Cabinet considering measures to offset soaring cost of living

A wide range of expanded cost-of-living supports will be scrutinized by the government as it seeks to offset the impact of runaway inflation and protect itself from political damage on the issue.

Senior coalition sources agreed that the cost of living was the most pressing issue facing the government as the threat of Covid remained suppressed. “Everyone agrees that’s the burning question,” said a senior source, with “a strong feeling that we need to do more.”

While €100 support for utility bills has already been announced, there is a drive to go further, multiple sources have confirmed, with scoping exercises planned in the coming days.

“We’re casting the net as wide as we can to look at the options,” a second senior source said. Particular attention will be paid to “the full range of costs and burdens people face to see what can be done”.

Social well-being

Coalition leaders Finance Minister Paschal Donohoe and Public Spending Minister Michael McGrath will lead the effort. Social Care Minister Heather Humphreys has asked her officials to present options to help welfare recipients.

Taoiseach Micheál Martin told his party on Wednesday evening that the government was considering measures to “enable people to cope with the rising cost of living” and to protect disposable income “during this difficult time”.

Fine Gael leader Leo Varadkar told his parliamentary party on Wednesday night that the electricity subsidy was “not good enough” and that “more needs to be done to help families”. However, he warned that there would be no “mini-budget”. Mr McGrath told a committee of the Oireachtas that ‘you can never go far enough at the moment given the level of inflation that exists’. Inflation is now expected to be higher throughout the year than the 2.2% forecast at budget time, he said.

Although specific measures have not yet been identified, sources have suggested that other energy subsidies or measures to protect people from charges directly imposed by the government could be considered. However, the state’s ability to bring down the costs of rent, mortgages, groceries and other items that burden households has been limited in the short term, sources said. Further discussions are expected to take place at a meeting of the Cabinet sub-committee on economic recovery scheduled for next Thursday.

Dynamic taxation

Coalition figures expect to come under pressure from unions on inflation on Thursday, as a meeting of the Labor Employers’ Economic Forum convenes, with an eye on public talks on wages which are scheduled for autumn. However, the ministers point the finger at a dynamic tax system which gives them room for manoeuvre. “We are aware that Treasury yields present a favorable backdrop,” one said.

It comes after the latest Treasury data showed pre-Christmas consumer spending generated more than €3bn in VAT revenue for the government in January. It was 400 million euros more than in the first month of 2020, before the pandemic hit.

Figures released by the Ministry of Finance show the government collected €6.7bn in taxes last month, up 24% (€1.3bn) from the same month last year last. Some €3.1 billion came from the sales tax, with consumers spending more in stores and online ahead of Christmas and during the post-Christmas sales period.