Core social welfare rates must increase by €20 in Budget 2023
Posted on Sunday, 25 September 2022
A €20 increase in core social welfare payments in Budget 2023 must be part of a suite of targeted measures to support households on fixed incomes. A social welfare payment should provide an adequate safety net to lift people out of poverty. This is even more critical in light of increases to essentials such as rent, energy and heating costs, and food.
Learning from the past
Past experiences of economic recovery and growth teach us that that the weakest in our society get left behind unless welfare increases track increases elsewhere in the economy. A €20 increase in core social welfare rates is the minimum increase required in Budget 2023 to set Government on the correct path to benchmark social welfare rates to 27.5 per cent average weekly earnings over a two-year period, which was the standard set by Government in 2007. Meeting this benchmark is a crucial first step in addressing income adequacy challenges for people dependent on social welfare. It would also lead to a reduction in poverty rates.
Households most impacted by rising costs
If Tuesday’s measures are to be a successful Cost of Living Budget it will need to focus its attention on those who need the greatest assistance with making ends meet given the significant and ongoing challenges they face. The standard of living that social welfare payments can provide is dramatically reduced when the cost of living rises. The impact of inflation on living standards is greatest for those households in the bottom twenty percent of the income distribution.
There is a high proportion of individuals who are unemployed, long-term ill or disabled, living alone, or who are single parents in these households. Compared to better off households, they spend a greater proportion of their income on essentials, which exposes them more to price increases in the shops and to energy hikes. Increasing core social welfare rates is a key policy tool for Government to support these households.
The importance of social welfare
There is comprehensive research to show that the social welfare system is the key to reducing poverty in Ireland. Welfare payments selectively support the most impoverished among us and play a central role in alleviating poverty.
Data from the CSO Survey on Income and Living Conditions 2021 shows that without the social welfare system almost four in every ten of the Irish population would have been living in poverty in 2021. However, welfare payments reduced the poverty rate by 27 percentage points to 11.6 per cent. Thus, when Budget resources are focused on the welfare system they assist those who need most help. Conversely, when a Budget fails to boost welfare payments sufficiently to inflation-proof poor households, it makes those poor homes even poorer.
The sheer scale of the numbers of people living in poverty in Ireland is particularly worrying in light of the impact of the pandemic and then the cost-of-living crisis on the weakest among us. Over 580,000 people are living in poverty, of which around 164,000 are children. Not least when we consider the sudden and persistent rise in the cost of living which impacts most seriously on those with the lowest incomes - the working poor, single parent households, people who are unemployed and people with long standing illness or disabilities. The social welfare system is a vital tool in reducing the rates of poverty and is even more critical in light of increases to essentials such as rent, energy and heating costs, and basic food items.
Core social welfare rates were not increased in two of the last three Budgets. In the third they were raised by €5 a week which falls far short of maintaining the value of the payment through the recent rising cost of living crisis. The purpose of economic development should be to improve the living standards of all of the population. Despite Ireland’s welcome economic performance, successive failures to raise core social welfare rates have further eroded social cohesion. Large numbers of people continue unnecessarily to experience deprivation as the gap between them and the better-off widens.
Poverty impacts hardest on those experiencing it in their day‐today lives. It limits their options and opportunity and narrows their focus to week‐to‐week survival and the unavoidable trade‐offs of living on inadequate incomes.
The most important requirement in tackling poverty is the provision of sufficient income to enable people to live life with dignity. If those dependent on social welfare are not to fall even further behind the rest of society as living costs continue to rise, the benchmarking of welfare rates to wage rates is essential.
Targeted measures to support welfare dependent households must be an essential part of the evolving policy response to the current experience of inflation and an increase of €20 in core social welfare rates should form a central part of the policy measures adopted as part of Budget 2023. If not, those on the lowest incomes will be left behind.