Dáil Éireann debate -
Thursday, 20 May 1976

Vol. 290 No. 12

Finance Bill, 1976: Committee Stage (Resumed).

Question again proposed: "That section 35 stand part of the Bill."

Mr. Colley

We established last night that since March, 1973, the price of the pint had more than doubled, increased by 20p. The Minister vindicated his efforts to avoid responsibility in this regard last night when he said that the increases in taxation were imposed by the Dáil, the increases that were authorised by those engaged in the trade had been recommended by the National Prices Commission and a proportion, he said, was due to publicans who had applied increases to which they were not legally entitled.

The fact is that this Government came to power complaining about the increase in prices of various commodities, including the pint and said —I am not even talking about their claim that they would reduce prices— that they would stabilise prices and introduce price control. A good example of their efforts in that regard is provided in the price of the pint which as I say, since March, 1973, since this Government came into office, has more than doubled. The efforts, if one can call them efforts, of the Government in regard to prices are shown very clearly when we look at what has happened to the price of the pint.

I do not know the various excuses that might be advanced by the Government in regard to this matter, but I would ask him, before they give any further excuses, to think about what they were saying to the people prior to the last general election in regard to prices and to apply the yardstick of their criticism at that time to their own performance now and to their own excuses now. It could be, I would hope, a salutary matter in the politics of this country if we were to get a little honest self-appraisal of that kind even if it was not done publicly, if there was a more realistic approach to problems of this kind, that in the longer term could be of benefit to all our people even though the cost of the lesson, literally and figuratively, would clearly have been extremely high.

Minister for Finance (Mr. R. Ryan)

Of the 20p increase in the price of beer since March, 1973, only 8p has accrued to the Exchequer. The remaining 12p has accrued to private interests, to brewers and vintners. Of that 8p accruing to the Exchequer by way of tax every penny has gone back to the public, so that the net increase is 12p and none of that has been received by the Government.

The Deputy is well aware that legal difficulties arose in relation to the control of the price of beer. These are at present a matter of litigation and also of very careful study by me and the Minister for Industry and Commerce, who will, I understand, shortly be bringing forward proposals which will have the effect of controlling liquor prices. The Finance Bill is not a suitable occasion on which to discuss the difficulties which arose in relation to the price control of alcoholic liquor. However, I think it is common knowledge that amongst other things the nature and description of premises in which alcoholic liquor is sold also arose and none of this could have been reasonably foreseen in 1972 or 1973 when we had expectations that we would be able to effect more control than seemed possible. Understandably there is disappointment about the price of this very popular drink, which can do people good—I mean the drink, not the discontent—and it is proper on this occasion when discussing the financial aspect that the position should be made clear so that people will realise the State is responsible for the smaller part of the increases which have occurred and this realisation may help in some way to assuage their anger or disappointment.

Ruairí Brugha

It is true, as the Minister said, that of the 20p increase only 8p represents tax increase, and that tax increase goes back, of course, to the people in Government expenditure. The Minister referred to the efforts made by the Government to control prices. When one looks at a range of tax increases one finds an automatic effect on prices. If tax is increased, as it was in the second last budget, on ordinary consumer popular goods, as the Minister described them, then inevitably prices will increase and so will the cost of living. The Minister talked about areas of choice in regard to tax increases. Most people who take a drink regard the pint as an essential commodity and an increase in tax on the pint creates a demand inevitably for increased wages. Therefore there is a direct effect as a result of the Minister's policy. Another criticism is that the rate of tax on the pint is far in excess of the British rate. This must have an indirect effect on tourism and, when tackling taxation policy, the Minister should bear in mind the tremendous benefits that flow in terms of jobs and from the point of view of our balance of payments as a result of expenditure on the part of those who come here. The numbers must be affected to some degree, though perhaps not very significantly, because of the price of an ordinary item most people like to enjoy, especially on holiday.

Mr. R. Ryan

May I just point out one interesting little statistic? Between 1969 and 1973 the duty content as a proportion of the retail price was higher than it is now.

