Rising tide of costs doesn’t lift all boats

20% cut on public transport costs is helpful but will have little impact in a rural county like Cavan.

Inflation, hyper inflation and the increased costs of living are hitting everyone’s pockets at the moment and causing some people restless or sleepless nights. We have gone from having more money in our pockets during the pandemic – fuel costs plummeted and options for spending our disposable cash were severely curtailed in the lockdown.

Now, as we emerge from the pandemic, fuel costs have rocketed and the euro doesn’t seem to stretch very far at all. The Government measures announced last week to alleviate the pressure on households are welcome but they don’t go far enough.

The €200 credit on electricity bills for every household in the country will help but it is coming a little late. It is only really a sticking plaster.

Ireland is the dearest country in Europe for energy. Most households have just been hit with their most expensive electricity bills ever for the Christmas/Winter period. They need paying now, not in April.

Similarly, with the once-off fuel allowance payment, we are coming out of Winter now and the weather is starting to get milder. Also, that payment will not benefit most households who are not in receipt of fuel allowance.

Irish fuel prices have risen by a third in the last year, close to the highest ever recorded. The average national price of petrol in January, according to AA Ireland, was 175.5 cent per litre; while diesel is about 166.1 cent per litre.

The 20% cut on public transport costs is helpful but will have little impact in a rural county like Cavan.

It is fuel costs – the underlying cost of bringing goods to the supermarket shelves – that is fuelling inflation and driving the price of many items up.

So to the elephant or indeed elephants in the room. Why did the government not take the opportunity to reduce the VAT on energy costs or fuel costs or indeed look at excise duty?

Such a measure(s) would bring real and permanent relief to everybody, particularly if producers were to pass back the savings in their input costs.

The Universal Social Charge (USC) has also been brought up again – the temporary tax that has now, let’s face it, become permanent.

The Government says it cannot be abolished due to increased demand for public expenditure, particularly given the high levels of borrowing to underpin the economy during the recent pandemic.

So it seems there is no escaping the rising tide of costs – we have to put fuel in our cars, heat and power our homes and put food on the table.

A recent Sunday Independent survey found the cost of a basket of groceries has risen by more than €5 over the past decade. It concerned 19 typical items taking in chilled products, frozen foods, dry grocery items, kitchen and bathroom products and certain staples.

Supermarket items rose by almost 20% in the past three years alone.

A sliced loaf has increased by 25 cent on average at the country’s three main supermarkets since 2019. Similar bread products at budget retailers rose by between 9% and 17% in the same period. Milk, sugar and other household staples have also significantly risen, heightening cost pressures for families.

And indications are it is going to get worse before it gets any better.

In Ireland, inflation is measured using the Consumer Price Index (CPI), which monitors the cost of goods and services typically bought by the average consumer over a defined period of time. This is often represented by how much a basket of shopping costs. For example, one year a full basket costs €20 to fill, but a year later the exact same goods cost €20.40. The 40c increase represents inflation of two per cent.

Figures from the Central Statistics Office (CSO) for December 2021 showed an annual increase of 5.5% on December 2020. However, in mid-December the ESRI said the inflation rate for 2021 was 2.4%, predicting it would increase to four per cent in 2022 before falling back to around two per cent towards the end of this year.

In fact the Consumer Association of Ireland estimates that the average household is facing €2,000 in additional costs this year.

Let’s hope that the Taoiseach Micheál Martin is right when he says the current pattern of inflation is only a “temporary phenomenon”.

Temporary as it may be, it is putting the squeeze on a lot of households and people.

While the government has said there will be no more interventions on the cost of living before the next budget, they may well have to row back on that before some families drown in the rising tide of costs.