Governments cannot fully compensate everyone for rising energy prices – watchdog

The Irish Fiscal Advisory Board says the government faces “difficult choices” in the 2023 budget and cannot compensate everyone in anticipation of a “sustained upward shift in prices”.

With energy and food prices likely to remain higher than originally projected earlier this year, the Watchdog said Ireland could expect cost-of-living pressures to rise and growth to slow in the coming years. Stated.

In a pre-budget statement, the council warned that governments cannot help everyone manage rising costs, and that public sector salaries, pensions and welfare payments cannot be fully indexed. He pointed out that it would cost €7 billion, which exceeds the € cap. In 2023 he will have $4.9 billion available for increased core spending.

“Governments cannot fully compensate everyone for the impact of rising energy prices.

Council chairman Sebastian Burns added that energy and food prices “are likely to remain higher than anticipated earlier this year” and will continue for much longer.

“From May to August, gas prices rose significantly due to growing concerns about Russian supplies,” he said.

“This means that gas prices will remain very high not only this winter, but also for years to come, and eventually come down, but that is a long way off.”

He said some households will be hit harder than others this winter, and rural households may be more vulnerable to rising energy prices.

Burns also said that if wages started to rise in response to inflation, “we would have a much more general price rise than current estimates and a much stronger inflation dynamic.”

He said average hourly wages have risen since the Covid-19 pandemic.

“This is being driven in part by high-wage sectors such as multinationals, pharmaceuticals and digital. will happen.”

Tightrope walking

The council warned that governments must choose between protecting people from inflation and implementing other policy priorities.

The council also argued that the budget “needs to address” medium-term challenges, including pension issues and the state’s goal of halving its carbon emissions by 2030.

“The main challenges are the cost of aging populations, overreliance on corporate taxes, the cost of reducing emissions to mitigate climate change, and health care for slante care,” Barnes said.

“Essentially, there are a lot of things going in the direction that require more government spending. not.”

The 2023 budget was announced three weeks ago on Tuesday 27 September and is worth around 6.7 billion euros.

The budget will consist of additional public expenditure worth €5.65 billion and tax measures worth €1.05 billion.

About €3 billion of the total amount has been pre-allocated and the remaining €3.7 billion will be split between government departments.

Alongside the 2023 budget, a cost of living package, a one-off measure to ease inflationary pressures on consumers, will also be unveiled, but the value of that package is still unknown. Governments cannot fully compensate everyone for rising energy prices – watchdog

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