McGrath signals more help for households with energy costs in upcoming budget

The possibility of more help for households with energy costs in the upcoming budget has been signalled by Minister for Finance Michael McGrath.

Energy prices shot up in the wake of Russia’s invasion of Ukraine last year.

The Government has since brought in four €200 energy credits to help all households with the costs, reduced VAT on gas and electricity bills and expanded the Fuel Allowance Scheme.

He promised additional support for households in the budget between tax and expenditure measures, and said the Government needs to decide on the “right mix”.

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Mr McGrath told RTÉ radio that the Government wants to see the market responding by passing on reductions in wholesale energy costs to consumers “and come early October we will then come to a final view about what is an appropriate Government response”.

He added: “It is an unavoidable cost that households are facing and that is why I do anticipate that the Government will be providing support to households to meet the energy bills in the months ahead.”

Mr McGrath said the decision is yet to be made on whether any support would go to all households.

[ Energy prices to remain high into 2024 despite wholesale falls ]

Separately, he confirmed it is still the Government’s intention to return the VAT rate for the hospitality sector to 13.5 per cent, up from the current 9 per cent.

He said the sector had been provided with extensive support during the Covid-19 pandemic and cost-of-living crisis.

He said the plan to return the VAT rate to 13.5 per cent at the end of August has been “decided upon, legislated and will be given effect”.

Mr McGrath also defended the Government’s plan to breach its own 5 per cent spending rule in the upcoming budget in the wake of criticism from the Irish Fiscal Advisory Council (Ifac).

That organisation said the intention for core expenditure to rise by 6.4 per cent in 2024 – as flagged by the Coalition in the Summer Economic Statement – “repeats a pattern and undermines the credibility”.

[ Irish people struggling with energy crisis costs more than others in EU ]

Asked about the worst-case scenario for the breaching of the spending rule, Ifac chairman Michael McMahon said on Sunday that if the country was suddenly in a position that it had to borrow a lot of money it could be much more costly or risk the availability of such funds.

Mr McGrath responded to the Ifac concerns about the plan to breach the spending rule saying the Government believes “we have struck the right balance here between supporting households, supporting businesses, protecting living standards, protecting the real value of public services, while at the same time not stoking inflation at a time when it is thankfully falling”.

Mr McGrath also said that €6 billion has been put into a national reserve fund and the Government plans to set up a new long-term savings fund “to protect and safeguard the country’s public finances”.