The Taoiseach has denied that upcoming measures to tackle the cost of living will be like a “mini-Budget” and has warned against a “cycle of inflation”.
The Government is currently looking at a number of different ways to tackle spiralling costs on families, with possible reductions in healthcare and education costs, motor tax, A+E charges on the table, as well as an increase in the upcoming €100 energy credit already being considered.
However, Finance Minister Paschal Donohoe today ruled out cutting VAT on heating bills.
“There won’t be a mini-Budget or anything like that but we are looking at other, further ways we could perhaps ease the situation for people in terms of the costs that they have to incur,” he said.
Mr Martin said that he wants to avoid a “cycle of inflation”.
“The [European Central Bank] have labelled the pandemic a cycle of inflation so I think that there are measures that we can do in terms of the energy rebate that we have already, that’s an illustration of what we can do without having to go through a budgetary scenario,” the Taoiseach said.
He said that the measures will be announced in the next “number of weeks” however it is believed within Government that it will be by the end of February.
Government officials within the departments of finance and public expenditure and reform are looking at a wide range of possible ways to reduce the impact of “one-off” costs on households, such as temporarily waiving fees on passport and driving licence renewals.
They are also looking at increasing the €100 energy credit to €150 or even €200, extending the fuel allowance season, as well as reducing the limit to the Drug Payment Scheme and extending eligibility to the medical card.
The Taoiseach said that financial situation is “improving all of the time”.
“The January [exchequer] returns were quite significant in terms of revenue,” he said.
“We have targets and I think we will reach our fiscal target by the end of the year but I think within that, there will be some flexibilities to enable us to help people, particularly those on lower incomes who are more effected by the inflationary cycle.”
The Coalition leaders have asked ministers to draft policy proposals aimed at easing the financial burden sparked by record rates of inflation.
Central to the Government’s plan will be targeting the cost of healthcare, with talks under way about reducing emergency department charges and prescription fees while also reducing the threshold for the Drugs Payment Scheme.
The Government is also examining the limits on medical cards to allow more people to claim the benefit.
Its €100 energy credit – to be deducted from bills in March – may also be increased, with senior government figures suggesting it could double to €200. The fuel allowance season could also be extended.
However Finance Minister Paschal Donohoe has ruled out cutting VAT on energy to deal with a spike in fuel prices, saying a €100 energy credit is the “priority”.
At an event today, Paschal Donohoe said reforming income tax could also help tackle the rising cost of living.
“The energy credit is a far more effective way of dealing with the cost of energy than our VAT code because we are already taxing at a low rate of VAT,” Mr Donohoe told an event organised by accounting body CPA Ireland.
The news comes after prices rose to a 21-year high of 5.7pc in December, falling slightly to 5pc in January, according to Eurostat.
The Consumers Association of Ireland (CAI) has called for an urgent cut to the 13.5pc VAT rate on electricity, gas and home heating oil to at least 9pc, the temporary pandemic rate for hospitality services.
Mr Donohoe said inflation is “clearly an issue” but that its causes are outside government control.
"We are looking to see, are there additional measures that we can put in place that will help, in particular, our consumers, our citizens, with the cost of living they’re facing.
"And the main priority that we have at the moment is the implementation of the energy credit which we’re aiming to bring in in March.”
EU rules allow for VAT rates as low as 5pc and 12pc for certain products, although the number of reduced rates per country is limited to two.
Mr Donohoe said Ireland’s VAT rate is already lower than most of our EU peers, which charge the standard 23pc rate.
Irish electricity prices are the fourth highest in the EU, at around 23pc above average, according to price comparison site bonkers.ie, with gas prices around the seventh most expensive.
Speaking today, Mr Donohoe said his “key priority” is to lower the number of people paying higher rates of income tax.
The Irish Independent revealed today how college fees for third-level students may also be reduced under cost of living cost cutting proposals.
Education Minister Norma Foley yesterday announced Leaving Cert and Junior Cert fees will be waived for this year’s students.
A reduction in motor tax is also on the table, but there are fears the Green Party will resist such a move.
The €55 driver licence fee and €75 charge for renewing a 10-year passport are also potentially up for review.
Social Protection Minister Heather Humphreys is examining whether the fuel allowance season could be extended by a number of weeks to allow people to draw down more money under the scheme.
A Fine Gael source said there is “total agreement among the party leaders that we need to do more”.
“Fine Gael favours a broad approach that would benefit all households, recognising the fact that middle-income households are struggling with significant bills such as childcare, mortgages, rents etc,” the senior party figure added.
Meanwhile, a Green Party source said they favoured a “targeted approach” aimed at helping people on lower incomes.
Fianna Fáil sources have warned there is a “thin line” between addressing the cost of living with government interventions, and contributing to rising inflation.
“The cost-of-living issue is very hard to manage politically, but the Government is very conscious of it and don’t want to contribute to inflation getting worse,” the source said.
Finance Minister Paschal Donohoe and Public Expenditure Minister Michael McGrath have been tasked with drafting a list of potential measures which could be introduced to address the cost of living crisis.
The powerful Cabinet Committee on Economic Recovery and Investment will meet next Thursday to discuss measures that could be introduced.
In the Dáil, Tánaiste Leo Varadkar said the cost of living is rising faster than it has in “20 or 30 years” and that he is aware governments in other countries are introducing policies to address the issue.
“Everyone is feeling it in their pockets and of course those on the lowest incomes are feeling it more so than those who are not, and the Government gets that,” he said.