believe the Government may need to adjust welfare payments to reflect their revised outlook for inflation.
The Government, which has so far resisted opposition calls for a mini-Budget in response to the economic fallout from Russia’s invasion of Ukraine, is set to unveil a new package of measures this week, aimed at easing the burden of rising prices on households.
The Public Service Obligation levy on energy bills is expected to be scrapped as part of the new ‘cost of living’ package — the second round of measures rolled out in a little over two months.
However, Government sources have said there is a need to “manage expectations” ahead of the announcement, given the uncertainty around the outlook for inflation.
It comes after the Central Bank downgraded its economic forecasts for 2022 against the backdrop of soaring prices.
Irish household earnings are now expected to fall in real terms in 2022 for the first time since 2013 with inflation expected to outpace the rate of income growth.
As a consequence, thousands of low-income, older and rural households — particularly those with no income from wages who are reliant on some form of social welfare — could see a significant decline in their standard of living, economists say.
Irish consumer prices were on average 6.7% higher in March this year than they were in March 2021, according to Central Statistics Office figures released last week.
But with both the Central Bank of Ireland and the Economic and Social Research Institute forecasting prices to rise at an even faster pace over the coming months, lower-income households and people on fixed incomes are expected to face significant challenges.
The Society of St Vincent De Paul (SVP) said its members are already seeing the impact of rising prices on people facing poverty.
“People are cutting back on essential energy use for fear of the next bill, or because there is no money to top up pre-payment meters, and are having to make the impossible choice between buying food or turning the heat on,” a spokesperson for the charity said in a statement.
The latest CPI showed that this situation is “continuing to get worse”, according to the spokesperson. “We have to remember that inflation is actually higher for people on the lowest incomes, who spend more of their budget on essentials like energy, food, housing and transport – all of which are getting more expensive.”
SVP said raising social welfare rates to meet the cost of living, creating a hardship fund to support people struggling with energy costs and increasing and extending the Fuel Allowance should be part of the Government’s response.
‘Targeted and temporary’
Current social welfare rates were set at Budget time last year when the Department of Finance expected inflation to peak at 4.5% in the fourth quarter of last year.
But the rate at which prices are increasing has accelerated sharply in 2022 against the backdrop of the war in Ukraine.
The invasion and Western sanctions have combined to push up global commodity prices, in particular, crude oil and wholesale natural gas prices.
Advertisement
That, in turn, is pushing up home energy and heating bills, which along with rising petrol, diesel and home heating oil prices, is the main driver of the current bout of inflation.
Food prices are also starting to rise along with fertiliser prices. Commodity markets are also pricing in the potential loss of Ukrainian and Russian grain later this year.
The CSO’s March Consumer Price Index revealed the price of flour and other cereals, up 10% over 12 months, climbed 5.1% in the month of March alone.
Both the Central Bank and the ESRI have recommended that any measures aimed at insulating households from inflation need to be targeted at the most vulnerable so as not to add to inflationary pressures building up within the economy. They would also need to be temporary in nature so as not to add to the long-run cost of running the State.
Asked last week by The Journal whether broad-based increases to core social welfare rates would meet the definition of “targeted”, Mark Cassidy, Director of Economics and Statistics at the Central Bank said they would.
“We know lower-income households are disproportionately affected,” he said.
We also know lower-income households, not only do they spend more of their incomes on fuel and energy than higher income groups, but we also know that they’re more vulnerable to the effects because they don’t have savings. They don’t have the same buffer between the money coming in and the money going out and therefore they are more vulnerable to the effects.
In that context, Cassidy said policymakers could “look at social welfare rates”. However, he cautioned that any increases may need to be temporary so as not to add “permanently to the cost base of the economy” after the current crisis subsides.
Speaking to The Journal this week, economist Karina Doorley, Senior Research Officer with the ESRI said the rate adjustments announced in Budget 2022 were designed to be inflation-proof.
“Some payments, like Child Benefit and the Working Family Payment, were not increased in line with inflation expectations,” she said. “But by and large, most of the welfare payments rose in line with expected inflation.
But obviously, that’s changed now. Expected inflation is going to be higher and unless there is a revision of those rates, then it is likely that those households on low incomes or with no wage income will experience greater losses than those who do have a wage and who can go to their employer and bargain for a wage increase.
The Government “can’t compensate everyone for expected inflation”, Doorley added.
She said, “The response is going to have to be very, very targeted. But I would argue that an increase in core rates is targeted. These are low-income households. If you want to be even more targeted, you could make the increases temporary.”
Doorley said the increase could take the form of an extra, one-off payment like the Christmas bonus for people in receipt of long-term welfare payments like the State Pension, the One-Parent Family Payment or the Long-term Jobseeker’s Allowance.
