Cabinet to look at measures to offset soaring cost of living

A wide range of expanded cost-of-living supports will be examined by the Government as it seeks to offset the impact of rampant inflation and insulate itself from political damage on the issue.

Senior coalition sources acknowledged that the cost of living was the most pressing issue faced by the Government as the threat of Covid remained suppressed. “Everyone agrees it’s the burning issue,” one senior source said, with a “strong feeling we need to do more”.

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

“We’re casting the net as wide as we possibly can to look at the options,” a second senior source said. Consideration will be given to the “full range of costs and charges that people face to see what can be done”.

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Social welfare

The Coalition leaders, Minister for Finance Paschal Donohoe and Minister for Public Expenditure Michael McGrath will steer the effort. Minister for Social Protection Heather Humphreys has asked her officials to present options for assisting those on social welfare.

On Wednesday evening, Taoiseach Micheál Martin told his party that the Government was looking at measures to “enable people to cope with the cost of living increases” and to protect disposable incomes “during this difficult time”.

Fine Gael leader Leo Varadkar told his parliamentary party on Wednesday evening the electricity subsidy was “not enough” and that “more needs to be done to help families”. He cautioned, however, that there would not be a “mini-budget”. Mr McGrath told an Oireachtas committee that “you can never go far enough at the moment given the level of inflation that is there”. Inflation was now expected to be higher across the year than the 2.2 per cent anticipated at budget time, he said.

While specific measures have not yet been identified, sources suggested further energy subsidies or measures to shield people from charges directly imposed by the Government could be considered. However, the State’s capacity to drive down the costs of rent, mortgages, groceries and other items which present a burden on households was limited in the short term, sources said. It is expected that further discussion will take place at a meeting of the Cabinet subcommittee on economic recovery planned for next Thursday.

Buoyant tax take

Coalition figures expect to come under pressure from unions on Thursday on inflation, when a meeting of the Labour Employer Economic Forum convenes, with one eye on public pay talks which are planned for the autumn. However, Ministers are pointing to a buoyant tax take as giving them room for manoeuvre. “We’re conscious the exchequer returns present a favourable backdrop,” one said.

It comes after the latest exchequer data showed pre-Christmas spending by consumers generated more than €3 billion in VAT receipts for the Government in January. This was €400 million more than in the first month of 2020, before the pandemic hit.

The figures published by the Department of Finance show the Government collected €6.7 billion in tax last month, up 24 per cent (€1.3 billion) on the same month last year. Some €3.1 billion came from sales tax as consumers spent more in shops and online in the lead-up to Christmas and during the post-Christmas sales period.