We need to think carefully about how we implement energy promotion policies

There are exactly 15 days left until the most important household in decades. The government has already announced that it will include a package of measures to protect people from the rising cost of living and in particular the rising cost of energy.

Speculation has increased over the size of the cost-of-living support package, with speculative minimum bids starting at over €2bn and rising to a potential several multiples of that amount.

The good news is that national current account balances are healthy and despite a long-term debt overhang ranked 10th among developed countries in the OECD, there is a view that the government is equipped to help without resorting to borrowing.

Even prudent economic advisers agree that classic laissez-faire doing nothing is not an option here. But the fragility of some sources of tax revenue, notably corporate tax, means that whatever is done must be viewed as a one-off measure rather than creating long-term obligations.

There has also been much hype about how this aid will be distributed. The potential for fomenting national jealousy is very real, and the risk of resulting social division must also be considered in all decisions.

In recent days there has been strong evidence from government buildings that energy bill credits, potentially totaling €600, will be paid out in stages later this year and early 2023. It has also been signaled by ministers that these payments could go to everyone, which will reignite debate over the need for more targeted action, primarily aimed at helping those most at risk.

All sane people will agree that government needs to provide the most help to those people who are most vulnerable to this spiraling energy price. And they also need to look after those who are above the welfare threshold who are still at serious risk and are already struggling.

Steps to help those who aren’t normally entitled to much welfare will increase political pressure to move towards ‘something for all’. And while there is some argument for an element of universal fuel payments, what this actually means is that fuel subsidies are given to people who are already very wealthy.

Tomorrow the European Commission is expected to present its plans for a tax on electricity supplies without gas. Companies that use nuclear or renewable energy are known to make very high profits because the price of electricity from all sources is so closely linked to the price of gas.

The hope is that a levy on excess profits can be used by governments to fund cost-of-living aid packages. Therefore, these EU proposals will be scrutinized by all 27 member governments, including Ireland.

With winter approaching, all governments know they need to act quickly and have support measures ready for implementation soon. But whatever is done in the September 27 budget, the issues about package size and how to allocate them need to be thought through very carefully.

https://www.independent.ie/opinion/editorial/we-must-think-carefully-about-how-we-implement-energy-support-measures-41980732.html We need to think carefully about how we implement energy promotion policies

Fry Electronics Team

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