Republic of Ireland news

Irish government unveils €11 billion budget package to stem rising cost of living

Minister for Finance Paschal Donohoe (right) and Minister for Public Expenditure Michael McGrath arriving at Government Buildings, Dublin, to unveil the Government's Budget for 2023. Picture date: Tuesday September 27, 2022.
Gráinne Ní Aodha, Cate McCurry and Michelle Devane, PA

The Republic of Ireland’s Minister for Finance has unveiled the Government’s €11 billion budget package to help tackle the rising cost of living for individuals, families and households.

Paschal Donohoe told the Irish parliament (Dail) that while the country emerged from the Covid-19 pandemic last year, it is now facing a further economic challenge.

In what is one of Ireland’s most significant budgets in years, the pressure has been on the coalition government for months to get the balance right as bills for energy, fuel, groceries and housing soar.

“If you are an older person, you are having to spend more of your pension on heating your home; if you are looking after a family, you are facing higher grocery bills; if you are running a small business, you are trying to cope with increases in the cost of energy,” Mr Donohoe said.

“This is why, Budget 2023, presented by Minister (Michael) McGrath and I today, is and must be a cost-of-living budget, focused on helping individuals, families and businesses to deal with rising prices.

“The onset of the war in Ukraine has sent shockwaves throughout the global economy.

“This shock is most clearly evident in energy and commodity markets, where prices surged at the onset of the war and have remained high.

“The inflationary pressures from energy have been further compounded by the imbalance between demand and supply that emerged as the economy reopened at the start if the year.

“Consumers released substantial pent-up demand as restrictions were eased, while supply chain bottlenecks prevented firms from keeping up with that demand.”

Mr Donohoe announced once-off measures worth €4.1 billion accompanied by budgetary measures for 2023 worth €6.9 billion .

It brings the total size of Budget 2023 to €11 billion .

In addition there will be a further €300 million in public service support measures funded from the Contingency Reserve Fund, Mr Donohoe said.

He said the figures were “significant”, but so was the need.

Mr Donohoe also said that in drafting the budget, the government has a responsibility to “strike a delicate balance” between helping with the cost-of-living pressures, but also “not making them worse by adding fuel to the inflationary fire”.

“For future years, we will aim to stay within the parameters of the medium-term budgetary strategy set out last year,” Mr Donohoe added.

“This will allow us to provide for steady improvements in public services and sustainable reductions in personal taxation while still ensuring that our public finances remain on a positive trajectory.”

Mr Donohoe announced a extension to the current excise reduction of 21 cents per litre of petrol, 16 cents per litre of diesel and 5.4 cents per litre in respect of marked gas oil and the 9% VAT rate for electricity and gas until February 28.

He said he will introduce the necessary financial resolutions in the Dail on Tuesday evening to give effect to these extensions.

Mr Donohoe announced an income tax package worth €1.1 billion, saying one of his core objectives for this Budget is to “ensure that workers do not find themselves in a position where they pay more income tax solely because of inflation”.

The standard rate cut-off point will increase by €3,200 to €40,000.

The main tax credits (personal, employee and earned income credit) will increase by €75.

The home carer tax credit will rise by €100 uro to support stay-at-home parents.

Mr Donohoe also said the Help-To-Buy scheme will continue at the current rates until the end of 2024.

He told the Dail that he will keep the scheme under review and will consider a number of recommendations made in a report on the scheme.

He also said he will introduce a new rent tax credit of €500 per year for renters.

“This measure, aimed at those who do not get any other housing supports, will apply for 2023 and subsequent years but I am providing that it may also be claimed in respect of rent paid in 2022,” Mr Donohoe said.

“Approximately 400,000 people are expected to benefit.”

Mr Donohoe said he will bring in a vacant homes tax to “increase the supply of homes for rent or purchase to meet demand”.

The tax will apply to residential properties which are occupied for less than 30 days in a 12-month period.

He also announced a number of measures to help businesses through the cost-of-living crisis.

“I am introducing a Temporary Business Energy Support Scheme to assist businesses with their energy cost over the winter months,” Mr Donohoe said.

“The scheme will be open to businesses that carry on a Case 1 trade, are tax compliant and have experienced a significant increase in their natural gas and electricity costs.

“It is proposed that the scheme will operate by comparing the average unit price for the relevant bill period in 2022 with the average unit price in the corresponding reference period in 2021.

“If the increase in average unit price is more than 50% then the threshold would be passed and the business would be eligible for support under the scheme. Once eligibility criteria are met the support will be calculated on the basis of 40% of the amount of the increase in the bill amount.

“A monthly cap of €10,000 per trade will apply and an overall cap will apply on the total amount a business can claim.”