Tuesday, 24 April 2012
Private Members' Business. Motorist Emergency Relief Bill 2012: Second Stage
I move: "That the Bill be now read a Second Time."
I will be sharing time. Fianna Fáil is bringing forward this Bill as an exceptional measure to deal with a crisis facing hundreds and thousands of motorists throughout the country. The price of petrol and diesel, which has been increasing steadily over the past year, is being raised with me and other Members of this House on an almost weekly basis. Motorists are at their wits end. Families are at breaking point. The steady increase in the price of oil is placing an unbearable burden on so many people throughout Ireland.
This Bill, Second Stage of which it is hoped will be passed by the House tomorrow evening, seeks to reduce the price of petrol and diesel on the forecourt by 5 cent. The mechanism in this Bill which we envisage being used by the Government to achieve the 5 cent reduction is a 4% reduction in excise duty and the corresponding VAT forgone, resulting in a 5 cent reduction. It is clear that there is an unbearable burden on so many motorists. The director of policy with AA Ireland, Mr. Conor Faughnan, has stated that feedback from the association's regular motorists' survey reveals the heavy cost to commuting mortgage holders. He also stated:
Motorists have told us that they are in negative equity in a house 40 miles from Dublin and commute to work in order to pay an outrageous or onerous mortgage. Some have actually quit their job because it was not adding up for them.
He further stated that while people who bought a house in 2007-2008, when their budget looked sound, were paying €142 for petrol in January 2009, they are now paying €300 per month, which is crucifying them.
Motorists make a huge contribution to the Exchequer, paying more than €4 billion per annum in excise duty, VRT, VAT and motor tax. Next year, that contribution will be in excess of 10% of the revenue generated by the State, an exceptional burden on one particular sector. It is for this reason that we believe there is a necessity to act and to do so swiftly. Fianna Fáil is calling for a relatively modest reduction in excise duty and is seeking to achieve this in a way which will address the current spike in oil prices.
The Fianna Fáil proposal also calls for a review of fuel prices every three months rather than annually as is currently the case. It does not make sense to only have a review of fuel prices once a year at budget time when the cost of oil on the world market is changing all the time. The Government needs flexibility to respond to this on a regular basis. The legislation we are proposing would allow the Government to react quickly to developing situations in the marketplace. We estimate that the cost in terms of revenue forgone would be approximately €145 million. However, the State is currently taking in substantial additional VAT revenue from the spike in fuel prices. The burden of increased motoring costs is, as stated by the Minister for Finance in the House last week in response to a parliamentary question, having a significant dampening effect on the domestic economy. I will deal with this issue later in my contribution.
As we enter the peak summer driving season, the need to give hard pressed motorists a break is becoming more acute. If this legislation is passed it will bring immediate relief to thousands of motorists, farmers and small businesses across the country. People feel they are being squeezed from every angle. The rapidly rising price of fuel is another cost they simply cannot afford. An instant reduction at the pumps would have a significant impact on household budgets. We are all aware that fuel prices in Ireland have risen steadily since January 2009. Since the deregulation of fuel prices in October 1991, AA Ireland has produced a useful monthly national average. This data shows that in January 2009 prices hit a low point of 94.6 cent for petrol and 94.4 cent for diesel. According to AA Ireland's April survey since then, prices have risen to 164.9 cent for petrol and 159.9 cent for diesel, representing an increase of 75% in petrol prices and 70% in diesel prices over that period, which is a phenomenal increase on a commodity which is such an essential part of every day life for so many people. If anything, prices have worsened since that survey was done. The website pumps.ie shows that retailers are charging 169.9 cent for petrol and 164.9 cent diesel.
Fianna Fáil acknowledges that fuel prices are driven by a number of factors, including the price of oil on international markets, exchange rates, production costs and refining costs. The rise in oil prices during the recent past reflected additional factors such as the geopolitical uncertainty in North Africa and the Middle East, with potential supply disruptions. The uncertainty in stock markets and the real estate sector have seen investors shift emphasis towards commodity markets and oil, gold and other extracts have seen significant increases as a result of that shift in investor sentiment. However, the State also has a significant influence on the price of motor fuel. Ireland's excise rates are 9th and 4th highest in the EU 27 for petrol and auto-diesel respectively. In its budget, the Government increased the carbon levy on fuel by €5 per tonne of CO2 and VAT by 2%. Some 54% of the cost of petrol and almost 50% of the cost of diesel accrues to the State. The loss of disposable income from increased motor taxes affects almost all households and businesses because it is a rise in a basic cost of living, taxed as if it were a luxury.
I am not blaming the current Government for this. This has been one of the old reliables for successive governments. Tonight is about trying to establish where we are at and recognising that the current price of oil is unsustainable and is creating an unsustainable burden on this economy and the people who live in it. The Automobile Association calculates that a car doing about 12,000 miles per year - which is a limited amount for many people in this House - based on a fuel economy rate of 30 miles per gallon would utilise approximately 150 litres of fuel per month. For petrol users, the monthly bill is now €247.35 while it is €239.85 for diesel users. The monthly cost for petrol and diesel users since April last year is €28 and €22 more per month, respectively.
Since the budget of October 2008 and the first budget announced by this Government last December there have been five separate tax increases on both fuels, which between them adds approximately 22 cent per litre to the retail price. Were it not for those tax increases, the price of petrol would be €1.42 per litre and diesel would be €1.37 per litre. The cumulative effect of these measures is that for an ordinary family the tax on fuel is now €396 per annum higher, which is a significant amount. High fuel prices have a particularly negative impact on rural communities where there is a lack of alternative public transport options. In this regard, I point not only to people living in rural communities, but to the many people who commute to work from commuter belt communities on a daily basis, often travelling a distance much greater than the average 12,000 miles per annum mentioned earlier. Many of those people will travel 25,000 to 30,000 miles per annum.
Within Europe, Ireland already has comparatively high electricity and fuel costs. While it lacks the major energy intensive industries which would result in competitiveness being severely impacted by oil and gas prices, the cost of energy and fuel is a factor in relation to the operational costs of business and associated investment decisions. In this regard, I understand the Irish Road Haulage Association has entered into dialogue with the Government through a working group established with the Department of Finance, which is welcome. However, I spoke with hauliers today and they do not believe that the Government or Department of Finance is addressing the issue as expeditiously as they need to. They believe there is a level of delay and non-engagement. I understand they are due to meet tomorrow. However, they do not believe there is an understanding at Government level of the benefits associated with the rebate which they have talked about and, in particular, of the urgent need to address the laundering of diesel which is creating an exceptionally uncompetitive environment for genuine hauliers. I urge the Minister to bring forward some measures to address this issue at the earliest possible opportunity. Fianna Fáil is happy to be of assistance to Government and to bring forward such measures, much as it is happy to bring forward this legislation tonight. I can assure the Minister of State, Deputy Perry, that if the Government does not move to meet the demands of the Irish Road Haulage Association and does not show a clear understanding of the issue in terms of its impact on the competitiveness of this State, Fianna Fáil will bring forward legislation. We are already working on that legislation. I will be happy to share with the House in due course our recommendations and solutions to this difficult problem.