Mr. Colley

May I comment on that interesting statistic from the Minister? All it proves is that the promise of the Coalition to stabilise prices has been so badly kept that the increase in the price of the pint has shot up but the proportion the Exchequer takes is now relatively smaller. This is highlighted when one recalls that we are asked in this Bill to confirm permanently an increase in duty or tax on the pint which is in excess of 6p. That illustrates just how appalling the lack of control of prices has been. Not alone has there been an increase of over 100 per cent in the price of the pint since this Government took office but in this Bill alone there is provision for more than 6p increase in tax on the price of the pint. Overall there has been an increase of 10p in the price of the pint in the early months of this year.

Apart from the effects mentioned by Deputy Brugha, that is also indicative of the savage increase which has taken place and which we are asked to implement in this Bill, an increase which is having a serious consequence on the consumer price index, with all the consequences that flow from that, consequences of which the Minister is only too well aware. The pint may not be the area in which the consequences of the increases are at their most serious but this is all part of an overall package embarked on by the Government in the budget. There is a most serious consequence in regard to wage claims and in the negotiation of a national pay agreement and all these increases were allowed to happen not inadvertantly but in the full knowledge that they would happen, it having been pointed out to the Minister what the consequences of what he was doing would be.

I do not wish to widen the scope of the discussion but it is proper that these things should be pointed out. I believe the Minister is being naive when he talks about the amount of the increase of more than 100 per cent under this Government which has gone to the Exchequer as distinct from the amount that has gone to the brewers and the publicans. The Minister must realise that the consumer is concerned with the price he has to pay. That is his primary concern. If he realises the portion of the increase he has to pay is going to the Exchequer he cannot console himself with the happy thought that it is going in a good cause, not when he sees the way the Exchequer is being handled or mishandled and realises that perhaps a great deal of what he is paying is going to pay off the servicing of the excessive borrowing that the Minister has engaged in. All of this arises out of consideration of the enormous increase that has been imposed and allowed to occur by this Government in the price of the pint.

However, I do not wish to prolong the discussion on this unduly. The verdict of the people on the performance of the Government in regard to prices generally, and in particular in regard to the price of the pint, will be delivered fairly soon and in delivering it the people will take into account what was said by the Minister and by all of his colleagues when they sought their votes in the general election.

Mr. R. Ryan

We are still not taxing it as heavily as Deputy Colley did.

Mr. Callanan

Does the Minister realise that it is now called "Richie's dear pint"?

Mr. R. Ryan

I do not mind people using my name.

Mr. Colley

"Dear Richie's pint" might be better.

Mr. Callanan

That is what it is called.

Mr. Kitt

There is little comfort for anybody who takes the popular pint, as it has been called, to know that a small portion goes to the Exchequer. I further point out that there is a big discrepancy between the price the person pays for the popular pint in different areas of the country, particularly in the Dublin area compared to rural areas. We have heard from the Minister this morning that the small portion goes to the Exchequer, but could he do anything about the fact with his colleagues, or could this Government do anything about the fact that there is such a discrepancy in the price of the pint all over the country?

An Ceann Comhairle

Price control, Deputy, would be a matter for another Minister.

Mr. R. Ryan

I was explaining earlier that there is a whole field of litigation affecting the price of beer at present. It is going on for over two years despite the present efforts of the Minister for Industry and Commerce to bring it to a conclusion. I understand the matter may again be before the court on 27th of this month, but until this matter is resolved the non-fiscal element of the price of beer is extremely difficult to control.

Question put and agreed to.

SECTION 36.

Question proposed: "That section 36 stand part of the Bill."

Mr. R. Ryan

The effect of this section is to increase the main rate of excise duty on spirits by the equivalent of 4.68p on a glass of spirits.

Mr. Colley

Could the Minister indicate the increase that arises from the budget and is being implemented in this Bill, taking account of the excise duty and value-added tax which was imposed later?

Mr. R. Ryan

Adding both the value-added tax which was attracted by the increase in January and the adjustment in value-added tax on 1st March, the total increase would be 7p.

Mr. Colley

Could the Minister indicate the increase in the price of a glass of spirits between March, 1973 and the present time?

