Economy

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

Tue Oct 12 2021 - 05:07

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.

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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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