Speed at which increases to welfare rates come in will be key question this budget season

Budget season has well and truly started, with senior Government figures – Tánaiste Leo Varadkar most prominent among them – for weeks flagging potential measures that may be part of October’s big political setpiece. However, more than three months out from Budget Day the Government is under pressure to do more – and do it sooner – to help households with the cost-of-living crisis.

Taoiseach Micheál Martin and Mr Varadkar, attending the National Economic Dialogue on Monday, both played down the prospect of any further cost-of-living measures before budget day, highlighting that around €2.4 billion in assistance has already been given. However, they also raised the prospect of some measures announced in October’s budget applying before the end of this year, rather than in the following year as would normally be the case.

Asked at a press conference if increased social welfare payments could kick in from October, Mr Varadkar said “that is possible” while offering no indication of the precise scale of these beyond that the intention was for the overall package to be greater than last year’s.

It will be particularly interesting if expected increases in social welfare benefits are among the measures that kick-in earlier than usual. Pensioners – and other recipients of core payments – could become accustomed to getting their increase in October. This would set a precedent that Ministers for Finance and Public Expenditure would likely find it very politically difficult to reverse in future years.

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The timing of welfare increases has varied in recent years but they have not taken place in the same calendar year. Budget 2022 saw the first increases to core social welfare rates in three years with the extra €5-per-week – at an overall cost of €450 million – kicking in from January.

Previously the Covid-19 pandemic – and the need to prepare for Brexit before that – put a halt to the regular welfare increases that had occurred during the years of the Fine Gael-led minority government which was propped up by Fianna Fáil. However, while a fiver on the pension had become somewhat routine, this increase and others often did not begin to be paid out until the spring.

For instance the increases in 2018 and 2019 did not start going to recipients until the end of March in both years, saving the exchequer tens of millions when compared to the full-year cost of increased payments.

Based on the €450 million cost of welfare increases this year, if a similar €5-per-week increase across core benefits was to be implemented from October the bill to the exchequer would be the guts of €100 million for the last 2½ months of this year. While that sum does not seem that high in the context of the €2.4 billion in cost-of-living supports already provided, it could become a €100 million that Ministers need to find every year to fund earlier welfare increases.

On this point Social Justice Ireland chief executive Seán Healy said it would be “nonsense” if the “danger of setting precedents should be the guiding concern”.

He said governments “can change the precedent” and pointed to variations in the level of Christmas bonus welfare payments that have been made over the years. He said that people on the lowest incomes have been “left behind” by the last three budgets, and this year’s welfare increase was far below the level of inflation being experienced.

Social Justice Ireland want to see €20-per-week increases in welfare payments, the introduction of a “living wage” of €12.90-per-hour and refundable tax credits for the working poor.

Budget day is more than three months away and many kites will be flown as Ministers and Coalition parties seek to secure the most funding for their priorities. A key question in budget season this year – aside from the usual “how much” and “who gets it” – will be how soon are they to be implemented.

If welfare increases are indeed brought in from October we can expect the timing of their implementation to be a major question for future budgets too.