Dipping into rainy day fund cannot be ruled out – Public Expenditure Minister

The Government cannot rule out dipping into the six billion euro rainy day fund early next year to help people struggling with the cost-of-living crisis, the Public Expenditure Minister has said.

Michael McGrath said it was “prudent” of the Government to set aside the funds, despite not intending to use them.

“It is a sensible thing to do it is the right thing to do, ” Mr McGrath said.

He added: “There is an incredible amount of volatility in the international economy, not least in the energy markets.

“We don’t know what will happen with the terrible war in Ukraine.

“But it’s a good thing that we have that reserve. We have that funding there if we need it.

“We don’t intend to use it but we cannot rule anything out.

“It all depends on circumstances. And we will use our best judgment as time goes by, as to what is the right decision or course of action to take.”

Mr McGrath made the remarks after answering questions alongside Finance Minister Paschal Donohoe from members of the public during RTE Radio 1’s Today with Claire Byrne annual Budget phone-in show.

Mr Donohoe said the Government had ensured there was a Budget surplus so that they have “the ability to help if conditions changed”.

“Michael (McGrath) and I have been united, as has the Government, in saying we’ve brought forward measures that go into a six-month period to provide as much certainty as we can.

“We hope we’ll be in a better place at that point. But the reason why we have a budget surplus is to be able to respond back to conditions that are changing.”

Mr Donohoe described the Budget measures unveiled by both ministers on Tuesday as “fair”.

“The Budget showed very clearly that those who have the least get the most … in the round, this is a very, very fair Budget,” he said.

They made the remarks after Tanaiste Leo Varadkar said the Government will reassess the country’s financial situation in the new year to see whether it needs to intervene again to help people.

But he said he did not envisage a mini-budget being implemented.

“We’ve just announced the budget, a very substantial package of assistance for families and businesses, of 11 billion euros,” Mr Varadkar said at the event on Wednesday.

“We believe that’s going to be enough, I am convinced of that. I don’t see the need for a mini budget in the new year and be very, very clear about that.

“We do have reserve funds, and they’re there just in case and I think that’s a sensible approach.”

He also said that a big part of the budget was putting money back in people’s pockets and giving them more confidence to spend.

“There is some evidence in recent weeks and recent months of people who have money, saving more of it and there’s a risk in that – the paradox of thrift – that people, because they feel they’re going to be worse off, don’t spend money and that can create a cycle of negativity in the economy.

“I hope what’s been done in the budget in the round will give people a bit more confidence that they will be able to pay their bills, and will still be able to spend money in our economy, including in the tourism hospitality sector.”

He said earlier on Wednesday that it was also about helping businesses with energy costs.

“The way it works is that the one-off payments fall between now and Christmas. The energy discounts are before and after Christmas and the increases in the weekly rates happen in the new year,” he told RTE’s Morning Ireland.

“So essentially we’re frontloading the Budget so that people are getting more up-front. You then see permanent increases in payments, pensions, welfare and permanent decreases in income tax in the new year.

“But we will have to see where we are in January, February.”

He also said energy prices might fall by February, but this was uncertain.

“If prices continue to rise, we will have to look at it again in the new year and that’s why we’ve put money in the tank,” he said.

He added that the Government had the “financial firepower” to intervene again if needed.

“There is more help in the new year with the energy credits and the tax deductions and increases and weekly welfare payments, but we have set aside some money in reserve in the tank in case we need to help again,” he said.

Mr Varadkar made the comments on Wednesday morning, less than 24 hours after Finance Minister Paschal Donohoe and Expenditure Minister Michael McGrath officially unveiled Budget 2023 in the Dail.

The Government’s 11 billion euro budget package comprises 6.9 billion euro in budgetary measures for next year, as well as a 4.1 billion euro package of one-off measures to help tackle the rising cost of living for individuals, families and households.

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

Mr Donohoe said a windfall tax or surplus will be used to fund any further cost-of-living measures that may be needed to help people struggling to pay energy bills.