Ministers signed off on a range of measures to address the cost of living and offset the controversial carbon tax, including a VAT cut (from 13.5% to 9%) on gas and electricity until the end of October, along with an additional €100 fuel allowance payment and 2.7-cent-per-litre excise reduction on green diesel.

Households are set to save €50 on their annual gas bill and €70 per year on electricity under measures agreed by Cabinet yesterday - but soaring energy prices mean they will be paying more in tax compared to last year.

Environment Minister Eamon Ryan also announced a €20million grant scheme for households that rely heavily on electricity for medical reasons to install solar panels. The scheme will allow for solar panels to be installed on 3,000 homes for people who face hefty bills due to medical equipment or devices such as home hospital beds.

But Finance Minister Paschal Donohoe warned yesterday that there are "no plans" and "no capacity" to do more to address the cost of living.

Speaking after the Cabinet meeting, Mr Donohoe said the Government was "hugely aware" of the impact rising prices are having on people.

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"The carbon tax increase will add €16.85 to an annual gas bill and €21.56 to a fill of home heating oil," he said.

"In contrast, the VAT reduction today will result in savings of over €50 on an annual gas bill and €70 on an annual electricity bill.

"So these measures will more than fully offset the increase in carbon taxation."

Mr Donohoe also confirmed that those on the fuel allowance scheme will receive their €100 lump sum in the middle of May. He said the taxation measures announced will be reassessed in October for the next Budget.

However, skyrocketing energy prices mean households will still fork out more in tax this year despite the Government's measures.

At the current 13.5% rate, the Government would take in more than €400 in VAT each year on the average gas and electricity bill combined, compared to around €238 in 2020, research by price comparison site Bonkers.ie found.

However, because of rising energy prices, the new lower VAT rate of 9% will now actually take in more from householders. Bonkers.ie's Daragh Cassidy explained: "Like all consumer goods and services, VAT is levied on the net price. So as the unit price of gas and electricity has shot up, the Government's tax take has increased too."

Mr Cassidy added: "The Government's €200 energy credit also does need to be taken into account. However unless it's repeated for next year, the Government will actually be making money from the energy crisis."

Mr Cassidy also cautioned about the Government's plans to force people with smart meters to start using so-called smart 'time-of-use' electricity tariffs, which charge people a different rate for their electricity depending on the time and day it was consumed.

Smart meters have been rolled out to around 750,000 households nationwide, but only around 10% have activated their new meters and even fewer have signed up to a smart time-of-use tariff.

Ms Cassidy said: "Although smart tariffs offer the lure of cheap or even free electricity at certain times of the day or week, the upshot is that you'll pay a higher price for your energy at other times - sometimes much higher."

As they unveiled their Stability Programme Update, Minister Donohoe and Public Expenditure Minister Michael McGrath said that inflation is expected to peak at 6.75% in the second quarter of this year. They warned that the current financial outlook remains uncertain due to Russia's war in Ukraine, but Mr Donohoe said the Government remains "confident" in current energy stocks and the ability to source energy.