On 18 April, the Minister for Finance, in response to a question, spoke about this issue in relation to the additional revenue that the State generates as a result of VAT being levied on the base price of oil.
The yield from VAT per litre of fuel, as VAT is set as a percentage of the price, increases as the price of fuels increase. However, in this regard it should be borne in mind that to the extent that spending in the economy is reallocated to petrol and other oil products, and away from other VAT liable spending, and to the extent that the overall level of economic activity is reduced by higher oil prices, there may be little or no net gain to the Exchequer.
I dispute that conclusion, as do my colleagues in the Fianna Fáil Party. The Minister of State, Deputy Perry, indicated in the House recently that in excess of €1 million accrues to the State each week as a result of the increased rate of VAT that is applied to the base oil price. He suggested that between €64 million and €70 million accrues to the State each year as a result. I am delighted that has been recognised by someone in the Minister of State's position.
I expected the Minister of State to have a particular focus on small and medium sized enterprises, which are most affected by the increased cost of fuel. If we accept that the Minister for Finance is right in his contention, which I have outlined, surely the converse is also true and a reduction in tax on oil would increase spending in other areas of the economy. If we follow the converse-----
The Government is taking that tax and putting it into much more labour-intensive areas of the economy. Deputy Perry is very familiar with the retail sector. Retail Excellence Ireland paid a great deal of attention to what it was promised by Fine Gael and the Labour Party when they were in opposition. The parties in question suggested they had the capacity to address the issue of upward-only rent reviews in a retrospective manner. They fell flat on their faces in that regard when they came into office. We can leave that aside. Now that Fine Gael and the Labour Party are in government, they should listen to what Retail Excellence Ireland is saying about the dampening effect of the increase in oil prices on the spend in the retail sector. It is having a devastating impact. I ask the Minister of State to address that at the earliest opportunity. There is a potential gain here regardless of whether one accepts the Minister of State's point of view or that of the Minister for Finance.
I wish to refer to a study that was recently conducted by the FairFuel UK campaign, which has been highlighting the potential positive impact on the UK economy of a reduction in fuel duty there. The proposal works on the basis that a reduction of 2.5p in fuel duty would result in the creation of thousands of jobs within a year, without any fiscal loss to the UK Government. It has been estimated that such a reduction would lead to a GDP increase of approximately 0.32% in a year and a GDP increase of approximately 0.34% over five years. If an extrapolation of that analysis is applied to the measure we are proposing in this legislation, we estimate that our suggestion could lead to a potential increase of approximately 0.5% of this country's GDP. That would result in an additional gain to the State of approximately €750 million. The Minister for Finance has pointed out that the cost of this measure would be approximately €145 million, but the potential gain is approximately €750 million. I do not suggest that the entire €750 million would come all at once. It is certainly worth a gamble.
The Government took a similar gamble when it reduced the rate of VAT that applies to the tourism sector by 4%. By its own admission, and on the basis of all the figures coming from the various industry sources, that measure worked. I am prepared to accept that it worked. I ask the Government to introduce a similar measure in this sector. I believe the measure we are proposing is conservative. Many people in my party wanted me to propose a reduction of 20 cent or 30 cent because they felt it would be more meaningful. I did not believe such a proposal could be costed, or indeed borne by the State in the current climate. I believe we have an opportunity to reduce the level of excise that is charged on a litre of fuel by 5 cent. I believe that can be costed, based on the numbers we have made available and the analysis in the study that was carried out in our nearest neighbour.
I welcome the opportunity to speak on this issue. I congratulate Deputy Dooley on the imaginative legislation he has introduced to try to deal with escalating fuel prices. I do not expect queues to run from the forecourts down the streets of this country tomorrow evening as people wait to see whether this Bill will be accepted by Deputies when the bells toll in the Dáil. The Minister for Finance roundly rejected it this morning without giving the actual debate in this House a hearing. He decided to summarily reject a proposal that was to be made in this Chamber without waiting to listen to the debate on it. As a result, he is not in a position to benefit from the common sense approach of Deputy Dooley and others to the question of how and, more importantly, why we should deal with the escalation in fuel prices. I genuinely thought this proposal would get a bit of hearing. I sat on the Government benches on Wednesday, 4 June 2008 when the then Leader of the Opposition almost fell over as he spoke passionately, with tears of sadness in his eyes, about hard-pressed trawlermen, truck drivers and motorists.
I genuinely believed every word he said. He spoke about the need to help hard-pressed workers, trawlermen, hauliers and others who were finding it very difficult to survive in the straitened economic times of June 2008. Nothing has improved since then, by any stretch of the imagination. Fuel prices have continued to escalate to the extent that a litre of diesel now costs €1.70. Ordinary people cannot afford it any more. Such an exorbitant tax on fuel is a tax on people who are trying to go to work, to commute and to pay their bills. It is distorting the take-home pay of those who are in work. It is creating a poverty trap. Some people have realised that it might not pay them to drive to work. The Minister of State knows rural Ireland as well as I do. He appreciates that people in many towns and villages in rural Ireland cannot use public transport to get from A to B. People have to travel to work in order to pay their bills.
I ask the Government to consider this legislation in a positive manner. When the Government did its sums in advance of budget 2012, it assumed it would take in a certain level of revenue from fuel and oil prices. The Government will take in more than it had planned because those prices have increased. Why can it not give a little of the additional revenue back? We are asking for a reduction of 5 cent a litre. We are proposing a reduction of 4 cent in excise duty and of 1 cent in VAT. That could have a meaningful impact. The problem with this Government was highlighted by the then Leader of the Opposition in 2008 when he said that people lose touch very quickly after they get into power. When they sit into their cars, they have already been filled with fuel. They do not have to worry too much about it as they are driven around the countryside. We recently listened to Ministers saying that the household charge would amount to just €2 a week. They did not seem to appreciate that many people cannot afford the basics. I know of cases of people ordering home heating oil by the litre, as opposed to the hundreds of litres they used to order a few years ago.
The proposal before the House should be given some thought. It deserves an airing and a hearing. I ask the Government to think about it over the next 24 hours. We need to give some relief to people who are under financial stress and pressure. Some of those who leave home early in the morning and return late at night are deciding whether it is worth their while having to travel long distances to go to work. A poverty trap is developing as a consequence of escalating fuel prices. This problem is particularly evident among lower-paid people who have to commute long distances. As Deputy Dooley pointed out, the Government has tried to stimulate job creation in the tourism sector by reducing VAT in that sector. If that is working in the tourism sector, it will also work in the fuel sector. If the price of fuel were reduced by a certain amount, people would get a little bit of breathing space. They might spend it on something else. They might pay a bill or they might buy something. The principle we are advocating is the same one that underpins the reduction in VAT in the tourism sector, which the Government considers to be one of its finest job stimulus packages since it came into office. I believe it might have the same result in this case. It might give people some breathing space, hope and confidence. We need to make sure it pays them to sit into their cars each day and drive to work in return for a fair day's pay.
I am pleased to have an opportunity to make a contribution to the Second Stage debate on this Bill. I commend our transport spokesperson, Deputy Timmy Dooley, on producing it. Very often, the Members of this House are accused of discussing issues that are not relevant to what is occurring outside. Both the Minister of State, Deputy Perry, and the Leas-Cheann Comhairle know the cost of fuel is being discussed by every family in the country.
