The Government is considering putting some of this year’s surplus into a reserve fund which could be called upon if the energy crisis continues into next year, according to people familiar with the negotiations on next week’s budget.
Ministers have repeatedly said that they want to keep some fiscal firepower in reserve in case high energy costs continue into 2023. But there is fierce pressure from inside and outside Government to spend any available money to ease the cost-of-living squeeze on households.
Putting the money into a reserve fund would mean it could be set aside for use only if needed. A similar device was used to provide contingency funds for Brexit and during the pandemic. Senior Coalition sources now say that the energy crisis is likely to persist into next year.
Government insiders suggest the combined budget and cost-of-living measures to be announced next week could exceed €10 billion, with some suggesting the final figure will significantly exceed that sum. This comprises the €6.7 billion in budget spending increases and tax changes and more than €3 billion expected in once-off cost-of-living measures.
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Officials are understood to be still working on designing a scheme that will assist businesses in coping with rising energy costs, with one source describing the process as “enormously complex”. There is considerable concern in Government that any schemes could be open to abuse and sources say any subsidies for business will have to be linked to protecting employment, rather than firms’ profitability.
Budget negotiations are continuing between Minister of Public Expenditure Michael McGrath and Cabinet colleagues. Minister for Social Protection Heather Humphreys met Mr McGrath on Tuesday but it is understood that final agreement was not reached on several issues. Minister for Health Stephen Donnelly has also met Mr McGrath. Officials expect the process to run into the weekend before it is finalised in advance of next Tuesday’s budget.
The Social Democrats on Wednesday published their alternative budget, promising €2.5 billion in support to households and businesses to help with rising energy costs.
Cash payments
The party said it would provide cash payments to workers “on a graduated basis”, giving €800 to households with incomes of less than €50,000, €600 to households with incomes of less than €100,000 and €200 to households with incomes of less than €120,000. It also said it would provide welfare increases for next month, including a double payment
The party also said it would provide €1 billion for an energy crisis support scheme for businesses.
“People are struggling to survive,” said co-leader Róisín Shortall.
The party also said it would increase spending by €8 billion next year and raise additional taxation of €2.3 billion to fund new spending on public services.
The Labour Party will launch its alternative budget on Thursday and the party is expected to advocate for a €4 billion package in once-off measures to be implemented this year to combat cost-of-living increases.
The party will also say that it would spend €200 million broadening the eligibility on the fuel allowance to more households at risk of energy poverty and also introduce a refundable “carbon credit”, applying to half a million households with incomes of under €50,000, which would be worth about €800 per household across this year and next.
