Cost of living crisis: Bills can increase by 2,000 euros per year - and over 3,500 euros when the cost of filling a car with diesel or petrol is included

Cost of living crisis: Bills can increase by 2,000 euros per year – and over 3,500 euros when the cost of filling a car with diesel or petrol is included

Inflation lowers a record number of households in energy poverty with warnings that household bills can now rise by as much as 2,000 euros a year and over 3,500 euros when the cost of filling your car is included.

new report from ESRI has suggested the possibility of a Christmas bonus-like double welfare to compensate for rising energy bills after discovering that the weekly cost of household energy consumption increased by more than 21 euros a week in the first four months of this year and could rise by over 36 euros in week if energy prices rise by another 25 pcs.

When motor fuels are included, ESRI estimates that energy inflation between January and April pushed up household consumption by more than 38 euros a week and a further 25 percent increase would increase household consumption by just over 67 euros a week.

The number of households in energy poverty – where more than 10 percent of a person’s or household’s net income is spent on energy bills – has already reached a record 29 percent, above the previous record high of 23 percent in the mid-90s.

The ESRI document warns that further increases in energy costs this year could lead to as many as four out of 10 households falling into energy poverty.

The research on energy poverty and deprivation published today by the state’s leading economic think tank also finds that the government’s recent reductions in VAT and fuel taxes were poorly targeted answers, and that a reduction in the carbon dioxide tax would also be the wrong approach.

Less than a third of the 40% of households in the lower part of the income scale, which has been more negatively affected by rising energy prices, would benefit from such measures.

“If the goal is to protect those hardest hit by rising energy prices, reduced indirect taxes are a poorly targeted response given that most of the revenue is spent on compensating high-income households that have been least affected,” the newspaper writes.

Instead, the newspaper identifies increases in social security contributions, fuel allowances and lump sums as household electricity credits of 200 euros that were recently applied to people’s electricity bills as more efficient. It also proposes a Christmas bonus-like double welfare benefit to compensate for rising energy bills.

The newspaper states that a lump sum or a double weekly social security contribution would result in gains that are greater both in cash terms and as a share of income for households with lower than higher incomes, as well as for those at risk of poverty.

A doubling of the fuel allowance would also have this effect, although the newspaper notes that this would be limited to long-term beneficiaries of social benefits and exclude the newly unemployed.

The newspaper also states that an increase in PRSI credits from € 12 to € 33 and an increase in the main income tax deductions by € 50 per year would increase household income by around € 2.30 and positively offset the energy costs for low-income earners and those who rent.

On the other hand, only increases in income tax deductions would primarily benefit households with higher and higher average incomes.

The paper also argues that lower energy taxes in the long run weaken the incentive to invest in energy-saving technologies and behavior, which is a key priority for the coalition in an effort to achieve its climate goals of more than halving greenhouse gas emissions by 2030.

“Reducing indirect taxes on energy exacerbates existing effective subsidies for the combustion of fossil fuels, with, for example, reductions in VAT on electricity and household fuels which further distort consumption decisions towards such services and away from goods or services covered by the standard tax.” states the newspaper.

“Households with lower incomes spend more of their total expenditure on energy and fuel, so as a result, increases in their incomes disproportionately affect,” said Barra Roantree, co-author of the paper.

“The relative loss from recent increases is more than twice as low for the lowest income fifth as the highest income for the fifth.”

He added: “Our results have important policy implications. If the goal is to protect those hardest hit by rising energy prices, reduced indirect taxes are a poorly targeted response.”

Denise Charlton, President of the Community Foundation for Ireland, which funded the research, said: “In rapidly growing numbers, households are faced with the choice between putting food on the table, buying clothes to start school or heating their homes.

“The increase in bills is already alarming. The potential for further increases risks creating a sense of desperation that requires assurances from decision-makers that action will be taken before winter comes.”

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