As the cost of living spirals, the Government has promised to introduce extra measures to help struggling households pay their bills.
There has been much speculation about what these measures could be. At a meeting of the three party leaders on Monday night, it was agreed that the relevant line Ministers would be tasked with coming up with a list of options that would be workable but that crucially won’t fan the inflationary flames.
A number of concrete ideas are now emerging and these will be discussed at a meeting at a Cabinet sub-committee next Thursday.
These include increasing the exemption to current bonus rules for workers so that up to €1,000 can be given tax-free, rather than the current amount of €500. The Minister for Social Protection Heather Humphreys is also understood to be examining a dedicated hardship fund which would be used to help out low-income households struggling with heating, fuel and grocery costs. A longer fuel allowance season may also be considered.
The Tánaiste Leo Varadkar is understood to favour a higher electricity credit above and beyond the €100 credit due to come in around the end of March.
Ministers may also look at changes and cuts to VAT on energy charges, food stuffs and road charges.
There are concerns at different levels in Government, however, about temporarily increasing welfare payments which is one suggestion that has been made. The worry is that it will be regarded as something of a “mini budget” and would be very hard to reverse once inflation begins to drop.
Both the Minister for Public Expenditure Michael McGrath and Minister for Finance Paschal Donohoe will resist any attempt for a give-away package and will be keenly analysing what effect any measure would have on the existing situation.
Taoiseach Micheál Martin promised his parliamentary party on Wednesday night that the Government would come to the aid of households although he did not give much away. Sources say that he would be open to looking at Government charges like cutting VAT on energy charges, food stuffs and road charges.
Options
There are other options open to the Government.
Late last year, conscious of the rising energy costs across the EU, the European Commission gave member states a number of options to address the issue.
These include: authorising the temporary deferrals of bill payments; putting in place safeguards to avoid disconnections from the grid; providing temporary, targeted reductions in taxation rates for vulnerable households; and temporarily applying a reduced tax rate for vulnerable households on electricity, natural gas, coal and solid fuels. Aid could also be provided to companies in line with EU rules, they said. All of these options will form part of the Government’s consideration, it is understood.
For their part Sinn Féin has called for higher increases in welfare payments, a longer fuel allowance season, as well as giving renter’s the equivalent of one month’s rent back in their pocket alongside a ban on rent increases.
Also on Thursday, Mr Varadkar said that a package of proposals to tackle the rising cost of living are being worked on by the Government with further discussions with employers and unions taking place.
Mr Varadkar said the Government will make a decision on measures in the coming weeks while the difficulty with increasing core social welfare rates is that “a lot of working people aren’t on social welfare” and wouldn’t help those who have mortgages.
The Tánaiste was responding to Sinn Féin deputy leader Pearse Doherty during Leaders' Questions in the Dáil on Thursday, who said inflation had reached its highest level in 20 years.
The Donegal TD also said the Government was "creating sound bites with leaks from parliamentary party meetings" rather than "real and immediate action" and called for an increase in core social welfare rates.
The Tánaiste acknowledged that the cost of living was rising “faster than it has in 20 or 30 years” and actions taken by the Government to date were “not enough”.
“For that reason, the three party leaders met on Monday night, commissioned line ministers to develop proposals for a package of measures that will allow us to help families with the cost of living,” he said.
“That’s being worked on at the moment, with further discussions on it today, meeting with the unions and employers this afternoon, a chance to discuss it then.
“There will be a committee meeting of the Economic Cabinet Committee, which I chair, next week. It will be another chance to discuss it as well and we will make a decision on it and we’ll make it soon, certainly in the next couple of weeks.”
Mr Varadkar said the Government was aware other governments across the world had taken action and “we believe we must do so as well.”
Rents and childcare
Mr Varadkar said the difficulty with increasing core social welfare rates was that “a lot of working people aren’t on social welfare”.
“You mightn’t appreciate this but people who are working hard, people who are on middle incomes on paper, even people who may look like they have good incomes on paper also have had to deal with a high cost of living and your proposal would exclude them,” he told Mr Doherty.
“What about somebody who has a mortgage, what about somebody who’s not on social welfare? Your proposal wouldn’t help them.”
Mr Varadkar also said that when Budget 2022 was being prepared last September the estimates for inflation were between two and three per cent and it was built “on that basis”.
He said this was not the case with inflation much higher, around five per cent, and rather than being a temporary phenomenon, “while it might moderate it looks like we may be stuck with high inflation for a longer period than we would have anticipated”.
Mr Doherty said rents were spiralling out of control and childcare costs are like a second mortgage for families.
“Putting food on your table and running your car has never been more expensive,” he said.
Mr Doherty said prices will continue to rise and the Government had not dealt with the cost of living crisis or came up with a comprehensive plan to support households.
“Not all households will feel the cost of living crisis equally, we know from the CSO that the poorest households spent three times more of their income on heating and lighting their homes than the richest households, that those in the middle spend twice as much as those at the higher end,” he added.
