Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

I ask everyone to turn off their mobile phones and devices or put them on silent. I have been out for a number of weeks and I thank Deputy Timmins for stepping in during my absence. I have heard he has done a great job and I thank him sincerely for accommodating me while I was out.

I wish to explain some limitations to parliamentary privilege and the practice of the Houses as regards references witnesses may make to other persons in their evidence. Witnesses are protected by absolute privilege in respect of the presentation they make to the committee. This means they have an absolute defence against any defamation action for anything they say at the meeting. However, they are expected not to abuse this privilege and it is my duty as Chair to ensure that this privilege is not abused. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.

I advise members of the constitutional requirement that they must be physically present within the confines of the Leinster House complex to participate in public meetings. In this regard, I ask that members partaking via MS Teams confirm prior to contributing to the meeting that they are on the grounds of the Leinster House campus. Members are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of a person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, I will direct them to discontinue their remarks. It is imperative they comply with any such direction.

Today marks the first two engagements on the topic of budgetary responses to the energy crisis and cost-of-living pressures. During these two sessions, we will engage with academic experts, trade unions and affected groups. We will explore the way in which a series of budget measures can be implemented to respond to the short- and medium-term impacts of the energy crisis and cost-of-living pressures related to the conflict in the Middle East.

I welcome a number of witnesses. I welcome from the ESRI: Professor Martina Lawless, director; Dr. Claire Keane, associate research professor; Dr. Conor O’Toole, associate research professor; Dr. Miguel Tovar Reaños, senior research officer; and Dr. Andrés Estévez, postdoctoral research fellow. I welcome from University College Dublin: Professor Lisa Ryan and Dr. Nora Strecker, assistant professor and Ad Astra Fellow; and from Trinity College Dublin and University College Dublin, Mr. John FitzGerald, adjunct professor. The committee welcomes the opportunity to engage with them and I thank them for being here.

I invite Dr. Keane to make her opening statement.

Dr. Claire Keane:

I thank the committee for the invitation to be here today. We are grateful for the opportunity to discuss the budgetary responses to the energy crisis and cost-of-living pressures.

On the macroeconomic backdrop and context, the recent conflict in Iran has sent shock waves through global energy markets and the international economy. The increase in inflationary pressures, as well as a greater level of uncertainty, will put downward pressure on economic activity and dampen domestic and external demand. The magnitude of the shock will depend on its duration and its severity. A rule of thumb from previous research by the ESRI was that for every 30% increase in oil and gas prices we see a 1% increase in consumer prices in Ireland. This led the ESRI to increase our inflation forecast to over 3% for the present year in our latest quarterly economic commentary for spring 2026. In that forecast, we used the technical assumption that oil and gas prices would moderate towards the end of 2026 in line with futures markets at that time. However, things are very volatile and now it seems the crisis will be more prolonged and therefore, the price shock will likely be larger and longer lasting than built into the early forecast. In response, the Government has announced two packages of temporary supports for households and industry at a combined cost of around €750 million. These include measures such as reductions in excise duties, an extension of the fuel allowance season and changes to the diesel rebate scheme, as well as a deferral of the planned carbon tax increase.

On policy targeting, we know from previous work that energy inflation tends to be larger for those on lower incomes. This in part is because they spend a higher proportion of their income on energy. Work to be published shortly will look at the distributional impact on households of the rise in prices and the packages of supports announced to date. We anticipate that like the cost-of-living packages rolled out between 2022 and 2025, the current measures will benefit lower income households more than higher income households in percentage terms. However, in absolute terms - in cash terms - higher income households are likely to benefit more. This reflects the untargeted nature of cuts to excise duty that are paid by all consumers and therefore, those cuts are felt by all. A recently published report by some of my colleagues here today shows that well-targeted interventions to address energy poverty can provide more effective support to those most in need at a lower cost than universal measures. It emphasises that, because energy poverty is experienced in diverse ways, monitoring systems should track a range of indicators. Universal measures like electricity credits help all households but they have limits. The flat amount might not be sufficient for the most vulnerable and substantial resources are inevitably directed to households that need little or no assistance. As a result, emergency measures should be targeted and explicitly temporary with a clear distinction from longer-term structural reforms. The report on energy poverty shows that households experiencing it rely heavily on other supports such as housing assistance, child benefits and disability benefits, thereby reflecting overlapping socio-economic challenges. It suggests energy poverty policy must be closely integrated with broader social protection, housing and energy strategies to ensure better targeting.

ESRI research indicates that the targeting of the fuel allowance could be improved to support more vulnerable households. Eligibility was extended in the most recent budget to working family payment recipients but there is a high potential for non-take-up, partly due to the administrative burden involved. While other energy cost supports, such as the additional needs payment, are available, their reliance on discretionary eligibility criteria can further increase administrative complexity for applicants.

In terms of implications for budgetary policy and public finances in the future, the ongoing reliance on fossil fuels - the prices of which we have seen to be very volatile - leaves households and businesses exposed in the long run and has the potential to reduce economic growth in an oil-importing country such as Ireland. In addition, if the recently introduced measures are not unwound in a timely manner, they may hinder our ability to reduce energy demand and incentivise the uptake of sustainable energy technology. Furthermore, any budgetary shock is likely to put pressure on our ability to deliver on longer-term infrastructure deficits such as housing, healthcare and transportation. Hard choices will have to be made and any supports should be financed from within the current spending limits rather than additional expenditure. Targeted, tailored and proportionate measures must be used to ensure the public finances remain on an even keel and avoid following procyclical budgetary policy.

All of these developments occur against the backdrop of an increasing reliance on corporation tax revenues, which are highly concentrated in a small number of large multinational corporations and contain a large windfall component. This tax fragility would suggest an even greater level of prudence is required in spending choices.

Dr. Nora Strecker:

I thank the committee for the opportunity to contribute. Similar to the 2022-2023 energy and cost-of-living crisis, European governments responded to the 2026 cost-of-living crisis with a mix of household supports. These measures, however, have been smaller and more targeted than previously. Many countries shifted away from broad energy subsidies and instead focused on direct income supports for vulnerable populations. For example, France accelerated energy voucher payments, the Netherlands expanded funding for emergency energy support funds and Greece introduced digital fuel cards and targeted support for lower income households and rural commuters. More widely, governments implemented and expanded transport allowances, commuting subsidies and one-off cash transfers for families and welfare recipients. Generally, the evidence of the effectiveness of these measures in alleviating the impact of the current crisis is mixed. Targeted transfers cushion the immediate reduction in real household incomes and are fiscally cheaper than universal price caps. At the same time, many European countries still implemented untargeted fuel tax cuts and broad subsidies, which disproportionately benefit higher income households, which consume more energy. IMF analysis recently suggested that untargeted subsidies in previous crises delivered roughly one third of benefits to the richest households. I will hand over to Professor Ryan.

Professor Lisa Ryan:

I thank the Cathaoirleach and members for the invitation. I will focus on energy. Ireland faces an acute exposure, compared with other countries, to the global energy crisis due to a systemic over-reliance on imported fossil fuels. Over 80% of our energy is imported, including 100% of our oil and 80% of natural gas, and we are highly susceptible to international price volatility. It also means that any energy subsidies generally involve subsidising imported fossil fuels. The primary driver of this vulnerability is a fuel mix dominated by oil, at more than 50%, and natural gas, at around 30%. If we look at this by sector, we see transport consumes about 42% of total energy, almost exclusively derived from oil, while private cars account for 71% of all journeys, which is very high compared to other countries. Regarding residential heating, 46% of homes still rely on high-carbon fuels, namely, oil, coal and peat.

We are not including gas in that. Over 700,000 households are still dependent on oil. This number has increased over the past ten years and these households are very vulnerable to price increases. Electricity is generated from a mix of 40% natural gas, around 30% wind and imported electricity. There is huge rural inequality in this because many counties are not on the gas grid. In counties like Donegal and Monaghan, oil heating prevalence reaches 70% of all households, compared with just 11% in urban Dublin. Furthermore, 65% of Ireland's housing stock was built before 2001 and is of low quality. These are inefficient structures that require deep retrofits before a heat pump can be put in them. This is a financial barrier that risks leaving low-income and elderly demographics in fuel poverty.

