The scale of the Government’s response to the energy crisis, in the shape of a €11 billion package, should provide some reassurance to a worried population that a serious effort is being made to cushion them from the worst impact of rising prices, at least in the short term. Whether more will be needed in the longer term is another question.
Politically the challenge facing the Coalition in the run up to the budget was whether it would respond to the cost of living crisis in a way that was in tune with the public mood of apprehension about the sudden escalation in the cost of living or whether the natural prudence of the Department of Finance would limit the scope for extra spending.
In the event the Government made the decision to go with a massive response. It was made up of permanent measures like welfare increases and tax cuts costing €6.9 billion and a range of once-off measures including help with energy bills costing €4.1. Politically it was the correct decision because any indication that the Government was not taking seriously the undoubted hardship being inflicted on people would have been political suicide.
All three Coalition partners can claim to have achieved core objectives in the budget. Taoiseach Micheál Martin has always proclaimed that Fianna Fáil is a party concerned with social equity and was known to be in favour of the most generous possible package given the circumstances. He can feel comfortable that the final budget during his term as Taoiseach, particularly the €12 a week increase in welfare rates, reflects his values.
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There was also a Fine Gael stamp on the budget in terms of the increase in the tax allowance which means that workers will not hit the higher rate of 40 per cent until they earn €40,000. That should add close to €16 a week to the take home pay of those close to the threshold. Removing middle income earners from the top rate has long been a priority of Tánaiste Leo Varadkar and this is an important step in that direction.
The Greens can also claim achievements within the overall thrust of the budget. The measures to deal with childcare in particular have long been priorities for the party. While the Opposition attacked the budget for not going far enough, the scale of the package unveiled by Paschal Donohoe and Michael McGrath meant that the criticism was relatively muted.
Still, despite the scale of the budget package, living standards are set to fall over the next 12 months and there will be pressure for some of the once-off measures to be repeated next year. If inflation remains over 7 per cent in 2023 that pressure will be difficult to resist. With the country at the mercy of events outside its control, the real test of the Government’s ingenuity may yet be to come.