Dáil Éireann Debate, Thursday - 28 April 2022
177. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he can continue to take measures to control the cost of living without contributing to inflation; and if he will make a statement on the matter. [21584/22]
Amharc ar fhreagraInflation picked up sharply over the course of the last year and in March stood at 6.9 per cent. Almost every advanced country in the world is in the same position, with euro area inflation reaching a record 7.4 per cent in March. The rise in wholesale energy prices is the key contributor and reflects the rapid rebound in global demand and, more recently, the war in Ukraine.
Looking ahead, energy prices increases will continue to feed into higher inflation over the coming months. The war has also led to a spike in the price of other commodities while further impairing global supply chains. Pass-through price effects are therefore expected in other sectors, such as food via higher fertiliser and fuel costs for instance, as well as other goods. Inflation is now expected to peak at around 6¾ per cent in the second quarter and average 6¼ per cent for the year as a whole. While inflation will remain elevated throughout 2022, inflation is expected to ease next year and average 3 per cent in 2023.
The Government is very conscious of the impact of rising prices on households and businesses and has accordingly introduced a series of measures in recent months at a cost of over €2 billion. Firstly, Budget 2022 contained a combined income tax and social welfare package amounting to almost €1.1 billion. A suite of measures was then introduced in mid-February, amounting to around €500 million, including an energy credit of €200 to every household in the country and a once-off lump sum payment of the fuel allowance. In March, Government announced reductions in excise duty of 20 cent per litre for petrol and 15 cent per litre for diesel.
Earlier this month we announced further measures amounting to almost €200 million. These measures included a temporary reduction in the VAT rate for electricity and gas to 9 per cent, an additional once-off lump sum payment of the fuel allowance and an extension of the reduction in excise duty to mid-October.
The Government is acutely aware of the cost pressures households and businesses face. However, resources are limited and the priority is to minimise the impact on those who are most affected; the Government can help, but cannot fully insulate all from the burden of higher energy prices.
Given the current dynamics at play, we must remain prudent in our approach – conscious that broad fiscal measures at this point in time could lead to further inflationary pressure which would be counterproductive in nature. My Department will continue to monitor the inflation situation closely and take appropriate actions when necessary.
