THE GOVERNMENT has ruled out setting up a voucher scheme to compensate people on low incomes for the rise in fuel costs prompted by the introduction of the carbon tax earlier this year.

Minister for Social Protection Éamon Ó Cuív also signalled yesterday that the Government was unable to reinstate the Christmas bonus for welfare recipients due to the dire economic situation.

“Any failure to make the necessary adjustments and stabilise the economy could have catastrophic consequences for social welfare recipients,” said Mr Ó Cuív, who warned that the State was now borrowing money to pay welfare.

Opposition parties and groups representing old people criticised the decision not to compensate pensioners on low incomes for the carbon tax, saying this would cause severe hardship for vulnerable old people and lead to more cold-related deaths this winter.

“This is literally a life or death issue,” Eamon Timmins of Age Action told the Oireachtas committee on social protection.

“It should be a matter of national shame that we have up to 2,000 excess winter deaths each year in Ireland – older people who die from cold-related illnesses because they cannot afford to heat their homes,” he said.

When the carbon tax was announced last December, Minister for Finance Brian Lenihan said a “vouched fuel allowance scheme would be developed to offset the increases for low-income families dependent on such fuel”.

In July Mr Ó Cuív said he had set up a working group to devise a scheme to enable compensation measures to be in place “when the heating season starts again”.

At the Oireachtas committee yesterday, Mr Ó Cuív said the working group had not yet finished its work but the department had decided not to introduce a voucher compensation system.

He said such a voucher scheme introduced stigma and caused a huge administrative burden because of their complexity.

Mr Ó Cuív said he was still awaiting a report from the working group but indicated a compensation payment may not be the best way to address rising fuel costs due to the carbon tax.

“If you want to assist the most vulnerable, a small extra payment would not be anywhere as efficient as actually making the houses thermally efficient . . . it’s insulation, insulation, insulation,” he said.

Mr Ó Cuív also said the Government could not afford to reintroduce the Christmas bonus for social welfare recipients.

“In the current economic and financial crisis, our main priority must be to restore stability to the public finances . . . No provision has been made in the estimates for the payment of a Christmas bonus in the 2010 estimate,” he said.

He provided some comfort to pensioners, saying he had no plans to means-test the State pension and denied he had caused huge fear among older people by suggesting the pension may be cut.

However, he suggested rich pensioners would have to contribute. “To say no one over 65 years can afford to make a contribution is patently nonsense,” he said.

“There are people over 65 who have pension pots that are literally worth millions of euro. So you cannot say that in all measures in the budget, tax and otherwise, that any particular income is absolutely immune to cutbacks,” he said.

Mr Ó Cuív said it was Government policy to reduce tax relief on pension contributions to 33 per cent down from 41 per cent.