The Government will spend billions in the coming months to try to stave off the worst of the cost-of-living crisis after it announced a record €11bn budget-day package.
Despite unprecedented spending which will hit €90bn in 2023, Finance Minister Paschal Donohoe and Public Expenditure Minister Michael McGrath would not rule out further emergency spending next year as it was admitted that a cold snap could put the country on the brink of recession.
Senior sources in the Department of Finance said the economy is now relying on data centres, spending on remote working by businesses, as well as investment by one or two major companies.
There are still fears that a cold snap across Europe this winter, or lower-than-expected generation of energy from wind and other renewables, could drive energy prices even higher.
However, senior Government sources said the package of measures announced yesterday has been devised to help protect against a recession in the coming months.
Striking an optimistic note, Mr Donohoe said: “We can, and we should be confident about our future.
The main measures in the budget include:
- Pensioners will receive about €2,300 more next year on foot of a €12 increase to their weekly State pension and other related welfare payments;
- Electricity credits for all households totalling €600 and a double child benefit payment for November;
- The entry point for paying the higher 40% income tax rate is to increase by €3,200 to €40,000 a year;
- Parents with children in creche, school, and college will all see reductions in their bills with reduced childcare fees, free school books at primary school level, and a €1,000 reduction in third-level fees announced.
- The price of diesel and petrol will remain unchanged, as the cut to excise will continue until the end of February.
On the potential need for more interventions next year, Mr McGrath said more energy credits could be given to households in 2023 if energy prices do not come down, as the Government will “evaluate” how households are coping.
Mr McGrath has also indicated there could be an extension of cuts to excise duty on fuel beyond February.
When asked about the possibility of further energy credits next year, in addition to the €600 announced in the budget, he warned that it will be a “tough” six to seven months for people across the country.
He told the: “As with all of these things, given the level of uncertainty and the level of change that’s there, and the volatility, we will of course have to keep it all under review."
The Department of Finance’s Economic and Fiscal Outlook states that "the key question is whether the economy is in line for a period of weaker growth or whether an outright recession is in prospect".
Department of Finance chief economist John McCarthy said: "I think we're in an incredibly uncertain environment."
The Opposition struggled to land any attacks on the budget, which several Government ministers admitted was designed to “stymie and muzzle” Sinn Féin’s relentless attacks on the cost of living.
Sinn Féin's finance spokesperson Pearse Doherty said the Government could have given "certainty" to those who are vulnerable and to "plan for the future", but that the Government had failed to do so.
In her Dáil speech, the party’s public expenditure spokesperson Mairéad Farrell said the Government chose to “weaken” or “water down” proposals they heard from her party.
She told the Dáil: “In some parts of today’s presentation, it would appear that you have spent the weekend rummaging through our wardrobe, stealing our clothes.
“But unfortunately, rather than a fashion upgrade, it appears to be something of a wardrobe malfunction.”