Cost of living: How is it affecting young people, parents and others?

While the impact of the current cost-of-living crisis has differed from person to person, and from household to household, everyone is being asked to pay more for pretty much everything.

Just how much more people have had to pay is actually quite easy to quantify. A typical Irish household’s energy bills have climbed by more than €2,000 over the past 18 months, while the annual cost of groceries is now more than €1,000 higher than it was in 2020. A spike in the price of motor fuel has seen motorists worse off by about €800 a year while clothes, haircuts, holidays, socialising – and almost everything else a person can spend money on – has climbed by double-digit percentages.

Meanwhile, a furious flurry of interest rate hikes from the European Central Bank (ECB) since last summer has inflicted significant pain on many hundreds of thousands of mortgage-holders who have been stung to the tune of more than €2,000 a year.

And, at least in that regard, worse is coming down the tracks.

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It is in this grim context that the latest support plan was unveiled in the form of the Government’s €1.3 billion cost-of-living package. And it could be argued that the gloom that greeted its publication suggests the Government has become a victim of its own earlier largesse.

Over the past 12 months, since Russian tanks first rolled into Ukraine and inflation started spiralling, the Government followed its Covid-19-related supports by putting forward a range of measures to help people get through what is one of the most financially painful crises in generations.

All households have already received €600 in energy credits with one final €200 credit coming next month. A cut of 15-20 cent in the excise duty on motor fuel saved the typical motorist about €200 over the past year while a VAT cut of 4.5 per cent on domestic energy bills, when spread over the course of a year, has been worth about €150. A household with two children qualifying for child benefit will have received a further €280 in extra payments.

When totted up, the reliefs of 2022 were worth just over €1,400 net to a typical Irish household. People in receipt of social welfare payments got more in pure monetary terms although with a significantly higher proportion of their income going on heating and lighting their homes and buying even the most basic of food items, few people could argue that they did not need it.

But eaten bread is soon forgotten and by contrast to last year, the latest measures may seem a bit undercooked if not stingily half-baked.

There will be a €200 bonus payment for welfare recipients and a €100 child benefit top-up for families in April and June respectively. The reduced VAT rate on electricity and gas is to be extended while excise cuts on petrol and diesel will be phased out in three stages between June and the end of October.

There will be no extra €200 electricity credit this summer but the Government has signalled that the need for such payments next winter might be considered in advance of the budget.

The Cabinet also agreed the waiving of exam fees for the Leaving Cert and Junior Cert and boosted the back-to-school allowance by €100 while the reduced 9 per cent VAT rate for the hospitality sector has been extended until the end of August and changes to the Temporary Business Energy Supports Scheme (TBESS) are being put in place to encourage take-up and expand eligibility for businesses.

But, as the dust settles on the latest plan, what do businesses and individuals make of it all and are there any silver linings to be found on the horizon?

The young person

Ruth Abbot is a 25-year-old television researcher who was initially dismayed when she learned there would be no new energy credits beyond next month to help her make ends meet.

She says there is little in the new package that will be of any benefit to her. “I don’t have any kids. I don’t get any welfare so realistically, other than the fact they’re going to keep the VAT down on the restaurants which might mean they won’t increase their prices, it won’t make that much difference to me.”

Like everyone she is feeling the pain of the cost of living spiral. “The cost of food has gone up big time and it doesn’t seem to matter where I shop any more, it’s all gone up. As for going out, I’m definitely doing less of that and when I do, I’m probably drinking more at home. I’m 25 and I shouldn’t have to ‘pre-drink’, you do that when you’re in college. I have a job. I shouldn’t have to do that.”

While she says she is fortunate to be in rental accommodation that is affordable and relatively secure “by Dublin standards”, her energy bills “are insane and they have more than doubled over the past 12 months”.

The cost of keeping her car on the road has also climbed dramatically and she is spending about €400 on fuel each month. “I was hoping they would do more to stop the petrol going up this year and they obviously did not do that so that will end up costing me a lot more this year.”

The parent

Judy Higgins from north Dublin admits to feeling guilt over the additional €300 she will get in child benefit in June as a result of the measures announced this week.

“It’s welcome but I do feel guilty because my family is riding this storm and I think we’ll be okay. But should I feel that guilt? I don’t know. I do know that it will help when I look at my utility bills.”

Those bills are certainly sobering and will see her paying close to €1,300 to cover her gas and electricity for the period between November and February – more than twice what she paid in 2021.

She doesn’t buy the idea that those who have the least are benefiting the most, and are somehow happy to sit back and take all the supports going. “There are people who are spongers – they’re in every country – but the vast majority of people on welfare do not want that. It’s a very stressful experience.”

She knows what she’s talking about, having lost her job “when the Celtic Tiger fell apart” after which she relied on social welfare for support for most of a year.