The primary purpose of this Bill is to offer some relief to motorists. The Bill, as Deputy Dooley outlined, is a modest measure, but it would be helpful. The cost of fuel represents a crisis and it is having a tangible impact on people's lives. In this regard, I fully agree with Deputy Kelleher's statement on the choices people must make. Many people have to commute 20 to 40 miles to work every day. The fuel cost incurred by them on return journeys five or six days per week is crippling. It is affecting every element of their household budgets and every spending decision they make. The price of fuel makes an enormous difference to them.
Consider the Government's strategy to encourage people to holiday at home, which we support. If a family is considering the options of taking a cheap flight abroad to spend a week in France, Spain or elsewhere and touring around Ireland, it must consider the cost of fuel here. The Government is advocating policies that are clearly inconsistent and incompatible with one another. On a micro-economic level, day-to-day trips that people must make to see parents who live 30 or 40 miles away, friends or people in hospital and voluntary trips to support soccer, hurling and rugby teams are all affected by the price of fuel. Nobody can deny this. The price is having a real impact on the lives of the people and a depressing effect on the wider economy.
This is a modest stimulus proposal. It is true, as Deputy Dooley stated, that Fianna Fáil in government increased taxation on fuel on a number of occasions since 2008. The current Government speakers will put this on the record over the course of this debate but none of those taxation measures brought the costs to €1.70 per litre of petrol and €1.60 per litre of diesel. We have now reached a tipping point that is affecting not only individual consumers and those involved in commercial transport but also the wider economy. The figures I have quoted are not outliers; they are confirmed as average by the website www.pumps.ie, the advocacy website, which states the average cost of petrol is now €1.69 per litre and the average cost of diesel is €1.59 per litre.
As Mr. Conor Faughnan of the AA has pointed out, there are three key drivers to the price of fuel that people pay at the forecourt. The first is the exchange rate. As we know, the euro has weakened recently. The second is the cost of crude oil and the third is Government-imposed taxes. It is disingenuous of the Minister, Deputy Noonan, or any other Minister to state the Government does not have an influence on the cost of fuel. People know this to be false because the reality is that approximately 54% of the cost of a litre of petrol at the pumps goes into the State coffers. There are three elements: excise duty; carbon tax; and VAT.
Deputy Kelleher referred to a statement made by the former leader of the Opposition, now the Taoiseach, in June 2008. He made a song and dance about the cost of fuel at the time and stated it was a battering ram against hard-pressed consumers. This was at a time when the cost of petrol was €1.30. It is now €1.70. If the Taoiseach believed it was a battering ram against hard-pressed consumers then, what does he believe it is now? I would like him to come into this House and tell Members what he believes the impact to be.
I want to anticipate what I believe will be the main criticism of this Bill by members on the Government side; they will ask how it would be funded. Deputy Dooley referred to this issue. The growth cost in terms of revenue forgone is calculated by the Department of Finance at approximately €145 million. We believe the net impact on the Exchequer of this measure will be minimal. In support of that, let me quote the statement by the Minister for Finance in the Dáil last week. A colleague of the Minister, Deputy Stanton, tabled a parliamentary question on hauliers and what is being done to alleviate some of their problems, and I took up the issue of ordinary consumers. The Minister denied there is any windfall for the State in net terms from the high cost of fuel. In response to my question, he stated:
What happens is that people who have to use their car to get to work will make savings elsewhere. In other words, they are spending more on fuel and less on something else. While the Exchequer takes an additional amount on VAT from fuel, it loses VAT on other parts of the spending profile.
That is the point. If the Minister accuses Fianna Fáil of dreaming today, he must have been dreaming last week. What we are proposing espouses exactly the same logic outlined by the Minister in this House last week, namely, that if one frees up some of the money being spent by consumers on fuel and allows them to spend it in other sectors of the economy - more productive sectors that are labour-intensive and sectors such as the retail and tourism sectors - there will be a better return. That is what we propose. In no way can anybody suggest this measure will cost the State €145 million. That is rubbish. Would it not be great if the people had a few more bob in their pockets to spend in the shops, go out for a meal with their families or take a trip over the weekend? That would benefit the wider economy and that is what Fianna Fáil proposes in its Bill.
When the Government signed up to the new deal in respect of the 2012 promissory note payment, it incurred an extra €90 million in interest for 2012. Therefore, I asked the Minister last week where he would get the €90 million. The answer was that, in the grand scheme of things, the matter would resolve itself and the €90 million would fall into the overall picture in the public finances. There is no way that the net cost of what we are proposing is anything like €90 million. Therefore, I reject the flippant manner in which the Government has rubbished the proposal of Fianna Fáil. We are making very sensible proposals in respect of the public finances.
This measure will have an impact on consumer confidence. If the logic of the Government were extended and the cost of a barrel of crude oil returned to the level in 2008, at which time it was at a record $148, the price of petrol at the pumps would rise to €2 per litre. Is there any point at which the Government will say enough is enough and that the State should not be benefiting from the crucifying price being charged at the petrol pumps? The logic of what the Government is saying is that it will not intervene at any point.
Deputy Dooley outlined the contribution of motorists to the Exchequer, which is enormous every year. The Minister of State, Deputy Perry, will no doubt refer in his reply to an agreement that Fianna Fáil signed up to in Europe not to revisit in a temporary way taxes on fuel because of any spike in the international price of oil. One reason the European Union is so unpopular is that it is not prepared to respond to the needs of its citizens. With the price of fuel as it is today, there is an obvious need not only for this Administration but also for other countries in Europe to respond with imaginative measures and a flexible tool such as the taxation system. As we all know, all it takes is a decision of this House to reduce the excise duty on fuel, which decision would take effect at midnight on the night of the decision. There are no administrative barriers to my proposal, therefore.
I am sure other colleagues will deal with the issues that affect hauliers and commercial motorists. Those issues are very serious, so much so that we did not want to involve them in this Bill. However, hauliers and commercial motorists will benefit if this Bill is accepted. While they can claim back VAT, they cannot claim back excise duty on fuel. A 4 cent reduction on the excise element would be of huge benefit to anyone involved in transporting goods throughout the country commercially.
We ask the Minister of State to take a second look at this measure, which we believe is proportionate, modest and sensible. Its net impact on the Exchequer is minimal. We know from looking at the EUROSTAT figures yesterday that we are heading towards a deficit of no more than 8.2% in 2012. Therefore, there is headroom for the Government to do as proposed. It is a matter for Government to set the priorities within the overall budgetary parameters and the scope is there to do so. If the Minister believes it is enough of a priority, he has the power to it and we urge him to do so.
I welcome the opportunity to contribute to this debate and I commend Deputy Dooley on bringing forward the Bill. It is a little over 12 months since the last general election, including the rhetoric of that election, the rhetoric of the Opposition at that time and the promises and commitments made to the electorate during that election campaign. What a short space of time has passed for the members of the current Government, including the Minister of State, Deputy Perry, and others, to become glove puppets of their Departments.
