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what to expect

Ireland follows Europe's lead as package aimed at surging household costs to be unveiled today

Tánaiste Leo Varadkar said the cost of living is now the ‘burning issue’ for most people.

THE COST OF living package due to be announced today will have targeted supports – as well as a ‘universal benefit’ for all households, according to Tánaiste Leo Varadkar.

Speaking at an event in Trinity College yesterday, he said the cost of living is fast becoming the “burning issue” for the public, and that they are feeling the impact of rising inflation in their weekly shop, their energy bills and their fuel costs. 

The Government “has to respond”, said Varadkar, indicating that following a meeting of the Economic sub-Cabinet committee later today, an announcement of the new “one-off” measures will be announced this evening.

“It is important to acknowledge that middle-income people – people who on paper may have average salaries of €40-50,000 – are also struggling to pay the bills because often they have to pay mortgages, childcare, all those things,” Varadkar said.

It is also important that there be a targeted element though because people on fixed income and social welfare are hit hardest by fuel prices increases.

Published this morning, a new poll by Red C — conducted on behalf of the Society of Saint Vincent De Paul — reveals the extent to which households are struggling to cope with the ongoing spike in inflation.

Some 37% of respondents said they have cut back on essential heating and electricity use and 17% said they have cut back on other essentials such as food.

Meanwhile, 48% of unemployed respondents said they had already cut back on essential heating and electricity along with 37% of single parents.

“The cost of living is rising and people are really feeling it,” Varadkar said.

They are seeing it in the cost of groceries, in filling a tank of diesel, and particularly in electricity and gas bills.
It is rising at about 5% a year. Depending on your individual experience, however, it can feel a lot higher than that.
It could be the case that inflation is going to be a feature in life in Ireland, Europe and around the world for years, so we need an anti-inflationary strategy that isn’t just about dealing with the symptoms.

Varadkar said the cost of living is the number one issue being brought up by his own constituents right now, adding that some people are feeling the impact more than others.

While he said there will be a “universal” element to some of the measures, the Tánaiste said targeted measures are needed for the “hardest hit” which he said is the “right approach”. 

Finance Minister Paschal Donohoe said the Government is “very much aware” of the pressures facing people, adding that a decision will be taken today that will “respond back” to the “real issues”.

He said it will respond “in a meaningful way” and not in a way “that makes things worse”. 

Energy credit

There has been plenty of speculation as to what the package of measures will be, but the planned electricity credit of €100 is likely to be increased, it is understood. Customers should start to see the impact of that credit at the end of next month.

Major changes to taxation or to social welfare rates are not likely to be a part of today’s Government announcement, with the focus instead being placed on energy costs and fees charged for State services in the areas of health, transport and education.

While there has been some speculation the energy credit could be doubled, sources who spoke to this website have estimated that, as that could cost in the region of €200 million, it might be a step too far – instead an increase to €150 might be on the cards, however nothing can be ruled out at this juncture. 

An increase in the €100 credit is seen as the most obvious and “cleanest” measure to tackle surging prices. 

Europe

There’s been a pattern of these sort of measures being taken by governments in some of our nearest neighbouring states. Across Europe, politicians have been under intense pressure to deal with the spike in the cost of living this winter.

Most of their efforts have been aimed at tackling rising household electricity and heating bills and the Irish Government is likely to follow that lead.

Another measure that is likely to be announced today is the extension of the fuel allowance season out to April of this year – with modifications to the criteria to allow more people to avail of the benefit.

While many members of the public may view the rise in the cost of petrol and diesel as one of the main problems, it is believed that there will be no moves to tackle the level of excise applied to the fuels. 

One source pointed out that such a measure would not be palatable to the Green Party adding that there would be “no point in having that row”.

In a bid to take the burden off drivers to some degree, items like a reduction in motor tax charges may be on the cards. 

Environment Minister and Greens leader Eamon Ryan only recently managed to get a reduction in some public transport charges, with sources stating that there could be more reductions announced.

Many of today’s measures are expected to be one-off in nature with the Government keen to get across that they are emergency measures and are likely to be reversed when inflation falls.

A change in the rules to allow employers to give employees a tax-free bonus of up to €1,000 per year is also being put forward as a proposal, as is a suggestion to cut fees for the likes of passports and driving licences. 

A global issue

Speaking yesterday, Varadkar was keen to highlight that inflation is a global issue and just isolated to Ireland. 

In an attempt to insulate households from sharply rising costs, most European interventions in recent months have been aimed at cushioning the blow of energy and home heating bill hikes.

As part of the EU’s suggested toolkit for tackling the rising cost of energy, it has suggested that emergency income support for energy-poor consumers, for example through vouchers or partial bill payments, could be permitted.

The EU has also said that member states could authorise temporary deferrals of bill payments. 

Higher bills have been the main symptom of Europe’s ongoing energy crisis, primarily sparked by sky-rocketing wholesale natural gas prices making it more expensive for power companies to generate electricity.

Electricity suppliers are, in turn, passing those costs on to Irish and European consumers in the form of higher household bills.

Crude oil and, consequently, petrol and diesel prices have also increased sharply over the past year as cars, buses and trucks returned to European roads after lengthy lockdown periods in 2021.

Home heating oil prices have also jumped during the winter months.

Overall energy product prices across the Eurozone were up almost 30% year-on-year last month, according to the latest figures from Eurostat — the EU’s official statistics agency.

France and UK

With an election looming in April, French President Emmanuel Macron last month promised to cap energy price rises at 4% per year and ordered French energy giant EDF to sell nuclear power to its rivals at cut rates.

But EDF is 80% state-owned. That gives the French government more wiggle room to intervene on prices than would be the case in Ireland where the electricity supply is privatised.

In the United Kingdom, where the energy market is also deregulated, the impact of price caps introduced in 2019 led to the collapse of a number of energy suppliers in the latter part of 2021.

Unable to keep up with spiralling wholesale costs and to adjust their prices accordingly, several major energy retailers folded. But the price cap is set to increase by 54% in April and household bills are expected to follow suit.

Prime Minister Boris Johnson’s government has announced a package of measures — including a £200 bill rebate that has to be repaid over five years — to tackle the issue.

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Christina Finn & Ian Curran
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