Mr. R. Ryan

An increase of 31p and of that only 11.7p came to the Exchequer as duty and the duty content as a percentage of retail price is now 41.9 per cent as against 49 per cent in 1973.

Mr. Colley

Is that the percentage content?

Mr. R. Ryan

Yes.

Mr. Colley

Could the Minister say what was the price of the glass in March, 1973?

Mr. R. Ryan

37p.

Mr. Colley

So again it would be true to say that in the case of the glass of spirits under this Government the price of the pint has more than doubled and the price of the glass of spirits has almost doubled. Would that be a fair statement?

Mr. R. Ryan

I do not know whether I would use the words "under the Government". I would say "during that period in which the Government were responsible for only 11.7p duty in the increase".

Mr. Colley

But the Minister presumably appreciates that he and his colleagues prior to March, 1973, had a very different tune to play in regard to increases in prices of different commodities, in particular the glass of spirits, whether they were occurring as a result of increased taxation or not. I presume the Minister has some recollection of what he said at that time. If he has, does it not strike him as irrelevant, to say the least, to tell us now what proportion of the almost doubling in the price of a glass of spirits has gone to the Exchequer and what has gone to the distillers or publicans? Is it not a fact that as far as the consumer is concerned, during the period of office of the Coalition the price for the glass of spirits has increased by 31p which is almost double the price it was when they came into office?

Mr. R. Ryan

The Deputy knows the Minister for Industry and Commerce has made orders under powers bestowed upon the Minister for Industry and Commerce by the previous Administration. These orders have been challenged in court. Until that issue is resolved, and until we know whether these orders are valid—and this is a matter which has to be determined by the court—all prosecutions against publicans in respect of excess charges are frustrated, pending the court decision on what has now become known as the Dundalk publicans' case.

While I understand the Deputy will naturally succumb to the temptation to make the most out of the increases that have occurred, I emphasise that a lot of those increases are, as far as the Government are concerned, not valid increases. However, the Government are frustrated in their efforts to effect control over the prices of these commodities because orders have been challenged. It is proper to draw attenion to the fact that the smaller part of the increase is attributable to tax because those who have increased prices without valid authority have endeavoured to create the impression that the increases are attributable to taxation, whereas the main impact has been attributable to other causes. This Government notified the country last year what the overall financial position was. No Government had ever given such detailed statements of the financial position, the cost of running the country, of the Estimates presented, the massive cuts made in those Estimates, the reductions in expenditure effected and the fact that notwithstanding those reductions increases in taxation will be necessary. We said the choice was not between having very popular and attractive reductions in taxation but rather, how the taxation would be paid. We made a decision which we entirely defend and which nobody has yet attacked in favour of putting the increases in taxation on less essential items, so that we collected the revenue by indirect taxation rather than by increasing the rates of income tax. Those who object to this increase on beer and spirits should say where they propose to collect the alternative revenue. The only real alternative would be by increasing the rates of income tax. It is argued that the effect of these increases on beer and spirits is to generate a demand for increased wages. For the last few years I have been asserting and I again assert that it is hypocritical for people to demand more and more Government expenditure and more services and decline to provide the money to pay for them. For people to demand more money for welfare and say that if you extract the money to pay for that welfare we will demand income increases is to make a hypocritical plea.

The vast mass of our people would prefer to pay their taxes on items which are at least avoidable, if they do not want to pay the taxes, rather than be obliged to pay them by way of income tax. All day yesterday was spent arguing against imposing income tax on a business with a turnover of £750 milion. Some Deputies opposite lost their reason as they laid their anger before the House and before the people, primarily for the benefit of the provincial Press because £3 million was going to be collected by way of tax from a business that could carry it without harm. That is, perhaps an indication of the resistance which people have to income tax.

Mr. Colley

It could be an indication of something else.

Mr. R. Ryan

Yes. It could be an indication of political opportunism or worse.

Mr. Colley

Or something else. It might be an indication of concern for employment.