“There could be an extra bonus this year or something like that,” she said, “something that is targeted and temporary to allay any fears that the exchequer is going to have to come up with this money every year in future because realistically, it will be expensive.”
Asked whether increasing social welfare rates across the board could actually increase inflationary pressures within the economy, Doorley said it’s possible. But the impact is likely to be very mild.
“Of course when you give people extra money it can increase demand for goods and services,” she said.
“But I would argue that if that money is targeted at low-income households, the effects are going to be moderate.”
She added, “The cost of living package that was announced recently, some of that was targeted but some of it was very broad and is going to be inflationary. Any more measures that are going to be introduced, they should be very, very targeted.
“The easiest way to do that is through the social welfare system.”
— Additional reporting by Christina Finn
Readers like you are keeping these stories free for everyone...
A mix of advertising and supporting contributions helps keep paywalls away from valuable information like this article.
Over 5,000 readers like you have already stepped up and support us with a monthly payment or a once-off donation.
To embed this post, copy the code below on your site
Close
58 Comments
This is YOUR comments community. Stay civil, stay constructive, stay on topic.
Please familiarise yourself with our comments policy
here
before taking part.
Ferry remains docked in Rosslare after woman dies in incident on sailing from Wales
Updated
17 mins ago
99.6k
Good Morning
The 8 at 8: Wednesday
15 mins ago
1
Rosslare
Ferry remains docked in Rosslare after woman dies in incident on sailing from Wales
Updated
17 mins ago
99.6k
Your Cookies. Your Choice.
Cookies help provide our news service while also enabling the advertising needed to fund this work.
We categorise cookies as Necessary, Performance (used to analyse the site performance) and Targeting (used to target advertising which helps us keep this service free).
We and our 152 partners store and access personal data, like browsing data or unique identifiers, on your device. Selecting Accept All enables tracking technologies to support the purposes shown under we and our partners process data to provide. If trackers are disabled, some content and ads you see may not be as relevant to you. You can resurface this menu to change your choices or withdraw consent at any time by clicking the Cookie Preferences link on the bottom of the webpage .Your choices will have effect within our Website. For more details, refer to our Privacy Policy.
We and our vendors process data for the following purposes:
Use precise geolocation data. Actively scan device characteristics for identification. Store and/or access information on a device. Personalised advertising and content, advertising and content measurement, audience research and services development.
Cookies Preference Centre
We process your data to deliver content or advertisements and measure the delivery of such content or advertisements to extract insights about our website. We share this information with our partners on the basis of consent. You may exercise your right to consent, based on a specific purpose below or at a partner level in the link under each purpose. Some vendors may process your data based on their legitimate interests, which does not require your consent. You cannot object to tracking technologies placed to ensure security, prevent fraud, fix errors, or deliver and present advertising and content, and precise geolocation data and active scanning of device characteristics for identification may be used to support this purpose. This exception does not apply to targeted advertising. These choices will be signaled to our vendors participating in the Transparency and Consent Framework.
Manage Consent Preferences
Necessary Cookies
Always Active
These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can set your browser to block or alert you about these cookies, but some parts of the site will not then work.
Targeting Cookies
These cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.
Functional Cookies
These cookies enable the website to provide enhanced functionality and personalisation. They may be set by us or by third party providers whose services we have added to our pages. If you do not allow these cookies then these services may not function properly.
Performance Cookies
These cookies allow us to count visits and traffic sources so we can measure and improve the performance of our site. They help us to know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies we will not be able to monitor our performance.
Store and/or access information on a device 104 partners can use this purpose
Cookies, device or similar online identifiers (e.g. login-based identifiers, randomly assigned identifiers, network based identifiers) together with other information (e.g. browser type and information, language, screen size, supported technologies etc.) can be stored or read on your device to recognise it each time it connects to an app or to a website, for one or several of the purposes presented here.
Personalised advertising and content, advertising and content measurement, audience research and services development 136 partners can use this purpose
Use limited data to select advertising 106 partners can use this purpose
Advertising presented to you on this service can be based on limited data, such as the website or app you are using, your non-precise location, your device type or which content you are (or have been) interacting with (for example, to limit the number of times an ad is presented to you).
Create profiles for personalised advertising 78 partners can use this purpose
Information about your activity on this service (such as forms you submit, content you look at) can be stored and combined with other information about you (for example, information from your previous activity on this service and other websites or apps) or similar users. This is then used to build or improve a profile about you (that might include possible interests and personal aspects). Your profile can be used (also later) to present advertising that appears more relevant based on your possible interests by this and other entities.