Little is now being said about the citizens of the State and how they are being treated or cheated, about new politics and about new economic policies. It is more of the same. Little change is taking place. That was seen tonight in the comments by the Minister for Finance which poked fun at the Fianna Fáil Party for bringing forward this proposition. I thought little of that. I often get a bit of fun out of some of the comical remarks and quips by the Minister for Finance but on this occasion, he showed a complete lack of understanding of the plight of the ordinary person who is going to work every day and is trying to make a living. He showed very little understanding of the need for a departure in some way to support the individual who is trying to make ends meet.
Would the Minister for Finance consider that those who commute to work are doing a lot more for less, that getting to work is costing them much more in the first place and that a little relief, even that suggested this evening, would be a big deal to them? As they restructure their lives, their attitudes towards work and the cost of getting to work, how they live and what they purchase, it would seem that the State does not care. It has no policy to support, or has no intention of supporting, the ordinary individual and family which is hard-pressed. Instead we get a break down of the maths in that it will only cost an extra €2 per week. When the Government is introducing policy, whether in regard household charges or otherwise, we are told it will not be a great burden on a family or an individual. However, no one adds up the cost to a family. It is easy to add up these costs, as has been done by previous speakers. When one adds up the cost, it is a huge burden on perhaps the one individual in the household who is working to put fuel in the car to go to work. All he or she is asking for is a little relief.
What about the unemployed person who we are insisting goes on various courses? In rural Ireland, they are not easily available and one must travel to those courses. We are asking that person, who does not have access to public transport, to pay much more than a person living in a city which public transport. No consideration at all is being given to such people from whom other benefits are being cut. The Government promised it would be different and yet it adds further costs to the cost of their lives and to the cost of what they do. No consideration whatsoever is being given to them but it still insists that they do courses in various centres. I do not condemn that but I condemn the fact that the Government gives no consideration to this proposition this evening to, in some way, alleviate their pain.
Would the Minister for Finance consider the long waiting lists in hospitals and the number of times people must visit hospitals for check-ups and consideration of one kind or another? It is usually those who are elderly or marginalised who must think about these things much more. Would he consider the fact that in many of those families and in many of those cases where people are marginalised, they adjust what they eat and they think twice about every cent they spend? The Minister had no regard in his "Six One" news clip quip for those people. He showed the height of disregard for them and a disrespect I would not have expected from him. I do not mind him condemning politically what we are trying to do but I mind what he said about those people because it did not go down well with them and it certainly has not gone down well with me.
I would like to ask about the hauliers. Some 1,500 trucks carry 80% of the country's goods and 95% of the country's export, as outlined by the hauliers themselves. I have a vested interest here because that is my background and I make no apology for that. Hauliers have seen 1,300 truck licences being dropped in the past few years and have seen their costs soar. What is misunderstood, or not understood at all, by this Government is the fact that those businesses are generally family-owned and employ a large number of people in a local community and contribute very positively to the economy. The Government refuses to consider what other countries are doing for hauliers and it refuses to give them a break in terms of their commitment to their colleagues and the people they employ. That is a disgrace.
The Minister of State, Deputy Perry, is one of the few who continues to talk about small businesses. How can he say a working group will deal with the Irish Road Haulage Association and the haulage industry? I understand it will meet tomorrow. As the working group progresses, small companies and family-owned businesses employing small numbers of people are going broke. They are travelling to the Continent to fill up with diesel to come back to put it into tanks. They then travel back to the Continent to fill up again.
This proposition is a small amount of money in the scheme of things and it could easily be replaced if the Government cut the costs to allow the hauliers to fill up at home. It should for once show an understanding of the case being made by an organisation which is keeping the country going. Diesel surcharges are being placed on companies and they are passing them on to the end-user, the consumer, including the shops on high streets whose businesses are bleeding and which have nothing else to offer the economy. The Government shows them no understanding whatsoever. It has turned its back on the business world and has left it to sweat and to lose jobs. It has refused to assist it. It has increased VAT and has refused to consider propositions such as this. It is acting in the most arrogant manner I have ever seen. When in opposition it often accused the last Government of being arrogant but it could be argued it took 15 years to become arrogant while it took this one less than 12 months.
I for one am deeply disappointed with the response to this proposition and the response generally to business people in this country and to ordinary citizens who are so hard pressed that they cannot meet their costs. The Government does not understand that.
The Government is opposing the Motorist Emergency Relief Bill 2012 sponsored by Deputy Dooley to provide for quarterly reviews of excise duty and the immediate reduction of 4 cent in excise duties on petrol and auto-diesel. In the context of our current budgetary situation, there is no scope to reduce the levels of excise duties at this time without providing for alternative revenue raising measures. Such a measure would cost the Exchequer €178 million in a full year when VAT is taken into account. The loss of this Revenue would have a negative impact on the performance of our public finances, which is vital to our economic well-being and to our exiting the EU-IMF programme.
Ireland has been running large public finance deficits since 2008, significantly driving up the country's debt level.
This is the backdrop framing our budgetary policy. We cannot consistently spend more than we collect in revenue each year. It is not sustainable. Conversely, we cannot reduce taxes or excises without introducing additional taxes or charges in other areas to replace the tax forgone. The Government is determined to correct the public finances, enhance economic growth prospects and create jobs. Contrary to Deputy McGuinness's remarks, the Government has a clear understanding of and concern and respect for business people. Had he the courtesy to await my reply, he would have been given the facts. The difficulties we are dealing with are the legacy of the previous Government, which bankrupted the country. That is the fact. The Minister for Finance, Deputy Noonan, was highly critical of Fianna Fáil's arrogance and economic legacy, the latter of which has forced business people to reduce job numbers. This point should be made clearly.
This Government is concerned with creating jobs and putting the country back on the road to recovery. It is not an easy task, despite the assertions by Deputies to whom I listened with agitation because of their memory loss. Their track record is one of arrogantly dominating and disrespecting small companies. Our public finances are stabilising. Figures released by EUROSTAT yesterday showed our underlying deficit in 2011 was at 9.4% of GDP and we were on the right trajectory towards meeting our 8.6% target in 2012 and correcting our excessive deficit by 2015. We are committed to this. To that end, a stable tax base is essential.
Notwithstanding this, a sizeable deficit in our public finances remains. This year, the limit placed on the general government deficit is 8.6% of GDP. At budget time, it was estimated that such a limit equated to a difference of almost €13.75 billion between revenues and expenditure. It is important that we deal with this deficit. Clearly, €13.75 billion is an elevated level and requires further corrective action.
Deputy Dooley raised a point about my statement last week. To correct the record, during a Topical Issue debate Deputy Naughten cited a net gain of €64 million as a result of VAT increases. Although I seemed to acknowledge his point, there was no fact to support that figure. According to Deputy Dooley, I stated that €1 million would accrue from the increase, but Deputy Naughten raised the issue, not I.
During a Topical Issue debate in the Chamber last week, Deputy Naughten stated the figure of €64 million and I addressed him in that context without the facts.
Last year saw a return to aggregate tax revenue growth for the first time since 2007. Exchequer data for the first three months of this year show a solid start to the year, with strong year-on-year growth in taxes. Taxes were also ahead of profile in the first quarter. Given the size of the gap between expenditure and revenues, it is clear that the adjustment process must continue on both sides of the account and the performance of tax revenues in the first quarter of the year is positive in that context.
