Dermot Ahern offers his insight and solutions to Ireland's inflation problems as we come out of the pandemic.

With Covid waning, the political scene has become much more focused on normal bread-and-butter issues. In the last week or so, the Government has been under considerable pressure on the overall topic of the cost of living in this country. Ministers are being caught in a perfect storm on the issue of rising prices.

Recently, it seems as if virtually everything has increased dramatically, especially rent and energy. An amazing figure was published recently about rental accommodation. According to the Daft.ie website, fewer than 1,400 places are available to rent in the entire country this month.

Obviously, the knock-on effect of this is that demand far outstrips supply, meaning that the cost of renting has rocketed. Many will express shock and horror as to why so few places are available for rent. But it is a fact that Government policy, over the last decade or so, has led to large numbers of what are known as 'occasional landlords' vacating the rental market.

These individuals will say that increased laws and regulations affecting them have left it uneconomical for them to rent their property. Yes, of course, some of the newer regulations, brought in to increase standards of rental accommodation, were long overdue. But, it is incontrovertible that the avalanche of new rules has meant individuals who dipped their toe into the rental market have exited it recently.

In Association with

The problem of huge rents will not be solved easily or quickly. This will be one of the major battlegrounds in the run-up to the next election. The Opposition knows that the Government will not be able to turn this around quickly. The Government parties are on a hiding to nothing on the issue.

But it is in the area of fuel and energy where the greatest pressure is on the Government. Every time I pass a road service station, I notice that petrol and diesel costs have gone up. As a driver of an electric vehicle, I thank my lucky stars that I made a decision over two years ago to go fully electric. But, now, with the rise in electricity prices, I'm beginning to notice a big increase in my electricity bill, even though I am charging the car on the cheaper night rate.

The cost of heating and lighting houses is now becoming one of the biggest issues affecting households. Global issues, which are outside the power of the Government to solve, are driving these price rises.

But there are things the Government can do to alleviate the pressure on people.

Ministers have set their faces against reducing the carbon tax or VAT on energy. The main plank of its response is to give a €200 rebate on all electricity bills. Many have found fault with this measure. Maybe an alternative that could be contemplated, by the Government, is to forgo the annual subvention it receives from the ESB Group, which operates and maintains the generation and network of electricity. In 2020, the ESB paid €81million to the State coffers.

Over the previous decade, it paid a total of €1.2billion, to the Government. Of course, the Minister for Finance would cry foul. Paschal Donohoe will maintain it cannot be done for myriad reasons. Historically, finance ministers have guarded this dividend with their life.

But this is money which the ESB has been able to afford to give to the Exchequer, every year, after it has paid all its staff, and looked after the current, and future, needs of our electricity network.

Surely, for a set period, Finance could forgo the annual payment, in order to reduce the unit cost of electricity to the consumer.

Equally, Gas Networks Ireland, the State-owned entity which operates the gas distribution network, paid a dividend of €70million to the Exchequer in 2020. This could also be looked at as a way of reducing the cost of gas to the consumer. Energy prices in Ireland are among the highest in the EU. No doubt, these types of annual dividends paid to the Government are part of the reason why that is the case. If the Government did not take these dividends, it might not have to pay out millions of euro in an effort to soften the blow of global energy prices! It strikes me that there is an element here of giving with one hand, and taking with the other.

The Government's much-anticipated announcement was substantial, in that it will cost €500million. But the Opposition has condemned it as being too little, too late. It has honed in on the fact the €200 energy credit is 'universal', and not targeted towards the less well-off.

To the ordinary person, it must seem nonsensical that both rich and less-well-off people get exactly the same payment. The Government could have restricted the assistance it was giving to recipients of the Fuel Allowance. This would have been an easier and far cheaper option. But Government ministers correctly accepted that the energy prices are affecting the vast majority of households. Therefore, they decided to help a much wider cohort of users.

Ministers, such as Michael McGrath in Public Expenditure and Donohoe in Finance, emphasise the fact that making the payment universal was the only way to get it out to people as quickly as possible. Mind you, it won't be that quick, as it appears the €200 credit will not kick in until the March/April bill! They point out that in order to prevent millionaires from getting the credit, they would have had to set up a large administrative operation to decide on individual applications.

This, they say, would cause huge delays and also unwarranted expense. They will also make the point that a payment of €200 to someone on low wages or on social welfare is of far greater value to them than it is to a well-off person.

Any universal scheme is imperfect. Just look at the implementation of the PUP scheme during the Covid crisis. There were so many tales of inconsistencies in that payment. But in the end, few could query the overall rationale of its existence.

During my five years as Minister for Social, Community and Family Affairs, our government delivered record increases in child benefit. At the time, we were hit with criticism about paying it to well-heeled families. Try as I might, I could never come up with a cost-effective and practical way to exclude well-off people from getting the payment. It would have been a logistical nightmare to individually check the incomes of every member of every family with children in the country.

Indeed, we were aware of many cases in wealthy households, where the main or sole earner, normally the male, did not give their spouse enough money to run the house and look after the children. So, in those cases, child benefit often made a huge difference to the recipient.

The overall package of cost of living measures from the Government, added to the promised enhanced retrofit scheme, was regarded by some independent observers as being larger than expected. Naturally, it didn't satisfy most of the Opposition.

There will be some who will quibble with the fact that people will have to wait a good while for some of the measures to be delivered.

But all in all, it was a reasonable stab at trying to help much-pressed households.

The Government will be hoping that, come the next election, recipients of the package will remember it when they go to the polling booth.

However, as is normally the case in politics, eaten bread is soon forgotten.