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‘Prolonged period of high inflation’ possible – McGrath

By June 30, 2022No Comments

The country may be facing in to a “prolonged period of inflation” according to Minister for Public Expenditure and Reform Michael McGrath, who said measures to help with the rising cost of living must be timed wisely to have maximum impact.

He was responding to calls from Sinn Féin for an emergency budget amounting to €1.3 billion in new funds between now and the end of the year.

Speaking during Leaders’ Questions in the Dáil, Sinn Féin leader Mary Lou McDonald said an emergency budget is a “sensible response at this time”.

“If it was those at the top that needed a bailout, Fianna Fáil and Fine Gael would be in like a flash, but when it is ordinary people that need a bailout package, your message is: ‘Tough luck’,” she said.

Mr McGrath said that if Sinn Féin’s proposed budget for this year, as well as its previous demands for extra spending had been met, there would be no fiscal capacity to help families now with the rising cost of living.

“The irony is not lost on you that if we had taken your approach, if we had taken your advice to spend €3.5bn more in the last budget, if we had taken your advice to do more every time we made an intervention in the last number of months, we wouldn’t have the headroom or the capacity that you now call on us to use in order to do more,” he said.

“We may face a prolonged period of high inflation, we think it will peak in the number of months ahead but we cannot be certain of that,” he added.

“The global economic outlook is deteriorating so we need to use the limited resources we have wisely, and we have to time our further interventions to have maximum impacted,” Mr McGrath said.

“It is our view that people will most need further help come the autumn and into the winter period and we will need at that time a set of measures that can have an impact quickly and can be targeted at those who most need help,” he added.

Ms McDonald accused Mr McGrath about “bragging” about the economic position “and how well you have managed the public finances”.

Meanwhile, the Taoiseach has warned that people will be under greater financial pressure this winter.

Micheál Martin said that energy was the greatest driver of inflation followed by food.

He acknowledged that people are under pressure now but he said everyone across Europe will face greater pressure this winter.

“We are concerned about the winter period,” he said.

Mr Martin said the Government would in the Budget have to protect the most vulnerable, those on low incomes, depending on food and the basics of life.

‘Housing disaster’

During Leaders’ Questions, Ms McDonald told the Dáil that worsening homelessness is a “damning indictment” of the Government.

She said that there are 170,000 vacant homes, and the Government should be “scandalised” at this.

She said Minister for Housing Darragh O’Brien “has failed” and his position is becoming increasingly untenable.

Mr McGrath pointed to “very significant inbound migration” in addition to the numbers of Ukrainian refugees entering the state which is adding to pressures on the system.

Labour Party leader Ivana Bacik said one of her constituents was asked by a landlord to engage in a “bidding war” to secure rented accommodation, and was told to indicate “how much they were willing to pay”.

She said that this this was a “shocking example” of the “housing disaster” under way.

Mr McGrath said that this was “completely unacceptable”.

Richard Boyd Barrett of Solidarity-PBP said that Dún Laoghaire-Rathdown County Council has confirmed to him that there are no family placements for people in need of emergency accommodation “anywhere in Dublin” – the first time that this has happened.

“Emergency accommodation will be found for people in such dire need”, the minister said, and asked for the details of a family who s circumstances the deputy outlined.

Donohoe rules out emergency budget before October

Earlier, Minister for Finance Paschal Donohoe said the Government “absolutely appreciated” the huge challenges people are facing, but ruled out an emergency budget before October.

Speaking on RTÉ’s Morning Ireland, he said these are not issues the Government can respond to on a month by month basis, because the difficulties will not go away in a month.

Mr Donohoe said it is really important that the Government is open and honest, but it must also have money available to fund other social schemes such as housing bodies and supporting students with special needs.

“We have to have the money to help with all those issues and make progress on those matters too.”

Mr Donohoe said targeted measures such as the fuel allowance and additional payments to help those at risk of fuel poverty have been implemented.

However he added that there is also a case for broad measures, such as those changes that have been made to excise and VAT, to assist more people.

This mixture of measures is appropriate, he said.

When asked about the implementation of a cap on variable mortgage rates, Mr Donohoe said pretending that Ireland can manage the interest rates here in a way that no other European country can will only undermine the banks here and make it more difficult to get new financial bodies to open in Ireland.

Speaking on the same programme, Labour Party Spokesperson on Finance, Public Expenditure and Reform Ged Nash said there is very little empirical evidence to suggest that increasing pay will fuel inflation.

Mr Nash said the reality is that those on the lowest pay scales are those who are being left behind, adding that this cohort of people often do not qualify for payments such as the fuel allowance.

The Labour Party has called for an intervention to design a scheme to provide additional fuel allowance support for these people, he said, and added that the party also wants to see a minimum wage increase of at least one euro an hour.

He said that the economy is doing “very, very well” with tax take at record levels, and that a cost-of-living package with targeted measures, such as a social welfare bonus, should be paid out now.

Mr Nash, who has introduced a bill asking for a cap on variable rate mortgages, said that such an intervention is crucial and would help families facing increased mortgage interest rates.

He said Labour would be willing to extend the Dáil session to work with Government to introduce the measures that people need in order to make ends meet.

Article Source – ‘Prolonged period of high inflation’ possible – McGrath – RTE

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