The Government understands that price rises are making energy bills “unaffordable” for many people and will introduce measures to ease pressure on consumers which will be implemented quickly after the budget, Minister for Finance Paschal Donohoe has said.
As the State’s largest energy retailer announced another round of price increases, Mr Donohoe said the next round of cost-of-living measures would target not just people on lower incomes but also businesses and those on middle incomes who were struggling with increased costs.
He said that the Government would take action to help people with bills that “are increasing at a rate that can be and will be unaffordable”, adding that measures that can help with the rising costs would be “at the heart” of the budget and would be implemented this year.
Earlier, Taoiseach Micheál Martin warned energy prices will continue to rise sharply during the autumn and winter months in Europe, necessitating a wider intervention from the EU into the markets and also forcing individuals to see how they consume energy.
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Commenting on the announcement by Electric Ireland that it will impose substantial increases in charges for both gas and electricity, Mr Martin said it reflected “exponential” increases in energy costs throughout Europe that show no signs of abating. He attributed the change to the continuing war in Ukraine.
“We can alleviate pressure to some degree. (But) given the exponential growth, and forecast for the winter and early next year, clearly there has to be a wider intervention in the market to bring prices back down,” Mr Martin said.
Mr Donohoe said there were constraints on how much the Government could spend to assist households with energy bills, but repeatedly declined to be drawn on a figure.
Government sources have speculated that the additional cost-of-living measures in the budget, to be implemented this year, could exceed €1 billion, but it is understood no actions or spending ceiling has yet been agreed between the parties.
“There are no open-ended fiscal processes,” Mr Donohoe said. He added that “budgetary constraints… are back”, pointing to movements in the bond markets which have increased the price of borrowing for governments.
“Do I have parameters in my mind regarding the scale of measures that we can bring forward? I do. But it is more appropriate that I work with the party leaders on that for now. But there are constraints,” he said.
He acknowledged, however, that the Government has a significant surplus with which to fund some budgetary measures.
Mr Donohoe also emphasised that while measures to help the low earners and those on social welfare would be introduced, the Government would also seek to provide assistance to people who earned too much to qualify for means-tested supports but did not earn enough to be insulated from rising costs.
Mr Donohoe was cool on suggestions of a price-cap on energy, saying that the most effective way of implementing price caps would be on a Europe-wide basis. “I have not been convinced that we would be able to implement a price cap in an economy of our size without quickly creating other problems for ourselves.”
However, he said that the Irish Government was keen to consider any suggestions from the European Commission about intervention in European energy markets in order to lower prices.
He cautioned that windfall taxes could impact on investment in energy at a time when the Government was seeking to encourage investment in renewables to accelerate the transition away from carbon-based sources. But he said that the Government was assessing suggestions of a windfall tax, and would make a decision in advance of the budget.