Mr. R. Ryan

Do not ask me to describe what it could be or I might embarrass some people opposite. Is it better that tax be collected on alcohol consumption or in income tax? I make no apology for saying that our preference in Government is to collect it from alcoholic drinks rather than impose it on income tax.

Mr. Colley

The Minister has already imposed it on income tax.

Mr. R. Ryan

We have spelt out exactly what it costs to run the country. The people know that taxes must be paid to meet these costs. The Government's other alternative was to slash Government expenditure and to increase unemployment still further. I notice that many of the critics today are silent about the fact that they endorsed Government expenditure in 1973, 1974 and 1975. They endorsed the decision of the Government to provide money to replace expenditures which the private sector would have engaged in if the recession had not come upon us. They said we were right to keep the economy ticking over by increasing the size of the deficit during the recession. They are silent today about that and they also failed to point out that every time we produced budgets increasing the size of public expenditure I recited on every occasion the need to reduce the deficit and to reduce Government expenditure when the country would be pulling out of the recession. That is understandable; nobody likes to be reminded of the fact that they agreed on previous occasions with a Minister they are now attacking.

Mr. Colley

The Minister, of course, is not speaking of the Opposition?

Mr. R. Ryan

I never take the criticisms of the Opposition too seriously at any time——

Mr. Colley

The Minister is learning the hard way now.

Mr. R. Ryan

——because it is invariably out of season and when they are preoccupied with looking at their mistakes over the last 50 years and celebrating them we do not have to listen too much to what they might say about the present.

We believe that we were right to tax beer and spirits. The amount of tax which we imposed was the correct amount. We regret that other interests decided at the same time to increase their prices and it was unfortunate from their own point of view that some of them decided to add on their increases, some of which were unauthorised, two days before the commencement of Lent. That undoubtedly had an impact on sales. That was a consequence not of taxation but of ill-timed increases and increases of which almost 50 per cent were unauthorised by the National Prices Commission or by the Minister for Industry and Commerce. The increase in prices by brewers was approved by the National Prices Commission. In one case a brewery decided not to impose the increase until June. The consequence on the sales of competing breweries are common knowledge.

Mr. Colley

The Minister informed me that the increase in the price of the glass between March, 1973, and now was 31p in total. How much of that 31p does the Minister say is unauthorised or unsanctioned?

Mr. R. Ryan

I am sorry I have not got that information.

Mr. Colley

There is a danger of confusion between the pint and the glass of spirits in this area. May we take it that the Minister is saying that some portion at least of the 31p increase in the glass of spirits is unauthorised.

Mr. R. Ryan

I understand that some of it is unauthorised.

Ruairí Brugha

The Minister is getting a bit touchy about criticism. Surely the Minister should come into the House expecting criticism from the Opposition. That is why the Opposition is here. We have no intention of suddenly becoming dumb. Is the Minister trying to get us to say that tax on drinks should be reduced and income tax increased? We have not that view at all. Income tax is already too high. From the point of view of the economy we believe it to be at a disincentive level. For the first time a glass of whiskey is cheaper than a pint. Is that correct?

Mr. R. Ryan

No.

Ruairí Brugha

That would be an undesirable social policy?

Mr. R. Ryan

I would not consider it to be desirable.

Mr. Colley

On the figures given by the Minister, it certainly is not true.

Mr. R. Ryan

It is true. A glass of whiskey is dearer than a pint of stout.

Mr. Colley

It is not true to say it is cheaper?

Mr. R. Ryan

It is not true to say it is cheaper.

Ruairí Brugha

I understand it has been sold cheaper in some places.

Mr. Callanan

Everything that can be taxed at the moment is taxed, it does not matter whether it is beer or income. The Minister can go no further. Nobody here would suggest that tax should be taken off spirits and put on to income tax. Is there a danger that the Minister may not get all he expects in this way because of a decrease in consumption? This raises, too, the important question of employment. One must have regard to possible redundancies in the trade as a result of this situation. The Minister has asked us to state where we think there are alternative sources of revenue but before the last general election we were asking them where they planned to get the money for the policies they were putting before the people. We told them then that we would spend everything we got from the EEC and, consequently, save on social welfare but we pointed out that in the context of our membership of the Community, there would have to be price increases. The then Opposition told us that it would be possible to control prices. Apart from the price increases that resulted from the oil crisis, the price of every commodity has soared with the result that the situation is now totally out of control. All along the line we have pointed out that spending must be related to the amount of money available. The man who must pay the extra money for his drink is not interested in knowing whether it is the Exchequer that is reaping the benefit. The point is that he is the one who is paying.

