Cost-of-living package: €200 welfare bonus, €100 child benefit top-up and retention of 9% hospitality VAT

The Government has signed off on a €1.3 billion package of cost-of-living measures, including €200 bonus welfare payments, a €100 child benefit top-up, more generous supports for businesses to meet energy costs and an extension of the lower VAT rate of 9 per cent for the hospitality industry.

At a meeting of the Cabinet on Tuesday morning, a range of new spending measures and extensions to tax cuts were agreed – along with an overhaul of the State’s support scheme for businesses facing high energy bills.

Details were announced by Taoiseach Leo Varadkar, Tánaiste Micheál Martin and Minister for the Environment Eamon Ryan at Government Buildings in Dublin.

As part of the announcement, Mr Varadkar said there will be no new credits for energy bills over the summer.

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The main measures are as follows:

Welfare

Carers, pensioners, lone parents, disabled people and other recipients of weekly welfare payments will receive a once-off bonus payment in the spring of €200 on top of their usual benefit. This is being pitched as a “targeted” measure, but it is not accompanied by further payments to things like the Live Alone or Fuel Allowances, or the Working Family payment, which were part of the budget last September.

It will be paid in April.

Parents

Child benefit will be topped up on a once-off basis by €100 per child. This is less than at budget time, when the bonus was paid at the full rate of €140 per child. The measure is being described as “universal”. The inclusion of a universal measure was a key demand of Fine Gael in particular. It will be paid in June.

The combined cost of the welfare measures will be €470 million.

School transport and education

The Government is to reintroduce a fee (subject to caps) for school transport services, after they were waived last year as a cost-of-living measure. Families will be asked to pay €50 for primary school students and €75 for post primary, up to a capped maximum of €125 per family.

It is understood the reintroduction is partially in reaction to people taking up the free ticket but not using it, or using it only rarely.

The cost is usually in the region of €600 per year, with the Government allocating €49 million to make up the difference between the new fee and the real cost of the service.

It will not affect people who hold a ticket for the 2022-2023 academic year, being introduced in September for the forthcoming school year.

The Government is also waiving exam fees for the Leaving Cert and Junior Cert in 2023, at a cost of €11 million.

There will also be a €100 top-up for the back to school allowance.

There was also an agreement to prepare for the expansion of the Hot School meals programme in non-DEIS primary schools, and the programme will be extended to all DEIS primary schools from September.

Hospitality

The hospitality industry has been granted another extension to the lowered VAT rate of 9 per cent. This comes after much toing and froing, as well as an abortive attempt to see if the rate could be split, with hotels going on to the higher rate and restaurants retaining the lower rate.

The entire industry will continue to benefit from the 9 per cent rate until the end of August – with the Government swearing that this will be the last extension, amid strong official warnings that there is no justification for its ongoing existence.

It will cost an estimated €300 million.

Excise

Lowered rates of excise duty levied on motor fuels are to be increased on a phased basis. Rates will go up on June 1st by 6 cent per litre of petrol, 5 cent per litre of diesel and 1 cent per litre of marked gas oil. On September 1st these rates will increase by a further 7 cent for petrol, 5 cent diesel and 1 cent for marked gas. Rates will then be fully restored on October 31st with a final increase of 8 cent for petrol, 6 cent for diesel, and 3 cent for market gas oil.

The cost will be in the region of €383 million.

Business supports

The Temporary Business Energy Support Scheme (TBESS) has been extended for another three months, following a lower than expected level of uptake. The terms will be more generous – with up to €15,000 per business available, or €45,000 for a firm with multiple sites.

Also, the eligibility has been tweaked – businesses will now have to show an increase of 30 per cent in the unit cost of their electricity over 2021, versus 50 per cent when it was first established. The scheme will now cover 50 per cent of the additional costs firms have experienced in their bills, up from 40 per cent. There is to be a new grant for businesses that use LPG or kerosene.

The costs of this have already been allocated for in Budget 2023.

Energy

There will not be more energy credits over the summer period, but the already-agreed March credit of €200 will go ahead. Taosieach Leo Varadkar said on Tuesday that this will be assessed again in advance of Budget 2024, later this year.

The lower 9 per cent VAT rate on electricity and gas bills will be extended at a cost of €115 million.

Political reaction

Taoiseach Leo Varadkar said the new measures are aimed at helping people, families and businesses to get through the spring and summer and Tuesday’s announcement will be the last cost-of-living intervention “this side of the Budget”.

Mr Varadkar said the measures are “more targeted than previously” but some are universal as well.

“Our focus is on families with school-aged children, pensioners, and people who are on welfare, people with disabilities, carers, low parents and so on and also medium and small sized businesses,” Mr Varadkar said.

He said the 9 per cent VAT rate for hospitality is being extended until August 31st but “this will be the final extension”.

Green Party leader Eamon Ryan said Minister for Tourism Catherine Martin’s argument that holding off on the restoration of the higher rate until the end of the summer “makes sense” for the industry, and expressed hope that inflation will come down further in that period.

He said this also applies to the extension of the VAT cut on gas and electricity.

However, he added: “We cannot put off forever and a day the restoration of our tax base because we need that in place so next October, we’re able to deal with the ongoing demands that Government always presents.

“We’re stronger as a country because we’ve been responsible in managing the public’s money.”

Mr Varadkar said the previously announced €200 energy credit will come off all households’ bills in March or April but there will not be new credits over the summer.

