Households could face €70 per week rise in energy bills

Some 29% of housholds are paying more than a 10th of their net income on energy (excluding motor fuel), according to the ESRI. File Picture.

Hard-pressed householders could see their energy bills rise by as much as €70 per week if prices continue to surge on their current trajectory.

The worrying forecast today from the Economic and Social Research Institute (ESRI) comes as it also says more than one in four households (29%) are already in "energy poverty".

That means they are spending more than a 10th of their net income on energy (including electricity but excluding motor fuel). It is the highest percentage of people in energy poverty in almost three decades — the previous recorded high was 23% in 1994/1995.

According to the ESRI:

• Energy inflation between January 2021 and April 2022 increased the cost to households by €21.27 per week, on average, rising to €38.63 per week when motor fuels are included;
• If energy prices rise by a further 25%, the costs will increase by an average of €36.57, excluding motor fuels, or €67.66 if they are included.

The ESRI also highlighted how those with the least money are the most adversely affected, as lower-income households have to spend a far greater share of their money on energy, particularly home heating and electricity. It has also warned the Government that tax cuts are not the solution.

"If the objective is to protect those most affected by rising energy prices, cutting indirect taxes on energy — like VAT, fuel duty, or the carbon tax — is a poorly targeted response," it stated. 

About half of the aggregate gain from such tax cuts — and so cost incurred — goes to the highest-income 40% of households compared to less than a third to the lowest-income 40%.

Instead, the ESRI says increases to welfare payments, the fuel allowance, and even lump-sum payments such as household electricity credit are better targeted at those most affected by energy inflation.

Sinn Féin leader Mary Lou McDonald said the research is incredibly concerning.

Sinn Fein leader Mary Lou McDonald: Urgent action is needed from the Government.

“This report is further evidence that families and workers cannot wait until the budget in October for action on the cost of living," she said.

"Households are already worried about next winter — we know prices are going to continue to rise, and urgent action is needed from the Government."

That almost one third of households are estimated to be in energy poverty really underlines the impact the spiralling cost-of-living crisis is having.

Speaking in Cork last night, Taoiseach Micheál Martin reiterated that people will have to wait until the budget for more Government measures to tackle the cost-of-living crisis.

He said the last cost-of-living package from the Government was bigger than the budget.

“Now there is public pay service round on at the moment and there are other pay determinations happening in the private sector," he said.

"We are also engaged in exploratory discussions with the social partners in respect of what's the best and the most strategic way we could deal with the cost of living."

We accept that those on lower incomes are suffering the most — of that there is no question. 

"But we want to do a comprehensive package in terms of the budget, and the budget will be a cost-of-living budget, but we want to look at areas that would dovetail with our policies in terms of climate change for example."

He conceded people are under "enormous pressure".

“We don't deny that for a moment," he said. "The war on Ukraine has created an unprecedented inflationary cycle — we haven't seen the likes of this since the 1970s."

Meanwhile, Finance Minister Paschal Donohoe has said the Government wants to index personal taxation to deal with the cost-of-living crisis, as it cannot continue to borrow to the extent that it has done previously.

Finance Minister Paschal Donohoe: Wage increases should feed back into the wallet. Picture: Sam Boal / RollingNews.ie

The Coalition has committed to link tax bands to wage increases, amid claims the Government is only looking after those in the top take-home pay bracket.

"The point the Government is making is that if there is an increase in overall wages ... we simply want to ensure that as much of the increase in overall wages as possible feeds back into the wallet, as opposed to work being absorbed into unintentionally higher levels of taxation,” said Mr Donohoe.

“What the Gvernment is doing is putting forward a personal taxation strategy that is looking to do the same — no more, no less — but it's something that will be really valued and really needed at a time in which the cost of living is under such challenge."