Bertie Ahern (Dublin Central, Fianna Fail)

In reply to Deputy Rabbitte's question, the windfall for the State from increases in oil prices arise in regard to VAT not excise duty. The overall effect may not be as big as people think from their expenditure on other goods on which VAT is paid.

The difference in fuel prices between the North and South is a factor. There is no excise duty in the North on kerosene and LPG. VAT on fuel prices is 5% in the North as opposed to 13.5% here. Fuel prices have been driven by a number of factors, only one of which is excise tax. In this instance, we have moved to use our power to reduce the price to consumers. The cross-Border price differential which has been mentioned by a number of Deputies was an issue. There is a significant degree of illegal activity in fuels and apart from the obvious benefits to the consumer, a reduction in activity in this area should be an added bonus.

My officials will observe prices. They encourage consumers to seek the best price. Those who do not pass on price reductions will lose business. I assure Deputy McGrath there will be monitoring of this area.

The reason for the differential in prices is that the €24 million in 2006 includes the second half of the phasing to zero from December 2006. The €21 million only includes the costs attached to this resolution.

Deputy Gormley will appreciate that a large biofuels package was announced in the budget. I accept what he said but we have moved in the right direction. As for moving further in future, that is a matter for examination every year on the basis of the annual examination of the Estimates.

On the basis that most heating fuels, for example electricity and natural gas, are not subject to excise, the Government considered it appropriate to move towards zero rating for home heating fuels over the next few years. We have said that the aim is to move on this, so we have given that indication. The measure will help to alleviate the problem faced in particular by suppliers in Border counties due to zero rating in the North. In the case of kerosene, for example, from tomorrow, the VAT inclusive price of a standard delivery of 1,000 litres will fall by almost €18, with the price falling in total by around €36 per 1,000 litres when the full excise tax is removed. In the case of LPG, the reduction will be slightly more than €12 from tomorrow and almost €24 per 1,000 litres when the full excise is removed.

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