Mr. John Kinnane:

I thank the committee for its invitation to discuss the measures introduced since budget 2022. Budget 2022 set out an expenditure allocation of €87.6 billion for investment in public services. This allocation was made in line with the medium-term expenditure strategy, which sets out core expenditure growth of approximately 5% on average over the period to 2025. A €1.2 billion package of expenditure measures was announced to support citizens across a range of sectors with cost-of-living pressures. Some of the headline measures were increases in social protection payments, including weekly working age and pension payments, the living alone allowance, qualified child increase and fuel allowance; health affordability measures; funding for social and affordable housing; and enhanced student and childcare supports.

Analysis was undertaken using the ESRI's simulation welfare and income tax changes, SWITCH, tax and benefit model to illustrate the impact of the budget. The combination of tax and expenditure measures was progressive in nature, with households in the lowest income deciles seeing the strongest gains.

The economic and social context has changed considerably since the announcement of budget 2022 in October. The emergence of this new set of challenges, including rising energy prices and the humanitarian response to the war in Ukraine, has resulted in a number of budgetary developments. Since December 2021, in the region of €560 million in additional expenditure measures has been put in place to support citizens and businesses with increased costs. A number of these measures build on supports put in place in budget 2022.

I will set out a summary of the main measures. An energy credit payment automatically applied to the electricity bill of all domestic account holders to assist with rising energy costs. This will benefit more than 2 million households at an Exchequer expenditure cost of just under €380 million. In addition to the €5 per week increase in fuel allowance payments introduced in the budget, a further two lump sum payments totalling €225, paid in March and in mid-May, will benefit more than 370,000 households. Budget 2022 announced an increase of €10 in the weekly income threshold for the working family payment. The implementation of this increase was brought forward from April to June. A further reduction from €100 to €80 in the monthly payment threshold for the drugs payment scheme was also introduced. This will reduce medicine and drug costs for more than 70,000 recipients. A temporary 20% reduction in public service obligation, PSO, public transport fares until the end of 2022 was introduced to reduce the financial burden on commuters returning to the workplace. The estimated cost of this is €54 million. The maximum annual school transport charge was reduced to €150 per family at primary level and €500 per family at post-primary level for the next academic year.

A temporary and targeted emergency grant scheme for licensed hauliers provides a payment of €100 per week for licensed heavy goods vehicles for a period of eight weeks. This scheme reflects the vital role hauliers play in the supply chain. The estimated cost is €18 million.

Turning to the impact of construction inflation on public works projects, a number of changes were introduced in January to address price volatility. These changes were made to contracting arrangements for new contracts to ameliorate challenges arising from inflationary pressures deriving from the pandemic. Based on extensive feedback from Departments and owing to further constraints on supply chains and increased fuel and energy prices arising out of the Russian invasion of Ukraine, the Minister for Public Expenditure and Reform, Deputy Michael McGrath, yesterday announced the introduction of an inflation co-operation framework for those parties engaged under public works contracts. This seeks to address the impacts of the most recent onset of exceptional inflation and supply chain disruption.

The Revised Estimates 2022 set out an overall Government expenditure ceiling of €87.6 billion. This is inclusive of an unallocated contingency reserve of €3.9 billion. At this stage, approximately €1.5 billion of the reserve has been committed, taking into account the increased Covid-related supports introduced in response to the December wave of the virus, and additional funding required for the cost-of-living measures I have outlined. Furthermore, there will also be calls on the contingency reserve in the coming months in the context of any additional Covid-related expenditure, in particular as we enter the winter period, and for the provision of humanitarian supports to refugees arriving from Ukraine. A Supplementary Estimate for Vote 29 - Department of Environment, Climate and Communications, was brought before the Dáil in March. Further Supplementary Estimates may be required later this year to provide for the measures I have set out.

The series of recently introduced measures to support households with cost of living pressures comes at a time of significant additional expenditure to mitigate the impacts of Covid-19. The public finances are in a stronger position than this time last year, with Covid-19 related supports being unwound and tax revenue increasing. However, risks to the fiscal position remain. Borrowing since the beginning of the pandemic has increased, with gross general government debt of €234 billion forecast for 2022 compared with €204 billion at the end of 2019. In this context, Government has sought to implement measures which strike a balance between delivering targeted support, capable of timely implementation and are temporary in nature to ensure that our public finances remain on a sustainable trajectory and avoid actions that could result in further inflation. I thank members for this opportunity to speak with the committee. We look forward to answering questions.