Has the Irish Government done ‘a lot more’ than the UK to reduce the cost of living?

June 13, 2022
|In Arts, Business, Culture
|By Angela O'Leary
THE TÁNAISTE HAS claimed that the Irish Government are doing more than their British counterparts to help citizens with spiralling rates of inflation in recent months.
Ireland has brought in a raft of such measures in the past few months, but after the UK announced similar measures last month, Leo Varadkar was asked whether “there any plans here to mirror what’s happening in the UK” in terms of dealing with inflation.
According to The Times, he answered: “We’ve actually done a lot more” and said that Ireland was “ahead of what’s being done in the United Kingdom” when comparing “like with like”.
It’s a complicated claim to make, because factors like the accessibility of public transport and the cost of healthcare are so much different in Ireland than the UK.
For this FactFind article, we’ve decided to see whether Ireland has done more than the UK, less, or around the same amount.
Ireland’s cost-of-living measures
Since the end of last year, Ireland has introduced a range of measures aimed at combating the increasing cost of living and to help tackle the rising costs of fuel, energy and food in particular.
Opposition politicians and social justice groups have repeatedly criticised these measures as not going far enough, and have called for further measures like a rent freeze or a 0% VAT rate on fuel to help ease the burden further.
But let’s look at what the Government has brought in.
We first asked the Tánaiste’s department, the Department of Enterprise, Trade and Employment, for evidence to back up his claim that Ireland had gone further than the UK.
A spokesperson for Varadkar directed us to his full answer to the question asked of him in Cork, reported in the Ireland edition of The Times as follows:
We’ve actually done a lot more: €2.4 billion in measures to help people with the cost of living. So, for example, in the United Kingdom, they put up income tax [and] national insurance; we reduced it. They’ve frozen welfare and pensions; we’ve increased them. And we have already given an increase in the fuel allowance to low-income households and also taken €200 off people’s electricity bills.
The Journal also asked for evidence to support the claim and what the Tánaiste meant by comparing “like with like” measures in both countries.
Varadkar’s spokesperson outlined a number of measures taken by the Irish Government to date and said that they included measures in Budget 2022, which “deliberately sought to pre-empt the rising cost of living”:
  • Cutting taxes and increasing social welfare and State pensions in Budget 2022
  • A €200 energy credit for all households and an extra €125 for fuel allowance recipients
  • A further €100 special payment for fuel allowance recipients
  • A cut of 20c for every litre of petrol and 15c for every litre of auto diesel, and a proportionate 2c reduction for excise on green diesel
  • Cutting VAT on gas and electricity from May to October
  • Cutting public transport fares by 20% from the end of April
  • Extending the special 9% VAT rate for tourism and hospitality into 2023
  • Reduced caps for multiple children on school transport fees
  • The temporary enhancement to the Diesel Rebate Scheme, which was provided in Budget 2020, has been maintained.
The spokesperson added that the Tánaiste’s point was that “to date Ireland’s response has been far more broad-ranging”.
UK measures
Next, let’s look at what measures have been introduced in the UK to help citizens cope with increasing inflation.
According to a ‘fact-sheet’ on the UK Government’s website, £37 billion (€43.5 billion) in supports have been announced to fight the cost of living.
These measures are listed as:
  • A £400 grant for all domestic energy customers to help with the cost of their bills through the Energy Bill Support Scheme
  • A £150 Council Tax rebate for households in bands A-D (ie the four lowest property value ranges)
  • A £650 payment for more than 8 million households on means-tested benefits (to be made in July and again in the autumn)
  • A £300 payment to over 8 million pensioner households who receive the Winter Fuel Payment (to be made this coming November/December)
  • A £150 Disability Cost of Living Payment to six million people on disability benefits (to be paid this coming September)
  • £1.5 billion as part of the Household Support Fund, which will be paid to local authorities to help households not eligible for other kinds of help or need further support (paid between October 2022 and May 2023)
  • A rise in National Insurance contribution thresholds to £12,570 (from July 2022)
  • Reducing National Insurance contributions for around 500,000 lower-earning self-employed people from April 2022, worth up to £165 a year
  • Reducing the Universal Credit taper rate from 63% to 55% and increasing work allowances by £500 per annum from late 2021, so that around 1.7 million households will save an extra £1,000 every year
  • A 12-month cut in the main rates of fuel duty for petrol and diesel of 5p per litre since 23 March
  • A freeze in alcohol duty rates on beer, cider, wine and spirits (announced in the autumn budget in 2021 for the third year in a row).
Like in Ireland, opposition parties in the UK have criticised these measures for not going far enough.
