The €5 a week pension increase announced in the last budget will be wiped out by inflation, analysis by the Oireachtas has said.
The Oireachtas parliamentary budget office, which provides independent economic advice to parliamentarians, has found the increase to €253.30 a week represents a real terms drop in purchasing power for recipients.
“Recent inflation rates and forecasts have resulted in real rate decrease in some instances, eg the contributory state pension will decrease 0.5 per cent in real terms in 2022 based on the inflation forecast by 2.5 per cent,” it said.
“Therefore, although the contributory state pension will increase by €5 per week in 2022, the purchasing power of the weekly payment will actually be less due to inflation.”
The report also noted that “flat increases” in other social welfare payments result in “disproportionate percentage changes” and do not account for price or wage inflation.
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“Jobseeker’s benefit will have increased 10.6 per cent in nominal terms between 2011 and 2022, but the real increase is substantially less over that period at 2.3 per cent — accounting for inflation and the 2022 inflation forecast,” it said.
However, the report said that lower value payments such as the living alone allowance and the island allowance will have increased proportionately more than others over the period 2011-2022, even in real terms (164.2 per cent and 45.6 per cent respectively).
Child benefit returned to the €140 per month rate in 2016, with no increases since. The report said that this means the real rate in 2022 will have decreased 5.3 per cent since 2017.
The report notes that Ireland is an outlier in that indexation is not a feature of its tax and welfare system. In contrast, many OECD countries index their welfare systems to inflation or wage growth, rather than make the ad hoc changes that usually occur in Ireland.
The report said that while it may be desirable to index social welfare rates from an equality perspective it would potentially be prohibitively expensive. The ESRI has estimated that it would cost the exchequer €1.23 billion a year at 2019 prices.
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Deborah Costello, communications manager with Friends of the Elderly, said that while it welcomed the increase of €5, the government had not gone “far enough”.
She said it was “disappointing” that the increase in the state pension would not cover the cost of inflation next year and that the government needed to do more to meet the needs of the elderly.
“It is our experience working with older people that many continue to experience poverty, especially in winter months with extra heating costs,” she said. “We have seen that the rise in petrol costs has a knock-on effect on attending medical appointments, if public transport is not an option.”