Brian Lenihan Jnr (Dublin West, Fianna Fail)

In response to many calls on all sides of the House, I have looked again at the standard rate of VAT and I have decided to reverse the 0.5% increase imposed in October 2008. This measure will take effect from 1 January 2010 and is estimated to cost €140 million next year.

I have decided not to make any changes to excise on tobacco in this budget because I believe the high price is now giving rise to massive cigarette smuggling. My responsibility as Minister for Finance is to protect the tax base. I have full confidence in the effectiveness of the current multi-agency approach but early in the new year I want to explore what further measures we may need to stem the illegal flow of cigarettes into this country.

Improving the Energy Efficiency of our Cars

The Government wants to encourage the increased use of environmentally-friendly electric cars and the development of new technology in this field. To that end, the VRT exemption for electric vehicles and the VRT reliefs of up to €2,500 for plug-in hybrid electric vehicles are being extended by two years until 31 December 2012. We will also provide support to offset the initial battery costs for such cars. This will help in fulfilling our ambitious goals to reduce transport-related emissions.

I am also introducing a car scrappage scheme, to run from 1 January until 31 December 2010. VRT relief of up to €1,500 per new car purchased will be made available under the scheme, where a car of ten years or older is scrapped under certain conditions.

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