The Irish Times view on the extension of cost-of-living supports: focus must be on those most in need

The Government is promising a decision in the next couple of weeks on the extension of cost-of-living supports, many of which are due to run out at the end of this month. The indications are that some, though not all, of the measures will be extended.

The Government is right to take its time to try to make the correct calls, which are difficult given the uncertainties it faces. A guiding principle needs to be leaving some room for manoeuvre later this year or into 2024 and also guarding against any short-term deterioration in the national finances. Striking the correct balance is far from straightforward and actions taken will also be guided by inevitable political pressures.

The Government can only proceed on the basis of the evidence in front of it. First of all, this shows that many less well-off households are struggling in the face of sharply rising energy bills and the generally high rate of inflation. The data shows clearly that these households are worst hit, due to their spending patterns and limited financial fire-power.

A priority needs to be to continue to support them through a range of welfare measures; indeed given the likelihood that energy prices will be slow to fall, some of these additional supports may become semi-permanent and there is a case to examine expert advice from the Economic and Social Research Institute and others on how best to direct supports to where they are most needed.

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More difficult decisions surround the more universal supports such as the energy credits and the cuts in fuel prices. With another €200 credit to be paid in March and the weather then improving, the Government might be well advised to hold off on committing further cash here, given its significant cost and the fact that is also benefits many better-off households. The matter could be reconsidered heading into next winter.

Whether to extend the reduction in VAT and excise duty on fuel will be another difficult call. This is a particularly contentious issue in rural Ireland, where there is often no option but to take the car. There are also tensions in Government, with the Green Party not keen on incentives for people to keep using polluting fuels. Political reality suggests that these reliefs will be extended, but perhaps with a firm end date. And that the special support scheme for business will be extended and its overly-tight terms relaxed to try to save jobs.

As with the 9 per cent VAT rate for hospitality, the difficulty with such measures is that temporary can easily become permanent. Given the longer-term pressures on the public finances and the rapid growth in spending in recent years, it is vital that a Covid-style approach is taken, making it clear that incentives will end. The difficulty is that, unlike during Covid-19 when restrictions ended, there will be no clear end-point to the cost-of-living crisis.