Seanad debates
Tuesday, 1 April 2003
Motor Vehicle (Duties and Licences) Bill 2003: Second Stage.
2:30 pm
Pat Gallagher (Donegal South West, Fianna Fail)
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The origins of this Bill were established with the passing in the Dáil on 12 December last of a financial resolution which essentially amended the Finance (Excise Duties) (Vehicles) Act 1952 and the Finance (No. 2) Act 1992 in respect of rates of motor taxation and trade plate licences. However, the resolution has only a limited life and to continue its effect, it needs to be replaced by a Bill which provides a permanent legal base.
The primary purpose of the Bill is to give that permanent legislative basis to the new motor tax rates set out in the resolution. These rates apply to tax discs taken out for periods commencing on and after 1 January 2003. A standard, across the board increase of 12% is provided. The Bill also contains two technical amendments to motor tax law and an enabling power to the Minister to facilitate the processing of on-line motor tax applications. The technical changes relate to extending the national vehicle file records to include vehicles prior to first taxing or vehicles never taxed and to remove an Irish punt amount, the euro equivalent of which is already in place.
Why is the Government proposing to increase motor tax? To set a context for our discussion, it is important to make it clear that motor tax is not paid into the Exchequer. In this regard, it is very different from other taxes. Motor tax is paid directly into the local government fund established under the Local Government Act of 1998. All the money in the fund is ring-fenced specifically for local government. This means it can only be spent on local government and cannot be dipped into and used by the Exchequer for any other purposes. To underline the independence of the fund from the Exchequer, we maintain its account in a local bank close to the Custom House. In addition to motor taxation, the fund is augmented by an annual contribution from the Exchequer.
The fund is used primarily for two purposes – to enhance non-national road grants to local authorities and to finance the general purpose block grants allocated to authorities each year to assist them in their day-to-day current expenditure. With the increases in motor tax provided for in this Bill, we have been able to increase the amounts available in general purpose grants to local authorities in 2003 and maintain the provision for the non-national roads at the record levels set in 2002.
Prior to the introduction of the local government fund, motor tax was paid into the local government equalisation fund that was used to finance local authority general purpose grants. The fund did not, however, provide any money for roads. The channelling of motor tax receipts into the local government fund and the use of the fund for non-national road grants have created a link between the amount of tax paid by motorists and the service they get for that tax in terms of better roads.
The motorist is seeing the benefits of significant and efficient spending on non-national roads. The national development plan provides for the investment of €2.43 billion in the non-national road network between 2000 and 2006, significant by any standards, and it is important that this money is well spent. As I indicated in the debate on the Bill in the Dáil, last year's independent evaluation of investment in the road network, carried out by Fitzpatrick Associates, economic consultants, concluded that the non-national roads programme was being operated on a reasonable and efficient basis. The non-national roads measure is one of the best performing in both the south-eastern and BMW regional operational programmes.
Along with funding roads, adequate finance must also be provided for local authorities to perform all of their functions and continue to provide good quality services for the public. Local authorities now face increased costs across a spectrum of services. If they are to continue their good work and improve the quality and level of service they provide for the public, they need extra resources. That is the reason we are increasing motor tax rates – the increases have allowed the Government to increase general purpose baseline allocations to local authorities by 6% over and above the 2002 grant levels.
The new rates of motor tax set out in the Bill are the same as those provided for in the financial resolution and apply to tax discs and trade licences taken out for periods beginning on or after January 2003. Standard increases of 12% have been applied to the old rates. Increases of this level must be viewed against a background of inflation increasing by 33% in the last ten years in comparison with a 12% increase in motor tax rates.
The new rates for all vehicles are set out in the Schedule to the Bill. Rather than taking up the House's valuable time listing every new tax rate, I would make better use of our time highlighting some details of the proposed changes for private cars and goods vehicles that make up 91% of the national fleet. For private cars, the following are some examples of the levels of increase. For the lowest engine car size of under 1,000 cc, the annual rate increase is €15. This represents an increase of 29 cent a week. For cars in the 1,001 cc to 1300 cc bracket, the annual increase is between €23 and €28. For cars in the 1,301 cc to 1,400 cc range, the additional annual increase is €30.
A total of 60% of the national car fleet is made up of cars under 1,400 cc. Therefore, the annual extra costs for most motorists will be between €15 and €30, that is, between 29 cent and 58 cent weekly, or, to put it another way, between 4.1 cent and 8.2 cent a day. For the remaining cars, the increases will range from €32 for cars not exceeding 1,500 cc up to €137 for cars over 3,001 cc. Less than 0.5% of the cars are in the 3,001 cc plus category.
As with private cars, the effect of the 12% increase in the rates for goods vehicles will vary depending on the size of the vehicle. While the rates for private cars depend on the cubic capacity of the vehicle, the rates for goods vehicles are based on the unladen weight of the vehicle. Some four fifths of goods vehicles qualify for the lowest level of charge, meaning that they will pay an annual increase of €26, or 50 cent per week.
A 12% increase also applies to trade licences, or trade plates. As the House may be aware, these are the green registration plates used by motor traders on vehicles temporarily in their possession, in lieu of taxing such vehicles. While there are strict restrictions on the use of the plates, they are transferable between vehicles. The increase for a pair of trade plates will be €27.
Before Christmas there was an Adjournment debate in this House on funding local government. During the debate Senators expressed concern about the increasing costs which local authorities were facing in 2003 and underlined that local government must have adequate funding to perform the functions entrusted to it. The Bill before the House is about local government, ensuring it has the funding it needs and ensuring it is in a position to adequately perform its functions and provide good local public services across a range of areas contributing to national, local and community development. I commend the Bill to the House.