Paschal Donohoe: Cost-of-living supports cannot be sustained on 'year-round' basis

Paschal Donohoe ruled out a mini-budget but said that he and Finance Minister Michael McGrath will make recommendations to the coalition leaders in the coming days

Paschal Donohoe will meet Finance Minister Michael McGrath on Thursday and the pair are expected to thrash out a package of supports for the public.

The Government cannot sustain cost-of-living supports on a "year-round" basis, the Public Expenditure Minister has said.

Speaking in his Dublin Central constituency on Wednesday, Paschal Donohoe ruled out a mini-budget but said he and Finance Minister Michael McGrath will make recommendations to the coalition leaders in the coming days.

Mr Donohoe will meet Mr McGrath on Thursday and the pair are expected to thrash out a package of supports for the public. The Irish Examiner reported on Tuesday that a fuel allowance lump sum, a bonus child benefit payment and a further energy rebate are to be the main elements of a spring cost-of-living package.

However, while Mr Donohoe said he has a "clear idea" of the size of the war chest available to him and his Fianna Fáil colleague, he would not be drawn on how much money the Government will spend.

However, he did say supports of a year-round nature could prove to be unaffordable, meaning the 9% Vat rate on hospitality and the excise duty supports on motor fuel could be in line to be reversed. Mr Donohoe said there has been a shift in Europe with regards to inflation, which he says has peaked but will remain high.

"The Government will be meeting across the coming days to agree the details of how we will support our country across spring and in the run up to Budget 2024.

"I think it's very likely that the very high levels of inflation that we experienced in 2022 should now be behind us, but inflation will still be high for this year. That will still have an effect on living standards for homes, will still have an effect for businesses and our ability to keep people employed.

"But I am very optimistic that in the time ahead, we will be able to overcome this challenge of rising prices and get back to a better place.

"We will help. We know further help is needed. But this help ultimately does need to be affordable as well. We put in place in October, November and December of last year, a massive amount of support for households and for businesses because it was needed because we needed to support our country at a time when energy prices were so high. 

"We will not be able to maintain that level of support across an entire year. That will ultimately become unaffordable. And while we are grappling with risks that are beyond our control, such as the rising price of energy, we don't want to create risks of our own."

Call for mini-Budget rejected

Mr Donohoe said the Government will have to "weigh up" the merits of targeted and universal measures. He said that while he believes inflation will come down in 2023, prices will remain high. However, he rejected calls from the Labour Party to hold a mini-Budget. Labour leader Ivana Bacik told the Dáil that clarity was needed ahead of next Tuesday's announcement.

“Right across the country, people are struggling," she said. 

"I have heard from constituents who are paying as much as €1,700 for just five weeks of heating. The sorts of untargeted measures we have already seen barely make a dent in people’s bills. I agree with Social Justice Ireland’s condemnation of the Government’s overreliance on one-off, untargeted payments. 

"€1.2bn has already been allocated for untargeted energy support payments. As my colleague Ged Nash TD has said, that money could have been much better spent on targeted reliefs, the increase of child benefit, and of core social welfare rates.

“The Taoiseach insisted that what will be announced will not amount to a mini-budget. If it looks like a rose and smells like a rose, it’s a mini-budget. A finance bill does constitute a mini-budget."