What should we do? The ESRI has already outlined some of the measures that have been put in place, but Government intervention has been on the supply side so far and we need to shift from short-term, supply-side subsidies to aggressive demand-side transformation. Energy prices are likely to remain high, at least until the end of the year. Therefore, action needs to be taken now and over the summer, in advance of next winter, when these oil-fired households will need heating. We need immediate efficiency improvements. This involves doing the simple things first, such as putting insulation in the attic of every house in the country. That would reduce energy demand to begin with, regardless of energy supply. We should focus on attic, wall and floor insulation. Another simple measure is in transport, instituting behavioural and structural shifts. This includes encouraging EV purchase, which is happening, but also simple things like reducing speed limits. A car driving at 110 km/h uses 30% more fuel than a car driving at 80 km/h. That is a big difference.

We need to continue the process of switching away from fossil fuels. We are accelerating residential solar PV and heat pump installation to compensate for the removal of oil heating. Although solar energy is not strong in winter, it can be used during the summer to reduce energy bills to offset winter bills. We need to accelerate the implementation of offshore wind farms. In the longer term, this will bring down electricity costs. We also need to think about workforce allocation, because if we want to retrofit houses, we need to prioritise that this summer, in advance of the winter, when there will be high heating costs.

From a security of supply, cost and climate perspective, the goal needs to be to electrify heat and transport and move to a diversified fuel mix, mainly derived from renewable sources. We need to focus on reducing electricity and heating demand so we can help people to reduce their bills in advance of the retrofitting of all houses, as set out in our targets.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

I look forward to the questions. I now invite Mr. FitzGerald to give his statement.

Mr. John FitzGerald:

I thank the committee for the invitation. The current energy crisis caused by the closure of the Strait of Hormuz will, if it continues, have grave consequences for the world economy. The head of the International Energy Agency, IEA, has indicated that it could be the worst such crisis since the Second World War. The International Monetary Fund, IMF, reinforced this message last month, indicating that it could result in a worldwide recession. We do not know whether the Strait of Hormuz will remain closed for long. If it reopens immediately, the economic consequences will still be serious, but not grave. However, closure into the autumn and winter would precipitate a worldwide recession, seriously affecting most of the world. As my daughters learned to say in Girl Guides, bígí ollamh.

I worked in the Department of Finance on the oil price crisis of the 1970s so I have experience of this. Over that decade, Middle East wars saw the price of oil increase by 500% in real terms. However, even with this massive shock, worldwide energy demand only went down by 15%. This time, if the strait remains closed, worldwide oil supply will be down by the same amount, 15%, and gas supply by 10%. What we do not know is how high prices would have to rise to reduce worldwide demand by 15% to equal supply. The Economist recently reviewed the academic research on this and suggested prices will have to rise by between 150% to 500% if the Strait of Hormuz does not reopen.

The most negative scenario in the Department of Finance’s recent spring statement looked at what could turn out to be a moderate increase in oil prices of just over 100%. That would not clear the market. The rise in prices would involve huge transfers of resources from rich and poor energy consumers to remaining oil producers. If energy demand has to be cut by 15%, some of this will be achieved by using alternative energy sources, as Professor Ryan suggested. However, in the short term, most would have to be delivered by cutting world output. That is a recession. As rich countries like Ireland bid for scarce supplies, squeezing poorer economies out of the market, this would have an even bigger impact on poorer countries. There are stories today about the impact already in India.

If oil prices were to double to $140 per barrel, Ireland would be worse off by €7.5 billion, or 2.5% of national income. If oil prices were to rise to over $200 per barrel, which might be more realistic if the strait remains closed, the hit to Ireland would approach €15 billion, or 5% of national income. If worldwide output were then to be reduced by 3% as a result of the crisis, based on previous ESRI modelling, Irish national income and consumption would fall by at least 3% in real terms, adding to unemployment, with inflation rising well above 5%, towards 10%. To protect those on low incomes and pay for increased unemployment payments, the welfare bill in the next budget would balloon. In real terms, revenue would fall, with lower consumption and employment. Depending on how high oil prices get, this could necessitate the Government borrowing next year. It would be that serious a hit.

These are very crude numbers. An economic model would be needed to do the job comprehensively. However, they illustrate that if the war continues or the strait remains closed, the consequences for Ireland will be very serious. Until we know whether the Department of Finance's moderate scenario is right, or whether instead we face a very serious crisis, the Government should keep its powder dry. Relying on the wisdom of Donald Trump to save us from an economic crisis is a dangerous bet. In the most serious case, where Ireland is worse off by just 2.5%, or even 5%, there is no way the Government could protect the bulk of the population from the consequences. Instead, the Government needs to hoard resources to be able to provide proper protection for those on low incomes and the unemployed, who will otherwise freeze next winter. These are the issues my colleagues from UCD and the ESRI have dealt with. With the possible budgetary costs I have outlined, the resources would not be there to protect the rest of the population.

In 1974 and 1975, faced with a 4% loss of national income due to the oil price shock, which was of a similar order of magnitude, the then coalition Government tried to protect everyone through a surge in expenditure. This was unsustainable and the toughest budget in the history of the State came in 1976, with the obvious electoral consequences the following year. Let us not repeat that mistake. The EU Commission and the IMF have warned against governments directly subsidising energy costs through tax cuts. In the long run, that would just lead to higher prices, benefiting oil producers, not consumers. Just how unwise it is as a policy is illustrated by the fact that Donald Trump announced yesterday that he was going to emulate Ireland. That is bad news.

Thanks to relatively prudent fiscal management in recent years, providing the Government does not fritter away resources on wasteful support for the less vulnerable in the population as we saw last month, the Government will be able to protect those on low incomes in the coming years. The relative strength of the public finances means that if they are managed appropriately, there should be no need to repeat the Government-induced austerity of the financial crisis, or of the oil crisis of the 1970s.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

I thank the witnesses for their words of wisdom. Would Deputy Timmins like to go first?

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank the witnesses for coming in and giving the committee their valuable time. I have six or seven questions. I will ask the ESRI the first two or three and then move on to UCD and Mr. FitzGerald.

Does the ESRI agree with fossil fuel energy subsidies, given they will not reduce demand?

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

Does Deputy Timmins want to direct his question to someone in particular?

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I do not mind.

Dr. Claire Keane:

The issue is that the Government is trying to protect people in the short term, but we may keep revisiting this. If we look back at the cost-of-living measures or the current measures, the main issue is the lack of targeting. The cost-of-living measures were done through increased social welfare payments, more targeted measures and some universal ones. Perhaps in the very short term, the Government might want to do that to prevent people from entering poverty, but it cannot continue to do that. Research by Trinity College has shown that things like electric vehicles and solar panels are mostly used by people on higher incomes.

It would be much wiser to use the money to try to subsidise those sorts of technologies for people at the lower end of the income distribution so that we do not keep continuing this loop with increased fuel prices having a negative impact on those on the lowest incomes.

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

How would the ESRI have done things differently given the Government was faced with a very challenging situation two months ago? Would the ESRI have done things any differently or at a different speed?

Dr. Claire Keane:

Perhaps Dr. Strecker might want to jump in here. We were talking about how in other countries there was maybe more targeting. Rather than having something like an excise cut, which affects everybody including higher income households that maybe can afford the hit more, there could some sort of improved targeting so that we know we are supporting-----

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The fuel allowance is an obvious one.

Dr. Claire Keane:

Yes, the fuel allowance. There is an extension there but some of the across-the-board cuts to excise are not targeted and will benefit in cash terms the higher income people more.

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

However, most people working need a car and many of these are middle and low-income earners as well, so it does benefit a lot of that target.

Dr. Claire Keane:

Yes, but we have seen other examples. Dr. Strecker will not be happy I am bringing her up again but she has given some good examples of countries that are bringing in means-tested supports. Of course, we will all argue that we all need help and that we are all spending on energy, but I guess it is about trying to target it as well as possible so that we do not have people entering poverty.

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Does Dr. Keane have a few specific suggestions the Government could take up? The examples have been given of Greece, the Netherlands and France. Are there specific measures the ESRI would suggest this Government should do that it has not done in relation to the targeting idea?

Dr. Nora Strecker:

Does the Deputy mean additional measures?

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Yes.

