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

The Deputy makes a valid point that rising fuel prices have an impact across the board. They affect private citizens in households, of course, but also private enterprise such as contractors, farmers and the delivery of public works contracts. We have made a number of interventions as a Government and we have already spoken about the reduction in excise, which comes at significant cost. Initially it was €320 million until the end of August and it was extended to budget day so the total cost now is well over €400 million. That is the reduction in excise on petrol and diesel.

To ensure school transport services continued up to the end of the year, we provided extra resources and extra money was paid to school transport providers. We were concerned that for many of them it was simply no longer viable to continue providing what is an essential service. We introduced a special scheme of support for hauliers with which I know the Deputy is very familiar.

With private contractors doing public works, I introduced an inflation co-operation framework not just in respect of materials pricing but also in respect of energy and fuel. The State will step in and carry 70% of the extra cost above and beyond normal levels of inflation, backdating that to 1 January. It is a little early to say what is the impact of that but there are some indications that we are seeing a greater willingness among private contractors to take up public works contracts. There was an issue, given the level of inflation and uncertainty and the fact that the contract up to that point provided for no price variation whatever, so the contractor had to carry all the risk. I recognised that was an issue and a change would have to be made.

On the price of fuels at the pump, the levers open to the Government are limited. We could reduce VAT, which is set at 23%, but we would have to do that on everything. Almost half of economic activity is levied at the 23% rate of VAT. A 1% reduction amounts to €500 million per year. That is the truth when it comes to VAT. We have already made a reduction in excise, and with diesel it is the case that when the excise reduction is combined with the diesel rebate scheme, we are at the minimum allowed under the minimum tax directive in the European Union.

We do not have that many options when it comes to reducing the price at the forecourts, which is primarily determined by wholesale prices. The exchange rate is unfavourable currently in respect of the strength of the dollar relative to the euro. There are challenges but the Government will examine all the matters in the period leading up to the autumn.

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