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Wednesday 8 February 2023 Dublin: 7°C
Shutterstock/Yevhen Prozhyrko
# inflation crisis
Cost of living package: Public transport fares to be cut by 20% and electricity customers to get €200 credit
Ministers Paschal Donohoe and Michael McGrath confirmed the government’s plans this evening.

LAST UPDATE | Feb 10th 2022, 8:32 PM

PEOPLE ARE SET to receive a credit of €200 on their electricity bills as the government has unveiled a number of initiatives to mitigate against the cost of living crisis. 

The measures also include a temporary 20% reduction in public transport fares from April for the rest of 2022.

The electricity bill assistance is in the form of a once-off credit and is an increase of the €100 that was approved before Christmas.

Customers should start to see the impact of that credit at the end of next month. The total cost of the credit to the exchequer is estimated to be over €400 million, including the €210 million previously estimated before the increase.  

The cut in public transport fares will cost the exchequer €54 million and the government says it will benefit 800,000 daily users. The services covered are Bus Éireann, Iarnród Éireann, Dublin Bus, Go Ahead, Luas, DART and Local Link.

Speaking at a briefing this evening, Minister for Public Expenditure Michael McGrath people who have purchased a yearly travel card will “get an extra credit” to account for this reduction. 

McGrath was also asked whether the government would struggle to unwind the reduction at the end of the year and whether it would become a longer -term reduction.

He said it was planned that it would last until the end of the year and that the government was already carrying out an “in depth review” of the funding needs for public transport providers. 

“We discussed this at length and the move is consistent with policy, but we do have to assess the underlying Public Service Obligation in relation to sustainability of public transport services into the future before I before making any longer term decisions. So it is a temporary decision to the end of the year,” he said.  

The plan also reduces the caps for the cost of school transport fees to €500 per family post primary and €150 for primary school children.

Drug Payment Scheme

The government had promised that targeted measures would be introduced to assist people suffering most from inflation including older people and people on low incomes. 

The government’s package also includes an enhanced Drug Payment Scheme which will now see qualifying families pay a maximum of €80 per month instead of €100 for approved prescribed drugs and medicines.

Fuel Allowance

The government has also confirmed an increase to the Fuel Allowance.

The Fuel Allowance is a means-tested €33 weekly payment to help with the cost of heating your home during the winter months. It is paid to people to are receiving certain long-term social welfare payments.

It’s generally paid with your social welfare payment on the same day. However, people can choose to get it paid weekly or paid in two lump sums.

The new increase consists of an additional lump sum payment of €125 that will be paid at the end of March. 

Working Family Payment

A planned widening of the Working Family Payment is also to be brought forward from the beginning of June to the beginning of April. 

The Working Family Payment supports families below certain incomes based on the number of dependant children. The thresholds were set to to increase by €10 across all family sizes in June 2022 but this has been brought forward by two months.

The change may disappoint politicians both in government and out who had called for a bigger increase, with Green Party TD Neasa Hourigan for example calling for the thresholds to be increased by 10% across the board. 

Not a ‘mini Budget’

Speaking this evening, Finance Minister Paschal Donohoe said there were no tax changes as part of the announced package and no changes to core social welfare rates so the moves could not constitute a so-called ‘mini Budget’. 

“These are not contained in the measures here today,” he said. 

As much as I do appreciate the pressures that many are under, the government has decided not to make changes in relation to personal taxation, we’ve also decided not to make changes in relation to core social welfare rates, all of which are the key features of where we are with regard to delivering a Budget. 

Asked about the decision not to reduce Motor Tax as well in addition to the reduction in public transport rate, Donohoe said it “would not be appropriate” to make a taxation decision outside of a Budget Day.

“For those who are I know experiencing great difficulty with the rising cost of fuel. Whether it be in their car, whether it be in heating their home, this is the guiding reason behind the electricity rebate that has been brought forward,” he said.  

When the Tánaiste Leo Varadkar was asked on Virgin Media’s Tonight show about why some of these actions weren’t taken earlier, like during Budget 2022. 

Varadkar said:

“Since October, inflation – rather than stabilising or moderating like people said it would, including the European Union and the European Central Bank – it continued to rise.

So at the time we drew up the Budget, we and everyone – the Central Bank, the ESRI – all projected inflation of being in around 2% or 3%. It’s 5%.

“And we had to respond to that, and that’s what we brought in this package today. It’s €500 million, in addition to that €1 billion package in the Budget, it’s comparable to what other countries have done.”

Varadkar said that he “knows” that most workers will see a pay increase this year, based on public sector pay increases, increases to the minimum wage, and unions successfully negotiating pay increases in the private sector. 

Inflation

The background for the increased assistance for costs of living is rising inflation across Europe. This is due to increased energy costs and associated increases in food an other essentials. 

In Ireland, inflation has risen to 5.7% and the Society of Saint Vincent De Paul has said that 37% of people have reported cutting back on heating and electricity use, with 17% cutting back on other essentials such as food.

Opposition parties have been critical of the newly announced changes with Labour’s Ged Nash TD saying that the government needed to take action to increase workers’ pay by implementing a living wage. 

Social Democrats co-leader Catherine Murphy TD said that while the increase in the Fuel Allowance was “welcome” the move did nothing to make more people eligible for it. 

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