Written answers

Thursday, 16 June 2022

Department of Finance

Cost of Living Issues

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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84. To ask the Minister for Finance his views in relation to the observations made in the Organisation for Economic Cooperation and Development’s recent economic outlook which noted that measures introduced by the Government since the beginning of 2022 in response to the cost-of-living crisis provided limited protection to poorer households; and if he will make a statement on the matter. [31252/22]

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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The Government recognises the challenges of rising price pressures and has responded to help to ease the impact on businesses and households, particularly those on low incomes. Indeed, the OECD Economic Outlook notes the extent of supports that the Government has introduced to mitigate the adverse impact of inflationary pressures. On a cumulative basis, €2.4 billion has been announced in cost of living measures to date.

At the outset, Budget 2022 was framed within the context of these price pressures. It contained an income tax package to the value of €520 million, a social welfare package worth €558 million, and other supports, including health and childcare measures, to help to mitigate the cost of living.

Since the Budget, Russia’s invasion of Ukraine has exacerbated price pressures. The Government has introduced further measures to help to ease cost of living pressures, including a suite of measures in February amounting to €505 million. Further supports were announced in March and April, including an energy credit, a reduction in the VAT rate for electricity and gas, and reductions in excise duties. In May, the Government announced an extension of the 9 per cent VAT rate for the tourism and hospitality industry for a further six months.

The Government is acutely aware of the differential impacts of rising inflation across household groups and has introduced this range of targeted measures to help alleviate the burden on those worst affected by current price pressures.

The tax and welfare changes introduced in Budget 2022 and more recent measures to mitigate the increase in the cost of living were strongly progressive, with the gains from measures more keenly felt by those in the lower income deciles.

However, it is important to bear in mind that the causes of current price pressures are not within our control. Whilst the Government will continue to work to minimise the fall-out on those who are least-equipped to respond, resources are limited and we cannot cushion households and businesses from the entire impact of the current shock.

Furthermore, in calibrating how we respond to the current challenges, it is important that we strike the right balance and ensure policy does not inadvertently add further inflationary pressures.

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