“It’s as stressful for people on the minimum wage, I don’t know how they can make ends meet in the current climate, how they are supposed to live.”

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While some people have been lining up to criticise the Government this week, Higgins has a more nuanced view. “I think maybe people’s expectations are too high. I don’t think it can simply turn around and fix everything because a lot of what is happening is out of the Government’s hands. It can’t keep pulling money out of nowhere.”

She is cautiously optimistic that the worst of the crisis might be over already. “When things were at their worst, it cost me €111 to fill my car from empty. I went to the same garage a while back and it cost €92, so that is an improvement. But now there is talk of raising the taxes again so the price will climb back up, so who knows?”

The energy expert

One of the big-ticket items rolled out last year were the energy credits but they have been taken off the table now. Market forces may, however, work in the favour of both the Government and consumers in the weeks ahead, according to Daragh Cassidy of price comparison and switching website bonkers.ie.

He says that with energy prices falling “hugely on wholesale markets over the past few months”, the outlook is “much more positive than it was even a few weeks ago”.

He tempers that upbeat assessment with a dash of gloom. “It’s important to highlight that prices still remain at very high levels. Despite all the recent falls, the price of gas on the UK wholesale market is still over double what it was around 18 months ago, for example.”

And because we import about 75 per cent of our gas via the UK, “this is as good a proxy as any for Irish gas prices”.

“Due to hedging it will take some time for the fall on wholesale markets to feed through into lower energy bills for households. However, I’m hopeful we might see prices decrease slightly in the second half of this year. In order for gas and electricity prices to return to normal levels [which we last saw in early 2021], they would need to fall by about 60 per cent. I absolutely do not see this happening any time soon given where wholesale prices still are,” he says.

He goes on to say that once the energy credits are taken out of the equation, “even if prices do fall in the second half of the year, and that’s still not a given, the removal of Government support could actually mean households are still worse off financially.”

The socially excluded

Dr Sean Healy of Social Justice Ireland pulls no punches when he says that anyone who suggests people in employment would be better off on social welfare and on housing waiting lists “hasn’t a clue what they are talking about”. He also rebukes the Government for saying this week’s cost-of-living package and last autumn’s budget were efficiently targeted at those on the margins.

When asked what difference this week’s measures will make he says simply, “not a great deal, it’s achieved little. My big concern is that the Government has continued making the same mistake as it made in the budget and it is continually making one-off payments rather than facing up to the fact that there’s a serious issue here that needs to be addressed.”

He says the gap between rich and poor is widening, while those on social welfare are substantially worse off now than they were two years ago.

He also insists that the poorest and most vulnerable were in no way the winners this week. “If €400 million of €1.3 billion goes to people on welfare, how are they the real winners? The bottom line is these are all talking points that are given to Ministers. The actual evidence is that the poorest are much worse off now, in real terms than they were this time last year, this time two years ago and that is a huge indictment, it seems to me, of a country that is as rich as Ireland.”

The Retailer

Duncan Graham of Retail Excellence Ireland is “pretty positive actually” about the cost-of-living package, particularly the changes to the TBESS scheme which he said had been “unwieldy and difficult”.

He also welcomes the extension of the lower 9 per cent VAT rate which would help keep Ireland attractive to visitors from overseas this summer. “Anything that drives tourism into the country this year, I think it’s going to be very welcome for retail.”

He also says the staggered increase in excise duty on motor fuel and the energy credit in March are “very positive” but says his members are struggling with staffing costs and the increase in the minimum wage, as well as the introduction of statutory sick pay and pension auto-enrolment later this year. “Those are the things we have to absorb and cope with. So we gain on the swings and lose on the roundabout”.

The hotelier

Brian Hughes is the owner of the Abbeyglen Castle Hotel in Clifden, Co Galway and while he welcomes certain aspects of the cost-of-living measures announced this week “and anything that puts money back in people’s pockets”, he is not convinced it will do much to lessen the challenges his sector is facing.

He says his biggest challenge over the past year has been the spike in energy prices which has seen the monthly bills go from little more than €6,000 to over €15,000. “That is a rate we never expected and even though we’ve done so much in our business to reduce consumption from changing to LED lighting and solar panels, the cost per unit has just kept going up faster than the speed we were bringing down the rate of consumption.”

He says the extension of the business supports is welcome although he highlights the “complicated application process. It was beyond us and we actually used our auditors to do it.”

But Hughes is nothing if not optimistic and he says despite the financial challenges, bookings are looking good so far this year. He welcomes the decision to extend the VAT rate of 9 per cent for the hospitality sector until the end of the summer and he expresses the hope that it will allow the hotel cope with the skyrocketing price of food.

“If the rate was pushed higher, it would make the pain greater and if we did not sell bedrooms, we would not be in business because you could not live on food and beverages; you couldn’t make a living on the restaurant and the bar alone.”