New report says energy poverty in Ireland has risen to an all-time high

According to the Irish think tank the Economic and Social Research Institute, authorities would effect better change if they offered targeted welfare as opposed to cutting VAT or fuel taxes

Today, the Irish think tank ‘The Economic and Social Research Institute’ published a report claiming that due to the recent spike in inflation, energy poverty for households in the country has risen to an all-time high of 29%. The previous energy poverty peak was recorded in 1994-1995 when conditions affected 23% of households.

Energy poverty in this case is defined as a household spending a tenth of their net income on energy, which includes electricity, but excludes motor fuel. At the same time, this estimate is based on energy prices between January 2021 and April 2022, while researchers claim that if prices go up by another 25%, the share of households in energy poverty would increase to 43%.

Cutting VAT would offer aimless, across-the-board help while taking away from targeted assistance to vulnerable households

According to the research, between January 2021 and April 2022, energy inflation increased the cost of estimated households’ consumption by 21.27 euros per week. However, this number reaches more than 38 euros per week when including motor fuel.

Furthermore, expert estimates state that a sustained rise of up to 25% would cause an increase to 36.57 euros of energy costs on average, excluding fuel, or 67.66 including it. This, they estimate, amounts to 5.9% of the net income for the lowest income fifth of the Irish population, compared to 3.1% of the highest income fifth.

This disparity is due to lower-income households spending a larger share of their income on energy, particularly in terms of home heating and electricity.

The Economic and Social Research Institute, however, claims that if authorities want to protect the most vulnerable, measures like cutting VAT, fuel duties or the carbon tax would have a rather counterproductive effect. A substantial part of the costs to the government and the benefits would go towards the top 40% of households.

Instead, they propose the government increase welfare payments, fuel allowances or even provide a lump-sum payment, like household electricity credit, aimed directly at low-income households. This would, they argue, cost less and it would encourage those who are more well-off to invest in energy-saving technologies like renewables or insulation.