Nobody objects to free money. And so the Government’s €200 energy rebate, the central part of its policy to respond to the jump in inflation, will no doubt be popular. To the extent that there is criticism, it is mainly that the package of measures was not enough to compensate people. Being in power is never easy.
The Government was right to respond to the big jump in energy prices and a number of the initiatives in the package which direct more income to less well-off households are welcome. It is also interesting to see the Government acting to cut temporarily some prices under its control, notably those for public transport. These measures will help – albeit that it is well nigh impossible to precisely target the worst-affected in a timely fashion.
The €200 rebate will also be a welcome boost to those hardest hit by higher energy prices. However, the universal nature of the payment – by far the costliest element of the package – means better-off households are also to receive it. Politics is at play here, with the Government wanting to give something to the so-called squeezed middle. And it also wishes to act quickly.
But the universal nature of the payment means that some of the money will be effectively wasted by giving it to people who don't need it. And it opens the question about what happens if energy prices keep rising. To keep following higher prices with universal grants is not the way forward. If energy prices stay high, this is a cost to Ireland and means living standards will have to adjust. Protecting those who need support must be the priority and in the months ahead.
This needs to be part of a wider energy strategy. The short-term jump in energy prices may – or may not – ease. But the transition to more climate-friendly energy will keep upward pressure on fossil fuel prices. Measures to support retrofitting are a sensible response to this, even if getting this done will be challenging.
But the latest episode has cast a new light on the issue of fuel poverty and the exposure of many households, both those on welfare and lower-income workers. Commitments to protect these households through the transition are important and must be delivered on.
The Government will hope that the worst of the inflationary wave will pass by summer. It may do, though it is hard to tell. Irish economic growth is strong and there is upward pressure on wages, as shown by the latest trade union demands. For the Government, negotiating an appropriate public sector wage deal – fair to employees but not fuelling inflation – will be challenging. So will framing the 2023 Budget.
Inflation changes a lot of things and it is many years since the Irish political system has had to deal with it.