Labour leader Keir Starmer has accused Boris Johnson of “choosing to let people struggle” with the cost of living and the Liberal Democrats accused the Conservative Party of “breaking promises” by raising VAT and said people were being “overwhelmed”.
Boris Johnson congratulates Chancellor Rishi Sunak after the delivery of the spring statement in MarchSource: PA
Comparing ‘like with like’
When making the claim last month, the Tánaiste said that Ireland was “ahead of what’s being done in the United Kingdom” when comparing “like with like”.
One could look at this in a number of ways: the amount spent, the number of different measures, or the actual measures themselves.
Each of these poses a specific problem because both countries are so different in terms of size and population, while the ability of each government to introduce certain measures (like a property tax cut, for example) is not the same.
In terms of the total amount spent, the UK far outstripped Ireland by £37 billion (€43.5 billion) to €2.4 billion. Even on a per capita basis, the UK – £551/€647 per person – has done more than Ireland (€480 per person).
Likewise, the UK list is far longer than the Irish list and includes things like property tax cuts and alcohol duty and a general fund for local authorities which the Irish list does not (though it does contain measures for transport and the hospitality sector).
But a significant portion of the UK’s measures haven’t kicked in yet, whereas all of the Irish ones listed above have – and Varadkar was referring to steps which have been taken “to date”.
A direct comparison between measures is also not easy, because only three of the measures listed above for the two countries are directly comparable: energy credits, fuel allowance payments and cuts in fuel duty.
In two of the three cases, the UK comes out on top.
Energy credits
Earlier this year, Ireland introduced a €200 energy credit for every household in Ireland, which was paid from April. This was specifically cited by Varadkar at the end of his initial response in Cork at the end of May.
 
 
However, the previous day British Chancellor Rishi Sunak announced that all households in the UK would receive a grant to reduce energy bills by £400 (€469) from October.
The discount works the exact same way in both countries, in that it is paid directly to energy suppliers who then subtract the value of the grant from customers’ bills.
It is worth noting that the average cost of energy – something that is very hard to estimate due to factors like usage, household sizes, the type of energy used and even how long you’ve been with your supplier – is broadly similar in both countries.
The UK energy regulator’s price cap – the maximum a supplier can charge for a unit of energy – is currently 28.34p (32.86 cent) for a unit of electricity and and 7.37p (8.21 cents) per unit for gas.
No cap exists in Ireland, but Electric Ireland – Ireland’s largest electricity supplier – currently charges standard rates of 29.28c per unit of electricity and 7.88c per unit of gas.
It’s not exactly a scientific comparison, but at first glance it appears that the UK’s £400 energy credit is worth a lot more to customers there than the €200 energy credit is worth to households in Ireland.
But the Irish Government also announced a cut on VAT for energy bills from 13.5% to 9% between 1 May and 31 October, which is expected to save householders an additional €50 on gas bills and €70 on electricity bills.
And the Public Service Obligation (PSO) Levy will be set to zero by October 2022, which is also expected to save householders a further €58.
At the generous end of things, this brings energy-saving measures in Ireland up to €328, which is still short of the £400 energy credit to be introduced in the UK.
However, Irish customers have already begun to receive their energy credit, while those in the UK will not start to receive theirs until October – so the Government here has technically done more to date.
Source: Shutterstock/Brian A Jackson
Fuel allowances
Both governments also announced special measures for those receiving payments to help with the cost of heating their homes during the winter months – known as Fuel Allowance in Ireland. This was also referenced by Varadkar at the end of this answer last month.
Here, a €125 lump sum for Fuel Allowance recipients was due to be paid by mid-March, followed by an additional lump sum of €100 at the start of April – a total of €225.
Meanwhile, the UK announced that those in receipt of the Winter Fuel Payment would get a £300 (€352) sum, though this will not be paid until November or December.
The UK measure is once again worth more, but like the energy credit has not actually been given to households who are eligible for it yet – unlike in Ireland.
Cuts in fuel duty
The Irish and UK governments have also both cut rates of duty on fuels to help motorists save money.
In Ireland, this has equated to 20c for every litre of petrol and 15c for every litre of auto diesel, with a proportionate 2c reduction for excise on green diesel, which came into effect in early March.
The UK introduced a 5p (6c) cut in the main rates of fuel duty for petrol and diesel for one year, which became effective in late March.
Again, the price of petrol and diesel is broadly similar in both countries. So in this case, Ireland’s measure is worth a lot more for motorists.
Indirectly comparable
There are also a number of measures introduced by both governments which, although they cannot be directly compared, do fall under similar umbrellas such as taxation and social welfare.
