Cost of living increases: One woman had to pick between petrol or food for her last tenner

With seemingly contradictory headlines this week that Irish people have an unprecedented level of savings, but also that a huge number of households are struggling to keep their heads above water amid increasing prices, the one thing nobody can deny is the marked increase in the cost of living

Soaring household price increases are having a devastating effect on the cost of living for many families.

The high cost of living was something that even the Taoiseach and the Sinn Féin leader agreed on during their latest tete-a-tete at Leaders’ Questions during the week.

Amid the talk of energy costs soaring, the recent publication of the Central Statistics Office's (CSO) Consumer Price Index showed just how much has changed in the past year. Inflation in Ireland rose 3.7% in the 12 months to the end of September, the sharpest rise since 2008. 

According to Eurostat, consumer price inflation was 5.1% in October. This is the highest since 2003, Micheál Martin told the Dáil. Drilling into the numbers, we can see that it is indeed electricity, gas and other fuels leading these price rises.

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Electricity went up 20.5%, gas rose 14.2% and liquid fuels such as home heating oil rose by 45.7%. In terms of transport, the cost of petrol and diesel has also risen by around 15% in the past year. The cost of accommodation services such as hotels has also risen by 9.7%.

Mercifully, given the ballooning costs of insurance over the last decade, the cost of motor insurance has actually fallen 8.4% in the past year, according to CSO figures. This may be an early sign that potential solutions such as the reduction in awards for damages are having an effect, although this is disputed by businesses.

Price inflation reaches 10.9% for residential property (August) and 3.7% for consumer goods & services (September)https://t.co/ydALkaa4d0 #CSOIreland #Ireland #CPI #ConsumerPrices #PropertyPrices #HousePrices #Inflation #Deflation #Prices #BusinessNews #IrishBusiness pic.twitter.com/dsYxLYW7Mw

— 🎄Central Statistics Office Ireland (@CSOIreland) October 14, 2021

And not everything is rising - or rising sharply. Food rose just 0.3% in the past year. Clothing and footwear has actually fallen by 3.2%.

But with costs for various essentials rising hundreds of euro, it does contrast sharply with reports this week that - while we’re paying more for these things - household savings have boomed during the pandemic.

Irish households saved €31 billion last year, as we spent less and saved more during the various lockdowns.

While total gross disposable income grew by €9.3 billion in 2020, this was “unevenly distributed” according to the CSO, with many feeling the pressures of the pandemic and the now-rising costs of energy very differently.

The Free Legal Advice Centres (Flac) also warned this week that some households will have suffered a great deal more than others during the pandemic, and that the spike in energy and other costs of living heading into the winter months “may leave many consumers vulnerable”.

So, have our wallets taken a hit in recent months? And where could it be going?

Energy prices

In this area, the rise is clear. Let’s take just a few examples of recent price rises.

Over 1.1 million customers will have been affected by the price rise implemented by Electric Ireland this week. Electricity rose 9.3% and gas rose by 7% from 1 November from this supplier. The last time Electric Ireland increased its prices was August.

With the two hikes combined, households would be paying over €200 more for their electricity and €120 for their gas according to analysis from Bonkers.ie.

Bord Gáis Energy also upped its prices last month by 10% for electricity and 12% for gas. Again, it was the second in the space of a few months and will add several hundred euro onto the cost of consumers energy bills this year.

Darragh Cassidy of Bonkers.ie believes Covid-19 is one of the drivers behind the recent price hikes, creating supply chain bottlenecks at times of high demand.

Similarly, SSE Airtricity announced its second price rise in the space of a few months last week, affecting over 250,000 customers. These increases will see households paying around €300 extra a year for their electricity and €200 more for their gas.

SSE Airtricity’s managing director Klair Neenan said the decision had not been taken lightly. She said: “We made every effort to delay this announcement as long as we could but unfortunately, as we have seen with other suppliers, sustained increases in wholesale energy costs are driving consumer prices upward.

“We know price increases are never welcome news for our customers and we will continue to monitor the situation closely with a commitment to reducing our prices as soon as it is possible to do so.” 

Companies such as Pinergy, Panda Power, Energia, Prepay Power and Flogas have also hiked prices in recent times. So why is it happening? Well, it’s not just an Irish problem.

There are a number of factors playing into the rising energy costs that include reduced coal production in China, Russia allegedly limiting its supply of natural gas to Europe, and weather events such as low wind levels in the UK affecting wind farms as global oil prices continuing to rise.

Just as demand has risen significantly for energy after countries around the world grappled with lockdowns, supply began to tighten. Energy prices across the EU have risen as a result.

