Taoiseach Micheál Martin has defended the Government’s strategy for tackling rising inflation, arguing they needed to prepare for a “difficult” winter as a result of a strategic squeeze on energy prices by Russian president Vladimir Putin.
It comes as Government figures strongly signalled on Monday that additional measures to help with the rising cost of living would not be taken before the budget is announced in October.
In response to Sinn Féin leader Mary Lou McDonald’s comments that the Government has been “slow” and “lacked urgency” in response to the cost-of-living crisis, Mr Martin said that “we can’t take risks with the economy or inflation either”.
“The World Bank is warning against the risk of stagflation, the kind of thing we experienced in the 1970s. And whereas the 1970s was caused by an initial oil-price shock, it was the second and third rounds of inflation that drove it on for the next 10 years,” the Taoiseach told the Dáil during Leaders’ Questions on Tuesday.
Mr Martin outlined some of the measures the Government had already taken to tackle the cost of living, including the €200 energy grant, the national retrofitting scheme, the 20 per cent cut to public transport fares, and the lowering of the threshold for the drugs payment scheme to €80 a month.
The Taoiseach added that he was “worried” about energy prices during the winter, saying it would be “a difficult winter period across the board”.
He said that as part of Vladimir Putin’s attack on Ukraine, the Russian president is “leveraging in particular to create maximum pressure as he can for the winter period”.
“So we do have to allocate our resources in the optimal way, which in my view is to protect people right throughout the winter period and beyond the winter. That’s the big objective, and one we should really share, is to get people through what will be a difficult winter period across the board.”
Ms McDonald said she wasn’t asking the Government to “chase inflation”, but instead acknowledge “that people are struggling now, in June”.
“We accept that the Government can’t do everything, but you can do more.
“Without emergency support, families will face a very difficult back-to-school period and a brutal winter as energy costs continue to rise.”
Mr Martin said Ms McDonald had been asking the Government to “chase inflation” from the start of the cost-of-living crisis.
“I think if we were to follow from the outset your advice, I think we should be into an even greater inflationary cycle and the ESRI report is a good reminder of that, in terms of the importance of targetting and not just doing wholesale cuts across the board, as you have advocated for time and time again.
“Because I think you would damage the economy. I don’t think you get the enterprise side of the economy, or want to get it.”
Social Democrats co-leader Catherine Murphy said that based on the queries she is getting from people to her constituency office in Kildare North, she is “really struggling to understand why you’re refusing to alleviate the pressure on people at this point”.
The Taoiseach responded: “We fully accept the pressures that are on people. We have brought in now since October about a €2.4 billion worth of measures targetted in many respects in terms of healthcare costs, education costs, fuel costs and transport costs.
“It seems to me that every month since this crisis, and it’s a very serious crisis, but every month people want a billion to be spent.
“I have no doubt that if something was announced next week, before the month was out, people would be looking for another package.
“That’s why we need to make sure that what we do is well thought through, doesn’t add unnecessarily to inflation or the inflationary cycle, is targetted… and also, I think it should be sustainable over a longer period of time.
“Not just saying here’s a billion in July, here’s a billion in August. That won’t work. And I don’t think it will be optimal or effective on the ground either.”
Independent TD for Limerick Richard O’Donoghue criticised the Government’s 49 per cent tax rate on fuel amid high fuel costs.
The Taoiseach said that a tax base is needed “to fund education, to fund housing, to fund health, to fund child protection services. We need revenue. Every society, every stable democracy needs a stable revenue base”.
“The idea that you can just eliminate €6 billion of tax revenue is just not a runner. You haven’t looked at the other side of it. So for example, €4 billion a year has been allocated to housing now, to build houses, social houses, affordable houses, cost rental, and so on.”
The Taoiseach said the war in Ukraine will impact on fuel prices.
“It could get worse in terms of the Russian strategy to now stop the flow of gas to Germany and other major customers that they have, and that will have an impact.
“If there’s a contraction in supply more globally, then that will affect everybody in terms of pricing.”