Dr. Nora Strecker:

The fuel allowances have already been implemented but one other thing that could be extended is to follow the French example of supporting commuting. The concern is that fuel prices, particularly for low and middle income households if they have to go to work, are too excessive especially if they have to commute a longer distance. Means testing for distance would be another alternative.

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The scale of the money the Government has put on the table is €775 million - €250 million on top of €525 million. I have done different calculations on annualising that but it is certainly in the order of €2 billion to €3 billion. What is the ESRI's opinion on the scale of the intervention in terms of euros? Do the witnesses think it is dangerously high or could we go further? What are the witnesses' views on it?

Dr. Martina Lawless:

Our concern is that we do not know how long this period of high fuel prices is likely to continue. If we annualise those numbers, and if we continue them on into next year and into the year after, then we are talking about very substantial impacts on the public finances. Obviously, Ireland is entering this challenge with a period of surplus, which is quite unusual in other comparable countries, but as we said in our opening statement we have long-running concerns about the vulnerability of the public finances and their level of reliance on corporate taxes. Also, we have not yet seen other impacts. There is very substantial risk that this lowered demand caused by fuel prices could have knock-on impacts into employment and into other sectors of the economy, which would also give rise to further pressures on the Government to intervene. In a sense, putting all our eggs in one basket of addressing this first surge in prices could make it difficult to have the resources available to follow on if the crisis is longer lasting or more broad range.

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Dr. Lawless is not suggesting that the Government should have done anything differently in terms of the quantity.

Dr. Martina Lawless:

We had not really made any specific comments on the quantities. It was more in terms of the efficiency of the targeting.

Dr. Conor O'Toole:

One way to think about it is that Ireland has had very rapid net spending growth for quite a number of years. The ESRI and the Irish Fiscal Advisory Council, IFAC, have pointed that out on a number of occasions. Certainly, when we came out in our quarterly commentary towards the end of March of this year we suggested that if there were to be additional supports, they would be done within the current envelope of spending that was there rather than additional spending in an economy, which at that particular point in time was still growing robustly and was experiencing net spending growth that was faster than the rate of growth in the economy we would expect the spending to be at.

From our point of view two things are really important here. One is the nature and duration of the crisis. When we look at the data at the present point in time, it certainly looks as if the crisis is going to be more severe and longer lasting than we had anticipated at the end of March. The data from today on oil prices has them probably higher than the adverse scenario that is already in the annual progress report from the Department of Finance. We are looking at a longer crisis than we previously anticipated. Again, we have to remember that we still do have a low unemployment rate and the domestic economy at the present point in time is still growing relatively rapidly. We need to keep our powder dry to make sure that if this larger shock comes and there is this knock-on effect back to the public finances that we have the resources to support the economy in a countercyclical manner.

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I share Dr. O'Toole's concern about the underlying spending growth in the economy. I think it is too high and that is commonly accepted. That is certainly an area the Government needs to target. This is actually exacerbating the problem, which is very clear.

I have one or two questions for Mr. FitzGerald, who is very welcome. In his statement, he said that the hit to Ireland of €7.5 billion if the price is doubled to $140 is the equivalent of 2.5% of national income. Does that translate directly into a drop in GDP of 2.5%? Is there a precise correlation there?

Mr. John FitzGerald:

It does and it will be higher than $140 if the Strait does not open. We would be looking at a hit to Ireland of probably €10 billion to €20 billion if the Strait does not open. That is the magnitude of it and that will translate into a very big rise in consumer prices, unemployment and so on.

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

If it goes higher, that is a 5% drop in GDP or €20 billion, roughly. Related to that, and I know there is not going to be exact correlation because economics is, unfortunately, not linear, precise or mathematical, a percentage fuel increase feeds into inflation and this then leads into a recession. I know we are talking in very broad figures, but I just want to get a sense of a correlation with the percentage of fuel price increase. If fuel went up by 30% or 40% and it was not subsidised by the Government, that would feed inflation. Is there a formula whereby we could estimate how much inflation would go up by?

Mr. John FitzGerald:

I do not have a precise number but I picked on a figure of five percentage points higher than inflation, so if it was 2% it could rise to 7% but it could well be higher. For example, to make sure that those on social welfare do not lose out next year, on top of the normal expenditure on social welfare we would need over a billion and a half additional to protect those on social welfare. On top of that, consider that people in rural areas use kerosene. Kerosene is more expensive and it could suffer an even bigger price increase. There is an issue with aviation fuel, kerosene and diesel. The price rise may be even bigger there than for petrol or other oil. We are looking at a really big figure if the Strait does not reopen. I do not know whether the oil price will go to $170 or $300 a barrel but we are looking at a huge shock to the economy.

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

If inflation hits a high figure, say 5% or 6%, does this trigger recession as in a GDP drop?

Mr. John FitzGerald:

What would trigger a recession is that this affects the world and not just Ireland. Let us think of what is happening in India where the price of gas used for cooking has gone up four times. As a result, the people in Delhi are leaving their jobs and going back to rural areas because they cannot afford to live. That is going to produce a recession in India. India buys our goods and Brazil buys our goods. This is a shock to the world. Looking back, my memories of the oil price crisis in the 1970s are of a pretty difficult decade. It affects the world and not just Ireland and therefore-----

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

There is no reason to believe it will be any different this time.

Mr. John FitzGerald:

No. We are in a stronger financial position to deal with it, even if the Government has to borrow next year to stop people freezing to death.

My concern is households in rural areas, such as farmers on very low incomes who are elderly. If they cannot heat their houses next winter, there will be deaths from hypothermia. Ensuring, if the price of kerosene doubles, trebles or quadruples, that they can keep warm is what we need to be ready to deal with. Who knows, maybe all this will pass. Maybe Trump will see sense and the Ayatollahs will get on with one another but at the moment, I am depressed.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

Deputy Timmins can come back in later. I call Deputy Guirke.

Johnny Guirke (Meath West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I thank the witnesses for coming in. I have a couple of quick questions for whoever feels able to answer them. To go back to the public finances, the Government said it would have a surplus of €4 billion. It now turns out the surplus is €9 billion. Why is that figure so far off what the Government said it would have?

Mr. John FitzGerald:

That is because the Government assumed the Strait of Hormuz would open rapidly. It believed Donald Trump, which I think was unwise. If the Strait of Hormuz does not open and the people of Ireland pay €10 billion or €20 billion more to buy oil and gas, that will be a huge hit. The Government may have a surplus of €9 billion this year but that will disappear if we have to spend twice that on oil and gas next year. That is the nature of the hit. If all goes well, the Government could end up with a surplus this year and things go back to normal but it requires the strait to open very quickly. The reason prices have not risen more is that we depend on the US for a significant amount and it has been running down its stocks and exporting like mad. When the US has run out of stocks prices will go up. What is even more worrying is that if Donald Trump stopped exports from the US to Europe to keep the price down, given he is facing an election in November, that would really aggravate the situation. There are dangers out there which could make things worse, not better.

Johnny Guirke (Meath West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Mr. FitzGerald stated that even during the crisis in the 1970s, demand fell by only 15% at most. If demand stays close to its current level, would that not mean windfall taxes for the Government on fuel and excise, given that it takes 65% on-----

Mr. John FitzGerald:

Excise is fixed. The Government will not get any more revenue from excise. VAT income will go up. If you have a 5% shock to inflation, wages will go up, though it will take time for them to adjust, so you will bring in a bit more in income tax. When prices go up you will bring in more VAT. The problem is that if people are spending 3% or 5% less because they do not have the income, you will lose on VAT. If 2% or 3% of people lose their jobs, you will lose on income tax. I have been through a few of these crises and the public finances turn nasty pretty fast.

Johnny Guirke (Meath West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Will the witnesses indicate how many people are experiencing energy poverty, between electricity and gas? Do we have those figures?

Dr. Claire Keane:

Dr. Tovar Reaños recently published a report on this.

Dr. Miguel Tovar Reaños:

We have a figure of 14% struggling to heat their homes and pay utility bills in Ireland. If we consider those who spend a lot of money and those who spend very little, as well as the spectrum of diverse issues related to struggling with affordability, 30% of the population could be struggling with energy poverty. It is a staggeringly high number.

Johnny Guirke (Meath West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Would that be mostly lone parents, older adults, people in rural areas and people with disabilities? It is probably all of the above.