At the same time, fears had been raised that Ireland could even experience mass blackouts this winter as supply falls under strain. Those fears have been somewhat eased by the return to operation of the Huntstown gas-fired power plant, and the energy regulator has said it’s working to address the challenges created from the lack of supply.

It’s likely the high energy prices will persist well into the winter. Darragh Cassidy, head of communications at Bonkers.ie, told the Irish Examiner that some suppliers have hiked their prices five times in the past year.

He said:

And some have increased them ‘only’ three times. 

“It could be that some suppliers have yet to catch up and we’ll see rises there in the future.” 

Mr Cassidy said that people still working at home due to Covid could be among those feeling the energy hikes acutely this winter as they heat and light their home more than they would’ve if they were in the traditional workplace.

“A lot of people are obviously saving money working from home, but that money they’re saving on commuting, on their coffee or the lunch they would’ve bought - they need to put some of that away into the virtual piggy bank,” he said, adding that some will need at least a portion of those savings to cover their energy bills.

He added that Covid-19 is one of the drivers behind the recent price hikes, creating supply chain bottlenecks at times of high demand. Furthermore, the price rises might not have peaked yet, as further hikes could be coming.

““We’re not going to see the crisis abate [this winter]. It could be a good while before we see prices reduce and come off their high.” 

Mitigation measures 

For its part, the Government said it was seeking to support those facing higher fuel costs in Budget 2022. As well as increasing the fuel allowance by €5, it will also increase weekly payments for pensioners, job seekers and other welfare recipients by €5 from January.

Dr Tricia Keilthy, head of social justice at St Vincent de Paul told the Irish Examiner that the implementation of the fuel allowance increase immediately was welcome but it already comes at a time of “crisis point”.

“The experience in normal times would have been that winter was hard for the people we’re assisting,” she said. “The added pressure of debt and of Covid-19, along with the quite substantial price increases in energy, mean that people who may not have struggled before will face a difficult winter.” 

Dr Keilthy said that the Government could be looking at more proactive measures heading into winter, and not just react when the situation people are facing worsens. One of the measures she suggested was an energy relief fund, that was temporary in nature to get through the current crisis and not as rigorously means-tested as the fuel allowance payment.

"The Government needs to respond to realities of people's lives and should reduce VAT on energy bills temporarily to 0% for the winter months to give some relief to people who are struggling" – @MaryLouMcDonald

Take our Cost of Living survey here: https://t.co/nY3a2DdB2E pic.twitter.com/Jjo50eTpLr

— Sinn Féin (@sinnfeinireland) November 3, 2021

The Government has also been criticised by the opposition for saying its measures don’t go far enough, culminating in another row in the Dáil this week between the Taoiseach and Sinn Féin leader Mary Lou McDonald. While the latter said that the cost of living had spun “out of control”, the former said that the Government “will do our best to protect the low-income groups”.

One potential measure on the horizon that could provide some relief to energy costs is the planned introduction of smart meters into every home and business in Ireland by the end of 2024.

The Government said, as well as increasing the fuel allowance by €5, it will also increase weekly payments for pensioners, job seekers and other welfare recipients by €5 from January. Photo: Julian Behal/PA

The Commission for Regulation Utilities says these can lower your carbon footprint and save money on your energy bills by allowing you to have the option of using energy at cheaper, greener times.

As of the end of September, a total of 493,877 meters had been installed across the country. It’s planned to install a further 500,000 over each of the next three years.

Minister for Communications, Climate Action and Environment Eamon Ryan said: “Accurate energy usage information across the day will enable consumers to be more efficient in their use of electricity and save money, for example by using appliances off peak. This will, in turn, reduce the need for less efficient and more costly generation at peak times.” 

However, with just a fifth of the intended premises having been fitted with a smart meter thus far, the effect they could have in reducing energy prices won’t be felt by many for some time.

Housing costs 

The elephant in the room for some time when it comes to the cost of living in this country is, of course, housing.

The most recent Daft.ie rental report highlighted how rents had risen in almost every region across the country so far this year. Its tally of a 5.6% annual rise corresponds with the CSO’s figure of a 5.9% rise in the year to September.

In Munster alone, rents had risen almost 14% in a year, according to the Daft report, with economist Ronan Lyons commenting: “The underlying pressure on Ireland’s rental system is intense and the supply shortages are chronic and worsening.” He said that the costs being well above affordable rental levels was the “key challenge” for those in power looking to fix Ireland’s rental market sector this decade.