The Government would be reluctant to introduce any measure at this point that might cost the Exchequer tax revenues. As the Deputy will appreciate, framing a budget is about making choices and introducing measures that are fair, equitable and robust. In this regard, the Government decided to maintain income tax levels, to remove more than 330,000 people from the scope of the universal social charge and to increase mortgage interest relief for home owners who bought their first homes during the 2004-08 period. The Government introduced compensating measures elsewhere in the tax system to finance such measures and our tax forecasts are robust, as highlighted in the first quarter Exchequer returns.
It is estimated that a reduction in excise on petrol and auto-diesel of 4 cent per litre would cost the Exchequer approximately €143 million in a full year and some €94 million this year, if applied from May. This amounts to €178 million in a full year or €119 million this year when VAT is taken into account. Without compensating adjustment measures elsewhere, this would make the achievement of our budgetary targets more challenging.
All of the quantitative fiscal targets set as part of the EU-IMF programme have been achieved and we are making good progress in returning our public finances to sustainability. It is important that we persist on this path and that we continue to meet the targets we have been set. Clearly the budgetary adjustment process presents challenges for policy makers, but we must remain steadfast in our commitment to meeting our budgetary targets. I compliment the Minister, Deputy Noonan, in this regard. It is important that we remain on a credible path of budgetary adjustment. Moving towards a balanced budgetary position is a necessary pre-condition for restoring the economy to sustainable growth and securing our re-entry to the international financial markets to source financing.
We fully appreciate that fuel prices are high and represent a significant financial burden on families. Fuel is a significant cost for people travelling to work and those involved in creating jobs. As with elsewhere, Ireland has experienced a significant increase in the cost of petrol and auto-diesel in recent years. The increase in fuel prices is an international phenomenon. They are driven by a number of factors, including the price of oil on international markets, exchange rates, production costs and refining costs. The rise in oil prices in recent times reflected additional factors, such as geopolitical uncertainty in north Africa and the Middle East with potential supply disruptions.
In 2010, the average price of auto-diesel was €1.23 per litre compared with today's average price of €1.61 per litre, a difference of 38 cent per litre. It is important to put on record the fact that, during this period, budget 2011's excise increases and budget 2012's carbon tax increases raised excise on auto-diesel by just over 3.5 cent per litre, VAT inclusive. Therefore, the increase in the price of auto-diesel is largely due to external factors outside the Government's control.
Including the carbon charge, excise rates on motor fuels are 58.8 cent per litre of petrol and 47.9 cent per litre of auto-diesel. When VAT is taken into account, the total Exchequer take, as a percentage of the total price, is 53.7% and 48.5% based on current average prices of €1.68 and €1.61 per litre for petrol and auto-diesel, respectively. While the tax increases are within the control of the Government, they must be seen in the context of difficult budgetary decisions. Nevertheless, it should be noted that our rates remain lower than many of our main trading partners' and significantly lower than our nearest neighbour's, the UK. Indeed, the price of auto-diesel is approximately 20 cent per litre less in this State than it is in the UK while the price of petrol is approximately 10 cent per litre cheaper.
As excise is set at a nominal amount, the Exchequer's yield from it does not increase as the price of fuels increase. As VAT is set as a percentage of the price, the yield from VAT per litre of fuel increases as the price of fuels increase. Accordingly, any increase in the tax take as a consequence of increasing fuel prices is confined to VAT. Opposition Members have been claiming that the VAT gain on increased fuel prices is approximately €60 million. I am advised by Revenue that, based on current fuel prices and current demand, the increased VAT take would be more in the order of €15.5 million per annum.
It should also be noted that businesses are entitled to reclaim VAT incurred on their business inputs, including VAT incurred on fuel. For example, VAT incurred on auto-diesel and marked gas oil, or green diesel as it is commonly known, used in the course of business is a deductible credit for business in the VAT system. VAT on petrol cannot be deducted or reclaimed. For example, at current average auto-diesel prices, a business can reclaim VAT of just over 30 cent per litre, thereby reducing the cost to the business from €1.61 to €1.31 per litre on average. That is the net cost when VAT is removed. People are not fully aware of that.
Given the current pressure on the public finances there is no scope for temporary taxation adjustments because they could lead to significant costs to the Exchequer. The programme for Government has stated that income tax will not be increased. The Government carefully considered the options open to it in the context of our commitments under the EU-IMF programme. Indirect taxes have a lower impact on economic growth and jobs. Accordingly, revenue raising in budget 2012 was largely in the areas of indirect taxes, including VAT and carbon tax. The decision to increase the carbon tax by €5 per tonne meant a lower increase across all fuels than if an increase had been applied solely on excise duties on petrol and diesel.
The rising cost of fuel is an international phenomenon. In this regard it should be noted that in 2005 and again in 2008, when oil prices last spiked, former Ministers for Finance subscribed to the approach agreed at ECOFIN. In light of the impact high oil prices can have on growth rates it was agreed that distorting fiscal and other policy interventions which prevent the necessary adjustments by economic agents should be avoided. That was the policy of a Government in which Deputy Dooley was a member. On 15 March 2011 the issue of rising fuel prices was briefly discussed by EU Finance Ministers and they reconfirmed the approach taken in 2005 and 2008.
Accordingly, given the kind of adjustment we have to implement we cannot start dismantling the budget three months into the year. It is irresponsible of Fianna Fáil to expect us to dismantle the budget without proposing alternative revenue sources. For the reasons I have outlined, I oppose the Bill.
I welcome the opportunity to speak on the Motorist Emergency Relief Bill 2012. There has been a sharp rise in the cost of fuel in recent times largely due to external factors such as the price of oil internationally. This is not a new phenomenon, however, because it has always been inevitable that if the price of a barrel of oil went up the cost of petrol and diesel would follow suit. This is exactly what has been happening in recent times mainly due to political tensions in the Middle East and North Africa and the potential for disruption in supply as a result of these conflicts.
The excise rates for petrol and diesel were increased in December's budget following the increase in the carbon charge for those fuels from €15 to €20 per tonne. This represents an increase of less than 1.5 cent per litre for petrol and slightly over 1.5 cent for diesel. As the memorandum of understanding with the troika, which the previous Fianna Fáil-led Government signed the country up to, commits us to a carbon tax increase, these increases were unavoidable.
It is ironic that after 15 years of inaction while in government Fianna Fáil has now decided to raise the issue of the fuel market. It was not as quick to act on the long running problems of fuel laundering and washed diesel which became rampant during its tenure in office. My own constituency of Cavan-Monaghan is probably the region that is worst affected by these problems. It is for this reason that Monaghan County Council was called before the Joint Committee on the Environment, Transport, Culture and the Gaeltacht earlier this year. Over the period from 2004 to January 2012 Monaghan County Council has dealt with over 150 separate incidents of diesel wash dumping. These incidents require the involvement of the fire brigade, specialist contractors, environmental staff from the council, the Garda and the Customs and Excise. The end result is clean-up costs amounting to over €1.5 million.
