Budget 2023: new electricity credits more likely than energy price cap

The Government is likely to opt for more electricity credits rather than seeking to cap householders’ and businesses’ bills, the Minister for Public Expenditure, Michael McGrath, has indicated.

“An electricity credit is a very live option, because it is has worked already and it is something that the system could administer quickly,” Mr McGrath said on Monday evening at the Fianna Fáil think-in in Mullingar.

While Mr McGrath said that no option had as yet been ruled out ahead of a crunch meeting with the party leaders and Minister for Finance Paschal Donohoe this week – likely on Tuesday evening – he gave a strong indication the Government would opt for a system of direct payments such as the electricity credit.

He said it was not clear how the British government’s pledge, announced last week, to cap electricity bills at 2021 prices, would work in practice.

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However, he said that the UK proposal would involve “a large amount of borrowing” by the state which was not for now envisaged in Ireland.

Windfall revenues

The Government has not examined a system of capping bills but officials had been working for some time on plans for more electricity credits, Mr McGrath said.

He said the Government also wanted to consider proposals from the European Commission to divert windfall revenues from energy companies to help consumers once more detail was available.

“In the meantime, we are developing a suite of options around direct supports for households and businesses,” he said. “I think that is the most likely scenario but we’re not ruling out any option at this stage.”

He added he expected some of the energy supports were likely to be paid in the first quarter of next year.

Mr McGrath played down suggestions that the Government was heading into a period of exchequer supports comparable to the pandemic. He said the Government spent “close to €50 billion” on the pandemic. “That is not the space we are in.”

Another senior figure in Government, however, said that EU governments were realising that they would have to do “whatever it takes” to ensure that households could cope with increased costs of fuel and other necessities.

Officials are also working on a package of business supports which may extend electricity credits to businesses, sources say. One senior Government figure suggested that hundreds of thousands of jobs were in danger if businesses were not given help with their bills.

Covid comparison

On Monday, Tánaiste Leo Varadkar told a pre-budget consultation with representatives of small and medium-sized enterprises that the budget would contain a package of business supports.

Speaking afterwards, Mr Varadkar said: “During the pandemic, the Government intervened to save countless jobs and businesses. For many businesses, the energy inflation crisis is comparable. It requires a response of sufficient scale, and that will happen.”

Earlier, Taoiseach Micheál Martin said the Government wanted to “allocate as much as we possibly can” for supports that kick in before the end of 2022. He also said it was seeking to provide a “sustained improvement in childcare” which Ministers have recently been hinting will be a major spending priority in the budget.

Mr Martin said an element of the cost-of-living package would help families with children “because the costs clearly with children are particularly high”.

He said the last budget saw substantial spending related to childcare workers and the next phase is to improve affordability for parents.

Mr McGrath is scheduled to brief the Fianna Fáil meeting on budgetary issues on Tuesday morning.

Meanwhile, nine European Union coastal states signed a “historic” declaration in Dublin on Monday that commits them to create enough renewable wind energy to supply 10 per cent of the union’s needs by 2050.

The Dublin declaration seeks to help Europe reduce its dependency on Russian gas and fossil fuels. Mr Martin said on Monday Russian president Vladimir Putin’s “policies around weaponisation of energy” were a challenge the Government needed to overcome.