“In other words, despite all the chaos of the last 18 months, it’s the same old story for Ireland’s rental market,” he said.

So, as well as lighting and heating our home, the cost of renting one has increased. In terms of house prices, the cost of purchasing a home is going in a similar direction. Prices nationally in the third quarter of 2021 were over 9% higher than the same period last year.

In Munster alone, the average cost of a property was up 13.6% on last year, with prices rising 5.8% in Cork city. With mortgage interest repayments also up 2.2% on last year, according to CSO figures, the price of a home in Ireland is higher across the board.

At least 400 calls a week were made to St Vincent de Paul by people in Kerry last month according to SVP Kerry President Mary Frances Behan. @SVP_Ireland received 1000 calls nationally a week in October because families are struggling with utility bills https://t.co/vKxtNPzy5n

— SVP - Ireland (@SVP_Ireland) November 4, 2021

Dr Keilthy from SVP, said that the organisation had been receiving calls from people regarding their housing situation even before the pandemic arrived. And the pressure of housing costs is having an effect.

“When rent is the priority, and is rising, other bills can be put on the long finger,” she said. For people on a prepay meter, it could mean it’s not getting topped up as often as it should, she said.

The ‘average’ household 

While household costs are increasing across the country, there is a sharp divide in how people are feeling it’s affecting them, according to the most recent consumer sentiment survey published last month by KBC.

It found that over two in five of us (42%) feel that personal living costs have risen by more than 5%. But one in four of us (25%) feel that it hasn’t risen or costs are falling.

Those who were on lower incomes, struggling to make ends meet and living outside of Dublin were more likely to report large increases in living costs in the past year, according to the survey.

KBC chief economist Austin Hughes told the Irish Examiner that when it comes to these stats, the experience on the ground for many may not be what the so-called average individual or family is experiencing.

Dr Kielthy, from SVP, said that the cost of transport is also on the rise, particularly in rural areas. Photo: Yui Mok/PA

He said: “Remember, inflation numbers are an average basket. In principle, it’s for male-female, 2.2 children, a dog and half a cat. That family doesn’t exist.

“Some families will have found that the cost of commuting or getting kids to school has increased dramatically because they have to use the car.” Mr Hughes said it’s the “basket” of goods and services that a household buys week-to-week that determines how much they’ll be affected by rising costs.

He said that light, heat, petrol or diesel will occupy a larger proportion of that basket for someone less well off as those with higher incomes.

“This is an important element,” he said. “It’s a doubling of the pandemic effect. The people who suffered most were on the lower incomes who had to go to work. Others have had it that little bit easier.

“The interesting thing on that survey is that those who are hardest hit are the least able to afford it.” 

Inflation in other areas 

Mr Cassidy, from Bonkers.ie, said that while it is clearly energy where people are being hit hardest, it could be the case that pressures on other areas could drive inflation upwards.

“The fear is that with Covid, with the supply chain bottlenecks and Brexit, you could see that having an effect.” So far, those other price increases have been far less pronounced, he said.

“In the likes of telecommunications [like broadband], there’s not been that same disruption. Food inflation is practically zero. But then things like home improvement is more expensive. Anyone trying to get work done. They’ve been getting higher quotes.

“Electronics might be becoming more expensive because of the shortages of microchips. SkyTV has announced small increases. Disney Plus and Netflix price increases in the last year reflect the cost of creating that content on the platforms. That will all put extra pressure on consumers.” 

The price for some waste companies are also on the rise, with increases on the way for customers of Panda Recycling and Thorntons Waste.

Dr Kielthy, from SVP, said that the cost of transport is also on the rise, particularly in rural areas.

“If you don’t have public transport living in rural area, you’re relying on a car,” she said. “And the cost of fuel there has risen. 

We had a call from a woman who had €10 left and had to decide if she wanted to put petrol in the tank to do the shop, or find another way [to get there] and spend it all on the shop.

Mr Hughes, from KBC, said that while the energy prices stand out, the cost of other things creeping up could have an effect on our pockets over the coming months.

“In areas like food, you still have intense competition among retailers [keeping the prices down],” he said. “This is disguising some of these other elements [such as Brexit and supply chain impacts].

“Where food prices were falling sharper, you’re seeing them edge up a little bit now. When you go to fill the car it’s very obvious, but these other things are creeping higher. It’s more a case when someone finishes their weekly shop, nothing looks dearer but it’s a bit here and there that adds up.

“There are two different elements to this. There’s inflation really flying in the likes or energy. But it’s the inflation creep in other areas that’s also happening that’ll have an effect.”