Cost of living crisis: Multibillion-euro package of supports to include significant cuts in childcare outlay

A multibillion-euro package of supports for families and workers is being prepared which will see childcare fees cut significantly and welfare rates increased beyond the levels that were agreed last year.

Senior Government sources said the changes, unlikely to be announced until budget day in October, could be introduced before the end of the year in response to the cost-of-living crisis rather than early next year.

The prospect of a “mini-budget” or the introduction of emergency welfare increases before October appeared to be receding on Monday, with Taoiseach Micheál Martin saying it was unlikely that there would be additional measures to alleviate inflationary pressures before the budget.

Speaking at the National Economic Dialogue in Dublin Castle, Tánaiste Leo Varadkar said “the case is stronger than ever” for indexing tax credits and tax bands. He said the current inflation spike could go on for years and would require long-term and temporary responses.

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Sources in the Department of Children said increased subsidies for childcare would be “significant” and would represent a key plank of October’s budget.

The three Government party leaders met on Monday night to discuss the cost-of-living crisis and they were given a presentation by Minister for Finance Paschal Donohoe and Minister for Public Expenditure Michael McGrath in advance of the publication of the Government’s summer economic statement.

Sources said the budgetary package for next year would far exceed what was provided last year, especially given the challenges posed by housing Ukrainian refugees and addressing high inflation. The social welfare package in Budget 2022 saw 1.4 million people receive a €5-per-week increase in payments and sources say this year’s package could see higher increases.

Mr Varadkar also said increases in the State pension and other social welfare payments would have to be greater next year than they were this year. He said the Government had already brought in €2.4 billion in measures to help with the cost of living and it had “nothing planned” before October’s budget.

However, he said some measures in the budget-day package “could come into effect almost immediately” while others would take effect next year. He said a lot of the weekly rates for social welfare payments could be increased by ministerial order and did not require legislation to go through the Dáil

Mr Martin said “we can’t chase inflation in a simplistic way” and warned the coming winter could be even more challenging.

After public pay talks were halted last week without agreement, Mr Varadkar said a “landing zone” for a pay deal could involve a higher percentage pay rise for lower-paid workers, tax reforms to benefit middle-income earners and “social wage” commitments. The negotiations with public-service unions stalled when a Government offer of a 5 per cent pay increase over two years was rejected.

Sources on both sides said they were awaiting an approach from the Workplace Relations Commission, but a spokesman for the Department of Enterprise said the role of the commission was to assist the parties at their request.