Linking tax and welfare measures to inflation would cost up to €1.2 billion in Budget 2020, according to new research from the Economic and Social Research Institute. 

The ESRI said increasing tax bands, tax credits and welfare payments in line with price rises would help to tackle inequality and poverty, but would cost €460m next year. 

A link with wage inflation - which is generally higher - would cost €1.2 billion, according to the ESRI.

Increasing tax bands, credits and welfare payments in line with price or earnings inflation is a process known as indexation.

The ESRI noted that some countries have "default" budgets that take account of price or wage inflation. 

But no such default policy applies in Ireland and changes to tax credits, tax bands and welfare payments are announced in an ad-hoc fashion on Budget day.

"We carried out this research in light of increased discussion amongst policymakers in Ireland about linking pensions and social welfare benefits to inflation," commented Claire Keane, ESRI Senior Research Officer and an author of today's report. 

"This would be a positive move in terms of inequality and poverty. However, the cost of doing so in line with price inflation would be €460m or €1.2 billion, if increased in line with wage inflation," Ms Keane added.