Varadkar actually referenced these in his reply last month, claiming that the UK had “put up income tax [and] national insurance” while Ireland reduced them, and that they had “frozen welfare and pensions” while Ireland increased them.
Again, the nature of Ireland and the UK’s welfare and taxation systems mean that one can’t say definitively which country has done ‘more’ to help through those measures, but let’s take a look at what each country has done.
Taxation
In Ireland, the Government did not specifically cut any taxes during Budget 2022 so Varadkar’s claim that Ireland reduced taxes is technically untrue.
However, there was an increase of €1,500 in the income tax standard rate band for all earners from €35,300 to €36,800 in the budget.
That is effectively the same thing as a cut, because it means that workers who were earning over €35,300 now have that initial €1,500 taxed at 20% rather than 40% (which works out at about €300 a year for those earning €36,800 and over).
Meanwhile, each of the personal tax credits, employee tax credits and income tax credits rose by €50, while the ceiling of the second USC band rose from €20,687 to €21,295.
But what about the UK?
In his spring statement in March, Chancellor Rishi Sunak said that the income threshold at which point people would start paying national insurance will rise from £9,570 to £12,570 from July – again, not technically a tax cut but effectively the same thing.
But last autumn, the government also announced that employees would pay 1.25% more in national insurance contributions from April, though national insurance contributions were also lowered for around 500,000 lower-earning self-employed people.
 
Social welfare
Ireland also increased a number of welfare and State pension rates last year, as Varadkar correctly pointed out.
Weekly pension payments increased in Budget 2022 by €5, while the Living Alone Allowance (also for those on pensions) increased by €3 per week.
Fuel Allowance payments rose by €5 per week, the Back to School Allowance rose by €10, while the Pandemic Unemployment Payment (PUP) was extended until it was finally wound down last month.
The annual cap for having children using the school transport scheme was also dropped to €500 per family at post primary level (reduced from €650) and €150 for primary school children (reduced from €200).
However, Varadkar’s claim that the UK had frozen social welfare payments and state pensions is untrue: both rose by 3.1% in April.
The UK also announced a number of cost-of-living measures which directly targeted those on benefits.
A £650 payment will be made to more than eight million households on means-tested benefits in July and again in the autumn.
A £150 cost of living payment will also be made to six million people on disability benefits this coming September.
And the Universal Credit taper rate – the rate at which the six-month social security payment is withdrawn as claimants’ earnings increase – was cut from 63% to 55% from late 2021.
In contrast, Ireland did not make any direct payments to those on social welfare, though again none of the UK’s payments listed above have kicked in yet either.
Alcohol duty
The UK also scrapped a planned duty increase on spirits, wine, cider and beer last autumn.
The Irish government also kept alcohol duty as it was in Budget 2022 – but it proceeded with the introduction of Minimum Unit Pricing on alcohol from 4 January 2022, which saw mandatory price increases on the cheapest forms of drink.
Not comparable
The remaining measures announced by the two governments are not directly comparable, and to decide which country has done more is open to interpretation.
Ireland introduced some measures which the UK did not, including a 20% cut in public transport costs and reducing the highest cost of school transport for families.
There was also an enhancement to the Diesel Rebate Scheme, first introduced in Budget 2020, which means that some of the mineral oil tax paid on diesel by certain commercial road transport operators can be refunded by Revenue.
The UK also introduced a number of measures or spent money where Ireland did not.
Included in the measures listed above are cuts in property tax for owners of the lowest-valued homes – something which the central Government here cannot decide to do because it such a decision is up to local authorities.
The UK also announced a £1.5 billion fund known as the Household Support Fund, which will also be paid between October and May next year to local authorities to help households who aren’t eligible for further support.
Conclusion
Both the UK and Irish Governments have introduced a wide range of measures to help people cope with the rising cost of living.
Leo Varadkar said Ireland last month that Ireland was “ahead of what’s being done in the United Kingdom” when comparing “like with like”.
But while each government announced many similar things – or in some cases, the same thing – it is next to impossible to say which country is “ahead” in helping its people, or to compare measures “like with like” because of the differing nature of the two countries’ tax and welfare systems.
In terms of the amount spent or the number of different measures taken, one could argue that the UK has done more than Ireland – and this is certainly the case when per capita spending is compared.
But many of the measures announced by the UK haven’t kicked in yet, and one could argue that in terms of measures taken, Ireland has done more to date.
There are further issues because of how aspects of the cost-of-living differ in each country: the NHS makes parts of public healthcare much cheaper in the UK, but the cost of a TV licence (£159/€186) is more expensive than in Ireland (€160).
At this point, therefore, while there are arguments in both directions it’s not yet possible to ascertain which country has done more one way or the other.