If this amount of fuel is being washed it is obvious that a considerable amount of illegal fuel is entering the market. The haulage industry has been severely affected as a result of these high levels of fuel laundering. I have met a number of representatives from the haulage industry, both locally and nationally, on this matter. In February a meeting was arranged with the Minister for Finance, officials from the Department of Finance and representatives from the Irish Road Hauliers Association. Following the meeting a special working group was established to examine the matter and to find a workable solution to this problem and other issues relating to the haulage industry. I am a member of the working group, which has met on a number of occasions since our initial meeting in February. Our meetings have been very useful in terms of permitting frank discussions and an exchange of ideas aimed at finding a workable solution. I acknowledge the commitment and work of the representatives of the Irish Road Haulage Association in this regard.
While there is no quick fix solution to this problem the will now exists to combat fuel laundering. This will has been sadly lacking in the past. In this regard, I welcome the changes introduced by the Minister for Finance in the Finance Act, which will provide for more effective controls in the fuel market. Under the new arrangements persons dealing in marked fuel will be required to hold a licence. The granting of this licence will be subject to tax clearance requirements and Revenue will have the power to revoke a licence if any condition is breached. The requirements for record keeping will also be strengthened and traders will have to make regular returns detailing their fuel transactions. The penalties for those found to be involved in fuel laundering have also significantly increased.
Revenue is in talks with the UK authorities regarding the marking of diesel and is looking to go to market shortly to seek a new marker. The big issue with regard to enforcement in fuel smuggling is traceability and it is clear that steps need to be taken to ensure greater traceability in the fuel market. The introduction of a new marker would be a welcome start in this regard.
These positive steps have been taken by the Government since it entered office in order to curtail the level of abuse that is ongoing in the Irish fuel market. It is not right that legitimate, law abiding fuel retailers are struggling due to the fact that those engaging in illegal activity have an unfair advantage and I strongly support any measure that will provide Revenue with sharper teeth in policing this area. At the end of the day, a legitimate fuel market will ultimately lead to a fair price for both the retailer and the consumer.
It goes without saying that we would all prefer for the price of fuel to be cheaper but if the Government were to reduce the excise duty on petrol and diesel by 4 cent per litre, as this Bill proposes, where does Fianna Fáil expect that shortfall in revenue to be recovered? The Minister stated earlier that Fianna Fáil is living in an economic dreamland with regard to its proposal. It is about time it woke up. The reality of the situation is that the Government is working within extremely difficult financial constraints as a result of the irresponsible budgetary measures introduced while Fianna Fáil was in power. Unfortunately it appears that the party has not learnt from the mistakes of the past. I will not be supporting this Bill.
I welcome the opportunity to speak on this Bill. The enormous increase in the cost of fuel in recent years has put considerable pressure on businesses, households and older people. Under the last Government excise duty, carbon tax and VAT increases amounted to 16 cent per litre of petrol and almost 12 cent per litre of diesel. This Government has raised the price of petrol and diesel by approximately 1.5 cent per litre.
The notion that our policies are to blame for the rising cost of fuel is not founded in reality. The €5 per tonne increase in the carbon tax announced in the last budget was the result of a previous agreement with the troika which was required because of the reckless behaviour of Fianna Fáil in government. It is difficult to describe the cheek of that party in introducing this Bill after what it has done to the country. If there was a Nobel prize for brass necks, Deputy Dooley would win it. I have no doubt John Drennan will have no difficulty in finding the biggest brass neck in this House. That is the reality. On the 2% increase in VAT-----
So much so that I read through some of the old files in my office to find a quote that would suit tonight's topic perfectly as follows:
Given the current Exchequer deficit position, the decision to increase the standard VAT rate continues to be necessary to support the public finances. We are borrowing to fund day-to-day public services, which is unsustainable as future generations will be required to pay higher taxes unless we correct the public finances.
This is a quote from the late Brian Lenihan Jr., the former Minister for Finance on 13 May 2009. I only wish some of his colleagues would take note of this more often.
Of course I understand the difficulty many people have in coping with the high costs. The reality is that most of these increases have come as a result of changing oil prices on the international market, exchange rates as well as production and refining costs. Compared with our closest neighbour, the UK, the excise rate on petrol and diesel is at a relatively low level. Our rates on petrol are nearly 20% lower and our rates on diesel are 35% lower than they are in the UK.
The problem is an international one. However, the important issue that remains to be tackled is the issue of fuel laundering. Across the country several people have raised that issue and it has not been addressed. Deputy Heather Humphreys already dealt with it in detail. Members of this House should collectively stand up man for man and call for this laundering to be stopped because it is robbing everybody.
I am grateful for the opportunity to speak on tonight's motion. The cost of fuel and the corresponding arguments in respect of excise duty are issues which matter to most households around the country now more than ever, given the changed social landscape of reduced household budgets and the increased awareness of discretionary spending. We cannot fudge the forecourt issue any longer. We must have a real and robust debate on the matter and examine ways in which penal rates being imposed on motorists can be addressed in a manner that is responsible and responsive to consumer sentiment. In this context, I welcome Fianna Fáil's initiative on bringing this matter before the House this evening.
Recent motorist surveys have demonstrated how the cost of fuel in Ireland continues to become more expensive. Just this month the AA estimated that the average motorist spends €249 a month on petrol, which equates to just under €3,000 per annum. According to the organisation, in January 2009 people were paying 95 cent a litre for petrol. Last month, that had crept up to an average of €1.62. This means that somebody, who was paying €142 a month for petrol in January 2009, is now paying €300.
I agree with the opposing party's view that such punitive costs are counterproductive because they mean less money in people's pockets and therefore less money circulating in a local economy. At its most basic level, higher fuel costs reduce people's spending power, thereby dissuading them from making discretionary journeys and forcing them to cancel spending in their local area. In short, the higher costs effectively negate the effect of extra revenue brought into the Exchequer by increased excise duty.
Most affected are parents who drive their children to school, people who use their cars regularly, and those who are trapped in the perfect commuter storm - caught between struggling to make mortgage repayments and pay for petrol to run their commuting lifestyles. This week The Irish Times reported that one commuting couple are spending the equivalent of four mortgage repayments a year on fuel alone.
The business and SME community are also suffering. Truckers, hauliers, fishermen and plant hire businesses are just some of the fuel-dependent industries here being disproportionately affected by higher fuel costs, which experts say are having a major impact on operating costs for firms of all sizes. Many Members of this House from all sides can attest to that. A recent survey by Close Business Barometer showed that 46% of Irish firms cited fuel costs as one of their main daily concerns. Some 26% of businesses are being forced to pass some of these costs on to the customer, further hitting the pockets of already cash-strapped households.
With respect, however, this was an issue against which Fianna Fáil repeatedly turned its face while in power. As the Minister for Finance, Deputy Noonan, has already pointed out, the same party made an agreement in Europe a few years ago not to react to spikes in the price of diesel and petrol by making distortionary fiscal adjustments, instead agreeing that prices would be allowed to come down again in a co-ordinated fashion over the course of the cycle.
I commend Deputy Timmy Dooley, who moved this Bill, on his new-found concern for hard-pressed households. I draw his attention to a Labour Private Members' motion debated in this House on 12 October 2010 against which he voted, and which dealt with the effect of electricity prices increases and fuel poverty on households on low incomes. His sudden interest in the financial hardship of these families is belated and indeed amusing.