Dr. Miguel Tovar Reaños:

There is a profile. Most of these people rely heavily on welfare payments, as the Deputy mentioned, including disability, unemployment, housing and child benefits. All of them are at potential risk.

Johnny Guirke (Meath West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Why is it so hard to target people? If we call for a mini budget today, it would be impossible to target people but why would it be so hard to target people in the next budget with cost-of-living packages, rather than giving them to everybody?

Dr. Miguel Tovar Reaños:

One of the issues is that targeting policies implies an administrative cost. You have to be very careful how you design the policy too. If you define the risk criteria very narrowly, you can exclude some people, so you have to find the right balance. We are proposing a system to measure energy poverty using a different set of metrics because we used to measure it using only high expenditure levels. We believe it is not possible to increase or improve the targeting of policies using only one metric for measuring energy poverty.

Johnny Guirke (Meath West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Energy companies seem to be getting a free pass. People are struggling to keep the lights on and stay warm. Multiple energy companies have decided to increase their prices in the past few weeks. I find it remarkable that they are still making hundreds of millions of euro in profits. Is there any way of reining them in?

Mr. John FitzGerald:

First, energy companies in Ireland, if you are talking about oil and gas, have to pay the world market price. In 1979, the then Minister for Energy, Des O'Malley, introduced a crazy policy. He capped the price. As a result, within a week people could not get petrol because the fuel companies internationally were sending it everywhere else. People were queueing up and unable to get petrol. You are paying the world market price. The Competition and Consumer Protection Commission, CCPC, looked at this and said there is no rip-off there.

Electricity prices are driven by gas. We have been fortunate that electricity companies in Ireland have bought gas forward. If you look at what happened in 2022-23 when the gas price went through the roof, Irish import prices actually rose by less than the EU average because the companies had contracted ahead for gas. We are kind of insulated until later in the year on electricity prices - they may go up by a little – but the real problem will be later in the year when the contracts for gas run out and companies are buying on a spot market when the world is too. If you read what is happening in Asia, there is a crisis on gas availability. Already, they are outbidding Europe and ships that were heading for Europe with LNG have turned around.

Johnny Guirke (Meath West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Yes, but at the moment, without any crisis, we have the highest prices in Europe.

Mr. John FitzGerald:

You will see a lot higher prices if the Strait of Hormuz does not reopen. I suspect that what the electricity companies are doing is they have bought gas forward and insulated the people of Ireland, provided the strait reopens, but if they have not contracted beyond the end of the year, we will be paying world market prices and electricity prices could rise very high.

Johnny Guirke (Meath West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

On the retrofitting of houses, Professor Ryan spoke about attic, wall and floor insulation. I deal with a lot of people who do not have the upfront costs or are unable to pay the percentage required to avail of these grants. That seems to be the biggest obstacle. In many cases, only those who can afford it are availing of those grants. How can we make that better?

Professor Lisa Ryan:

We know attic insulation does not cost an awful lot. Often the main barrier is the hassle factor and the disruption, especially if we think of elderly people. There have been examples where attic insulation was available for free in some county councils and people did not take it up. We need to think a bit more outside the box here. Retrofitting is expensive. In counties where people mainly use oil-fired heating, we need to go door to door. Someone needs to knock on doors and help people. This is an emergency. Heating oil has already doubled in price. It is kerosene so it is clear the price will keep going up. This summer, we need to go around knocking on doors and helping people to insulate their attics. It is as simple as that, and we should offer it for free.

I agree with the Deputy that the upfront cost is very off-putting for people but we need to think about the money we are spending to give a subsidy to fossil fuel in the short term. We do not get anything out of that in the long term. We are just helping people in the very short term and we need to think long term. There is no reason this is not going to happen again. It is going to get worse. What have we done with that money now? We have just given it away. While we have helped people in the short term, if we had people going door to door offering to insulate attics, people would get something that will last for years.

Johnny Guirke (Meath West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Yes, and there is also wall insulation and all of that.

A lot of the people I am dealing with will need 100% grants.

Professor Lisa Ryan:

There is a case for that outside the urban areas. They are off the gas grid and they do not have too many choices. It is the same for transport because, as Deputy Timmins said, people are driving to work. We should have targeted grants for EVs, for example. If you are living in an area that has no public transport, you should be nearly giving cars away. The fiscal people will not like that, but we have to take account of somebody getting an EV who lives in Dundrum and has the Luas beside them.

Johnny Guirke (Meath West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

In rural Ireland I am dealing with a lot of people who up to a few years ago heated their houses with turf. We are trying to get them to change but they do not have the money unless they get help.

Professor Lisa Ryan:

In the meantime, 30,000 new oil boilers have been installed in the last five years. Increasing the number of oil boilers being installed is going in the wrong direction. I am guessing these are the people who used peat or coal beforehand and now they are switching to oil boilers. They are very vulnerable to price shocks now. The Deputy is correct that much larger subsidies need to be given. It is not just about subsidies and finance. It is also someone helping people, knocking on the door and raising awareness that this is coming, instead of it being too late next October.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

I apologise for not being here earlier but I read through the contributions. I had to speak in the Dáil. I also apologise in advance because I will have to run in to another committee. I thank the witnesses for their contributions and submissions.

I will take up a point made by Deputy Guirke, which is one I make fairly regularly as well, about electricity prices in this country. We had the lowest electricity prices when the ESB had a not-for-profit mandate and was entirely State-controlled. I find it grimly amusing to go back and look at Eamon Ryan's comments when that was changed because he argued that competition was going to benefit the consumer from a price point of view. Anyone can go back and look at the quotes. A small number of us said that would not happen but the rationale used to justify the change in the Irish electricity and energy markets to bring in private operators was that competition would help the consumer. The exact opposite happened and pretty much straight away prices started to go up. Competition has not in any way benefited the consumer. It has done the opposite. When we look at the profits of the energy companies we see that they are doing very nicely. Is not at least part of the puzzle that needs to be addressed is that privatisation and a for-profit approach to the provision of energy for householders and so on has failed?

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

You have to direct your question to someone, Deputy.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

I can see Mr. FitzGerald is dying to respond, so he can.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

That is fine. I am looking forward to my questions as well.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

I have other questions, so leave me a bit of time to-----

Mr. John FitzGerald:

On competition, there are three elements to the electricity prices. There is generation. Competition was introduced in 2000 and there was a substantial fall in the cost of generation because the staffing levels were reduced. It is a State-owned monopoly that takes the electricity from the generator to people's houses.

Professor Lisa Ryan:

The grid.

Mr. John FitzGerald:

Yes, the grid. There is competition among companies trying to sell electricity. That is only 10% of the cost and I am not sure that this competition is justified. I was sympathetic to the Deputy's view in 2000 that introducing competition there was not going to benefit the people of Ireland, but that is only 10% of the cost where maybe it could be slightly lower. On generation costs, there is competition. The State-owned monopoly accounts for about 40% of the cost of getting the electricity to people. Actually, there are two monopolies; EirGrid and the ESB.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

Is Mr. FitzGerald saying we should not have competition?

Mr. John FitzGerald:

I am not sure about competition at the consumer end. One of the problems with competition-----

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

There we go now. There is a news bite - a newsflash.

Mr. John FitzGerald:

-----is that unless people change electricity supplier every year they pay a much higher price. I am well off and not inclined to change but I discovered that I could actually save a lot of money. The problem is the people who do not change are elderly and do not use the Internet, and those on low incomes. In Britain, this was a really big issue. Those were the people who were being ripped off by the supply companies. There has been a debate there on this. Ofgem, the regulator, unfortunately did not say there should be a regulated price given to people who do not change, which would protect them. Protection is needed and I am not sure that changing electricity provider every year to keep your price down is a wise way of doing it, especially when people like me can do it. I am elderly but other elderly people on low incomes do not do it. There are issues there which the Deputy is correct to identify.

Professor Lisa Ryan:

Mr. FitzGerald is addressing the retail market but I think we would agree that the wholesale market is a place for competition. A distinction has to be made. Mr. FitzGerald emphasised the grid, which is still a monopoly. There is also the wholesale market where the generators are trading each day for the price and that is then is translated to the retail market. For the retail market, the Deputy is saying that maybe not so much competition is good, but I think we all agree that the wholesale market is a place where the generators are trying to bid into the market at the cheapest price possible because that will be passed through. That is where we agree there should be competition, if there is competition right now.

