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Cabinet officials

Government Stands Firm on Cost-of-Living Measures Despite Fresh Warnings of Poverty and Inequality

Strategic Insights

— 2 min read

As the country faces economic storm clouds gathering, the Government remains committed to ending one-off cost-of-living measures, despite a warning from the Economic and Social Research Institute (ESRI) that removing these measures will lead to poverty and inequality. The ESRI has cautioned that while temporary measures have been successful in helping households deal with rising prices, their inevitable phasing out will cause affordability issues, and that headline welfare payments may fail to keep pace with income growth. Meanwhile, the Government has come under increasing pressure to reverse course on plans to remove a €1,000 reduction in college fees and to do more to tackle the soaring cost of groceries.

Key Takeaways:

  • The Government remains committed to ending one-off cost-of-living measures, despite the ESRI's warning that this will lead to poverty and inequality.
  • The ESRI has cautioned that while temporary measures have been successful in helping households deal with rising prices, their inevitable phasing out will cause affordability issues.
  • The ESRI warns that headline welfare payments may fail to keep pace with income growth, leading to poverty and inequality.
  • The rate of food inflation since June 2024 has been more than double that of the general rise in prices across the economy, at 4.6% compared to 1.8%, according to the CSO.
  • Milk, cheese, butter, and beef have risen significantly in price over the past year, exerting pressure on families and the elderly.
  • The ESRI has revised its growth estimates downwards by 0.7%, citing international developments and the vulnerability of the Irish economy to any deterioration in global trading conditions.
  • The ESRI recommends that more funds should be put into Ireland's two savings vehicles, the Strategic Investment Fund and the National Reserve Fund.
  • The Government is running a pro-cyclical economic policy, arguing that it is pumping money into the economy at a time when it does not need to.
  • Current expenditure is up 6.5% compared with the first six months of 2024, while capital expenditure is up 22.5% in the same period.

Statistics:

  • 4.6%: The rate of food inflation since June 2024, more than double the general rise in prices across the economy.
  • 1.8%: The general rise in prices across the economy, compared to 4.6% food inflation.
  • 6.5%: The increase in current expenditure in the first six months of 2024 compared to the same period last year.
  • 22.5%: The increase in capital expenditure in the first six months of 2024 compared to the same period last year.
  • 2.3%: The revised growth forecast for Modified Domestic Demand, down from 3% in the Spring Quarterly Economic Commentary.
  • 2.8%: The possible growth rate of Modified Domestic Demand in 2026, assuming tariffs settle at moderate levels.

Sources:

  • The Economic and Social Research Institute (ESRI)
  • The Irish Daily Mail
  • The Central Bank
  • The Irish Fiscal Advisory Council (IFAC)
  • The IMF

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