Furthermore, Fianna Fáil has acknowledged that the tax adjustment would give rise to an initial marginal net cost to the Exchequer, creating an effective hole of €145 million. While I broadly agree that adjusting fuel prices would in time be beneficial because it would encourage consumers to spend money in other sectors of the economy, Fianna Fáil's has failed to come up with any revenue-raising alternative. What does it propose replace that €145 million if the Bill were accepted?
As Deputy Tom Hayes has pointed out, much of problem relates to international factors, including the crude oil issue, the war in Libya - some Members of this House could give us some intimate detail of what went on there - and Western tensions with Iran. We must understand and acknowledge that many of the issues affecting this topic are not domestic but international. In that context and in the absence of any alternative proposal it is very difficult to expect other Members of this House to support Fianna Fáil's Bill. I broadly support the thrust of the Bill and it is important for us to recognise when the Opposition comes up with a proposal. Regardless of how nuanced it might be, it deserves to be mentioned.
Deputy Heather Humphreys, who knows more about this issue than the rest of us, has pointed to the criminality in Border areas. The thugs and mindless criminals, who launder fuel, take the money out of the ordinary law-abiding forecourt owner. Such criminal activity is having a major effect on legitimate tax-compliant business in the Border areas. Just as the international dimension affects this issue here, we must recognise that criminality in Border areas is placing hardship in disproportionate terms on other people who are law-abiding and respectful citizens of our Republic.
Probably one of the only ways to get rid of criminality in Border regions is to get rid of the Border. I would welcome the support of all parties in helping us in achieving that. It is extremely important if we want to sort out cross-Border fuel issues that we work for all-island excise and tax rates. The Government will not find us wanting with regard to that.
Across the State people are hurting as a result of four years of austerity. Families and businesses are finding it extremely difficult to make ends meet. Every day we hear stories of people being forced to make impossible decisions with the meagre money they have. Unemployment emigration, mortgage distress, financial hardship, etc., have been forced on the people through austerity cuts. These policies were introduced by Fianna Fáil and are now being continued under the Fine Gael and Labour Party Administration. Sinn Féin has always been against this consensus for cuts. When Fianna Fáil introduced the austerity budgets in 2009-----
When Fianna Fáil was introducing austerity budgets in 2009 and 2010, Sinn Féin opposed them because of the damage they would do to the economy. When Fine Gael and the Labour Party followed in Fianna Fáil's footsteps in December, we opposed that too. On every occasion we provided detailed costings of alternatives to promote growth, jobs and equality. I listened to Fianna Fáil's Deputy Dooley on "Morning Ireland" last week outlining his party's commitment to what he called constructive opposition. He told listeners that Fianna Fáil was not interested in populist opposition, or opposition for its own sake, and that it had tabled 20 Bills since the last general election. Many Members would be rightly sceptical, like me, and wonder why Fianna Fáil did not introduce these Bills when it was in government.
The Bill we are discussing tonight is a case in point. Sinn Féin strongly supports any measure that will reduce pressure on struggling families and businesses. The proposal to reduce the cost of petrol and diesel by four cent per litre, if passed, would significantly ease the burden on tens of thousands of people. Sinn Féin would support such a Bill. However, it is important to remind ourselves who is responsible for creating this taxation burden in the first place. In last December's budget, the Labour Party and Fine Gael introduced an increase of 1 cent per litre of fuel, but over the three years before that, Fianna Fáil had introduced a massive increase of 14 cent per litre of petrol or diesel. Nobody should be under any illusion that if Fianna Fáil had been in government last December, it would have increased the fuel excise once again, and Deputy Dooley would have voted for it, just as he did from 2009 to 2011. This Bill, rather than being an exercise in constructive opposition, is a return to classic Fianna Fáil.
Let us not forget the reason people are so heavily dependent on their cars, particularly in rural Ireland. It is because of the lack of investment in the transportation system by Fianna Fáil between 1997 and 2011. In addition, Fianna Fáil has not clarified where it will source the replacement revenue. A sum of €140 million is not insignificant, especially in the current financial climate. Those who propose tax reductions should have the responsibility of explaining where the replacement revenue will come from. This is what Sinn Féin has done in its pre-budget submission. Claims that a reduction in petrol and diesel tax would be revenue-neutral are hocus pocus. Fianna Fáil needs to tell us where is going to collect these taxes and, in particular, how is going to replace the €140 million.
It is important that the Government take a strategic view on the pricing of fuel, which is a pivotal issue across the State. This includes the issues of a VAT rebate, the identification of correct prices for fuel and the use of the taxation system to ensure there is no radical change in price. It can be done. It is also important to build into this thought process consideration of our environmental obligations and our obligations with regard to the 2020 targets set by Europe.
Rising fuel prices are a significant factor in the current deep recession in the Irish economy. They are pushing up the prices of goods and services and decreasing demand and spending. Producers, service providers and retailers are being hit hard. Consumers also know the cost, as does everyone dependent on transport to get to work. The overall effect on the economy is stagnation and decline, with a resulting fall in tax revenue.
For the hauliers on whom we depend totally for our imports and exports, the problem has become acute. The Irish Road Haulage Association has said that so-called tanker tourism is now widespread, with trucks leaving Ireland with the minimum of fuel in the tank and filling up abroad. This entails a major loss of revenue for the State. For motorists the situation is equally serious. Household budgets have been hit with blow after blow by this and the previous Government. New flat-rate taxes and stealth charges are piling huge pressure on low- to middle-income families. Add to this the rising price of fuel, and there is real hardship. This is especially the case for those who are totally dependent on their cars for work, study or access to services. Outside our cities, the public transport network in this State is nothing less than appalling. In nearly 14 years in Government, Fianna Fáil failed to develop a proper public transport network for rural Ireland, failing even to reopen existing railway lines as promised, and left us with a bus network little better than when they came to office.
According to figures published by the Automobile Association last week, the State-wide average price of a litre of unleaded petrol is now 164.9 cent - I would drive anywhere to find that price, if I could - which is an increase of 2.8 cent compared to the figure for March. Diesel also rose by 2.2 cent to its new record high of 159.9 cent per litre. These are average figures across the State. I have had to pay up to 5 cent more than that average figure for a litre of unleaded petrol in recent days - that is, 169.9 cent. It is scandalous. The average motorist now pays an estimated €226 for fuel in a month, of which €127.77, or 57%, is tax. That figure is €30 higher than it was just last October. According to the Minister for Finance in reply to a question I asked last week in the Dáil, 32.3% of the price of petrol and 26.5% of the price of diesel is excise duty. These prices rises fall most heavily on those who depend on their cars to commute to work or must use vehicles as an integral part of their businesses. It is undoubtedly a key factor in closing many businesses. The figures I have cited reflect the severe difficulties caused to hauliers - I would particularly like to reflect on them - and to the wider economy by rising fuel costs. This needs to be tackled by the Government.
Everything should be put on the table, including prices at the pumps and the level of excise duty. I emphasise, as I have done here before, the urgent requirement - I say this with all the strength I can command - to tackle the reprehensible diesel laundering racket, which I absolutely reject. Despite an earlier speaker's commentary, this is not confined to one area of the country; the beneficiaries could very well be anywhere from Donegal to Cork, and all places in between, and people need to wake up to that fact. These people need to be rooted out and this outrageous activity finished once and for all.