Use profiles to select personalised advertising 77 partners can use this purpose
Advertising presented to you on this service can be based on your advertising profiles, which can reflect your activity on this service or other websites or apps (like the forms you submit, content you look at), possible interests and personal aspects.
Create profiles to personalise content 37 partners can use this purpose
Information about your activity on this service (for instance, forms you submit, non-advertising content you look at) can be stored and combined with other information about you (such as your previous activity on this service or other websites or apps) or similar users. This is then used to build or improve a profile about you (which might for example include possible interests and personal aspects). Your profile can be used (also later) to present content that appears more relevant based on your possible interests, such as by adapting the order in which content is shown to you, so that it is even easier for you to find content that matches your interests.
Use profiles to select personalised content 33 partners can use this purpose
Content presented to you on this service can be based on your content personalisation profiles, which can reflect your activity on this or other services (for instance, the forms you submit, content you look at), possible interests and personal aspects. This can for example be used to adapt the order in which content is shown to you, so that it is even easier for you to find (non-advertising) content that matches your interests.
Measure advertising performance 127 partners can use this purpose
Information regarding which advertising is presented to you and how you interact with it can be used to determine how well an advert has worked for you or other users and whether the goals of the advertising were reached. For instance, whether you saw an ad, whether you clicked on it, whether it led you to buy a product or visit a website, etc. This is very helpful to understand the relevance of advertising campaigns.
Measure content performance 60 partners can use this purpose
Information regarding which content is presented to you and how you interact with it can be used to determine whether the (non-advertising) content e.g. reached its intended audience and matched your interests. For instance, whether you read an article, watch a video, listen to a podcast or look at a product description, how long you spent on this service and the web pages you visit etc. This is very helpful to understand the relevance of (non-advertising) content that is shown to you.
Understand audiences through statistics or combinations of data from different sources 75 partners can use this purpose
Reports can be generated based on the combination of data sets (like user profiles, statistics, market research, analytics data) regarding your interactions and those of other users with advertising or (non-advertising) content to identify common characteristics (for instance, to determine which target audiences are more receptive to an ad campaign or to certain contents).
Develop and improve services 82 partners can use this purpose
Information about your activity on this service, such as your interaction with ads or content, can be very helpful to improve products and services and to build new products and services based on user interactions, the type of audience, etc. This specific purpose does not include the development or improvement of user profiles and identifiers.
Use limited data to select content 38 partners can use this purpose
Content presented to you on this service can be based on limited data, such as the website or app you are using, your non-precise location, your device type, or which content you are (or have been) interacting with (for example, to limit the number of times a video or an article is presented to you).
Use precise geolocation data 43 partners can use this special feature
With your acceptance, your precise location (within a radius of less than 500 metres) may be used in support of the purposes explained in this notice.
Actively scan device characteristics for identification 25 partners can use this special feature
With your acceptance, certain characteristics specific to your device might be requested and used to distinguish it from other devices (such as the installed fonts or plugins, the resolution of your screen) in support of the purposes explained in this notice.
Ensure security, prevent and detect fraud, and fix errors 86 partners can use this special purpose
Always Active
Your data can be used to monitor for and prevent unusual and possibly fraudulent activity (for example, regarding advertising, ad clicks by bots), and ensure systems and processes work properly and securely. It can also be used to correct any problems you, the publisher or the advertiser may encounter in the delivery of content and ads and in your interaction with them.
Deliver and present advertising and content 96 partners can use this special purpose
Always Active
Certain information (like an IP address or device capabilities) is used to ensure the technical compatibility of the content or advertising, and to facilitate the transmission of the content or ad to your device.
Match and combine data from other data sources 68 partners can use this feature
Always Active
Information about your activity on this service may be matched and combined with other information relating to you and originating from various sources (for instance your activity on a separate online service, your use of a loyalty card in-store, or your answers to a survey), in support of the purposes explained in this notice.
Link different devices 50 partners can use this feature
Always Active
In support of the purposes explained in this notice, your device might be considered as likely linked to other devices that belong to you or your household (for instance because you are logged in to the same service on both your phone and your computer, or because you may use the same Internet connection on both devices).
Identify devices based on information transmitted automatically 84 partners can use this feature
Always Active
Your device might be distinguished from other devices based on information it automatically sends when accessing the Internet (for instance, the IP address of your Internet connection or the type of browser you are using) in support of the purposes exposed in this notice.
Save and communicate privacy choices 64 partners can use this special purpose
Always Active
The choices you make regarding the purposes and entities listed in this notice are saved and made available to those entities in the form of digital signals (such as a string of characters). This is necessary in order to enable both this service and those entities to respect such choices.
have your say