No ‘cliff edge’ in February when cost-of-living subsidies for energy end, Varadkar says

Taoiseach says not all measures will be retained but no decision taken yet on keeping lower VAT rate for hospitality

The Taoiseach has said there will be no “cliff edge” for householders at the end of February when subsidies for energy are due to end, and taxes are scheduled to increase for electricity, gas, and at the petrol pumps.

Leo Varadkar also said no decision has been taken yet on whether the VAT rate for hospitality will continue at its temporary lower rate or revert to a higher rate.

In a round-table interview with political reporters, Mr Varadkar, who became Taoiseach on December 17th, said the cost-of-living issue would be one of the real challenges for the Government he is now leading.

He said inflation and cost-of-living pressures were affecting families very harshly at the moment.


“Notwithstanding the actions that Government has taken, notwithstanding rising incomes, almost full employment, a lot of people – maybe even most people – are seeing their real incomes fall because their spending power has been reduced, because prices have gone up so much,” he said.

In that context, he said there could be no cliff-edge for householders and consumers at the end of February. However, he indicated it was unlikely that all measures introduced to address cost-of-living issues would be retained.

“My view is there can’t be a cliff edge at the end of February. If we do nothing at the end of February, the energy credits run out, the TBES Scheme for business ends, VAT goes up on hospitality, electricity and gas, and excise goes up on petrol and diesel. I don’t think that’s a credible proposition at the end of February,” he said.

Mr Varadkar said a number of actions that will temper inflation and price increases will occur in the new year, including increases in the State pension, minimum wage and social welfare payments; reductions in income tax; and a further energy credit; as well as reductions in the cost of childcare.

However, he said it would not be enough to cancel out increases in costs. “I think it’s fair to say that we can’t have that kind of cliff edge happen at the end of February. We’re not going to have inflation and the cost of living under control by then. So in the new year, certainly by the end of January, or early February, the Government will have to give consideration as to what we can do in the spring to help people with cost of living – it won’t be possible to extend all of those measures, I think that’s clear, the public finances just wouldn’t support that.”

The current lower 9 per cent VAT rate for hospitality applies to accommodation and also food services.

However, some hotels have been charging higher prices because of increased demand. Asked if the Government could distinguish between hotels and food services in pubs and restaurants, the Taoiseach said: “No decision has been made on that. I know the reason why people speculate on that and that’s because that was not legally possible in the past to separate food service from accommodation.

“However, because the VAT directive has been changed, that is now possible legally. But just because it’s possible legally doesn’t mean that we’ll do it. It’s an option that we can consider as part of the mix.”

Asked if housing could be the issue on which the Government loses the next election, Mr Varadkar said he was not going to spend the next two years fighting the next election.

“We’re going to spend the next two years as a Government, all three parties, focusing on doing a good job. I think if we do a good job, well that will increase the electoral prospects of all three parties that are in the Government.

“I think what’s important is that in two years’ time, things that are going well in Ireland, whether it’s the economy, job opportunities, economic opportunities, the public finances, that they should still be going well, and the things that aren’t going so well, or are going badly, for example the housing situation, that those things should be improving.”

Responding specifically to issues affecting young people, he referred to climate change as one of the areas where the Government was distinct from Sinn Féin and other smaller Opposition parties. “Climate action is an area where we have very good plans as a Government. I think we’re much more credible on climate for example than the Opposition is.

“When it comes to being part of Europe, being part of the world, I think we’re much more in the space of being in favour of the European Union than the Opposition is. A lot of them are very hostile to European integration, don’t want any more of it,” Mr Varadkar said.

“They don’t talk about that much any more because they know it may cost them votes, but it’s the truth and they need to be called out on that.

“Of course there is housing and, you know. I understand how much the housing crisis is hurting people, particularly young people, and that’s why I want to do all that we can to reduce the cost of rents and the tax credit is the first step in that.”

Harry McGee

Harry McGee

Harry McGee is a Political Correspondent with The Irish Times