Ruairí Brugha

I realise that it was the small whiskey I should have been talking of. For the first time in history this is now cheaper than the pint.

Mr. R. Ryan

This situation has arisen because of the vintners having increased their profit margin without authority.

Ruairí Brugha

If the situation had resulted from the Minister's policy, I should have criticised it.

Mr. R. Ryan

When we were determining what would be appropriate, we took care to ensure that the price of the small whiskey would be no less than the price of the pint.

I share the same desire as Deputy Callanan for more effective control of prices but there are problems in this regard. For instance, the ingredients of the two commodities under discussion, beer and whiskey, are grown in Ireland to a large extent. I am glad that growers have been receiving better prices for their barley in recent years and, of course, the workers in the plants concerned have qualified for increases in wages and salaries. Increases in productivity have reduced costs to some extent but a certain amount of the cost increases were unavoidable. However, we should not spend too much time on that aspect since this is a Finance Bill and there remains a good deal to be discussed between now and 5 p.m.

Mr. Callanan

Surely, as an intelligent man, the Minister knew that this situation would arise. We hear of the great brains of this Government but where are the results? We foresaw this situation although, according to the Government, we have no brains.

Mr. R. Ryan

That is not so but there were times when we thought that you did not use the brains you have.

Mr. Callanan

The Minister used his brains successfully to deceive the country.

Mr. Colley

I never cease to be amazed at the capacity of the Minister for Finance for self-deception. I confess, though, that in his early days as Minister I thought his attitude was an attempt at deceiving other people and the public in general but since then I have reached the conclusion that he suffers from self-deception. We have had different examples of this condition during the course of this debate and no later than a few moments ago when he talked about the fact that the Government have let the public know the extent of the cuts that had to be made in the Estimates. I wonder whether the Minister has thought about what he said. Does he not know that ever year, regardless of which Government are in power, there are Estimates from every Department which are much greater than what can be accepted, that there are cuts made in those Estimates and whether these cuts are 100 per cent, 50 per cent or 5 per cent is irrelevant so far as the public are concerned. A cut may be based on the fact that a Department with an ambitious and hopeful Secretary or Minister were trying to get away with something. That is of no relevance to the public. What counts is the final figure agreed by the Government to be allocated to each Department and the manner in which the amount is to be financed. The rest is an internal matter with no relevance to the action or inaction of the Government in managing the economy.

I urge the Minister even at this late stage to stop talking about that irrelevant matter. The Government ought not to be telling the people about their internal arguments. Such arguments are not confined to this Government. They apply to every Government in this area of reducing the estimate for each Department. As Deputy Callanan has pointed out, the responsibility of the Minister is to relate expenditure to the money available but it is a confession of failure on his part to tell us that the Government made these various cuts and then found that, committed to a certain figure, they were faced with the question of where to find the money. It is the duty of the Government to decide how much money and for what purposes it is to be spent. It is their duty also to decide how the money is to be raised. It is not part of their duty, privilege or responsibility to decide on a certain figure and then to tell the Opposition and those critics in other areas of whom the Minister is becoming conscious that they should tell the Government where the money is to come from or, else, stop talking about it. Most of the criticism directed against the Minister and his colleagues is the fact that they have allowed expenditure to reach the present level. That is inherent in criticism of the taxes imposed, such as this one.

Many people other than those who have a very special vested interest would agree that where additional taxation has been imposed it is preferable that it be imposed on an item such as spirits rather than income tax, and we would not quarrel with the Minister on that. But he conveniently overlooked the fact that he has already imposed a surcharge on income tax. If he thought he could have got more money out of income tax he would have increased it too, so he need not claim any credit for not having increased income tax again this year.