It can be argued that in Ireland we have a particular situation in that 50% is coming from gas and gas is setting that market price, which means that our market is expensive. The other thing is the monopoly part is very expensive, so it is not a solution. I am not sure that causality is being shown here between the bits that are monopoly, for example, the grid. Our grid is one of the most expensive in Europe. We pay very high grid charges and there is no competition there. It is not the competition that causes price increases. There are particular situations in Ireland where our grid is very expensive-----

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

Is Professor Ryan saying the ESB is profiteering then?

Professor Lisa Ryan:

No, not at all. The grid is very expensive in Ireland because we have a very dispersed island situation. We are trying to reinforce it. We underinvested for years, and this is ESB Networks, which is owned by the State, not ESB the commercial entity. EirGrid, which is also owned by the State, owns the transmission network. It is very expensive to run and we are going to have to invest more in them.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

Sure, although I suggest that the removal of the not-for-profit mandate the ESB had contributed to that. The ESB might be State-owned but it is not just about State ownership. It is about what the dynamic in the market is.

Professor Lisa Ryan:

ESB Networks and EirGrid have a not-for-profit mandate. Everything earned there has to be put back into the grid, so there is a not-for-profit mandate.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

With all the profits they are making, why is it so expensive then?

Professor Lisa Ryan:

There are different parts of the company. ESB commercial is allowed to earn profits, ESB Networks puts it back in and they do not earn any profit. EirGrid and-----

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

Why is it so expensive then?

Professor Lisa Ryan:

It is very expensive. We could do a whole session on our electricity system. There are multiple reasons why it is expensive. As I mentioned, the grid costs are expensive because our grid is very dispersed. We have one-off houses all around the country. We have little wires going to every single one of them compared to a very concentrated population in Europe, for example. A lot of our fuel is gas. Gas is the most expensive fuel, yet that is what we are using. That will bring up the price as well. There are lots of reasons. Plus, we have to invest now into renewables and offshore renewables. A lot of that renewable energy is not being used properly and we are wasting it.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

I just want to ask a quick question in the time available to me. On offshore renewables, almost all of the proposed wind farms will not be owned by the State. There is no requirement on the companies that will develop those wind farms to do anything to improve the situation for the consumer here because they are just commercially driven, private companies. Most of them are not even based in this country. Is that not folly in terms of developing our renewable resources?

I agree with Professor Ryan about asking people whether they want their homes insulated and the State doing it for free. It would be a huge saving. I agree this should happen and we have argued for it for some time. Would an extension of that not be that everybody should get free solar panels, in precisely the places Professor Ryan is talking about? If the cost of electricity is high because the dispersed nature of houses in rural parts of the country is adding to the cost, would a way to address that - as well as insulating homes - be to give everybody the means to generate electricity on the spot?

Professor Lisa Ryan:

I agree with the Deputy that solar PV is something we should be investing in. However, it is not going to help with heating next winter. These are bundles of measures we need to put in place but I agree we should have solar in many more houses around the country, especially because as people in Ireland live in more houses than apartments, we are well-suited. We also have driveways for EVs. While the long-term vision has to be that you will see a rural household with all these things in them, the question is how we make sure they get there.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

If we are going to do it on scale and fast to a point where it is going to make an impact, does the State not have to do it upfront and then look at how it is going to pay for it?

Professor Lisa Ryan:

Yes, the State will probably have to do a lot of it. As there is a benefit to the person who has the house, however, you have to think about whether there is a fairness issue here. You cannot give everybody a free whatever and in the case of a person who has an insulated house or a solar PV, his or her house is worth more. They also are the ones who are going to benefit from cheaper heating. There has to be a balance there.

Coming back to the offshore wind, in most countries in the world that have offshore wind - we are talking about northern Europe and Scotland, which has been brilliant and developed much faster than us - they are private companies that are making profit. The reason we have to develop it is because we have the greatest resource in the world with offshore wind. Private will do it faster but we are stuck where we are because the State has not developed the infrastructure to allow companies to go and develop offshore. That is the reality of it. The planning regulation, the ports and everything are behind. The private companies of course should be going for it but the State has to get its act together to get things going faster in terms of accelerating what needs to happen with the planning. Companies are putting in 2,000-page planning applications and only get an answer one year afterwards. They then have to do another whole year of putting in their revised planning application and this has been going on for years.

The reason we need offshore wind is because it will bring our electricity wholesale prices down and will use less gas.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

I am for offshore wind, although I am not for putting it on sandbanks that are environmentally sensitive. By and large, that is not happening in the rest of Europe. They are pushing them out further. They are not putting them on sand, where they are destroying biodiversity in the name of climate action, but that is maybe a longer debate.

What would the witnesses' view be on free public transport? We would be big proponents of that as we want to get people out of the cars and reduce fossil fuel use. We need to take bold action on the question of public transport. It also has to be frequent. It has to be better public transport with a lot more investment in it generally and with the financial obstacles removed.

Mr. John FitzGerald:

The Green government in Germany tried that and the problem was that you had a load of people travelling at rush hour who did not need to travel and you could not get on the public transport. It is also about how you finance it in the end. People did not switch going to work from a car to public transport because it was free. The main thing which affects people's decision is whether it is faster.

Professor Lisa Ryan:

I agree with Mr. FitzGerald that the first thing you do is improve the service, location and quality. We see that - I cannot remember the name of it - with the rural transport system that has come in with the little buses going around. You can see there is a great take-up of them. There are many parts of the country where we do not have public transport and that is where we should invest first.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

Rural Link.

Professor Lisa Ryan:

Rural Link, thank you, Cathaoirleach. If you do not have any public transport, it does not matter whether it is free or not. We do not have rail or light rail in any other city but Dublin, so there is a lot we can do and I would focus on doing that. That comes into short-term and long-term measures. You put your money into the long-term ones that will provide benefit and try to get it done a bit faster.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

I agree we need to massively ramp up the quality and access to public transport in rural areas and other places. However, I am also for making it free.

My clock is doing well here. I do not know how I still have a minute left.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

They will probably stop me getting on the clock.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

It still says 59 seconds there, so I will take the time.

There is a debate about targeted and universal measures and so on. I am for both but do the witnesses have a concern, because I do? The general consensus for most of the witnesses is to go for the targeted measures as the universal is benefiting the rich. I think it is about capturing the rich with taxes on their wealth because to be honest, I do not think they are too bothered one way or the other whether they get an electricity credit. Administratively, it is easy to give it out that way- that is my feeling - and capturing it in taxes on wealth, rather than worrying about it.

If you just do the targeted measures, you end up means-testing things and you end up with cliff edges. One of the things that absolutely infuriates people is when they are just over the threshold for eligibility. They are not rich, they are just not eligible for social welfare or social housing. They are not eligible for this, that and the other but they are not rich by any means at all. They always lose out with targeted, or exclusively targeted, measures.

Do the witnesses have anything to say on that?

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

Can we keep it short? The Deputy is after getting a good ten minutes there.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
Link to this: Individually | In context | Oireachtas source

Yes, I have and I thank the Chair.

Dr. Miguel Tovar Reaños:

Policies need to be distinguishable between the short run and the long run. That is very important as even targeted policies need to be in that dimension. What we are trying to say is that as there are households that need the help now, prioritisation is one issue here. You need to decide what kind of combination of policies you need to implement.

One of them is through the welfare system immediately and the other is through demand flexibility. We also hear that the demand response is very flat and this is because people do not have the power to reduce their own consumption. We need to talk about technologies to empower these households. The policy has to be a combination of these short-run and long-run policies. In that way, you will reach the most vulnerable but also those who are near poor, let us say, and who would normally be excluded from the current benefits out there.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

I thank the witnesses for that. Did Dr. O'Toole want to come in?

Dr. Conor O'Toole:

I will quickly come in on the cliff edges. This happens extremely often when you are trying to calibrate any policy. The Deputy mentioned a couple of them, such as social housing thresholds, social welfare supports, etc. I would argue that if you have good research whereby you can look at the type of households you are trying to target and the measures you are trying to target with, you can try to understand, using distributional research, how many households will fall when you move, for example, on an income threshold and how many households are on either side of that.

