The Government’s response to the cost of living crisis will inevitably dominate the new Dáil session which begins today. The Coalition parties will have to walk a tightrope between devising a generous package of measures to reassure a worried public while not placing too heavy a burden on the Exchequer.
The indications are that the budget, which is due to be unveiled in two weeks, will contain more than €2 billion in once-off spending to assist people with their fuel bills over the coming winter as well as a range of longer-term measures to help, including increases in pension and social welfare payments and enhanced childcare supports. The Government is fortunate that the most recent official figures at the end of August revealed an Exchequer surplus of €6.3 billion, compared to a deficit of €6.7 billion a year earlier.
The massive €13 billion turn-around was due to strong growth in tax revenue and a decline in spending following the unwinding of Covid-19 supports. Taking the figures on a 12-month rolling basis, a better indicator of the trend, the Exchequer surplus stands at €5.6 billion. The healthy state of the public finances despite the pandemic spending should give the Government sufficient headway to come up with a range of measures to cushion people, particularly the most vulnerable, from the impact of escalating energy costs, at least for this winter.
Minister for Public Expenditure Michael McGrath has given a strong hint that the focus of energy policy will be further direct assistance with electricity bills, based on the model of the credit introduced earlier in the year, rather than a cap on the bills of households – and for a period businesses – which has been adopted by the new UK government. The advantage of a credit rather than a price cap is that it will still give people an incentive to cut down on their energy use and leaves less exposure for the exchequer.
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However uncertainty about the scale of bills will remain. A clear strategy – including advice to households – on reducing demand, especially during peak hours, will also be important. As well as help with energy bills there have been hints of a double payment of child benefit, pensions and welfare payments for the last three months of the year as a way of helping people likely to be hardest hit. A range of measures to help business and protect jobs are also on the cards. The cost of living crisis does not mean that other issues have gone away. Housing and the allied question of looking after Ukrainian refugees will continue to be the focus of political debate. The ongoing tension about the Northern Ireland protocol will also require close attention from the Government. The coming Dáil session could be a defining one for the Coalition.