Taoiseach Leo Varadkar is correct when he says there should be no “cliff-edge” in February when many of the existing cost of living supports run out. It was clear from the time many of the measures were put in place that – as happened during Covid-19 – the likelihood was that some, at least, would be extended.
While the exchequer has available resources to do this, deciding on the correct course of action is not straightforward. During the pandemic, there was always a likelihood that lockdowns would, at some stage, be over. The subsequent reopening provided a clear end-point for many of the supports. There is no similar, clear end-point to the cost-of-living crisis.
There are some signs for cautious optimism. Wholesale energy prices have fallen significantly from their peak, though they remain multiples of their level before the crisis hit. The Irish economy continues to show some resilience.
However, even if the rate of inflation falls sharply this year, many households and businesses will remain in difficulty. Prices will most likely remain around current high levels. More permanent supports via budget changes to the welfare and tax systems are now kicking in, but such is the extent of the shock that the case for some temporary supports for households and businesses to be extended is likely to remain compelling. The question is how best to target them.
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The priority must remain helping less well-off households which have been hit hardest by the surge in inflation. Directing targeted supports at these households so that they do not face an income shock in the spring as current supports run out is justified.
There is also a case to continue to target help at businesses – many also facing punishing increases in energy prices – to save jobs. The case for a repeat of wider measures, such as further payments of the universal energy credit, looks weaker, particularly as bills will fall after the winter. Unfortunately the full impact of the price shock cannot be taken on by the State – the truth is that this has left Ireland poorer.