Thursday, 16 December 2021
Department of Finance
104. To ask the Minister for Finance the measures he plans to take to curb inflation and the impact it is having on the cost of living for those on low and middle incomes; and if he will make a statement on the matter. [62402/21]
107. To ask the Minister for Finance the measures he is taking to deal with the increasing cost of living and the impact this is having on low and middle-income households; and if he will make a statement on the matter. [62405/21]
I propose to take Questions Nos. 104 and 107 together.
The Government is very conscious of the recent spike in consumer price inflation, which reached 5.4 per cent in November. This, of course, is not unique to Ireland, with the majority of advanced economies recording relatively high rates of price inflation in recent months. That said, it is worth pointing out that this comes after several years of low inflation: the price level in Ireland is well below the level it would have been had inflation been in line with the ECB's price stability target of 2 per cent over the last two decades.
The recent rise in inflation is partly explained by global factors, including the recovery in oil prices following the pandemic-induced decline in prices last year, global supply chain disruptions and the imbalance between supply and demand in the markets for some goods and services following the re-opening of the economy. Many of these factors are expected to fade over the course of next year.
In its Economic and Fiscal Outlook, published alongside Budget 2022, my Department forecast a headline inflation rate of 2¼ per cent both for this year and for next. A scenario analysis was also presented which showed the impact inter aliaof higher energy prices on this projection.
The recent rise in wholesale energy prices means there is likely to be some upside to the projection for next year. Nevertheless, the baseline projection that the rate of inflation eases over the course of next year remains valid; while persistently higher inflation cannot be ruled out, this is not the central assumption.
The Government has responded to higher inflation in a timely manner, with a range of measures introduced in Budget 2022 to protect households against increases in the cost of living.
At a macro-level, these include a personal income tax package worth €520m and a social welfare package of over €550m.
At a micro-level, the fuel allowance was increased by €5 per week to compensate lower-income households for higher energy costs as a result of the increase in the carbon tax. There were also increases in the allocation of Early Learning Care and School-Age Childcare to ensure childcare prices do not rise.
Furthermore, following the recent rise in energy prices, the Cabinet this week approved an Electricity Costs Emergency Benefit Payment of up to €100 in 2022 to an estimated 2.1m domestic electricity account holders.
In conclusion, the Government has responded to the mitigate the cost of living increases and my Department will continue to monitor inflationary developments closely.