Dáil debates

Wednesday, 27 April 2022

Carbon Tax: Motion [Private Members]

 

10:17 am

Photo of Joe O'BrienJoe O'Brien (Dublin Fingal, Green Party) | Oireachtas source

This provided for a 20 cent reduction in the excise rate for petrol and a 15 cent reduction in the rate for auto diesel, with a proportionate 2 cent reduction in the excise rate on marked gas oil, MGO. These measures were VAT inclusive and were set to last until 31 August 2022. This was estimated to cost €320 million. Last week it was announced that these measures would be extended and enhanced. We have taken the decision to extend these reductions until 11 October 2022. The Government is also providing for a further reduction in the excise rate on MGO, which amounts to a VAT-inclusive reduction of 3 cent effective from 1 May until 11 October. The excise reduction extension and the further reduction in the rate applied to MGO will cost an estimated additional €97 million.

The Government is also taking action beyond autofuels. From 1 May and effective until 31 October we are also providing for a reduction in the rate of VAT on the supply of gas and electricity from 13.5% to 9%, resulting in estimated annual savings of €49 on gas bills and €69 on electricity bills for households. This will more than offset the 1 May increase in carbon tax. The VAT reduction will cost an estimated €46 million. These tax reductions strike the balance between passing a significant benefit to consumers while managing the tax base and respecting the constraints of the energy tax and VAT directives.

In terms of revenue impacts, the combined impact of the fuel tax reductions alone is €436 million. The Government believes that this represents a significant response by it to tackle the unprecedented challenge which we are currently facing. However, this is not all the Government is doing. These measures come in addition to the measures in budget 2022 and the February package of measures to alleviate the impact of the increased cost of living on households.

In this regard, budget 2022 included a personal income tax package worth €520 million for this year alongside a social welfare package of over €550 million, while the February additional package of measures made changes to the value of over €500 million. This package included an increase in the energy credit to €200, including VAT, which is estimated to impact just over 2 million households; a lump sum payment of €125 on fuel allowance, which was paid in early March to 390,000 recipients, and an additional €100 payment announced in April; a temporary reduction in fares of 20% from the end of April to the end of the year to reduce the burden on people returning to the workplace and people using public transport, which will impact approximately 800,000 daily users; a further reduction in the drug payment scheme threshold to €80, which will benefit just over 70,000 families; the bringing forward of the working family payment budget increase announced on budget day from 1 June to 1 April; reduced caps for multiple children on school transport fees to €500 per family post primary and €150 for primary school children; and a reduction in the public service obligation, PSO, levy to zero by October 2022.

As mentioned, the evidence confirms that the measures taken by the Government to date are progressive. In this regard, recent analysis undertaken by the Department of Finance using SWITCH has confirmed that the suite of recently announced measures more than offset the carbon tax increases for all income deciles. The lump sum increase in the fuel allowance of €100, a cut in the VAT rate on gas and electricity from 13.5% to 9%, a reduction in the PSO levy of €58.57 annually and an extension of the cut in excise duty of 15 cent for diesel and 20 cent for petrol from 31 August to budget day in October were included in the analysis.

Additionally, the Government continues to drive public investment in energy efficiency with an overall investment of €267 million this year, €118 million of which is allocated to making homes of those at risk of energy poverty warmer, healthier and cheaper to heat. In response to increasing energy costs, new grant rates have been introduced that will cover approximately 80% of the typical cost of attic and wall insulation. These are very cost-effective upgrade measures that can be deployed rapidly and at scale this year. The typical cost savings from cavity wall insulation is €300 per year on a home heating bill.

Cumulatively, the Government has spent approximately €2 billion on additional cost of living and welfare supports since budget 2022.

The Government is very conscious of the negative impact that the rapid rise in consumer prices is having on society. We know things are difficult for many. This is why the financial measures I have outlined have been introduced in budget 2022 and in the months since.

The Government remains committed to its current policy of carbon taxation. The carbon tax is critical to reducing our dependence on fossil fuels and ensuring a just transition to a decarbonised society. We therefore cannot support a proposal to scrap carbon tax. Doing so would not make a significant impact in the context of the current rise in prices and instead would leave those who rely on the welfare support measures that are funded by the carbon tax worse off. It would also jeopardise the suite of measures that are central to our emissions reduction goals. The Government believes that this House should reject this Private Members' motion on the removal of the carbon tax and instead support the Government's countermotion on this matter.

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