Temporary cost-of-living tax cuts to be phased out over the year - Taoiseach

Taoiseach Leo Varadkar has said that temporary tax cuts introduced during the cost of living crisis will be phased out throughout the remainder of the year.

Mr Varadkar further dampened hopes within the hospitality sector that the VAT rate for the sector would not increase from 9 to 13.5 per cent. It is due to revert to 13.5 per cent at the end of the month. He said that other temporary measures such as cuts to excise on petrol and diesel would also need to be phased out, and that the Cabinet will set out the plan for this after its meeting next Tuesday.

He pledged a package of support for families, workers, businesses and vulnerable groups but moved to play down expectations by saying it will not be a mini-budget.

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“The package has not been finalised yet and won’t be finalised until it is approved by Cabinet on Tuesday. Suffice to say that inflation is now slowing down but the cost of living remains very high and is still getting higher and that is putting a lot of people, families and businesses under pressure and we want to help. The package will be all about helping businesses with their energy costs, helping families who are really struggling with the cost of living and also helping the people most vulnerable in our society, those with fixed incomes, pensioners, people on social welfare who will need a little bit of extra help.

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“But I also need to be frank with people as well, this is not going to be a budget or a mini-budget. The €11bn that we deployed in the last budget, that is only a few months ago, those measures are still being rolled out, and the temporary tax cuts that were put in place, they are temporary and they will need to be phased out over the course of the year and we will be setting out how that will be done.”

Asked specifically about the VAT rate for hospitality, he said: “we did a number of temporary tax cuts and they were temporary. We always said they were temporary in relation to VAT on hospitality, also on electricity and gas, also on excise on petrol and diesel. We were always very clear that they were temporary. They are not budgeted for, and they do have to be phased out and we will set out on Tuesday how they will be phased out. But what it does mean is that there will be further help at the same time. Help for businesses in particular, small businesses with high energy costs, help for families and people who are the most vulnerable.”

[ Cost of living: One-off welfare payments being considered as part of Government package ]

[ Coalition under growing last-minute pressure on hospitality cost of living measures ]

[ Spring cost-of-living proposals will focus on people on low incomes - Tánaiste ]

He said people have not yet seen the next €200 electricity credit take effect, and that not all of the budgetary measures have yet kicked in.

It emerged on Thursday night that the Coalition may be considering once-off payments to people on weekly welfare schemes – similar to the Christmas bonus but less generous – as part of measures to ease the cost of living crisis.

Sources cautioned on Thursday evening that no final decisions have been made, and that any such payments may not worth as much as the Christmas bonus, which was a double payment to welfare recipients.

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One option would be a “top up” given to some or all social welfare recipients to help with the cost of living. The Coalition is keen, however, to “normalise” the State’s financial outlay on the cost of living as inflation stabilises, and is also keen to provide assistance to workers.

There is also no certainty yet about another €200 electricity credit beyond the next one due in March, despite speculation in recent weeks that an extra credit could be on the table.

In its next package of supports, the Government is aiming to avoid a cliff-edge in the previous cost of living measures announced, such as the cuts to petrol and diesel which were introduced in March 2022. This was supposed to be for a period of six months but the measures were extended in the Budget in October until February 28th. The cuts in excise meant that a litre of petrol is 21 cent cheaper; a litre of diesel is 16 cent cheaper; and green diesel is 5 cent cheaper.