The increase in the price of a glass of spirits, which the Minister has told us has almost doubled since he came to office, is again indicative of the total and abject failure of the Government even to attempt to operate the kind of price control they promised. Various factors come into this, but the important thing is that the Government promised the public in the general election of 1973 that they would stabilise prices and introduce price controls, but here we have a situation in which since that election the price of a glass of spirits has almost doubled. The facts speak for themselves, and when the public to whom the promises were addressed get the opportunity in a general election to express their opinion of the Government's performance in this respect they will express it in no uncertain terms.

Mr. R. Ryan

Deputy Colley will recall that one of his predecessors, Deputy Haughey, said that these items, when taxed, always come up smiling. It is very interesting to see that notwithstanding increases in prices, consumption has arisen very substantially in the intervening period. The number of proof gallons of spirits has risen from 1.969 million gallons in 1972 to 2.457 million gallons in 1975. In regard to beer the number of standard barrels has risen from 1.413 million in 1972 to 1.612 million in 1975.

Mr. Colley

Interesting but hardly relevant to the Government's promise to stabilise prices.

Mr. R. Ryan

Everything is relative.

Question put and agreed to.

SECTION 37.

Question proposed: "That section 37 stand part of the Bill."

Mr. R. Ryan

This section is to raise the excise duty on tobacco by the equivalent of 2.81p per packet of 20 standard size plain cigarettes. This increase attracted an additional payment of 0.19p in value-added tax at the time of the January budget which makes a total increase of 3p. In the case of pipe tobacco the increase in the excise duty is in the range of 3.2p to 3.7p per oz, depending, of course, on the type of tobacco.

Mr. Colley

Has the Minister information as to the increase in the price of 20 cigarettes from March, 1973 to date?

Mr. R. Ryan

The 20 packet of standard untipped cigarettes in March, 1973, cost 29p and currently the cost is 47p, the total additional duty being 10.9p. The increase in VAT is related not merely to the duty but the profit margin brings the total tax increase to 13.7p.

Mr. Colley

I am sure the Minister will be aware that this is one of the few areas if not the only area in which people were expecting the Minister to impose higher increases than he did. I received some information—it is quite unofficial and it may be true or untrue—suggesting that the manufacturers were geared for and expected a considerably larger increase than that imposed in the budget. Indeed, they had calculated that a considerably larger increase would not produce a reduction in consumption. Would the Minister care to comment on that? I am sure he has heard it in different quarters: it certainly was commonly said that of all the increases imposed in the budget this was the most surprising not only because of the amount of revenue that might have been collected and was not, but also because the public and the health policies would indicate that even if an increase in duty would have brought about a reduction in consumption, this could well have been regarded as a desirable development. For these reasons it seems difficult to understand why, as compared with the other items on which increases were imposed, the increase here was relatively small.

Mr. R. Ryan

Tobacco is more sensitive to price increases than the other commodities—past experience has shown that. For instance, in 1970 there was a decline in consumption of 3.6 per cent compared with the previous year and in 1971 there was a further decrease of 1.2 per cent.

There are two factors which have to be borne in mind which are of concern to the Minister for Finance when he is preparing the budget. One is the question of ensuring additional revenue arising out of the increases, and sometimes you can by a smaller increase in tax get a larger amount of revenue and also you can, by putting on a larger increase, depress consumption.

Mr. Colley

Would the Minister not consider that the decrease he referred to in 1970 and 1971 could have been due to factors other than duty, in particular to the medical propaganda in regard to tobacco at that time?

Mr. R. Ryan

Of course, I do not know all the factors which could have led to the reduction. There was no increase in duty in 1971. I am not in a position at the moment to answer specifically what the Deputy asked. However, past experience has shown that tobacco is sensitive to tax increases. The consumption of tobacco is still increasing overall, notwithstanding increases in prices. In 1972 the amount consumed was 12.876 million lbs and in 1975 it was 14.013 million lbs.

Ruairí Brugha

That is cigarettes?