Good targeting can be brought on by good research, which gives you the information to be able to pick those thresholds in a more informed manner than you would in other ways. A good example of that is when the Central Bank first brought in its macroprudential regulations. It had a huge amount of distributional research around where it was going to set the caps and the targets that came from the micro data. That is a way to try to help understand if there are cliff edges, how many people are falling on those levels and if you can shift those levels to try to eliminate or reduce that.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

I thank Dr. O'Toole for that. It is my turn now, but I want to do a small bit of research myself and I am going to start with the front bench here. How many of the witnesses on the front bench here live in the city at present? They all live in the city. From the back bench, how many of the witnesses live in the city? Two on the back bench live in the city. How many drive EVs? How many are from rural Ireland? I am doing my statistics, and to tell the truth, when I listened to the front bench, everything they talked about was where you have infrastructure. I have been listening from the very start.

I am from rural Ireland; born and bred. I have been listening to Mr. FitzGerald talking about farmers and rural areas but when was the last time the witnesses were in the countryside? I live there, and I am sorry but from their point of view - and I will get to all the points of view - when people are making decisions for Ireland, it is supposed to be inclusive. You are supposed to have the experience, when you do research, for the whole of the country.

When I have a front bench here that is city-based and is not rural-based, they do not have the full package. That is like me having a hurling match tomorrow morning with all backs and no forwards; I have no game. I like research to be done on both sides. I like people who are living on both sides to do that research in order that they can collaborate together. It is like our Cabinet. When you have a Cabinet that is 70% or 80% city-based that is making decisions for the whole country, it does not reflect the country.

I am a very pragmatic person, I am a common-sense person, but I am also a businessperson. I have been self-employed all my life. I want the city to flourish and I want the counties to flourish but I want the experience where one supports the other. What is wrong here at present is much of the research we are getting is one-sided and it does not co-ordinate for both sides.

Probably the only comment of Professor Ryan's that I agreed with was on offshore. I 100% agree about offshore. I believe that, under Eamon Ryan, the designated maritime area plans, DMAPs, stopped offshore. There are houses scattered around this country and the health guidelines are there. We have all been mentioning other countries here, and in other countries there are health guidelines about wind farms being too close to households. We have only 2% of our land area to put wind farms on, so we should put them offshore in areas where they do not cause problems. We can get them up faster and get the electricity going.

Professor Ryan also mentioned insulation. Did her research show where insulation came from? It is oil-based. There is oil-based insulation in all the retrofits in Ireland. Why do I know this? It is because I am a building contractor with experience of building. I am also a contractor who can tell all of the witnesses that, in the last four months, there has been a 38% increase in the cost of insulation, but the witnesses all want to get everywhere insulated in Ireland. Let us put more pressure on an oil-based product, which is going up in price, to get all these houses insulated. I have done external insulation, internal insulation and attic insulation. I do it daily. I was on site this morning at 7 a.m. That is my job, as I am building contractor. I understand all the different prices and the increases.

I have been listening to everything. I have listened to Mr. FitzGerald about how the cap on fuel was tried. However, a cap on the taxation of fuel was not tried. I was on the protest. I stood there for six days with people. Mr. FitzGerald mentioned that he was in a certain age group but it was people from his age group who were there. I have never seen them protesting in this country in my life. These are people who would give you their dinner but would not ask you for yours. This is where I want research to be done across the whole country.

My idea for a cap on fuel was very simple. Let us say we cap the fuel at €1.70 and the fuel cost goes up. You pay the increase in the cost of the fuel but you do not pay tax on the increase. About ten weeks ago, diesel was at €1.70 per litre. Taking the tax out of that price, you were paying 88.4 cent in taxes. With petrol, you were paying 89.6 cent in taxes. Today, you are paying €1.95 for diesel but you are paying €1.04 in taxes. If the Government had done what I asked it to, it would have benefited all the low-income families, businesses, hauliers and the transport sector countrywide. If the Government had capped the taxable amount at €1.70, it would not be €1.95 as it is today because you take off 13 cent in tax, making it €1.82 at the pumps without revenue to the country going down. What did the Government come up with? It targeted transport. It went to the Irish Road Haulage Association, which only represents 17% of haulage here. It does not represent all of the transport network. The Government has targeted 17% but not the rest of the country. If it had put a cap on the cost of fuel so we could have paid the increase in the cost but not paid tax on it, that would have benefited every single person in this country. That comes from a businessperson with a lifetime of experience because I am shown the increased costs in construction weekly. That is why when people come in here with their experience, their data and their research, I want them to be from all sides. I do not want them from only one sector. That is one thing when I am looking at this.

Professor Ryan talked about speed limits. I am a car enthusiast. I am a petrolhead, born and reared. I have no problem with EVs when you have the infrastructure to power them. However, when you are three weeks without electricity, which we were two years ago, my fossil fuel jeep helped an awful lot of people survive whereas your EVs were stuck at home and they could do nothing. Your heat pumps were off. People had to come to my house to stay warm. You can talk about all the experience and the data you have but until you have the infrastructure, you cannot do this. The average car that people are driving is from between 2010 and 2018. That has been researched. They cannot afford to buy anything better than that. That is the research I am doing. If we want to help the country holistically, targeting things does not work because there is always somebody left behind. This one measure of capping the tax so we pay the increased fuel cost but not the tax on that would have helped everyone by 13 cent per litre at the moment. In the transport network the Government locked it in at €1.92. What about afterwards? After the VAT comes back, that will be €1.56. As you can see, I like numbers. When you take the €1.56, the Government gave €1,300 per truck but if you work it back, if it had been at €1.70, there would have been no rebates. We could have locked it in for the transport network at €1.70 without rebates and across every network, whether it was commercial vans, commercial trucks or commercial buses.

The targeted measures do not work. You have to have one thing that targets everyone regardless of their circumstances. That stops inflation. The people who are worst-off are the squeezed middle working class. I am a building contractor. I have four sons. You would think they would be able to build a house more cheaply with today's costs. The inflation is rising more quickly than what they can save every 12 months. I am all for what the witnesses are all saying but it does not work beyond the Red Cow because the infrastructure is not in place for that to happen, and that is what I want to happen - for everyone.

I would like to go to Mr. FitzGerald on this. Could my idea of capping the tax on fuel so we only pay the cost increases work?

Mr. John FitzGerald:

Obviously, if the Government decided to do it, it would work but it is a very bad idea.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

For what reason?

Mr. John FitzGerald:

For three reasons. First, if the price of fuel goes up, people will pass on the price. With the current system where the Government has reduced the tax, if oil prices go up further, it will be passed on. More importantly, and this is where-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

Sorry, I want Mr. FitzGerald to finish that point. I said a cap on fuel where we paid the increased costs but we do not pay tax on the increased cost. Could it work? We will pay the increased cost of the fuel but we will not pay tax on the increase above €1.70, so there is no loss of revenue.

Mr. John FitzGerald:

You can reduce the tax rate if you want but we are spending €700 million for, I think, four months.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

It is €750 million.

Mr. John FitzGerald:

It will be over €2 billion.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

But it is not going everywhere.

Mr. John FitzGerald:

It will be over €2 billion.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

It is not going everywhere.

Mr. John FitzGerald:

The figures show it does not go to people at the bottom of the income distribution. It goes to people who are in the middle or better-off. When you need to target those who are going to be cold next winter - particularly in rural areas and I emphasised rural households because they were on-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

Mr. FitzGerald said an old farmer could go cold in his own house.

Mr. John FitzGerald:

Yes.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

An old farmer will have timber. There is no fear out there for those old farmers.

Mr. John FitzGerald:

There are two other reasons. There is the distributional effect. The reason the International Monetary Fund, IMF, and the European Commission have said we should not cut taxes on fuel is if you go into an auction-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

I am not asking that we cut tax on fuel.

Mr. John FitzGerald:

Hold on a second. If the Cathaoirleach and I go into an auction to buy a house and I am prepared to bid €470,000 and you bid €500,000, if somebody at the door says the Government will give €100,000 to whoever buys the house, you will bid €600,000 and I will bid €570,000. If the world reduces the tax on oil, people will have more to bid with and the price of oil will go higher in the world. It is a world market for oil.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

I am not asking to reduce taxes on oil. I am asking about putting a cap on the tax that can be taken on oil, so we would have the same tax take today as ten weeks ago rather than paying an inflated tax on the increase in the cost of fuel above €1.70. There would have been no loss in revenue between ten weeks ago and today if the Government had put a cap on the taxation of fuel.

