The Government's new measures to ease the financial pressure caused by increases in the cost of living are an acknowledgement that Budget 2022 failed people on lower incomes, according to Social Justice Ireland.
The think tank's economic and social analyst, Colette Bennett said Thursday's announcement confirmed the budget unveiled last October "failed those on low incomes the most, which is something we immediately said once Budget 2022 was announced".
Facing calls to help people struggling to cover essential costs in the face of high inflation and soaring energy bills, the support package included an increase of the energy credit announced last year to €200, a lump sum fuel allowance payment of €125 and a 20 per cent reduction in public transport fees from April to the end of the year.
However, Ms Bennett says the changes will not support those most in need, with many of the measures applying equally across the board, including to higher-earners who likely do not need assistance.
Social welfare
One area which she believes ought to have been looked at to adequately support those struggling is social welfare, reiterating Social Justice Ireland's calls for core social welfare payments to be set at a benchmark of 27.5 per cent of average weekly earnings.
“Social welfare is there to provide people with a proper social floor so they can actually afford a basic standard of living and currently that’s not being provided.”
Ms Bennett adds that of the over 660,000 people currently living in poverty in Ireland, 113,000 are in employment, showing measures are also needed for lower earners.
In this regard, Social Justice Ireland also urged the Government to introduce refundable tax credits for PAYE and personal income tax. This would see workers who do not earn enough to use their full allocation of annual tax credits receive the difference as a payment at the end of the year, meaning lowest earners would benefit the most.
However, no such measures were approved by the Government, much to the frustration of the group who have long been calling for such action, particularly given that a similar mechanism is in place for corporation tax.
“It’s hugely frustrating, there’s no argument not to do this,” Ms Bennett says.
When you’re making a choice between food and heat then you’ve got a real difficulty.
She adds that a removal of tax expenditures, which “disproportionately benefit people on higher incomes and corporations”, would increase the money available to the Exchequer to fund measures which could better the quality of life of people on lower incomes, such as a move towards a living wage rather than a minimum wage.
“[People] are barely surviving on the minimum wage - when you’re making a choice between food and heat then you’ve got a real difficulty.”
In response to the Government’s line that the measures announced were carefully considered in order to ensure they did not lead to a further rise in inflation, Ms Bennett says the maths do not add up.
“I don’t think the evidence supports that if they were to increase core social welfare rates, or the incomes of the lowest decile, that it would have any impact on inflation.
“Essentially those households spend a higher proportion on things like energy costs and food than higher-income earners, so they’re not going to be pumping money into services or eating out - the areas that drive inflation - they’re going to be spending it on their essentials.
“The inflation argument for people on very low incomes doesn’t make sense.”
Interplay
Ms Bennett explains that the current increases in the cost of living, while easily blamed on outside factors like rising energy prices, are also a compounding of ongoing, seemingly separate issues that are actually intrinsically linked.
“There’s no public recognition [from the Government] of the interplay between things like housing and energy and sustainability targets and all of those kinds of things and how each one impacts on the other.
“The Government really needs to acknowledge that every policy that they’re implementing has an impact on something else. We need to address the housing shortage, we need to address the affordability crisis, but we also need to address the income issue.”
“We made proposals in advance of Budget 2022 to benchmark the core social welfare rates, to ensure that there was adequate payment in relation to heating, to ensure there was an adequate retrofitting programme put in place for low-income households that wouldn’t require an upfront fee, and to ensure that things like the refundable tax credit for low-income workers were put in place.
“The Government decided not to do any of that and now, by putting these measures in place, not alone are they acknowledging that Budget 2022 did not go far enough, but they themselves are acknowledging that this current package is not going to go far enough.”