Mr Varadkar said the overall €1.3 billion cost of the package is broadly being done within the parameters of last year’s Budget.

He said this means the Government will still have “the financial firepower to act again in the autumn in the context of Budget 2024 depending on where we stand with the cost of living then.”

Tánaiste Micheál Martin said that by “standing firm” last summer against the “incessant cynicism and negativity of the Opposition” the Government were able to provide “a very significant and targeted Budget and cost-of-living package last September”.

He predicted that the public will welcome Tuesday’s announcement when viewed in alongside the €11 billion in last year’s Budget.

During the press conference it was put to Mr Varadkar that there is very little in the announcement for middle income earners.

Mr Varadkar said it is important to bear in mind that pay rises for public servants have kicked in over recent weeks, there is an increase in the minimum wage and there has been income tax cuts and the rent credit.

He also said working people with children have benefited through a cut in childcare costs and they will get the €100 payment.

Mr Varadkar said the deferred and phased restoration of excise rates on petrol and diesel as well as the planned ending of the reduced VAT rate on electricity and gas are measures that will “benefit everybody”.

The introduction of free school transport in rural areas led to a huge increase in applications for the service last year.

Asked if bringing in a modest fee was an attempt to prevent the scheme being over-subscribed, Mr Varadkar insisted the free scheme brought in last year was “a phenomenal success”.

He added: “I do think that bringing a modest charge in does make some sense”, saying Fine Gael TDs have told him they have seen evidence of people taking up the concessionary pass and using it infrequently with other children losing out on passes.

He said: “It’s a much lower fee than would have been charged in the past and I guess we’ll see how that works out in the next school year.”

Mr Ryan said that previously some families were paying up to €625 for school transport passes and now that will be down to €125.

In a series of interviews at Leinster House, Opposition parties claimed the funding was not targeted enough at those on social welfare or living in poverty, with some criticising the continuation of the six month extension for the 9 per cent VAT rate for the hospitality industry.

The package is “silent on housing” and there is “nothing” included in it for renters or mortgage holders, Sinn Féin leader Mary Lou McDonald has said.

Ms McDonald said it “beggars belief” that the Government would produce any package that “completely ignores the fact that rents are out of control”.

Ms McDonald said out Leinster House on Tuesday that she could not understand how the “three men leading Government” having spent “two months in talks” could produce a package that “is silent on housing”.

“We know that extortionate housing costs are at the very heart of this crisis, and yet there is nothing here for renters,” she said.

“These are workers and families fleeced by hike after hike, paying out the lion’s share of their income on rent.

“There’s nothing here for mortgage holders either, battered by a barrage of interest rate increases, they’re forced to pay hundreds more in mortgage repayments and there is still more to come. The pressure is enormous.”

The Sinn Féin leader said so many of the State’s young people are forced out of Ireland because they “can’t afford a roof over their heads”.

“The cost of our young people leaving Ireland because of the housing emergency is massive. The cost and damage to society, our economy and competitiveness, to families and community is a cost that we can’t afford.

“This generation being forced out is brimming with talent, education, ideas, but they need a Government with the determination and courage to do the big things so they can have a shot at the life they deserve.”

Social Democrats co-leader Róisín Shortall said the Government’s cost of living package was “wholly inadequate” and went nowhere near “meeting the desperate need of so many workers and families who are really struggling just to keep their head above water”.

In response, Taoiseach Leo Varadkar acknowledged rents were “out of control” and said the Government had introduced a rent credit eight weeks ago.

Mr Varadkar said he was interested to hear Sinn Féin’s finance spokesman Pearse Doherty speaking on a recent radio interview saying they wanted the VAT rate to go back to the 13.5 per cent rate “right away” and extend excise reductions on petrol and diesel “only until May and that you would have VAT on electricity and gas go up in May as well”.

“So for anyone driving a car, anyone using petrol or diesel, anyone using electricity or gas, they would face tax hikes under Sinn Féin within weeks, we have put them off until much later in the year,” he said.

Mr Varadkar also said that the financial supports announced by the Government wasn’t a budget or mini-budget but “a series of one-off measures” to help people. He said other permanent measures such as the increase in the pension, reduction in childcare and healthcare had been previously announced by the Government.

Labour leader Ivana Bacik honed in on denials of the Government that it was not a mini budget.

“The big political issue of today is the ‘I Can’t Believe It’s Not a Mini Budget’ issue,” she said. It is a mini budget.”

She and the party’s finance spokesman Ged Nash said the party wanted more systemic changes. That included an increase of €20 in the social welfare rates as well as an increase in the minimum wage to €12 an hour.

Mr Nash said the Government boasted last October that it was spending an unprecedented amount of money to tackle cost-of-living issues.

He said the said the Government’s message of targeted measures which it had trailed in the media for some days was as targeted as a “Darwin Nunez shot from outside the box”. That was a reference to the Liverpool FC striker who has recently struggled with goalscoring form.

Jennifer Whitmore of the Social Democrats said the cost-of-living measures were not going to meet the needs of vulnerable an older people

“One-off measures are not going to cut it for people. Having a disability is not a once-off measure. Having a cost-of-living crisis or living in poverty is not a once-off measure,” she said.

Bríd Smith of People Before Profit (PBP) said the Government had not done enough. She said workers needed higher wages and those of welfare needed increases in their weekly payments.