The mind-boggling costs for Ireland of the crisis in Ukraine

While the impact of Russia's invasion of Ukraine on Ireland pales into insignificance compared with the terrors being visited on that country, the toll on the exchequer and wider society should not be underestimated. This is not for the short term, it is not cheap, and it will not be easy.

Yesterday, Minister for Public Expenditure Michael McGrath updated a cabinet committee on the costs for Ireland associated with hosting tens of thousands of refugees – and they are mind-boggling, reaching up to €2.8 billion next year and €1.7 billion this year. When you add in the €800 million allocated to offset the impact of inflation on households, the impact this year could be up to €2.5 billion. To put that in context, the total taxation and spending package for Budget 2022 was worth about €4.7 billion. Much of that was pre-allocated, so the discretionary measures last budget day were actually less than what is likely to be spent on the crisis.

The Government response can simplistically be split in two: one side focused on providing humanitarian assistance, the other on supporting households.

While the former may seem open-ended, it is probably easier to define. The maths is relatively simple: take the number of refugees, and multiply by the combined cost of welfare, education and accommodation. This morning’s figure is jarring, but at least now it has been defined – notwithstanding uncertainties over how many people will need support, or what different forms of accommodation may cost.

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The coalition's hope is that measures announced will suffice while the worst of the crisis passes. In this calculation, there may not be a reason to "go again" – introduce more supports – until the budget, when some form of support for the next home heating season is likely. This is partially underpinned by the hope, as articulated by the ECB's Philip Lane, that inflation will start to ease off by mid-year. That seems hard to credit now, but if the coalition can muddle through until then, it may be rewarded. Whether that comes to pass is another thing entirely.

What would going again look like, and what questions would it prompt? There was a hope that VAT could be cut again, but while the Government has trumpeted commitments in the text of a communiqué following last week’s summit, sources in the coalition were yesterday downplaying the likelihood of immediate action on that.

Whether or not the Government intervenes again is contingent on several factors. The impact of inflation on prices for consumer staples is one, as is whether business and consumer confidence ebbs away. Questions multiply, but answers are harder to grasp. Carbon tax increases, due in May, are already causing grumbles – but are a political fait accompli, so could measures to offset the impact be favoured? Would new channels be created if additional measures were needed? Or would it be kept simple, cash payments or bonuses delivered through the welfare system – one off measures that don’t have to be turned off?

There are already expiry dates in the future that will prove politically problematic – the special hospitality VAT rate, and the excise cuts on fuel, both in August. Should more be created? And what of the steady rhythm of medium sized bailouts for certain sectors – €15 million for hauliers, €12 million for fodder farmers and, going to Cabinet today, €10 million for travel agents (admittedly a Covid legacy measure). Will more follow?

Government these days seems to be less about simply managing priorities, resources and demands, and more about doing so in an environment where massive shocks can be expected every few years.

Amidst all this, in some quarters there is a growing sense that not everything can be solved by unconstrained Government intervention – notwithstanding the conventional wisdom of counter-cyclical spending. "During Covid there was an automatic response to any request," a senior source said on Monday. "Now times are very different."

You can say that again.

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Playbook

Cabinet starts at 9am in Dublin castle, and will be followed by a press conference with at least one minister. The big item on the agenda is pension reform. More on what ministers will be discussing here.

Leaders’ Questions kicks off action in the Dáil at 2pm, from Sinn Féin, Labour, the Regional Group and the Independent Group. The Order of Business precedes Taoiseach’s Questions at 3.05pm, and Government business on the planning and development regulations at 3.50pm. Sinn Féin has Private Members’ Business with a motion on services for children with disabilities, at 4.45pm. Helen McEntee, who has finished Covid isolation, takes Oral Questions at 6.45pm, before Topical Issues at 8.15pm.

In the Seanad, the Order of Business follows Commencement Matters from 2.30pm, before the Committee Stage of the Health (Miscellaneous Provisions) Bill. There will be statements regarding the impact on the farming sector of the war in Ukraine, at 5.30pm. The report and final stages of the Animal Health and Welfare and Forestry Bill 2020 will come at 7pm.

On the committee front, the environment committee sits at 11am to hear from activist groups and the Commission for the Regulation of Utilities on energy challenges. The roundtable discussion on the future funding of higher and further education comes before the education committee at the same time. Later in the afternoon, there’s a session on social and affordable housing at the housing committee. That’s at 3pm, at the same time the justice committee is going to hear from the Irish Prison Service and others on rehabilitative opportunities within the prison system.