Mr. R. Ryan

All tobacco.

Ruairí Brugha

Would there be a difference in proportion between the increase in the consumption of cigarettes and other tobacco. Is one increasing more than the other?

Mr. R. Ryan

I understand that the consumption of pipe tobacco is not increasing as fast as cigarettes.

Ruairí Brugha

Would the increase in cigarette smoking be proportionate to the increase in population?

Mr. R. Ryan

I have not worked those figures out; possibly. It surprises me to see these figures because one is quite impressed by the large numbers of young people who are not smoking and, indeed, the large numbers of occasions when one is in the company of people, very few of whom are smoking. Those who are smoking must be smoking more.

Question put and agreed to.

SECTION 38.

Question proposed: "That section 38 stand part of the Bill."

Mr. R. Ryan

The effect of this section is to increase the excise duty on all wines by amounts varying between the equivalents of 9.36p and 18.73p per bottle depending on the alcoholic strength of the wine and whether it is still or sparkling. These increases attracted an additional payment of value-added tax and raised the total tax content of a bottle of wine, following the January budget increase, by amounts varying between 10p and 20p per bottle. Of course, the level of the value-added tax has been increased from 6.75 per cent to 10 per cent as from 1st March last.

I should recall that I was pressed last year to put a higher duty on champagne and a lower one on vin ordinaire. The arrangements we made this year had that effect, that the champagne went up by a larger amount than the cheaper wines.

Mr. Colley

Is that achieved by a kind of ad valorem arrangement?

Mr. R. Ryan

No, it was by applying a higher one to sparkling wines.

Mr. Colley

Of course, with VAT, the Minister is catching non-champagne as well, is he not?

Ruairí Brugha

Is the consumption of wine increasing or decreasing?

Mr. R. Ryan

It has increased, from the 1972 figure of 1.261 million gallons to 1.644 million gallons in 1975. Incidentally, those figures are for imported wines but there is an increase also in home-manufactured wines.

Question put and agreed to.

SECTION 39.

Question proposed: "That section 39 stand part of the Bill."

Mr. R. Ryan

The effect of this section is to increase the excise duty on petrol by 9.36p per gallon. This increase also attracted an additional payment of 0.64p in value-added tax at the time of the January budget, making the then total tax increase 10p. It also has the effect of charging an excise duty of 2p per gallon on certain hydrocarbon oils—on oils other than diesel oils used in road motor vehicles and petrol—which, by reason of various exemptions, reliefs or rebates, have hitherto not borne excise duty. The rate of excise duty on diesel oil used in road motor vehicles is not affected by the present section. Also, the repayment of duty made on such oil used in passenger road-service vehicles remains unchanged. The section does not extend to imposing an excise duty on gaseous hydrocarbons.

Mr. Colley

The first thing I want to raise on this section is the Minister's estimate of what will be the revenue from it. I think I am right in saying that the Minister's estimate of revenue from the additional duty and the value-added tax was £17.5 million for the year 1976. I have been furnished with figures which suggest that that is an underestimate by approximately £4 million. I do not know if any such submission has been made to the Minister but I should be interested to know whether he accepts that his estimate of £17.5 million was an underestimate.

Mr. R. Ryan

No, we believe the figure is a realistic one and there is no reason to believe that it should be any more. That figure of £17.5 million is made up of the increases in the excise duty in the January budget and the VAT income increase related to the January increase. The increase in VAT on 1st March from 6.75 per cent to 10 per cent would bring in additional revenue which is believed to be about £4 million. No doubt these are the figures which the Deputy may have in mind.

Mr. Colley

I am not sure that they are. Is the 0.64p value-added tax increase the one the Minister refers to as bringing in the £4 million?

Mr. R. Ryan

No, that brings in the £1 million in addition to—£16.5 million excise, £1 million January VAT, and £4 million March VAT.

Mr. Colley

Is the Minister assuming a steady consumption of petrol, or a fall or increase?

Mr. R. Ryan

A fall is not anticipated. Indications are that there is a slight increase.

