Budget measures on cost of living will have ‘immediate impact’, says Taoiseach

Martin says a budget package must be developed that does not add to inflation and create second and third rounds

Measures in the budget will have an “immediate impact” this year, Taoiseach Micheál Martin has pledged as he insisted the Government is correct in its strategy to wait until the autumn for further measures to ease the cost of living.

His remarks come as inflation in Ireland hit 9.6 per cent and Electric Ireland announced price increases that will kick in next month.

Fianna Fáil held a half-day parliamentary party meeting focused on the budget on Friday.

Mr Martin said a budget package must be developed that does not add to inflation and create second and third rounds.

Fianna Fáil, he said, wants to target measures on households with low incomes and the “squeezed middle”.

He said the party’s TDs and Senators made about 110 budget proposals on issues such as childcare, pensions, housing and education.

At a press conference, Mr Martin promised a “substantial budgetary package” including income tax and expenditure measures to respond to the cost of living.

Asked whether it is sustainable to tell the public to wait until September or October for the budget given the rising energy bills and rate of inflation, Mr Martin said the Government has already brought in €2.4 billion in measures.

He said the Government is “correct” in its strategy as it will be a “long winter” and the “big fear in the autumn is that Russia may cut off gas supplies to Europe with the consequential prices”.

He said the budgetary strategy is to have a package “that can have immediate impact once the budget is announced on people, certainly within this calendar year”.

Mr Martin said: “We have to work out what’s the best way to alleviate the pressures on households in terms of their disposable income and a way that doesn’t further exacerbate the inflationary round.”

He said one key objective of Government is to “marry some cost-reducing measures” with climate action such as reducing transport costs.

Minister for Public Expenditure Michael McGrath said the Summer Economic Statement will be brought to Cabinet on Monday.

“It will take account of the current economic circumstances and it will go beyond the package that was envisaged in the Stability Programme Update that we published in April,” he said.

Mr McGrath said the package had been based on the medium-term fiscal framework adopted in last year’s Summer Economic Statement.

“The principal reason for a change is that when it comes to public spending, for example, the rule at the time was based on about 5 per cent growth, which is linked to the trend growth rate in the economy.

“And that was predicated on about 2 per cent inflation and then 3 per cent real growth.

“Of course we are now in a very different space in the context of the level of inflation that we’re facing.

“So we will be changing the parameters and the exact details of that will be available on Monday.”

Asked how concerned he was at the 9.6 per cent inflation rate in June, Mr McGrath said it “reflects the living reality, it reflects the prices that people have been paying in recent weeks and it is exceptionally high”.

He said 10 of the 19 eurozone countries have a higher rate than Ireland’s but added: “That’s no consolation to people who have to pay those high prices.”

He said it underlines the need for the Government to “respond in a very significant way” and that measures to respond to the cost-of-living crisis will have to be implemented “really quickly”.

Mr McGrath also said: “This is a level of inflation we haven’t seen for four decades.

“The Government’s response has to be commensurate with that and reflect that.”

Cormac McQuinn

Cormac McQuinn

Cormac McQuinn is a Political Correspondent at The Irish Times