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The Cabinet is expected to sign off on further measures to mitigate the rising cost of living on Wednesday, while also approving the Stability Programme Update, a key economic and fiscal document which will set out the Government’s medium-term view of the budgetary situation.
The temporary reductions in VAT on gas and electricity (but not on petrol, diesel or home heating oil) are intended to offset the scheduled rise in the carbon tax next month, which the Government is determined to proceed with despite calls from the opposition and some of its own TDs to postpone it.
The Cabinet is also likely to approve further targeted supports for those on the fuel allowance, including an additional three weeks’ payment worth €99, paid in one lump sum. This will benefit about 370,000 people, officials said.
The planned temporary reduction of VAT on gas and electricity from 13.5 per cent to 9 per cent will require domestic legislation and be worth about €49 a year on gas and €61 a year on electricity.
Overall, the Government was spending approximately €2 billion on packages designed to help people with cost-of-living increases, Tánaiste Leo Varadkar said while speaking to reporters in Dublin on Tuesday.
The Government wanted to have a balanced budget this year but the growing economy meant there was scope for helping people with cost-of-living increases, he said.
“What we want to avoid is the fool’s paradise of using borrowed money to help people with the cost of living, and that is why we can’t go as far as maybe we would like to in an ideal world,” he said.
“If we jack up borrowing to help people with the cost of living now, we would have to take that back off people in a few years’ time, and I don’t think we would be doing anyone any favours if we did that.”
Elsewhere, the Taoiseach said that the Government could not entirely offset the rises in the cost of fuel.
“I’ve been very consistent that we cannot entirely deal with our response 100 per cent to all of the increases that have happened as a result of the pandemic and as a result of war,” he said.
“What we can do is do the very best we can to alleviate pressures on people and we have done that through close to €2 billion allocation from both the budget and measures since January,” Mr Martin said.
Meanwhile, the Stability Programme Update - which the Government is required to submit to the European Commission under EU budget rules - due to be approved by the Cabinet this morning is expected to stress the dangers of the rising cost of borrowing, in a deeply uncertain international environment.
It is expected that the document will say that the war in Ukraine will slow rather than derail the post-Covid economic recovery. It is also likely to predict that inflation will peak in the second quarter of the year, but also warn that a further escalation of the war, which would impact on energy prices and supply chains, is possible.
Ireland’s very high levels of public debt makes it vulnerable to increases in the cost of borrowing, widely expected in the second half of the year.
A number of judicial appointments are also expected to be approved by the Cabinet.