Ireland’s humanitarian aid for Ukrainian refugees likely to be €2.8bn next year

The cost of Ireland providing humanitarian support for refugees from the Ukraine war is expected to reach €2.8 billion next year, according to internal Government figures.

The figure – described by one Government source as “huge” – is expected to “ramp up significantly” this year as more arrivals follow the initial cohort of 10,000 refugees.

Around €500 million per year is expected to be spent on those already in the country, but this could rise to €1.7 billion in 2022 as more fleeing the conflict arrive here.

The figures were provided by Minister for Public Expenditure Michael McGrath to the Cabinet committee on economic recovery and investment. Mr McGrath told his colleagues that the cost would cover the provision of accommodation, social welfare supports, health and education.

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He previously said that the sum would run to the “hundreds of millions”, but the projections which will also be shared with Cabinet on Tuesday are the first concrete projections of the impact on the exchequer.

October’s budget

The Covid contingency fund – which was provided with €4 billion in firepower in last October’s budget – has also been significantly impacted so far with €1.5 billion to cover Covid supports in December and January, the €1,000 bonus for healthcare workers and cost-of-living measures like the €200 electricity credit.

There is around €2.5 billion available to tackle further Covid costs and the labour market impacts arising from pandemic supports being unwound.

The figures are estimates and will vary depend on the exact types of accommodation being used. There will be an additional need to allocate a budget in 2023, with no Covid reserve fund to draw on.

The scale of the spending required is likely to harden Government resolve in the face of calls to increase cost-of-living interventions in the short term.

Sources across the coalition downplayed the possibility of any imminent further measures, with senior figures anxious to hold out for the budget if possible. Interventions, if they come, are likely to focus on lower-earning households, one senior source said.

With a public sector pay deal due to be negotiated this summer the Government is now expecting “angst” over the wage hikes it can deliver to public servants.

Similarly, private sector wages are also set to be impacted despite calls from Siptu, which doubled down on its call for wage increases on Monday.

Speaking at the union's biennial delegate conference, general secretary Joe Cunningham said the union "will not accept the idea that wage increases will fuel further inflation. Inflation is being driven by energy costs and transport fuel".

Fórsa, which represents public sector workers, has sought a date for pay talks.

Pressures

However, sources inside Government were guarded. “We need to try to control what we can domestically,”one said, referencing wage increases and inflationary pressures.

”We need to anchor for a bit,” one said.

The prospect of rapid action on VAT was downplayed despite Ireland securing concessions from Europe on measures to tackle high energy costs, which a commission communiqué issued on Friday described as "time-limited departure from the status quo".

Dublin is optimistic that this language clears the way for VAT cuts on energy if needed without threatening Ireland’s historic derogations, but believes more technical work is needed before this comes to fruition. The coalition is hopeful that energy rebates will nurse households through the current period of high energy costs.

Sources acknowledge higher food prices and shortages are on the horizon, but point to €800 million in interventions sanctioned already this year. Others in Government believe the line should be held until at least May, with the possibility then to do something to even out the impact of carbon price increases.