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

The first financial resolution provides for an extension of the excise duty reduction to mineral oil tax that the Government initially introduced in March of last year. VAT-inclusive reductions of 21 cent for petrol, 16 cent for auto diesel and 5.4 cent for marked gas oil, MGO, or green diesel, were extended in the Finance Act 2022 and were due to expire on 28 February of this year. The purpose of this current financial resolution is to extend these temporary reductions with effect from 1 March and begin a phased restoration of the full rates from 1 June.

On 1 June, the mineral oil tax rates will increase on a VAT-inclusive basis by 6 cent, 5 cent and 1 cent per litre for each of petrol, diesel and MGO, respectively. On 1 September, the rates will increase by a further 7 cent, 5 cent and 1 cent per litre for each of petrol, diesel and MGO, respectively. Finally, the rates will be fully restored by the balance of 8 cent for petrol, 6 cent for diesel and 3.4 cent for MGO on 31 October 2023. The cost of this measure is estimated at €383 million.

These introductions were first introduced by my predecessor, the former Minister for Finance, Deputy Donohoe, almost a year ago. At that time, we were experiencing impacts of sharp inflation, particularly in energy product prices. This was a global phenomenon, and one which was exacerbated by Russia's invasion of Ukraine. I will reiterate now what was said then: that the spikes in energy prices were driven by market factors, and that the tax system cannot prevent this. The Government provided for these reductions, however, to mitigate the impacts of the price increases that we have witnessed. Though inflationary impacts are slowing, the Government recognises that households and businesses are still facing relatively high energy costs. Balancing the sustainability of public finances with the need to mitigate the impacts of high energy costs, it believes that it is appropriate to extend the excise reductions while beginning the process of a phased restoration of the full rates over the coming months.

These resolutions form part of a new package of measures announced yesterday, totalling almost €1.3 billion. The continuation of these excise measures and the VAT measures which I will outline shortly, in addition to the rest of the package, will assist families and businesses in mitigating the impact of increased energy costs. I might speak to the amendments if I get a chance, but I want to deal with the primary resolutions first and I will revert to the amendments if time permits.

The second financial resolution provides for an extension of the temporary 9% VAT rate for gas and electricity. This measure was first introduced on 1 May 2022, and was due to expire on 28 February this year. The Government recognises that even with some improvements in the global energy markets, households and businesses are continuing to struggle with the cost of living. For that reason, the Government has taken the decision to extend the application of the 9% VAT rate for gas and electricity to 31 October this year to provide ongoing support to those who are high energy prices. The estimated cost of this measure is €115 million. This will add to the substantial support provided by Government to help with the cost of living.

The final financial resolution provides for an extension of the temporary 9% VAT rate for the tourism and hospitality sectors and, indeed, a number of other sectors, including hairdressers, barbers, amusement arcades, theatres, cinemas and so on. This measure was first introduced on 1 November 2020, though, of course, it had existed since 2011 up to the beginning 2019. Following previous extensions, it was due to expire on 28 February this year. The Government recognises the challenging business environment that the tourism and hospitality sectors are currently operating in, as well as the role that these business play in driving employment and economic activity across Ireland. For this reason, I will extend the application of the 9% VAT rate for these sectors to 31 August this year. It will revert to the 13.5% rate on 1 September 2023 and there will be no further extensions. The estimated cost of this measure is €300 million. This extension strikes a balance between the cost to the public finances and the provision of support for these sectors. A key consideration on this issue is the fact that while inflation is falling, it is still at a high level and the Government wants to see inflation fall to a much lower level. To allow the rate to go up next week would undoubtedly push up some prices and add to inflation and the pressures that a lot of households are facing at this time.

With regard to the Opposition amendments, amendment No. 5, tabled by Deputy Doherty, seeks a review of the rate of mineral oil tax applied to other heavy oil, MGO, petrol and diesel by June 2023, and a review of mineral oil tax applied to non-propellant uses of kerosene by 31 October 2023. The amendments further seek that the rate of mineral oil tax applied to non-propellant uses of kerosene be reduced to zero until 31 October. The amendments also seek the reduction in the rate of mineral oil tax applied to MGO from €131.47 per 1,000 l to €111.14 per 1,000 l until 1 June 2023. As the Deputy will be aware, mineral oil tax comprises a carbon and non-carbon component. The carbon component is commonly referred to as carbon tax, and the non-carbon component is often referred to as fuel excise or fuel duty. Mineral oil tax rates are subject to review annually as part of the annual budget cycle. As the Deputy will be aware, these reductions were first provided for in March 2022. The rates were kept under review and have subsequently been extended, initially to budget day in October last year and again, until the end of February 2023. The resolutions I have moved will further extend the reductions and provide for a phased restoration of these rates. It is evident that the Government is acutely aware of fuel price impacts and has taken action accordingly over the last year. I do not believe there is any need for a Government to commit to a specific review. The rates are always reviewed in the lead up to the budget.

The Deputy's amendment proposes setting the mineral oil tax rate to zero on kerosene. Mineral oil tax applied to kerosene is comprised of carbon tax alone, as no non-carbon charge applies to kerosene. As the Deputy will be aware, the significant rise in energy prices which we have seen in the last year is attributed to external global market factors. The long-term carbon tax policy, which received cross-party support, sets out gradual annual increases in the carbon tax rate.

The 2020 programme for Government committed to increasing the amount that is 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 €100 per tonne of CO2 by 2030. This measure is a key pillar underpinning the Government's climate action plan to halve emissions by 2030 and reach net zero not later than 2050. It is important to note that a significant portion of carbon tax revenue is allocated for expenditure and targeted welfare 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. Removing the carbon tax for this period would not effectively address the current fuel price trends and would also impact on revenues allocated for expenditure on fuel poverty prevention and, therefore, I cannot accept the Deputy's amendment.

I will turn to the amendment that has been put forward by Deputy Nash to Financial Resolution No. 3. I thank the Deputy for his suggested amendment. The measure this Financial Resolution deals with provides two important supports for the tourism and hospitality sectors. One is a financial support, allowing businesses to keep their current prices without having to either absorb the cost of a VAT increase or pass the additional cost on to their customers. However, this measure also gives businesses certainty. It allows them to consider their plans and effectively budget for the rest of the year. If the Deputy's amendment was to be passed, it would essentially make financial support for the sector contingent on the establishment of a joint labour committee. This would introduce an element of doubt into their plans and budgeting.

As the Deputy will be aware, there are businesses throughout Ireland in the hospitality and tourism sectors that are struggling with the running costs of their businesses in this very uncertain climate. Government wants to do what it can to give them the certainty and confidence they need to be able to maintain staffing levels and continue the operation of their businesses. I acknowledge it is important that the sector treats its staff fairly and, as a general rule, it does. However, I appreciate this does not happen everywhere. As the Deputy will be aware, joint labour committees are set up by the Labour Court, following an application from either the Minister for Enterprise, Trade and Employment, a trade union, or an organisation that represents workers or employers involved in the sector.

In the first instance, the establishment of a joint labour committee is a matter for my colleague, the Minister for Enterprise, Trade and Employment. I also note that establishing a joint labour committee is not a solution, in and of itself, and that the effectiveness of such a committee will be determined by how the various parties engage with it. There can be no guarantee that it would be a success. Making financial support contingent on a joint labour committee's establishment would not necessarily achieve the Deputy's aims, that is, to improve work, conditions and pay throughout these sectors. Therefore, I cannot accept the Deputy's amendment.

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