Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I move:

To delete all the words after "Dáil Éireann" and substitute the following:

"notes that: — the volatility in fuel prices experienced now and over the last two years is due to a variety of geopolitical issues, including conflict in the Middle East and Ukraine, none of which the Government has control or influence over;

— crude oil is an internationally traded commodity, and its price is determined by changing global demand, and while the price of a barrel of oil has increased in recent weeks, prices are well below the highs of more than $110 a barrel experienced for much of 2022;

— figures published this week by the Central Statistics Office show that the annual rate of inflation fell to 1.6 per cent in April, the lowest rate of increase since mid-2021;

— within the above constraints, the Government has recognised the struggles many people and businesses have faced with increasing fuel prices, and has been very pro-active in responding to these fuel cost challenges over the last two years;

— in particular, the provision of temporary reductions in the rate of non-carbon Mineral Oil Tax applying to diesel, petrol and marked gas oil (MGO), which were due to be reversed in October 2023, but were further extended in Budget 2024;

— to date, the reductions are estimated to have cost over €1.2 billion in terms of revenue foregone since their implementation in March 2022;

— in their pre-Budget submission for 2024, Sinn Féin provided for a full restoration of excise from April 2024, meaning an increase of 8 cent, 6 cent, and 3.4 cent in a litre of petrol, diesel and MGO respectively earlier this month under the Sinn Féin proposals, instead of a two-step restoration proposed by the Government; and

— the cost in 2024 of the measures proposed in a previously published Sinn Féin motion is approximately €165 million, which has not been provided for in the party's budgetary proposals; recalls that: — in addition to its fuel excise reductions, the Government has made substantial fiscal support available to assist with the cost-of-living challenges amounting thus far to some €12 billion;

— Budget 2024 provided for €2.7 billion in once-off cost-of-living measures (net of windfall gains from the energy sector) which included;

— extending the 9 per cent Value Added Tax rate for gas and electricity to 31st October, 2024;

— extending the reduced rate of excise levied on fuels;

— three €150 electricity credits; and

— €1.1 billion in social welfare and other expenditure measures;

— this approach to the cost-of-living challenge balances the need to provide the necessary fiscal support to households and firms while, at the same time, avoiding a situation whereby the Government's fiscal response becomes part of the inflation problem;

— the policy response has been focussed on measures that are temporary, timely and targeted at those most in need; and

— Government has also been conscious of rising borrowing costs as well as the need to preserve price signals, in other words, the need to avoid interfering with the transition to carbon-neutrality; recognises that: — carbon tax is a key pillar underpinning the Government's Climate Action Plan 2024, to halve emissions by 2030, and reach net-zero no later than 2050;

— the Programme for Government: Our Shared Future committed to increasing carbon tax and the Finance Act 2020 provides for a 10-year trajectory for carbon tax increases to reach €100 per tonne of CO2 by 2030;

— a significant portion of carbon tax revenue is allocated for expenditure on targeted welfare measures and energy efficiency measures, which not only support the most vulnerable households in society but also in the long-term, provide support against fuel price impacts by reducing our reliance on fossil fuels;

— analysis, undertaken using SWITCH, the ESRI tax and benefit model, to simulate the impact of the carbon tax increase and the compensatory welfare package, has confirmed that the net impact of the combined measures is progressive, and households in the bottom four income deciles will see all of the cost of the carbon tax increase offset, with the bottom three deciles being better off as a result of these measures; and

— in the long run the best way to protect Ireland from the impact of international fossil fuel prices is to reduce our dependence on them, and we will achieve this through the progressive decarbonisation of the Irish economy and society, and through the steps that will be taken to meet the Government's commitment to reach net-zero greenhouse gas emissions by 2050; and further recognises that: — the Minister for Finance will continue to monitor and review the position in the coming months in the context of the final phase of excise rate restorations due to take place in August 2024; and

— Budget 2025 is the appropriate time for the Government to set out its taxation and expenditure decisions in response to the cost-of-living pressures currently being faced by many households.".

I welcome the opportunity to set out the Government's response to the Sinn Féin Private Members’ motion. The Government is acutely aware of the impacts of energy price inflation and the broader cost-of-living crisis on households and business across Ireland, and has acted decisively to lessen the financial impacts across the economy and society as a whole. The drivers of inflation are global in nature and, accordingly, it is not possible for any one government to fully absorb the costs. Therefore, Government policy has focused on temporary and targeted measures, aimed at the most vulnerable. The policy response has also been designed to avoid generating second round effects that could lead to an inflationary spiral.

It is important to set out the context of the wider inflation situation at the moment. Consumer price inflation has been a challenging headwind in recent years, averaging more than 8% in 2022 and more than 5.2% last year. Since then, wholesale energy prices have declined substantially and the process of disinflation is now thankfully well advanced, with both energy and non-energy inflation declining significantly over recent months. Inflation in April, as measured by the flash estimate of HICP, the harmonised EU-wide measure, stands at 1.6% which is the lowest since June 2021 and almost 5 percentage points down on April last year. Energy prices were down over 6% year-on-year in April and have fallen by 15% since the peak in November 2022, and, therefore, while I acknowledge we have been through a difficult time with inflation, the figures I have just outlined show an improving position.

It is important to note that the final retail price of fuel is determined by a number of factors, including the costs of production, distribution, global market factors, international exchange rates, taxation, wholesale market contracts as well as individual retail pricing policies. The price of a barrel of oil has increased in recent weeks to an average of approximately $88 so far this month, compared with $84 in March, $81 in February and $79 in January. These values are still well below the highs of more than $110 a barrel experienced for much of 2022.

