A refusal to bring welfare payments in line with inflation would lead to higher rates of poverty and a rise in inequality, according to new research from the ESRI.

It found the cost would be between €460m and €1.2bn in Budget 2020, with some of that partly off-set by carbon tax and taxes on goods such as tobacco and alcohol.

Senior Research Officer at the ESRI, Claire Keane, said: "It would give welfare recipients more certainty around their income so they know each year that they would be able to maintain their standard of living in the goods and services that they buy.

"As well for people in receipt of wages or self-employed people it would mean that if they do experience a rise in their wages, as is going on at the moment, then there is certainty that their taxes aren't going to increase very sharply because of that."

The research comes following suggestions by the Government in April that it is looking at bringing welfare payments in line with inflation, despite objections from Fianna Fáil.

In their research the ESRI said: "If social welfare rates are not increased in line with price inflation, the purchasing power of social welfare recipients falls and poverty and inequality rise.

"If they are not increased in line with wage growth, which is generally higher than price inflation, purchasing power may be maintained but poverty rates and inequality still increase as the incomes of workers rise faster than those of benefit recipients."