The Facts

The basic social welfare rate for people of working age (20-64 year olds) is €204.30 per week. In the mini-budget of April 2009, the basic social welfare rate for 18 and 19 year olds was cut to €100 per week. 

According to the Survey on Income and Living Conditions (SILC) in 2007 the ‘risk-of-poverty threshold’ (60% of median income) was €228.65 or €24.35 above the basic rate.

Depending on the main claimant’s family circumstances he/she can claim €135.60 per week for their partner/spouse (known as the qualified adult). Claimants with dependent children get €26 for each child. 

Welfare recipients may also be eligible for accommodation supports such as Rent Supplement, local authority accommodation, or the Rental Accommodation Scheme. Most, though not all, welfare recipients are eligible for a medical card. 

Despite these supports, households that are dependent on welfare payments experience higher rates of poverty than other household types. For example, the consistent poverty rate  for unemployed people, lone parents, disabled people, and people living in accommodation ‘rented below the market rate or rent free’ was 17.5%; 20.1%, 15.8% and 20.7% respectively. This compares with a national average of 5.1%.

Budget 2009 increased the State Pension (transition and contributory) to €230.30 and the non contributory to €219, a raise of €7.  The basic social welfare rate for older people is €219 per week; €9.15 below the ‘at risk of poverty’ threshold.

Depending on a person’s pension entitlement and spouse’s age, s/he can claim for their partner/spouse known as the qualified adult and the maximum payment is €206.30 for over 66 and €153.50 for under 66 for those on a contributory pension, and €144.70 irrespective of the qualified adults age on a non-contributory pension.

Despite these entitlements, Ireland still has a high ‘at risk of poverty’ rate for older people at 16.6%. Between 2006-2007, this rate increased by 3%. This increase broke a declining trend which had seen rates fall from 30 and 40% in the early ‘noughties’.  In addition, the ‘at risk of poverty’ rate for older persons living alone was 24.3% which indicates the insufficiency of the Living Alone Allowance payment of €7.70 to alleviate this particular group’s vulnerability to poverty.

Welfare recipients may also be eligible to avail of Fuel Allowance and the Households Benefits Package.

Cost of living

The McCarthy Report acknowledges that the most important consumer price index to use, with regard to welfare recipients, is the Harmonised CPI, which does not include the impact of mortgage interest rate movements. The HCPI fell by 2.2% in comparison to 5.4% in the CPI at the end of June 2009.

However, the CPI figures also confirm the inflation of certain products and services which have particular implications for welfare recipients. For example, electricity has increased by 4.7%, gas by 6.5%, and solid fuels by 13.5%. Transport, and access to it, is crucial for people to be able to shop around and benefit from the food deflation however bus fares are up 10.9%. Education inflation is 4.5% with primary education showing the biggest increase of 7.6%. Insurance is up 19.2% and childcare has increased by 6.7%.

In addition, regional disparities among food prices highlight the need for good local transport services. The National Consumer Agency survey has found that grocery prices are down between 7-15%, but significant regional disparities exist. Prices in convenience stores are considerably higher with of a basket of 21 branded items almost €20 dearer at Spar in Dundalk compared to the cheapest Dunnes, a difference of 23%.  NCA chief executive Ann Fitzgerald, said that the gap between the cheapest and dearest supermarket has widened to over €8 or 4% for a basket of branded goods, which in grocery terms is ‘absolutely enormous’ (23 July, Irish Independent). The ‘at risk of poverty’ rate in rural Ireland is 7.2% higher than in urban areas with the ‘at risk of poverty’ rates of 21.5% and 14.3% respectively (CORI Justice, 2008).

Many are very dependent on social transfers in order to meet basic living standards. In 2007 social transfers made up 91% of the gross household income of households in the lowest income quintile and between 70-80% in the 2nd and 3rd quintiles.  Department of Social and Family Affairs (2007) figures show that 62% of older people’s income came from social welfare payments and 20% from occupational/personal pensions. There is also significant gender differential as women are more reliant on the income from social welfare pensions than are men. The Green Paper on Pensions, 2007 argued “half of the workforce expect supplementary pensions to be their main source of income in retirement…while a relatively low percentage (7.9%) of workers expect their main income source to come from ‘savings or investments.” (2007;41) The OECD reports that private pensions and other investments provide 33% of retirement incomes in Ireland, compared with the OECD average of less than 20%. However, Irish private pension funds have been heavily hit by the financial crisis with real losses of 37.5% in 2008, representing the worst investment performance for private pensions in the 30 OECD countries. In addition dividends from stocks have plummeted  reducing the income many older people had depended upon.

Welfare cuts

Social Welfare recipients have already experienced a range of cuts impacting their incomes. For example due to recent changes to Rent Supplement the amount contributed towards rent has increased by €11 per week. In addition an 8% cut in the supplement, which was meant to lead to reduced rents, has often had to be met by the tenant. The combination of these two changes is an increase in weekly accommodation costs of between €15-€20.

Budget 2009 cut the length of time recipients can be on Jobseekers Benefit, for those recipients with 250 or more contributions the duration of their payments was reduced from 15 months to 12 months; and for those with less than 250 contributions it was reduced from 12 to 9 months.

The state of the debate

Prior to the 2009 supplementary budget there was considerable speculation about cuts in basic welfare rates, with IBEC and others specifically calling for a cut, basing their arguments on the decrease in the ‘cost of living.’

The McCarthy Report (Bord Snip Nua) has recommended either a 5% reduction in social welfare rates (which it says will save €850m in a full year), or a 3% reduction (saving €510m) which effectively would reverse the increase announced in October 2008. The main basis of the reports argument is “the ratio of social welfare income to take-home pay has increased, especially at lower income levels, affecting incentives in the labour market” arising from deflation and recent budgetary changes to income tax.

The report also recommends further age gradation of the basic social welfare rate which could impact on the 20–24 year old age group. It is interesting that in her post-budget speech in October on the changes announced to Child Benefit and ending supports to 18 year olds by 2010, Minister for Social and Family Affairs Mary Hanafin noted "at that stage, they are effectively treated as adults in most respects." Yet the Social Welfare system no longer treats 18 and 19 year olds as adults.