The Central Bank has forecasted that food price increases will drive inflation to 8% by the summer, heaping additional pressure on workers and families already struggling to get by. Costs for goods and services everywhere are rising rapidly and household budgets have been vaporised. This particularly impacts on those with low to middle incomes and on those with fixed incomes. I have listened to what the Taoiseach has said about this crisis carefully and he has repeatedly stated that the Government cannot bring in separate measures every week. Nobody is asking the Government to do that. We want to see a credible and meaningful response that would provide real relief to those who are struggling, those who are worried and those who are already in trouble.

There has been a lot of political debate about the carbon tax in recent weeks, much of it ignoring the taxation elephant in the room, which is VAT. The Taoiseach has said that next month, the carbon tax increase will mean an average increase in household bills of €1.40 per month. I am sure the Taoiseach will agree that VAT is considerably more and it is ever-increasing given the enormous prices rises in energy, which provides an unprecedented windfall to the Government. Last year alone, for example, the Government took in €3 billion more in VAT than it did in 2020. A large chunk of that was from energy costs. Up until February of this year the Taoiseach was telling the House that the VAT derogation was impossible because of EU rules. On 9 March, when a cut in excise duty was announced, we were told the Government was working with EU colleagues to see whether we could introduce greater relief or flexibility in that area. Last week the Taoiseach told us that a VAT derogation had been sought. It also was reported last week that the Taoiseach told his parliamentary party that we can expect some hard proposals on energy from the EU by the end of April.

Maybe the Taoiseach can provide some details to the House on that. When exactly did the Government apply for that VAT derogation? Was it separate or was it combined with other member states? Did the Taoiseach personally make that application to the European Council on 24 and 25 March? Has the Government applied for a specific derogation on VAT, reducing it to levels of 9% or 5%, for example? When will we get an indication of when that application will be successful? The Taoiseach said the application was made yesterday. The Taoiseach said the Government is considering offsetting the carbon tax increase. Is that impacted by VAT or the public service obligation, PSO, level? Can the Taoiseach give us some sort of an indication and a timeline for that?

I thank the Deputy for raising those points. Members are looking for initiatives every week and I understand that. We have to stand back, however, and take a more considered view on how we respond to this fairly unique crisis, which has been caused by the combination of a pandemic, emerging from that pandemic and the imbalance of supply and demand which that created and a terrible war, the likes of which we have not seen since the Second World War that is happening on the Continent of Europe and that is creating huge issues for all of us. We have to look at this in the medium term, rather than just from week to week. I believe the Deputy accepts that and I appreciate the point she has made on that.

I refer to the European Union and European Commission approach to the energy market. There have been considerable discussions in recent months at European Council level on the market, on how it is designed and on whether that market can be adjusted or changed to reduce the cost of energy. Different member states have different perspectives on that and we have consistently put forward the view that we need more flexibility on the legislation and the directives, including the energy tax and the VAT directives. We already enjoy a historic derogation on the VAT rate on fuels of 13.5%. We have told the Commission, including prior to the last meeting and prior to Versailles, that there should be flexibilities in the current situation that would not endanger the historic derogation we have. If we had simply reduced energy prices below that 13.5% rate, there was no guarantee under the existing laws that we could stay at 13.5% when the crisis was over but rather, we would have to go to 23%. That was something we were anxious to avoid.

We put forward an amendment to the conclusions of the last meeting, which was accepted, to try to head off that situation. It still has to involve discussions with the Commission. We want to be absolutely clear and certain. This is to allow us flexibility. We have different options and know what we can and cannot do. With the laws as they were, we were not in a position to do it all along, which we made clear to the House. We reduced excise duties significantly, by between 15% and 20%. The Central Bank spokesperson said that had an impact on reducing the costs on people from what they would otherwise have been.

The other side of the argument is that the Commission itself acknowledges that the market needs to be revisited with regard to the domination of gas in dictating the price of all energy in the European Union market.

I thank the Taoiseach.

Hopefully, by the end of April, there will be a further return to this, with a fuller reform of the market by the end of May.

For many people, there is a personal crisis and a family crisis. I know the debates have to go on at European Union level, but we have to inject some degree of certainty about the timeline. Are we talking about next October or before then? The Taoiseach talks about an inclusive process with social partners and stakeholders. What does that mean? We increasingly see people who are at breaking point. The Taoiseach must see them himself. Their budgets do not stretch to providing a roof over their head, food and energy. They are hoping that there will be good weather. That is the point we have come down to. There is a significant windfall for the Government, since VAT take increases as energy prices increase. How can that sit side by side with people in that kind of difficulty? Will the Taoiseach give us some certainty?

There is no point in tackling this with one measure alone. Pay policy is important. The Minister for Public Expenditure and Reform has invited social partners to discuss extending the existing national pay agreement. It should be possible for us, as a society, to work through the different strands of income policy, pay, tax and welfare. The question is whether we can get agreement on prioritising those most in need and having a response that does not endanger the progress we are making in the economy and that does not have us just chasing inflation. We have already spent close to €2 billion since October in endeavouring to alleviate the pressure on people.

We have taken in a lot.

I know. There will be significant expenditure from here until the end of the year and beyond that. It is necessary and right. With the number of Ukrainians coming into the country, there will be expenditure on education, health and housing, of a significant nature. We have to get the balance right and not just react from week to week and month to month. I think the Deputy accepts that we should not.

I thank the Taoiseach.

To be clear, that will not be solved today but we need to engage with the social partners.