Households will receive an additional three weeks’ payment of the fuel allowance, while the VAT on gas and electricity looks set to be temporarily cut from 13.5 per cent to 9 per cent under plans due to be brought to Cabinet to tackle the cost of living.
A Government meeting was held on Monday evening to discuss plans to tackle increased energy costs and soaring inflation. Ministers agreed on targeted supports for those on the fuel allowance, including an additional three weeks’ payment worth €99, paid in one lump sum. This will benefit about 370,000 people.
Ministers are also planning a temporary reduction of VAT on gas and electricity from 13.5 per cent to 9 per cent. It would require domestic legislation and be worth around €49 a year on gas and €61 a year on electricity.
There were fears that any move to reduce VAT on fuel temporarily would mean that when the situation returns to normal,Ireland would lose an existing derogation in the EU which allows for a lower level of VAT on fuel.
Ministers were told, however, that it would be possible to temporarily lower the rate through domestic legislation without affecting the derogation, a source said.
The plan is to bring about the reduction through an amendment to existing legislation, and to have this done after Easter.
Carbon tax
The Government is hoping that the VAT cut will offset the planned increase in the carbon tax.
The coalition has estimated that the carbon tax increases due at the end of April on home heating would amount to rises of no more than €1.40 a month on a gas bill and €1.50 a month on home heating oil.
The three coalition leaders met Minister for Public Expenditure Michael McGrath and Minister for Finance Paschal Donohoe to finalise measures to help address the rising cost of fuel, food and energy.
A source said increasing the tax-free gift allowance that employers can give to staff from €500 to €1,000 is also still on the table.
The public service obligation levy which is placed on energy bills is also due to be scrapped from the autumn. It is charged to all electricity customers with suppliers collecting the levy through bills. The levy is €4.30 excluding VAT per month which equates to €58.57 per year inclusive of VAT.
Other options explored included mandatory time-of-day-pricing for electricity to encourage people to change their energy use to times when the costs would be cheaper.
The overall package of measures will likely be brought to Cabinet on Wednesday.
Taoiseach Micheál Martin previously said the measures will be “targeted” to support families on low incomes.
Behaviour
Work is also under way on an information campaign which will advise the public on how changes in household behaviour can cut the cost of bills.
Sinn Féin finance spokesman Pearse Doherty called on the Government to introduce an emergency budget with targeted measures to support low- and middle-income households.
“I am urging them to use this opportunity to plan for an urgent emergency budget that supports workers and families. Right now they need action, not more talk.”
He called on the Government to remove excise duty from home heating oil and to negotiate with the European Commission to reduce VAT on domestic energy bills.
He also said that cost of living cash payments should be introduced, and the fuel allowance should be extended by six weeks, while social welfare rates should be increased for the most vulnerable in response to inflation.
