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Real living standards will fall this year – Varadkar

Real living standards will fall this year if prices rise faster than disposable incomes, Tánaiste Leo Varadkar said yesterday at the National Economic Dialogue at Dublin Castle. 

Pointing to CSO statistics showing inflation at 7.6% in March for the lowest income households, he said that people on social welfare and pensioners, are hardest hit, and people in rural areas are more affected that those in urban ones.

“The CSO statistics also show that the inflation rate being experienced by the highest income category is 6.1% and for the average household 6.7%,” he said.

Feeling the pinch

However, he added that the gap between the poorest and the average household is not as wide as many think because everyone is feeling the pinch.

Targeted interventions that help those most in need will continue, he said.

He warned that the spike in inflation is not temporary and could go on for years predicting no return to low inflation any time soon.

A comprehensive anti-inflation strategy should involve reducing the income tax burden on workers and middle income families by indexing tax credits and tax bands, he added.

Workers should not have to rely on their employer being profitable enough to get a pay increase, he said.

“And middle-income people getting pay increases should not lose 52% in income tax, USC and PRSI. They should be able to keep most of it,” he said.

Welfare and pensions 

Childcare subsidies will increase, along with substantial welfare and pension boosts. 

The Government must also scale up social-housing construction, thus freeing up private rental properties, he said.

It must also scale up its cost-rental programme, which offers below-market rents to those on low and middle-incomes.

“I strongly support a new public sector pay deal,” he added.