Taoiseach Micheál Martin has promised “a separate cost of living package” in September to help households financially. The initiative is to be introduced “parallel” to budget supports intended to alleviate the pressures being experienced by households due to rising inflation and hugely increased fuel prices.
Speaking in Dunquin, west Co Kerry at the Blasket Island Centre on Thursday, Mr Martin described Wednesday’s exchequer figures showing a surplus of €5 billion as “good news”.
“It’s good that the revenues have remained strong this year notwithstanding challenges in terms of the cost of living overall internationally,” he said.
Key sectors of the economy were still doing very well and foreign direct investment levels were strong, the Taoiseach said.
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“Revenues are increasing so Government plans are basically a comprehensive budget to deal with the medium to longer-term framework. That will also have a cost focus in terms of tax relief and also how can we reduce costs for families. Parallel with that, there will be a separate cost of living package, elements of which will apply this year and that people will feel the benefits of that package before the end of the year and in some cases almost immediately.”
This was to alleviate the pressures “that are undoubtedly there on many households across the country”, he said.
The pressures, he suggested, arose “substantially” from the war in the Ukraine “and Russia’s weaponisation of energy, of food and of migration. The buoyant revenue figures do give us some opportunity ... in the budget and cost of living package in September to take pressure off people.”
No figure in mind
He had no figure in mind “right now” for the special cost of living package but the intention would be to ease the burden on people generally, on “households, families with children”, he said. He also noted that a number of measures had already been introduced in pursuit of this goal.
The Taoiseach’s suggestion that the better than expected exchequer returns had provided the Government with an additional degree of latitude to help people in the budget with the pressures being experienced due to soaring inflation appeared somewhat at odds with the attitude at the Department of Finance on Thursday.
Officials at the department said that the situation with regard to the €6.7 billion package for measures announced at the time of the Summer Economic Statement remains unchanged with no plans for increased spending in September’s budget despite the surge in tax receipts this year.
The Government recorded record tax receipts for the first seven months of 2022, with a take of over €43 billion to the State’s coffers. The surplus of income over expenditure until the end of July is €5 billion compared to a deficit of more than €5 billion at this juncture last year. That €10 billion turnaround had already been identified by the Opposition as giving the Government more scope for the cost of living measures.
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Sinn Féin’s finance spokesman Pearse Doherty said on Thursday that the figures confirmed that the economy has rebounded quickly from the pandemic and there is scope to help those who have been hit hardest by rising energy prices and the cost of living.
“We saw earlier this year there was scope for additional interventions outside the normal budgetary cycle,” said Mr Doherty.
‘A failure by the Government’
“It was disappointing and a failure by the Government to leave families and small businesses high and dry over the summer months, when the impact of inflation and energy prices was known.
“There is still scope there to offset what’s been experienced by those worst affected and to soften the sharpest edges of the war in Ukraine,” he said.
Paul Murphy of People Before Profit said the latest returns removed any excuse from the Government for not taking action to shield people from the cost of living crisis.
“They will be under massive pressure to act decisively and to protect people. They need to increase social welfare and pension payments by 10 per cent, increase the fuel allowance and give a €1,000 electricity credit for all. I also think they need to put money aside to address the defects in Celtic Tiger buildings revealed by last week’s working group report. A major redress scheme will be needed to fix the tens of thousands of apartments affected,” he said.
However, a Department of Finance spokesman said that in the wake of the latest exchequer returns “the bottom line remains the same. These figures are not going to change that. The department was expecting these figures. But it is also expecting to see softening in the figures in later months this year despite this month’s figures. With energy prices, inflation and the war in Ukraine, we are expecting a weakening to occur.”
The Bank of England has forecast the UK is likely to fall into recession for the last three months of 2022 and for the whole of 2023, with inflation now set to reach 13 per cent.
In the Republic, large increases in corporate tax, VAT and income tax were the main drivers for the record returns. It is the highest tax-take for the first seven months of any year, and it was 23 per cent, or €8.2 billion higher than in the same period last year.
However, inflation is now running at over 9 per cent which is unlikely to be compensated for fully by any budgetary changes
The introduction of a windfall tax on the profits of energy companies in the budget is one income-raising measure being considered, the Taoiseach revealed in response to questions on Thursday.
“The Government will consider a range of issues and will give examination to the issue of windfall tax,” Mr Martin said.
‘Significant profits’
In the context of State companies like the ESB, he observed, the Government already takes a dividend but “I think there are significant profits being made all round, we will examine that in the context of the budget.”
Mr Martin added that Liquefied Natural Gas (LNG) “simply has to be considered” in light of the energy security crisis brought about by the war in Ukraine.
“All of Europe is looking at LNG, but the type of energy we look at and the mode of delivery may differ. So I am not going to get into any specific project, other than to say that LNG that uses fuel that is not derived from fracking is consistent with the programme for government,” Mr Martin added.
With regard to housing and the suggestion by a building firm that smaller gardens had a part to play in the provision of more homes, Mr Martin said that “delivery” remains central to solving the issue.
“We have a lot of planning permissions that have been granted. We need those planning permissions turned into houses as soon as we possibly can,” he said.
“Delivery is where I am focused on. We should make 24,500 [new homes] in 2022 but we need to be getting to 33,000 as in the plan, or even higher, every year for the next 10 years. To put a dent on the housing issue we need different modalities of housing from modular, to conventional, to timber frames,” he said.
Many high-density developments that already have planning permission are not progressing for one reason or another which is a significant issue, he suggested.
“It’s all about delivery now,” he said as he launched a book and a CD on the traditional music of the Blasket islands.
