Cantillon: One-size-fits-all approach to welfare rates could hit most vulnerable

Is Budget 2023 going to be a case of deja vu all over again for recipients of core social welfare payments? It certainly looks that way.

The Irish Times reported this week that hopes are fading fast for a €15 across-the-board increase to weekly social welfare payments, including jobseekers’ allowance, the State pension and other benefits like the working family payment in Budget 2023.

“Amid concerns over its impact on the wider €6.7 billion budget package and Coalition tensions,” Jack Horgan-Jones reported on Friday, senior Government sources believe “a more likely option at this juncture was a welfare package that included across-the-board increases, albeit at a lower level, accompanied by more targeted increases to other payments, and some one-off measures from the €1 billion-plus pot of money intended for in-year cost-of-living policies, which is separate from the budget.”

We’ll have to wait to see the detail, of course. However, this will sound all-too familiar to anyone who can cast their minds back to last October when the Government – for messaging and ease-of-communication reasons rather than economic ones – announced across-the-board core welfare rate increases of €5.

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By way of an example, this amounted to a 2 per cent increase in payments for State pensioners, or a cut in real terms, as the Economic and Social Research Institute highlighted in its assessment of Budget 2022 last December, given that annual consumer price inflation was then expected to average out at 2.2 per cent in 2022.

With inflation then surging to 9.6 per cent in the following months and as high as 10 per cent for the most vulnerable, according to CSO data, the poverty of the Government’s language and approach was laid bare.

One year on, the outlook for inflation is just as uncertain as it was last year and yet it seems neither the language nor the approach has evolved much. As it stands, the Central Bank of Ireland is forecasting inflation to peak this summer before falling back down towards the European Central Bank’s annual target of 2 per cent over the coming years.

While annual consumer price inflation is now forecast to average out at about 4.2 per cent in 2023, you can expect that to be revised over the coming months, particularly if energy prices skyrocket again in the winter.

No one believes Budget 2023 can compensate everyone for soaring inflation. However, a one-size-fits-all approach to welfare payments could well deliver large, real-terms cuts to the living standards of the most vulnerable in Irish society.