Box 5 Why does the adequacy of transfers decline over time? Over time, increasing overall living standards and inflation erode the level of protection that a given amount of cash benefit can provide. As the cost of goods and services increases, the value of social protection transfers decreases, resulting in a reduction in their purchasing power. This can lead to a decline in the standard of living of beneficiaries and potentially undermine the effectiveness of social protection programmes in reducing poverty and inequality. There are many examples of the deterioration of transfer values in the absence of adjustment mechanisms. Therefore, it is important for policymakers to take inflation into account when designing social protection programmes and when determining annual budgets to ensure their effectiveness and sustainability over time. The mechanism of adjusting transfer values with the goal of protecting its purchasing power against rising prices is known as indexation. Several countries index their child benefits from time to time. However, the regular and automatic adjustment of transfer levels remains rare. A best practice example of regular indexation is Belgium, a country that has historically been proactive in ensuring that its citizens receive social protection benefits in tune with the changing costs of living. To safeguard the purchasing power of benefits, the Belgian government adjusts the level of transfers (as well as public sector wages) based on the so-called ‘health index’, which is derived from the consumer price index. As soon as the smoothed health index reaches a value specified by law, benefits and wages are automatically adjusted to reflect the increase.48 43 Child Poverty in the Midst of Wealth Innocenti Report Card 18