Will Budget 2022 provide respite on cost-of-living squeeze?

Rising inflation and shortages of some goods have shifted the economic focus

Minister for Finance Paschal Donohoe. Photograph: Julien Behal

Minister for Finance Paschal Donohoe. Photograph: Julien Behal

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Increasing welfare and pension rates by €5 in the budget would have in the past deflected Opposition criticism that the Government wasn’t doing enough to help the most vulnerable. Now it’s a focus of attack. That’s because the cost of living – energy costs in particular – is rising at a significant clip and a fiver is small change in the Ireland of 2021.

In fact, it’s not enough to buy a beer in many city centre establishments. Households are grappling with rising inflation and shortages of some goods, a product of the post-Covid unwind, and this has shifted the economic focus. Families face paying €400 more for their electricity and heating this winter and that’s before higher petrol and diesel prices are factored in. Whether Budget 2022 delivers some form of respite to cash-strapped households in the grip of a cost-of-living squeeze is likely to take up a lot of the post-budget analysis.

It will outweigh debates about corporation tax (they’ve been had and the decision to move from 12.5 per cent to 15 per cent already made); the unwinding of Covid supports (the Government has already signalled when its support programmes will be dialled down), and the green transition (this is bigger than a single budget and perhaps better viewed through the prism of the National Development Plan).

The two other big cost-of-living measures in Budget 2022 relate to income tax and the fuel allowance. Much of the €500 million earmarked for tax measures will go towards indexing tax credits and bands to offset the impact of inflation on people’s take-home pay. As energy costs soar, the Government is also likely to announce a big rise in the fuel allowance for vulnerable households, significantly more than the €3.50-a-week increase announced last year.

Budgets shouldn’t be about winners and losers or pulling rabbits out of hats. We’ve had years of that and it hasn’t served us well. They should be sober – perhaps even dull – affairs, in which spending priorities and strategies are set out, not just for the coming year but for the medium term.

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