Leaders of the three Government parties are expected to meet Minister for Finance Paschal Donohoe and Minister for Public Expenditure Michael McGrath on Monday to discuss further cost of living measures and ways to cut spiralling fuel bills.
Surging inflation and the rising cost of fuel is putting intense political pressure on Government to introduce additional measures to mitigate cost of living increases. But Ministers fear a fresh package of supports would soon be overtaken by price increases and Government would have to find further measures – and money to pay for them – before the summer.
There is particular focus on home heating oil, the price of which has rocketed in recent months. And there is acute political concern that people will have difficulty paying to heat their homes.
Figures published by the Central Statistics Office on Thursday show home heating oil prices increased by 58 per cent in March and have risen by more than 125 per cent since this time last year.
Petrol prices have increased by 35 per cent in the last month, while diesel is up 46 per cent. Food prices are rising more slowly, but there is concern these increases will continue for some time.
Carbon tax increase
Meanwhile, Tánaiste Leo Varadkar told the Dáil measures to offset the forthcoming increase in carbon tax will be introduced by Government before May.
However Mr Varadkar also said a VAT reduction on energy amid the current cost of living crisis is not possible, following engagement with the European Commission by Taoiseach Micheál Martin and Mr Donohoe on a potential reduction.
Mr Varadkar was speaking during Leaders’ Questions, when Sinn Féin’s Pearse Doherty said the planned increase in the carbon tax, due to come into effect from May 1st, “should not go ahead”.
Mr Doherty said an emergency mini-budget was needed amid the cost of living crisis and that the Government “can and must do more”.
Sources said subsequently the commission has not yet responded definitively to the Government’s requests. But it is understood the legal situation is that if the Government reduces VAT on fuel temporarily, it would then need to be restored to a higher rate, as the Republic’s special arrangements for low VAT on fuel would end.
If the Republic was to be granted a derogation from this rule, it would require all other European Union states to agree – a prospect officials consider unlikely as “every country has their own asks”, said one source.
Reducing excise further may be the only way to cut fuel bills, say Government sources.