With Russia’s invasion of Ukraine signalling further hikes in energy prices, Neil Hughes asks if the government’s cost of living package will really make a difference for Irish households facing spiralling costs.
The Russian military invasion of neighbouring Ukraine will undoubtedly carry devastating consequences for its people and economy. At our firm, our thoughts are with our colleagues at Baker Tilly Kyiv as their country faces the greatest challenge in its 31-year history as a democratic European state.
The crisis has also presented the Irish government with a fresh set of unwelcome challenges concerning the spiralling cost of living here.
The €505 million support package announced earlier this month covers several areas the government has prioritised to help alleviate the recent spike in consumer prices. Chief among them is the surge in energy prices, now more pressing in the face of the Ukraine invasion.
Cost increase factors
The rising costs we are seeing are down to factors including global energy prices, inflation for basic commodities, and pandemic-induced supply chain issues in critical locations.
Russia accounts for the highest EU imports of natural gas (41.1%) and solid fuel (46.7%), according to 2019 Eurostat research.
As Russia has such a stranglehold on the energy market, sanctions introducd by the EU, UK and US (among others) will inevitably destabilise energy costs in the coming months.
Government supports
The Irish government is offering cost of living supports in a number of ways:
Electricity rebate
The government announced plans for the €100 rebate before Christmas, but has since opted to double the amount to €200. The rebate will be VAT inclusive and will apply automatically to electricity bills through the March and April billing cycle. It will be added as a credit of €200 to pay-as-you-go providers.
Public transport
Public transport fees will be reduced by 20 percent from the end of April. Fare reductions will apply to Bus Éireann, Irish Rail, Dublin Bus, Go Ahead, Luas, DART and Local Link services.
Fuel allowance
Families receiving the fuel allowance will be given a lump sum payment of €125 before St Patrick’s Day.
Health
The Drugs Payments Scheme, which sees households paying €100 or less per month for specific medicines, will now be reduced to €80 per month.
School transport
The family cap for school buses will be cut to €150 per family at primary level and €500 per family for secondary schools.
Family payments
The Family Working Payment will be brought forward, kicking in from 1 April instead of 1 June. The weekly tax-free payment is targeted at employees with children and supports low pay workers.
Is it enough?
Although these government supports are welcome, they will not benefit everybody in the same way. For instance, someone from commuter counties, like Wexford or Louth, who is reliant on their car for work will not benefit from the public transport price cut in the same way as a Dublin commuter might.
On top of that, the electricity rebate is not being rolled out in a targeted manner. Instead, it will be made available to every household as a blanket payment of €200, no matter the energy rating or financial situation of that household.
This support might have been better suited to a claims process, similar to the pandemic support subsidies made available to businesses, so that the more a household needs the support, the more they could receive by claiming through a centralised process.
The decision not to implement a claims process might have been down to a perceived time-crunch. As the impact of the Ukraine war may now render the package woefully inadequate for many families, however, this strategy could come back to bite the government in the next election.
Neil Hughes is the Managing Partner of Baker Tilly. He is the author of A Practical Guide to Examinership, published by Chartered Accountants Ireland.
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