Blanket solutions to increasing energy costs are not going to protect those most impacted by rising prices
While Government’s announcement on a package of supports to reduce energy costs on 24th March should provide some relief, they won't fully resolve the challenges income vulnerable households face. While the reduction in excise duty on petrol and diesel should provide some relief, Government must recognise that in the long-term, blanket solutions such as these do not work for everyone. We welcome the decision to extend the fuel allowance by four weeks, which will provide relief to vulnerable households, however this is not a long term solution to energy poverty or energy arrears.
Income adequacy and rising prices
Government must ensure that decisions around measures to address the rising cost of energy and the knock on impact on the cost living are focussed on income adequacy and improving the situation of those who are most impacted by the rising costs. Cost of living challenges are an issue of adequate income. Households on fixed or low incomes are already fully stretched financially and have endured almost four years of increased costs in the basics – food, energy and housing. While prices have risen consistently, the purchasing power of these households has fallen.
Previous one off cost of living supports provided temporary respite, however the value of these supports was not translated into weekly social welfare increases for people on fixed incomes, or supports such as expanded eligibility for some social welfare supports and refundable tax credits for low income workers in last year’s Budget. This has led to a situation where we are seeing increased poverty levels for vulnerable groups and increased levels of arrears on energy bills. Blanket solutions are not going to protect the poorest and most vulnerable. They can be costly, but often the benefit does not always go to those who are most in need. The potential cost of measures announced today is around €250m, but beyond the extension of the Fuel Allowance, there is no guarantee that the full benefit will go to those most in need of support.
Energy
Energy remains one of the key drivers in the increased cost of living, and rising oil and gas costs are behind recent spikes in prices. Government must expedite investment in our renewable energy infrastructure to insulate us from the worst impacts of turmoil in the global oil supply chain. In the long-run, the only way to prepare for future energy shocks, either caused by global turmoil or the impact of climate change, is to invest substantially to improve and upgrade our energy infrastructure. Government must consider policies such as diverting existing fossil fuel subsidies to renewable energy. Such a move would front-load the renewable sector’s development while supporting the Government’s aim to cut long-term energy costs for homes and businesses.
Government should allocate resources from the Infrastructure, Climate and Nature Fund to substantially improve and upgrade our energy infrastructure. Expansion of our renewable energy generation and storage capacity alongside improved interconnectors are central to reducing our reliance on fossil fuels. An upgraded grid with expanded capacity would increase renewable output, improve our energy resilience, reduce fossil fuel usage and offer Government the opportunity to ensure savings through renewables can be delivered to homes and businesses across the island.
Due to the very challenging situation globally, and the potential for a prolonged period of increased costs for oil, gas and also fertilisers, Government may find itself planning for a further set of measures in October. If this is the case, then resources must be targeted at policies that will directly assist people on fixed incomes and people in low paid employment who are most impacted by the rising cost of living and on improving our energy resilience. Short term blanket solutions have proved costly in the past and have not always delivered the desired outcomes. Government must learn the lessons from previous cost of living packages and ensure that any new measures that are introduced are targeted at those who need them most.