Government unveils third package to offset cost-of-living crisis 

Finance Minister Paschal Donohoe said the reduction in VAT approved on Wednesday will result in savings of over €50 on an annual gas bill and €70 on an annual electricity bill.

The Government has unveiled its third major package of measures since October to offset the cost-of-living crisis as it seeks to combat growing unrest on its own backbenches.

A reduction to 9% in the VAT rate for gas and electricity from May 1 until the end of October has been approved by Cabinet.

Ministers also agreed to further reduce the excise tax on marked gas oil by 2.7%, to further offset cost increases on farmers and others in the agricultural sector from May 1.

“Today the Government has agreed to reductions in the rate of VAT from 13.5% to 9% on the supply of gas and electricity from May 1 to October 31,” Finance Minister Paschal Donohoe said.

Ministers also agreed to extend the period at which the reduced excise rate on petrol, diesel and on marked gas oil will apply up until budget day.

Social Protection Minister Heather Humphreys on Wednesday received approval from Government to provide an additional once-off lump sum payment of €100 to more than 370,000 of the most vulnerable households who are in receipt of fuel allowance.

Ministers also agreed to scrap the €50 PSO levy on electricity bills.

However, ministers did not reduce the VAT on home heating oil as to do that would have required a reduction to everything in the 13.5% category and that is not possible, Mr Donohoe said.

“The challenge that remains is that if I was to make a reduction in the VAT rate from home heating oil, everything else that is charged at that 13.5% rate would have to come down as well,” he said.

"The cost of this measure is estimated at €46m. So this measure has been introduced in recognition both of the challenge with the cost of living but also in particular to offset the increase in carbon tax which will take effect from May 1, Mr Donohoe said.

Carbon tax

Mr Donohoe said the carbon tax increases due in May will add €16.85 on average to an annual gas bill and €21.56 to a fill of home heating oil.

However, he said the reduction in VAT approved on Wednesday will result in savings of over €50 on an annual gas bill and €70 on an annual electricity bill.

“So these measures will more than fully offsets the increase in carbon taxation,” he said.

Wednesday’s move brings to almost €2bn the total amount of measures introduced by the Government since last October to offset the impact of the cost-of-living pressures.

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