Budget 2023 has come and gone, and the most pressing issue have been housing, and of course, energy.
In an effort to alleviate the burden that rising costs are placing on households nationwide, an energy credit of €600 (paid in three €200 instalments) has been announced for all domestic electricity customers.
Fundamentally, while the tax credits will help customers to keep up with their electricity spending, if they are not matched by a price cap directed at energy profits, they will amount to nothing more than a subsidy for these companies.
This will no doubt alleviate the burden in the short term. However, it is very much a short-term solution. It is highly unlikely that credits will continue year on year, due to the strain it would put on the Exchequer (which is already in a precarious position due to its over-reliance on corporate tax receipts).
Meanwhile, energy companies continue to record incomprehensible profits. For instance, the ESB recorded revenue of €3.7 billion in the first half of 2022. While a windfall tax on these profits has been announced backdated to all profits recorded in 2022, if it were to be depicted on a diagram, it would form something of a circle. Let’s look at the path the money takes.
An energy company records massive profits and has these taxed by the government. The government collects these tax credits and designates them for energy credits to alleviate rising costs for consumers. The money then flows right back into the energy company’s coffers through the consumer, and the cycle begins again. All the while, global prices continue to rise, and, in Ireland at least, the energy company can continue to raise its prices safe in the knowledge that the burden will be socialised.
Price caps are not a radical policy. Ireland is in the minority in the EU in that we have not implemented some form of price control to aid consumers. Caps as implemented in France or Spain for instance, allow for prices to be kept down, and for the burden to be borne by those recording the massive profits, rather than the state (and ultimately, its citizens). Furthermore, if price increases continue apace as they have done for the past six months, then the €600 credit will be swallowed up and become obsolete before it can be fully distributed.
With its choice of measures in this latest budget, the government has demonstrated its commitment to the profits of private companies over and above the responsibility it has for the citizens it represents.