Looking forward, future markets, upon which the price at the pump depends, expect oil prices to decline slowly but steadily over the forecast horizon. By the end of this year, the price of a barrel of oil is expected to be approximately $82, $77 by the end of 2025 and $74 by the end of 2026, but of course there are no guarantees. However, as has been clear from recent volatility, there is considerable uncertainty associated with the future path of energy prices and there is a possibility for future prices to diverge significantly from what is anticipated by the markets at present.

The Government is very aware of the severity of the financial impact that fuel price increases have on Irish households and businesses. I will shortly outline how we have responded to lessen the financial burden being faced by society. It is clear, however, that many of the factors influencing the current price of fuels are out of the Government’s control, in particular the market volatility.

Let me now turn to the Government’s response to the increase in energy prices over the past couple of years. Notwithstanding the restrictions of the energy tax directive and the need to manage the public finances, the Government has acted decisively on the energy crisis. We have recognised the impacts of fuel price increases. While these trends are driven primarily by global factors, the Government made the decision to alleviate some of these impacts through the domestic taxation of fuel. In particular, as colleagues have acknowledged, in March 2022, the Government provided for temporary reductions in the rate of non-carbon excise applying to diesel, petrol and marked gas oil, MGO. Following extensions and amendments, cumulatively these reductions amounted to 21 cent, 16 cent and 5.4 cent per litre for petrol, diesel and MGO, respectively.

These temporary reductions were initially due to end on 31 August 2022, but following review and monitoring of fuel prices they were extended until February 2023 with a phased restoration beginning in June 2023, followed by a second restoration in September 2023. A final restoration of excise rates was due to take place at the end of October 2023 but in the budget, I provided for a further extension until 31 March this year with a phased restoration occurring in two stages, on 1 April 2024 and 1 August 2024. The first stage of this final restoration came into effect at the beginning of this month. Inclusive of VAT, the excise on petrol, auto-diesel and MGO increased by 4 cent, 3 cent and 1.7 cent per litre, respectively. The amounts due as part of the final restoration scheduled for 1 August 2024 are of the same order.

The excise reductions to date are designed to strike the balance between passing a significant benefit to consumers while managing the tax base and respecting the minimum rates allowable under the energy tax directive. They are estimated to have cost more than €1.2 billion in revenue foregone to the Exchequer from their implementation in March 2022 to date.

I would like the House to note that as I outlined our plan to restore excise duty on budget day, the stated position of Sinn Féin, the main Opposition party, according to its pre-budget submission, was to have full restoration in April 2024.

That proposal would have cost motorists an extra 8 cent and 6 cent per litre on the price of petrol and diesel. Perhaps, unsurprisingly, yet again, the party has changed its position. The cost this year of the measures proposed in the motion is approximately €165 million, which is not provided for in any of its pre-budgetary arithmetic. The Government has made substantial fiscal support available to assist with the cost-of-living challenges amounting thus far to €12 billion. Budget 2024 provided for €2.7 billion in once-off cost-of-living measures, net of windfall gains from the energy sector, which included extending the 9% VAT rate for gas and electricity to the end of October this year; extending the reduced rate of excise levied on fuels; three €150 electricity credits; and more than €1 billion in social welfare and other expenditure measures. The Government recognises that there continues to be upward pressure in fuel prices due to a variety of issues but we do not believe it is appropriate to respond to this by accepting the motion before the House. It is our view that budget 2025 is the appropriate place to set out taxation and expenditure decisions in response to the cost-of-living pressures being faced by many across the country. In addition, both my Department and I will continue to monitor fuel prices over the next number of months, as I have said publicly on a number of occasions, with a view to evaluating the position prior to the 1 August excise restoration that is planned. That examination will include consideration of the cross-Border issues that colleagues across the House have raised again today.

Deputies will be aware that the 2020 programme for Government committed to increasing the amount charged per tonne of CO2. emissions from fuels to €100 by 2030. The Government followed through on this commitment by introducing legislation in the Finance Act 2020 to provide for a ten-year trajectory for carbon tax increases to reach this target level. This measure is the key pillar underpinning our climate action plan to halve emissions by 2030 and reach net zero no later than 2050. A further key element of the Government’s carbon tax policy is the effect of hypothecation of revenues raised from these rate increases to fund important just transition measures. It is important to note that a significant portion of carbon tax revenue is allocated for expenditure on targeted welfare measures and energy efficiency measures, which not only support the most vulnerable households, but also in the long term will mitigate fuel price impacts by reducing our reliance on fossil fuels. In the long run, the best way to protect Ireland from the impact of international fossil fuel price changes, is to reduce our dependence on them. We will achieve this through progressive decarbonisation of our society and through the steps that will be taken to meet the Government’s commitment to reach net-zero greenhouse gas emissions by 2050.

For context, it must be noted that the annual increases in the carbon tax rates have a relatively small impact on energy prices. The budget 2024 change in carbon tax, which came into effect in October last year for auto fuels, added approximately 2 cent per litre in tax to petrol and diesel. The increase in rates for home heating fuels such as kerosene, gas and solid fuels, does not take effect until 1 May on an annual basis and this is to mitigate against impacts during the winter heating season. The May 2024 increase will add approximately €21.56 to a 1,000 l fill of kerosene and 20 cent to a 12.5 kg bale of briquettes. It is clear that carbon taxation is not the cause of current energy price inflation.

To conclude, the Government is very conscious of the negative impact that energy price increases are having on households around the country. Everybody in this House will be aware of the primary reason for these and I have given a commitment in the House today, and previously, that the Government will consider and evaluate in a careful and deliberate manner, the environment for excise restoration, the final stage of which is due on 1 August. I will take into account where we are in the weeks leading up to that and will report to the House at that point.

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