Budget alone will not be able to get Ireland ‘on top of inflation crisis’, Varadkar says

No budget announcement, be it now or in September, will be able to get Ireland “on top of the inflation crisis”, Tánaiste Leo Varadkar has said.

However, the Fine Gael leader said the Government needs to “tame inflation” and this would require “a comprehensive approach” involving domestic and international actions.

Mr Varadkar said the Coalition is working on an inflation-crisis related loan scheme for businesses, similar to schemes put in place in response to Brexit and the Covid-19 pandemic. He said a grant scheme for businesses facing viability issues as a result of surging energy costs was also being examined, but this would not apply to retail operations.

[ Inflation hits 38-year peak of 9.1% as cost-of-living crisis worsens ]

The Tánaiste was speaking during Leaders’ Questions in the Dáil on Thursday, where Sinn Féin deputy leader Pearse Doherty said inflation had, according to the Central Statistics Office, reached 9.1 per cent, the “highest rate in four decades”.

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Mr Doherty said one in three people were living in energy poverty and that the Government “can and should have done more” to protect workers and families.

Mr Varadkar said the State was facing “an unprecedented situation” with war going on in Europe while economies were recovering from the effects of the pandemic.

“I think it is important to say that budgetary measures and budgetary actions that the Government has taken and will take can help to ease the cost of living for people and can help to ease the burden of inflation,” Mr Varadkar said. “But there’s no budget, whether it’s early or late or emergency or ordinary, that is going to get us on top of the inflation crisis. We need to tame inflation and that requires a comprehensive approach; international action, action on a European level and also domestic action as well.

“What we have to do over the next six months to a year is get inflation down and tame inflation, not fan the fires of inflation. That won’t help anyone in the long run. We have to avoid that.”

Mr Varadkar said the upcoming budget would include a series of measures which “people will see in their pockets within weeks” as well as “another set of more regular measures” that would take effect from January.

Not a tax haven

Separately, Mr Varadkar said Ireland was “not a tax haven” and did not want to be perceived as one.

The Tánaiste was responding to Independent TD Michael Lowry who asked what contingency plans were in place in the event of decreasing levels of foreign direct investment as a result of the implementation of the global and European minimum corporation tax rate.

Mr Lowry said Ireland had used the 12.5 per cent tax rate as a “very effective economic developmental tool” which had led to “a flood of multinational investment” into the country on the back of “favourable conditions”.

The Government has agreed that Ireland will sign up to a global deal on corporate tax reform that will set a minimum rate of 15 per cent for large companies.

Mr Varadkar said the Government felt it made sense “from an enterprise and economic policy point of view that we should be inside the tent, that we should be part of the agreement”.

“Ireland is not a tax haven and we do no not want to be perceived as a tax haven and we think it makes sense to be inside the agreement and that’s one of the reasons why we have supported it,” he said.

He said the Government anticipated that there would be record corporation profit tax receipts this year and expected these to “continue to rise”.

“We think revenues will continue to rise over coming years but we can’t take that for granted and they will fall at some point,” he said.

Mr Varadkar said such profits had to be used in a “sensible way” and would be put into investing in capital infrastructure.