Committee calls for inflation measures to be targeted

The Oireachtas committee on budgetary oversight wants the State using its economy of scale to try to ameliorate the rising cost of construction materials on capital spending plans. 

Neasa Hourigan: 'Inflation and the consequences of the Russian invasion of Ukraine will have a significant impact on the Irish economy'. Picture: Gareth Chaney/Collins

Any further measures by the State to address the cost-of-living crisis should be targeted at lower-income, rural, and older households, the Oireachtas committee on budgetary oversight has said.

The committee said the current soaring prices for food, energy, and services impact differently on different households.

The recommendation is included in the committee's Pre-Stability Programme Update Report where it also said that future measures should be accompanied by an analysis of the expected impact on different households and income deciles.

It follows the Central Bank's analysis which shows the current inflationary pressures are not uniform across the economy. It said the average portion spent on food is 21% but is 26% and 16%, respectively, for the lowest and highest 20% of incomes. It is a similar pattern for energy with the average being 10% but 8% for the highest incomes and 10% for the lowest.

The committee's report was published in the same week the Central Statistics Office (CSO) released new data on rising inflation. The consumer price index for March shows prices paid by Irish consumers increased by 6.7% in the past year, the largest increase in more than 20 years.

The most significant increases in the year were seen in transport which was up 18.7% reflecting a rise in the cost of diesel by 46% and petrol up 35.2% compared to March 2021.

Increased energy costs are reflected in the yearly increase of Housing, Water, Electricity, Gas & Other Fuels with electricity up 22.4%, gas up 27.9%, liquid fuels (home heating oil) up 126.6% and solid fuels up 20.5% in the year.

However, there were sharp rises in food items as well with staple items such as a sliced pan of bread up 8.3%, milk up 8.6% and meat prices up 3.5%.

Launching the committee report on Friday, Neasa Hourigan, Cathaoirleach of the Committee said: "The Committee has set out some risks to the economy that will have to be considered and addressed in fiscal policy."

"Inflation and the consequences of the Russian invasion of Ukraine will have a significant impact on the Irish economy and the require fiscal responses. The Committee looks forward to engaging with the Minister of Finance on these issues and the draft SPU."

Construction

In their report, the committee also warns that the rapidly rising cost of construction materials and the tight supply of labour means it will be a challenge to fully deliver on capital spending plans. 

"This Committee believes this gives added urgency to the State using its economy of scale to try to ameliorate such cost pressures and increase productivity through investments in modern methods of construction," the report recommends.

They also said there are ongoing discussions around the EU fiscal rules and recommended that the Government push strongly for certain well-defined expenditure areas, such as climate and public housing spending, be excluded from the fiscal rules.