If there was no tax above €1.70 and tax below €1.70, there would be no loss of revenue.

Mr. John FitzGerald:

The problem is that if the Strait of Hormuz remains closed, we are looking at inflation moving to 5% or 10%.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

That is exactly why I wanted it.

Mr. John FitzGerald:

If tax revenue does not rise in line with it - I talked about a hole in the public finances - you get a bloody massive hole. If prices go up, the Government gets more money in VAT which will help pay for the unemployed, etc., but if you cap it, the hole in the public finances becomes even bigger.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

Listen to me. I am in business all my life. If you have got a cap on something and you pay the increased cost of it, you will not pay tax on it. The Government would have had no loss in revenue ten weeks ago if they had capped it. There would have been no loss in revenue. You would have had no €750 million targeted because it would have been capped.

Mr. John FitzGerald:

But if you have-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

I am in business all my life. I can see it. I am self-employed all my life and I have people working with me.

I would like to ask the back bench about what I am saying. From my point of view, by capping taxation on fuel at €1.70 and people paying the increased cost, which today would have been 13 cent less if they had capped it, there would be no loss in revenue and every household and the person going to work would have got what the Government was targeting for the transport network. Of the 2.3 million vehicles on the road, only a minor part are EVs. They have no public transport, as I say. Then we would have been able to target everyone. When the cost of fuel goes up in my business, I have to add it on. That means the consumer is paying all the time. The minimum wage goes out of sync. Everything goes dearer and dearer because of transport costs. Eighty-two per cent of our goods come through Dublin Port and are transported on trucks around the country. When you add it all up, if we had put in a cap system, we could have steadied the ship even if it was only for a certain amount of time. Also, we need to put in these sequences from budget to budget so not only can the Government budget for the year, but businesses and small businesses will know from October to October exactly what is going to happen within budgets so we can forecast the business. Over the past five years, we have been able to forecast nothing.

Dr. Andrés Estévez:

I see the Cathaoirleach's point and I appreciate the sentiment. However, Mr. FitzGerald was alluding to something macroeconomic. Basically, the behaviour of individual countries will affect the price so that, eventually, at some point, Ireland, with the idea, might be worse off.

I would like to add also another risk about pursuing that type of policy, which is it is very difficult to roll out. What we advocate in our research is that when you are facing a crisis, we are talking about emergency measures and these measures should be temporary.

The other thing is that, of course, we want more support, but resources are limited. One will always have to find the balance between untargeted transfers, where no one is missed and probably everyone will need help, and providing adequate support. Maybe you will end up in a situation where you spread yourself too thinly and even if you are giving something to everyone, that something would not be enough. Here, it is to take a step back and assess the situation so that, let us say, if you want to focus on the lowest-income households and the squeezed middle, then do that but see where you are. Our research definitely draws a lot of attention to rural households and to the most disadvantaged.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

But it takes too long when you target it. You can see, by the time you implement something. If you look at the concrete crisis, they put on an extra 5% after something happened within concrete. That was put on top of the price. It is actually added on.

Something that is targeted in the short-term such as even the capping of fuel, and for the consumer to pay the increased cost, is a reduction because they are only paying the increased cost; they are not paying the increased cost plus tax. It takes the pressure off. It would affect transport and every sector would have got it at the same time. Then you could have implemented something for the likes of the point of the transport. If it was below that, you could have then given them a tariff to keep the cost lower because the way this country is set up on the transport network it is mainly fossil fuels. At the moment, we need to deal with today. Without affecting the tax purse, we could have done it with one targeted measure of capping it in the short term.

I am speaking from a forecasting point of view, and bringing it into context for a house. The difference in the price of a one-off house, from November to 6 January, was €8,500 on insulation costs. We are looking to make things better and making houses warmer for people at present. The witnesses mentioned the amount of burners that went out. Do they know why the burners went out? People could not afford to change their heating system, but what they did was put in high-condensing burners, which burn half the amount of fuel their old ones were burning. We will drop the emissions by 50% in the interim until we can get people into the 100% solar panels and 100% offshore renewables. I am 100% for insulation when we are not driving the cost of inflation on the other side by promoting something that is already under pressure. We have to work with different methods. I am 100% in favour of alternative methods, but we have work with today and put out a target that targets everyone at the one time and creates a cushion. That is what we need to do.

I will finish up on this one, from the agricultural point of view. A scheme was put out for 12 cent per litre for agriculture, but they did not target it. What are they after doing? You have got to send in your receipts for 2025 and it is based on what you used in 2025. If they knew agriculture, the most intense part is five months. That is when you use the most amount of fuel, but they worked it out over 12 months which means that 12 cent is now 8 cent, when you work out the maths, but it is based over 12 months. If you want to target something to bring down the cost of food, and we have all mentioned all the different things that are happening, including the different wars, if we do not keep those farmers going and we do not keep food security here, and our population is after rising by 1.5 million in the past decade, the consequence could be that nothing will be coming into the country and we might be depending on the people to produce food here, and they are the people at the moment that we are not targeting to try to help.

I thank the witnesses for everything that they have come out with but I would appreciate if researchers come in here to me that they have the research of the country and the panel has researched across the country so I get the full context of Ireland, not just one sector. Does Deputy Timmins want to come in?

Edward Timmins (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank the people for coming in here today and for all their excellent research. What they had to say is very much appreciated.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

Would anyone else like to comment on the process of today?

Professor Lisa Ryan:

I thank the Cathaoirleach for his comments. I am surprised that he finds that we are not focused on the whole country because my comments - it is true I am from Dublin - are nearly solely focused on rural Ireland, in fact, because that is where the problems lie right now and where we have a lot of the crisis. I agree with the Cathaoirleach on that.

I am kind of hesitant because the Cathaoirleach made a big statement. Maybe this is not for me because I am meant to be answering the Cathaoirleach's questions, but I can only flip it back at him. I am not sure what the Cathaoirleach would like because he says we are against insulation, and you are not allowed to reduce taxes. My understanding is the tax proposal the Cathaoirleach put forward, if you reduce the VAT-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

I am not reducing the VAT. Professor Ryan did not listen to the question.

Professor Lisa Ryan:

Well, tax with the percentage bar-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

Capped it for the short term.

Professor Lisa Ryan:

Yes, but if you do that you have to put it on all goods. Taxes are levied across goods. You cannot just do it on fuel.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

It was just on the fuel because it would have interacted across all the different processes.

Professor Lisa Ryan:

I know but, legally, you are not allowed do that. I am just saying.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

Legally, you are not allowed put 5% on blocks either.

Professor Lisa Ryan:

I am not a legal expert. There has been 32 cent given on excise duty and that is more than my understanding of the cap------

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

But when the fuel price goes back up, you are back up to €1.95. When you work it back, you are paying the increased costs. To give everyone a chance, €1.70 would have been a cap. Then, if there is an increase, we are paying the increase in the cost of fuel and we are not paying a tax on the increase. That helps everyone by 13 cent per litre

Professor Lisa Ryan:

I understand the Cathaoirleach's plan. I do not know if it is legally allowed or not.

I am just addressing some of the other points. On the speed limit, the Cathaoirleach is a petrolhead. How is that an answer? If we are talking about people having costs and trying to reduce them-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

We will do one at a time. EVs have electric motors which run them. I am into electrics as well. A lot of cars have seven- or eight-speed gear boxes. If you run a car on an eight-speed gear box at 80 km/h, it is in a lower gear and it revs higher, which burns more fuel. That is what I am trying to say from the point of view of cars running efficiently.

Certain cars have a higher gear ratio. There are five-, six-, seven- and eight-speed vehicles. It depends on the type of vehicle used. I am into cars. I look at older cars I have from the 1950s all the way up to modern-day cars. I look at the different ratios of all cars. Most of the cars from 2010 to 2018 that are on the roads at the moment are either five- or six-speed. and any of the automatics run at seven- or eight-speed. New modern cars have ten speeds. It is the ratio.

