The government plans to introduce a Christmas bonus-style welfare payment in July and extend fuel allowances as part of a series of new measures to tackle the spiraling cost of living, can we reveal.
The move – which comes as economists warn of an unprecedented FOUR interest rate hikes before the end of the year – is one of several anti-inflationary fiscal measures planned for next month and October. Some will be announced in a summer economic statement before the Dáil breaks in mid-July.
But, in a “revolutionary overhaul” of the budget process, as one minister described it, many of the measures announced in October – such as social protection and fuel subsidies – will take effect immediately.
The measures come as thousands of people took to the streets yesterday to demand the government take action to control the rising cost of living.
Christmas bonus-type social assistance, an expansion of the fuel allowance scheme and new measures on excise duties on petrol are among the measures favored by government leaders.
Widespread increases in mileage rates and travel allowances for civil servants are also expected, which will be part of any agreement on pay negotiations.
A €600m investment in childcare – spread across three budgets – will also be announced in October, along with what ministers describe as “measures to deal with soaring rents”. New social protection measures and increases will be unveiled in October, which will take effect immediately.
Protests against soaring prices took place across the country yesterday, including a rally at the Garden of Remembrance in Dublin and a march to the Dáil. Referring to a report this week which highlighted that almost 30% of households were fuel poor, Dublin walk coordinator Eddie Conlon said: “It will get worse as prices continue to rise.” Urgent action is needed. Next October will be too late for many households as they slide deeper and deeper into financial distress.
In response to calls for action, Coalition leaders will begin a series of meetings tomorrow with Finance Minister Paschal Donohoe and Public Spending Minister Michael McGrath. They will meet next Monday to finalize the last package of interventions.
Cabinet is in the process of finalizing the Summer Economic Statement, which will be released in late June or early July. This will reveal the amount of money the Depleted Treasury will need to spend this year and beyond.
In pictures: thousands of people protest against soaring prices
Senior government sources involved in the budget process said funds would be made available for a “significant intervention” in July. But they warned it would reduce the coalition’s ability to act again in October, when the rising cost of fuel will really start to be felt as temperatures drop.
In the past, most social benefits and other measures announced in the October budget were paid at the end of December or at the beginning of the year. But indicating the need to respond quickly to the worsening crisis, action will be taken immediately.
A minister said: ‘What some of us like about the Christmas bonus type payment is that the system is already there to make the money immediately available to struggling families, but the problem with Christmas delivery in the summer is that it reduces our ability to get around at Christmas. Or October for that matter.
Another cabinet minister revealed that the finance ministry was successfully resisting pre-budget intervention until a few weeks ago. However, the pressure from politicians, themselves under increasing pressure from voters, to move is now “irresistible”.
A minister said: “There are powerful cabinet ministers behind a decision now. It’s not set in stone that there will be a package before the budget, but there is debate on that now… and the pro-interventionists are winning. This is a judgment call. People are hurting now, but it’s likely to hurt a lot more in the fall.
Among the measures being considered is a plan to significantly expand the pool of people eligible for a boosted fuel allowance in July. And while the government says the scope for VAT cuts is stretched to the limit, Cabinet sources say there is room for petrol excise duty cuts.
However, Taoiseach Micheál Martin is under pressure from Fine Gael ministers to deliver on his pledge to secure a waiver of EU VAT and excise duties on fuel.
A source said: “I don’t think anything concrete came of it. [Taoiseach’s commitment on VAT derogation]. There is a new VAT directive which is on the way and this has given us additional flexibility which has been used there in the VAT reductions on gas and electricity. We therefore do not expect any changes at EU level.
The government is also frustrated that the Taoiseach’s repeated statements that any intervention will be part of the “Budget process” has not underlined that this also means that important payments and measures would be accelerated to delivery in October.
A Cabinet source said: ‘This is a major reform of the way we do things. We will vote for changes to social protection in the nights following the budget.
Starting tomorrow, there will be weekly meetings on Mondays in preparation for the Summer Economic Statement.
Additional reporting by John Drennan