Budget 2023: Can Government plan for a rainy day ahead while people get soaked now?

Ballooning energy costs have created more of a demand for money to help those who will be hurt most, but Paschal Donohoe has said that keeping spending down has protected the country long term.

Does the Minister for Finance, Paschal Donohoe, throw absolutely everything at this crisis now and leave no room to absorb future shocks, or does he squirrel away a bit of money to help if prices rise again? Picture: Colin Keegan, Collins Dublin

While the press releases accompanying the August Exchequer Returns were being signed off at the Department of Finance, news broke of yet another energy supplier upping its prices.

Bord Gáis Energy, this time, joining Electric Ireland, SSE Airtricity and Prepay Power in jacking prices, with further rises already being flagged. From October 2, Bord Gáis will be increasing electricity bills by 34% (€48.25) and gas bills will jump by 39% (€43.80) per month.

This will add €579 to the average annual electricity bill and €525.60 to the average gas bill. That's over a thousand euro a year extra for an average household.

While the August figures have provided Finance Minister Paschal Donohoe with an outline of what he and Public Expenditure Minister Michael McGrath have to spend on a cost-of-living support package later this month, energy costs ballooning creates more of a demand for that money to help those who will be hurt most by rising prices. 

And Mr Donohoe is keenly aware of that. On Friday, he told RTÉ's Morning Ireland: “Of course we do fully understand that those who were in lower income that the higher prices hurt them more. And what we will need to do, which we did earlier on in the year and we will continue to do, is look at a mix of measures that are capable of helping, of making a real difference."

But on the other side of the coin, Mr Donohoe is aware that these bumper corporation taxes are not necessarily permanent and has sought not to build them into spending plans. He denies being doctrinaire in keeping spending down, saying that it has delivered Budget surpluses and protected the country long term.

However, the reality of the situation was hammered home in a vox-pop on the radio programme which played right before the Minister took his questioning from Aine Lawlor. In it, one respondent said that their mother would not turn on the home heating at the moment if she was cold because of fears over the cost.

And this is the balance that Mr Donohoe and Mr McGrath will have to find - do they throw absolutely everything at this crisis now and leave no room to absorb future shocks? Do they squirrel away a bit of money to help if prices rise again?

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All of this comes at a time when the country is operating without a rainy day fund, with €1.5 billion having been taken from the fund in 2020 to pay for pandemic-related spending. A decision was made last year not to make a planned a €500 million payment into the fund and while another €500 million payment is set out in legislation, this too can be decided against by government.

Mr McGrath has been clear that he would like to see something put away in the fund and Mr Donohoe is said to be minded to, as well. However, the question will be whether a public which is struggling with costs across the board will be happy to play the long game and watch the Government be prudent while they suffer death by a thousand price rises.

The argument for prudence is strong — there are many cans which have been kicked down the road which will have to be handled soon and building up a fund with which to pay for them would be incredibly useful and further price hikes are likely.

Either way, it will be one of the biggest decisions the ministers have to make in the coming weeks.