Professor Lisa Ryan:

Why do we not talk about a campaign measure to make people more aware? I do not think everybody knows how to drive at high speed. The Cathaoirleach spoke about seven- and eight-gear vehicles. I worked for Volkswagen, and I know about car engines as well. We know the sweet spot for the vast majority of internal combustion engines is 80 km/h. Maybe some people know how to drive them very efficiently at other speeds, but why do we not run a campaign to show people how to drive cars through eco-driving? It is proven. We are not at all talking about how to reduce our demand and more emphasis needs to be on this. These are little things that would help people.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

I agree 100%.

Professor Lisa Ryan:

It is not about trying to control people but to give them some things to help them.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

This is why I am coming back to what we got from the research. Having the witnesses in here today is not targeted-----

Professor Lisa Ryan:

You invited us.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

Yes, 100%. What I wanted to do was to see where their heads were at and for them to see where our heads are at. Then we can work together and target something in order to find solutions. Even if we find 10% of what we have today, taking a holistic view, we could then make a change. If we can find 1%, we will have made a change. I want all of the sides to come together to find that 1%. If we can make a 1% difference here today, it would still be a difference. We all have various ideas and we are all going on different trajectories, with the Government following one trajectory. Let us try something different. We can mix the witnesses' experience and knowledge with mine and that of other people and find something that, holistically, will represent the country in all systems.

This is probably one of the best meetings I have been at, and I am sorry if I have come across negatively. We have had great meetings with the witnesses previously. I want to find things that will allow us to make changes. People giving me their views is no good unless we have a hustle-bustle and can get to everyone's thoughts in order to see where we stand. Then we will have the ingredients of the cake and we can bake it. Regardless of whether we agree on everything, we will find common ground on what we do agree on and move it forward.

I am delighted with this meeting. It is one of the best debates I have had in a long time because it has been over and back, and that is what I want to listen to. It is no good me coming in to do this all day. I am pushing the witnesses because I want them to push back, and I want to discover what is their mindset. If they would like to come in with anything else, I would really appreciate it.

Mr. John FitzGerald:

People do research. I have spent 50 years doing research, first of all at the Department of Finance, when I had to read the Irish Farmers Journal every week and follow up on farming. One does research based on the data. The fact that I do not come from a household living in poverty does not mean I cannot do research on poverty. The fact that I am from Dublin does not mean I cannot do research on Ireland.

I admire the Cathaoirleach's faith in Donald Trump and the ayatollahs to sort this out. My point is that it is possible that he has seen nothing yet in terms of the crisis. The Taoiseach sounded like the adult in the room after the head of the International Energy Agency said what was coming down the track. He sounded a warning. After the European Council meeting in Cyprus, he said it once again. I would be critical because he has not followed up on it. The Cathaoirleach obviously does not see that there is a potential massive crisis coming down the tracks if diesel goes to €3 or €3.50. There are parts of Asia where people cannot get diesel today. We need to be prepared for a completely different world. That is my point.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

I agree with Mr FitzGerald. Regarding Donald Trump, I do not have any faith in him. Mr. FitzGerald has his view on the systems he had, and he is entitled to it. My point is not that Mr. FitzGerald is from Dublin; my uncles live in Dublin, and they are as wise as what Mr FitzGerald is. They have been in business. Mr. FitzGerald is welcome to come to my county, work on his experience in the county and experience a bit of what we have there by living there. He might come up with something, with all of the wisdom he has, that might benefit people. We can only get research from lived experience. There is a television programme, "Living with Lucy", where she goes to different places. I come to Dublin and I get the experience. I go to different counties and places and I get the experience. Every place is different, and no research will tell us what is different.

We spoke about Eamon Ryan previously. His suggestion of 30 cars to a population of 3,000 people suggests that he did not understand what he was talking about and that he thought he could walk out the door anywhere and get a bus or a Luas. Put him out into the country for a month or two and he would realise that we cannot do this. This is the type of experience we want. The towns and villages are probably key in the context of getting what the witnesses and everyone else needs. We could build the infrastructure in these areas, whether that is in respect of electricity, sewerage or water, and then put in a fast rail network to connect the dots. People living in Limerick could work in Dublin. However, the infrastructure has to be but in those places around the country in order to join the dots. The problem is that everything has been invested in the Dublin area and there has not been investment in the rest of the country. As a result, we cannot join the dots.

Dr. Nora Strecker:

I do not have a car. I live in Dublin, and I do not drive. The idea that it needs to be car based is not my experience. I would point the Cathaoirleach to the experience in other European countries that have similar rural populations and that are implementing targeted measures for those populations. It is not impossible.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

Agreed.

Dr. Nora Strecker:

Our neighbours from slightly further away can help in this regard. In terms of speed limits, I have family in the Netherlands where there is a speed limit of 80 km/h, and it is not impossible to get somewhere. There is potential for this to work.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

I understand. With regard to the road network in this country, I agree 100% regarding roads on which it is not possible to travel at speed. On motorways, I have no issue with the speed limits in places at present. We have roads that are 3 m wide on which the speed limit is 80 km/h. I do not agree with that because people could not do 30 km/h on such roads never mind 80 km/h. However, it is possible to drive at 80 km/h on good-quality roads.

With regard to the transport network, somebody came up with a solution for older trucks because it is so expensive to upgrade them. This was the Euro 5 engine that would have reduced fuel consumption by 30% if it had been invested in, even with older vehicles. This was a change I looked for, but I was told that it would cost too much to do it. It would have temporarily reduced fuel emissions as people could have done 1 million km with those engines. Doing 1 million km with them would have taken out 300,000 tonnes of emissions, which would have been absolutely huge. These would be small improvements on what we are working with at present. I agree 100% on where we want to get to, but do we get there piece by piece? I would prefer to take one bite of the apple at a time and make it worthwhile and then we can eat the whole apple together. At the moment it has to be targeted.

Dr. Claire Keane:

It sounds like the Cathaoirleach is opening his house to an economist to come live with him. He should be careful what he wishes for.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

No problem. The witnesses are all welcome.

Dr. Claire Keane:

I grew up in a small town, and I am privileged that I can afford solar panels and an electric car. The Cathaoirleach hit on something with regard to people only being able to afford this if they have high incomes because subsidies are targeted at newer cars. There is no point in giving a subsidy for a solar grant if we do not fully enable people on lower incomes to get it. There is no point in having thousands of euro in subsidies if people cannot spend a few hundred euro. When we talk about targeting, we should target measures at lower income people getting solar panels on their houses and for lower income people to be able to buy second-hand EVs as the stock builds. That is very important.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

Yes.

Dr. Claire Keane:

I will give a plug to our SWITCH model, which is the model used in various Departments to look at distributional impact analysis. We are building in a component whereby this can be done on a rural-urban basis or at county level.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

Fantastic.

Dr. Claire Keane:

We are very conscious of that. I have mechanic in my family who looks at my EV like it is the devil, and it is terrible. Something very important about the IFAC report warning us about how much we will be fined if we do not meet climate targets is that inevitably this will fall on taxpayers as well. The targeted measures should make sure that not only higher income people get to have these technologies and this is very important.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
Link to this: Individually | In context | Oireachtas source

I will speak about EVs and a perfect targeted system.

I have four sons and they have their partners. There are seven cars at my house at the moment and there is an eighth one coming. What if there was a system where if you have two cars, the State will subsidise one EV to get one of the cars off the road? That would be a solution. A problem shared is a problem halved. If a subsidy was brought in for that to get one car off the road, I would be 100% in support. What if we took trade-in cars - electric ones - that were, say, five years old and gave them completely new battery systems and warrantied them for another five years? Electric vehicles are not as hard on the running system as normal cars because they do not have the driveshafts, so they run a lot longer. They are heavier on tyres because they are heavier vehicles. It is about the battery time they have. An awful lot of the problems with the old electric cars happened because, from 2016 up to 2021, the wiring systems for the batteries that were being put into them were not forward compatible, so they could not be upgraded. This meant you could not get more mileage out of your car. With forward thinking, the wiring systems have been upgraded so now you can put higher output batteries into the cars that are being produced today. Manufacturers had to learn that too, but it is getting better. We will all get there together if we collaborate on everything. If we make one small piece of the whole country work, it will be a job well done.

I must admit it is my first day back for a while. It has been an interesting day back. I thank all the witnesses for coming in. It has been a very innovative discussion and I look forward to having many more. I look forward to coming to you all for information and advice and you are welcome to come to me so I can help you in your endeavours as well, and we might find some way forward for everyone together. Thank you very much.