I appeal to the Minister of State and his colleagues in Government to go further than this Bill provides. The Bill does not go far enough, especially for diesel. Road hauliers are being severely hit, jobs are being lost, and worse will follow. Ultimately, we are all paying and will continue to pay the price.
I agree with the broad intent of the Fianna Fáil Bill, but it does not go nearly far enough. A reduction of four or five cent per litre, while welcome, is not enough to get this country moving again. Let us think for a moment about the agri-food sector. Everybody talks about how well the sector is doing, which is true. However, the industry is under significant threat from rising fuel prices. Fuel costs for farmers have doubled in the last three years, but profits have not increased to match. The profit margins of individual farmers are being eroded, which is resulting in serious financial pressure, particularly for the smaller farmers of the west and north west. Costs for agricultural contractors are astronomical during the summer and harvest periods, and these are passed on to farmers. In the last two years, the price of agricultural diesel has risen by a massive 54%. Imagine the effect on any industry in which the cost of a major component rises by 54% in two years. The price of road diesel has increased by almost 35%. At a time when the Government, rightly, calls for industrial and commercial competitiveness, Ireland's competitiveness in agriculture is being damaged due to expensive road haulage costs and the distance we are from the markets. I call on the Government to substantially reduce fuel duties and stop the prices of petrol and diesel from spiralling. The high price of fuel is causing severe hardship to consumers. Government taxes account for more than 57% of the cost of fuel, according to the Irish Petrol Retail Association. An earlier speaker mentioned Libya and the oil producers but Government is the main taker from the price of fuel. It is within the remit of the Government to address the considerable extra hardship placed on rural dwellers by these taxes.
Motoring is not an optional extra in the constituency I represent, Sligo-Leitrim. We do not have buses passing our door every 15 minutes and do not have access to taxis or the Luas in order to bring our children to school, go shopping, go to work or visit the doctor. The Government should also seriously consider the law of diminishing returns. Energy and transport costs are seriously damaging our local and national competitiveness. A recent survey by the Automobile Association found that fuel prices have become so grave for some people that livelihoods are now at stake. The survey shows costs of €100 per week for the average car owner. I recall the remark by the Minister for the Environment, Community and Local Government, Deputy Hogan, to the effect that the household tax costs only €2 a week extra. He was not talking about the existing cost of €100 per week that any family unfortunate enough to own a car in these times must pay. Five per cent of the motorists polled in that AA survey indicated they will either definitely or possibly abandon their job this year as their daily commute has become too expensive. Another 8% stated their fuel bill has become such a burden they are currently likely to be on the look out for alternative employment in the near future if such exists closer to their home.
Biofuels must also be considered as a means of providing an alternative fuel supply in this time of international uncertainty. There has to be investment in the growing of crops for biofuels, such as rapeseed, willow and sugar beet. We cannot become solely dependent on imported biofuels as we have become so on fossil fuels. A clean and affordable alternative must be found.
It is a pity this motion was not broadened to include heating oil because many families whose houses were designed for oil-fired central heating simply cannot afford the exorbitant costs involved in fuel purchase. We should seriously consider extending the SEI warmer home scheme to provide support for families who wish to install solid fuel alongside their existing oil-fired systems.
Any Deputy of any party, Government or Opposition, who goes out talking to his or her constituents will know there are many families going cold at this time because they cannot afford oil. This will get worse unless corrective action is taken.
I, too, am delighted to speak on this motion, in the limited time available to me. I am really disappointed in the response from the Government. I quote from a speech the Taoiseach made some years ago. He stated: "I am disappointed that Deputy Cowen does not have an initiative with regard to the mix of excise duties and VAT to ensure they are not used as a further battering ram against the hard-pressed consumer". What kind of optics, politics or blackguarding is this? The public are sick of all of us. The price of oil is downright disgraceful. I have a meeting tomorrow, as I am sure many of us have, with the Irish Agricultural Contractors Association, a new association set up to try to save whatever bastion its members have left. They have no bank overdrafts. I met 131 of them two weeks ago, 130 of whom had their overdrafts taken away. There is talk of being pro-jobs and pro-business. The Government does not have a clue. The mandarins in the Department are running the show and they cannot see beyond their noses. They need to take off their glasses and clean them because they are codding the people. People cannot afford to drive their cars. The law of diminishing returns is a fact.
I heard my colleague in South Tipperary, Deputy Tom Hayes, spoofing before I came into the Chamber. I ran to the screen to hear what he was saying.
The Minister of State should know better because he is a businessman. He is codding the people and is on a hiding to nothing. The Government wants to stop people cutting turf; it wants to break the resolve of people in this country to fend for themselves and keep the last bit of decency and respect for themselves.
I did, but now I am talking about the Minister of State and his party. When they were over here they knew everything. I have an e-mail from a person in South Tipperary, a haulier, who states, "We are currently purchasing 33,000 litres of diesel in Belgium and 19,000 in Luxembourg per month". Imagine that. Why? The reason is the following difference in prices: 7 cent difference between our price and that in Belgium and 12 cent between our price and that in Luxembourg. Who are we codding? The hauliers who can afford to go abroad are lucky. The people at home cannot go. They are being extinguished from business and the lifeblood is being driven out of them. If the Government increases VAT we will then face another increase on 1 May, of 1.6% in carbon tax.
All the lies the Minister of State told-----
I thank the Leas-Cheann Comhairle for the opportunity to speak about this new piece of legislation, the Motorists Emergency Relief Bill. I welcome the Bill. As many of my colleagues have also observed, I wish it would go further. It is an attempt to help the hard-pressed motorist while at the same time trying to generate activity in the economy and increase employment. It would also act as a job-saving measure which is something on which this Government should focus.
Each day, I meet motorists and small business people who have to cope with the high price of diesel and petrol. They are fighting for their lives and their businesses and are trying to survive for their families. This is the real economic world and I wish the Government would open its eyes and listen to the people who want a hand-up, not a hand-out. It is a little rich for this Government to lecture the people on a regular basis about competitiveness and costs while at the same time it runs away from the proposals in this legislation. When one looks at its details, one sees it is an Act that would allow for the quarterly review of excise duty on petrol and diesel and the introduction of an immediate reduction of 4% per litre on the excise duty on both fuels. The Minister for Finance would review the excise duty on mineral oil on a quarterly basis, taking into account the international price of oil, the domestic economy, the public finances and the annual rate of inflation as per consumer price index. In addition, the legislation states, in subsection (3): "the reduction in excise duty shall come into effect on the enactment of this Bill and shall not give rise to any refund of excise duty". Let us have some common sense in this debate and let us deal with the high cost issues in this Bill. It is time for the Government to get off the fence, do something practical and generate movement and spending in the economy.
While we are on this issue, let us look at the United States and the madness of boycotting bargain oil coming from countries such as Iran. Recently, I met the Iranian ambassador who told me straight out that, first, Iran does not want any nuclear weapons as they are against the people's faith and religion and,second, Iran wants to do business with Ireland, increase imports and trade with us. What is the Minister for Foreign Affairs and Trade, Deputy Gilmore, doing? He is closing down our embassy in Tehran.