Last Updated on Tuesday, 25 October, 2022 at 9:52 am by Andre Camilleri
COLA at €9.90 per week
Pensioners to get €12.50 per week (including COLA)
The government will be introducing social assistance “with prudence and wisdom”. We are spending within our means, Finance Minister Clyde Caruana said.
“As Finance Minister I could have spent €1 billion in direct help. I am certain that there would have been gratitude, but in this way we would have increased expenditure, we would not have addressed inflation, and the economy would have been impacted by energy costs”, Caruana said.
So what needs to be done will be done sustainably. The €1 billion to be spent in energy subsidies in two years is an indirect social assistance, but this expenditure will put us in a situation that will help the economy grow, the minister said.
When this happens, the government will then use income to sustain social assistance. This is why, as an economist, “I believe we cannot spend what we do not have. But as a Labourite I believe that our society is judged on how much it helps the vulnerable”, Caruana added.
In this respect, the government resisted calls to change the COLA mechanism for this budget, given that it will be the highest ever. The government did not accept these calls because it wants to send the message that the workers need to be sustained at a time when inflation is high. As we helped businesses during the pandemic, so we will help workers.
The Cost of Living Adjustment for this year will be €9.90 per worker per week. This increase will be given to all workers, all pensioners and those receiving social benefits. The stipends for students will increase pro-rata.
Pensioners will be getting even more, as their increase will be that of €12.50 (including COLA). This means that the government will be giving pensioners €650 more every year, or €65 million for 100,000 pensioners.
Caruana said that this shows the government’s commitment to sustain pensioners even at a difficult time. One also has to keep in mind that, were it not for the government’s intervention to keep energy prices stable, the COLA would have been closer to €25 because of inflation. But the weight on families would have been too high if the government had allowed the price of electricity and fuel to go up. If, then, COLA would have gone up by €25 per week, many businesses would have gone bankrupt.
The government is also introducing an additional COLA mechanism for the vulnerable sectors. Some 80,000 people will be receiving this additional income which will not be paid for by businesses.
The government has developed a mechanism to compensate those who are in need the most. This is because the Retail Price Index does not always reflect the consumption of families in need, and who fall below the average income. This means that COLA is not enough to retain their spending power, and this is seen mostly when inflation is high.
The mechanism to be introduced will be triggered when two factors take place – inflation over 12 months is more than 2%, and inflation for three of five basic components of the RPI (food; accommodation; electricity, water, gas and fuel; home maintenance and home equipment; and private health expenses) exceeds the average of the previous five years.
If these criteria are met, the additional COLA is triggered for families who receive social benefits and have an income which is below average, which this year was €17,796. This year, before Christmas, these 80,000 individuals and 37,000 families will be receiving this compensation. The minister did not say how much this is.
The capping for the income from a pension which is not taxable will be increased to €14,968. Couples whose income tax is calculated as married individuals will benefit from a tax exemption of a maximum of €3,600.
A new limit for pensioners who were born after 1962 will be introduced to be aligned with the highest pension that these can receive, the minister said.
The Cost of Living bonus will be paid in full to all pensioners who retired after 2008. This means that, in 2023, 56,000 pensioners will be benefiting from an additional income of a maximum of €1.50 per week, for a total of €1.7 million.
Widows receiving a pension will be having the pension they receive gradually altered, so that by the end of the legislature, they will start receiving what their departed partner used to receive. Some 9,000 widows will be getting an additional €3.54 (maximum) per week, for a total of €1.6 million.