The state pension would have to rise to 288 euros to keep up with inflation, according to the budget review

The state pension would need to rise to €288 a week this year and next to keep up with inflation, a new report shows.

The budget audit of the Parliamentary Budget Office finds that instead the contributory state pension will increase by €12 to €265.30 from 1 January.

That is 23 euros less than would be required to maintain purchasing power due to the rising cost of living.

The Parliamentary Budget Office is an independent specialist body that advises politicians and the Oireachtas Committee on Budgetary Oversight.

The preliminary review of the 2023 budget says the €12 increase represents a 4.7 percent increase next year, resulting in costs of around €325 million. Combined with the €5 increase last year, the rate will have risen by almost 7 percent since 2021.

“However, with inflation now forecast to be 8.5 percent in 2022 and 7.1 percent in 2023, the rate will fall by 2.2 percent in real terms in 2023 and by 8.1 percent in real terms since 2021,” it said.

“To keep up with inflation in 2022 and 2023, the rate would need to be €288.53.”

The review notes that the Pensions Commission has suggested that 34 percent of average weekly earnings could be a guideline for the pension rate. The €12 increase doesn’t meet that benchmark, and the pension does
have to increase to 275 € for this.

The review said the 2023 budget “exceeds what one would reasonably expect for a budget designed to respond to a cost-of-living crisis.”

Some of the measures are “broad in scope” and would benefit households “that do not require government support”.

The report notes that child support, which is doubled in a single payment, is a universal payment. It’s not means test.

“It is worth noting that every euro spent supporting high-income households could have been spent elsewhere providing greater support to those who need it most,” it said.

It raises concerns about one-off payments, saying their “biggest risk” is becoming a recurring feature of future budgets.

The review says the Fiscal Council has criticized the fact that the Christmas bonus has been paid every year since 2014, even though it was not part of the original budget plan.

The report notes that the PRSI parameters are intended to remain unchanged and this “results in a slight increase in the PRSI burden for full-time minimum wage earners”.

Meanwhile, the retail union mandate accused the Low Pay Commission of “failing to fulfill its mandate to protect workers”.

Secretary-General Gerry Light said the Commission’s recommendation for a minimum wage of €11.30 per hour has not kept pace with inflation this year.

He told the Dáil Enterprise Committee yesterday that the government must raise the minimum wage to more than €14. Mr Light said that adjusting for inflation is the absolute minimum expectation of workers. “Anything else is a pay cut,” he said.

The chair of the Low Pay Commission, Ultan Courtney, said the commission is aware of the need to avoid a wage-price spiral when it comes to wage increases.

Labour’s Marie Sherlock expressed concern that the Commission admitted it did not have up-to-date data on the profitability of sectors with a high concentration of minimum-wage workers.

“This is particularly significant as the Low Wage Commission knowingly made a recommendation for 2023 that would result in a real pay cut for minimum-wage workers next year,” she said. The state pension would have to rise to 288 euros to keep up with inflation, according to the budget review

Fry Electronics Team

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