Mr. Colley

Perhaps I might tell the Minister, if he has not got it already, how the calculation is arrived at which suggests that his estimate is £4 million too little. It is based on the sale of petrol in 1975. Assuming the same sale of petrol in 1976, and no increase, it is 238 million gallons at £.0936 per gallon for 11 months from February to December. That works out, I think, at a yield of £20.4 million. The additional VAT at £.0164 for eight months, on the basis that the VAT on November/ December sales would not be received until January, is 238 million gallons multiplied by eight, multiplied by the VAT rate, and that seems to give £1 million. That is a total of £21.4 million whereas the Minister's estimate was £17.5 million. That is why it would appear that his estimate in this regard is an underestimate of £4 million. If that is so, one would like to know how it occurred.

Mr. R. Ryan

My first point of difference is with the figure the Deputy has for 1975. It may be right but the figure which I have before me is 235.37 million gallons, whereas I think he gave a figure of 238 million gallons. I think also, in Deputy Colley's calculations, he may have anticipated that a change in duty would have no impact on sales in 1976. Experience has shown that an increase in duty will have an impact on sales. It may simply stop growth or could cause a decline. The growth one may have—and which seems to be emerging this year—may possibly be less than it would have been had the additional duty not gone on. These are all very difficult orders of magnitude to assess but the Revenue Commissioners have been fairly good at making assessments in the past about the impact of duty and I do not think they will be significantly out of line with the estimates they have made already for this year. If there is more buoyancy than anticipated, then certainly more revenue will be produced. As the Deputy knows, the size of the deficit is so large that such would be a very welcome bonus indeed.

Mr. Colley

I asked the Minister if his calculations were based on the assumption of an increase or a decrease in consumption or its remaining the same. The calculations I gave him were based on its remaining the same but I am not quite sure what he said his calculations were based on. He indicated that consumption is increasing.

Mr. R. Ryan

I thought I was answering the Deputy's question and I think I did but maybe I better approach it in a different way. Consumption is unlikely to have remained at 235 million gallons if the duty had remained the same. There would probably have been a growth of up to 250 million gallons. The impact of the duty would probably have the consequences of bringing the consumption down to something like the 240 million gallon mark rather than the 250 million gallons. It is the difference between those figures which might have lead Deputy Colley to anticipate that there would have been a greater revenue than, in fact, there may be.

Mr. Colley

I did not anticipate in these calculations an increase in consumption. The calculations were based on the same consumption as last year. The Minister has given a figure of 240 million gallons which is a little over the figure for last year. How does he arrive at £17½ million on 240 million gallons?

Mr. R. Ryan

If at the old rate we had this additional consumption, then my revenue would have risen as well but it would have risen to a higher figure. Calculating what the actual increase would be over what it might have been, if there had not been any change, is what gives us the net increase which we have calculated.

Mr. Colley

Does the £17½ million represent an increase over and above that increase which was expected if there had been no change?

Mr. R. Ryan

Yes, if the tax rates had remained the same.

Mr. Colley

Can the Minister say over and above last year how much the increased revenue is likely to be?

Mr. R. Ryan

Over the 1975 figures the increase is £22 million but over what we have estimated will be the returns for 1976, as distinct from 1975, the increase is £17½ million.

Mr. Colley

There is no discrepancy on that basis, is there?

Mr. R. Ryan

No.

Mr. Colley

Could the Minister give the information in relation to petrol that he gave in relation to spirits and beer? What is the increase in the price of a gallon of petrol from March 1973 up to now?

Mr. R. Ryan

The increase is 52p of which 28.8p is attributable to duty and VAT.

Mr. Colley

What was the price of a gallon of petrol in March 1973?

Mr. R. Ryan

It was 36p but there was an oil crisis in the meantime.

Mr. Colley

There was but the Minister will notice that a gallon of petrol in March 1973 cost 36p, including all costs, such as duty. The increase in the price of a gallon of petrol attributable solely to duty and tax under his regime has been 28.8p, almost 29p. I have not done the percentage calculation but, clearly, 90 per cent or thereabouts in the price of a gallon of petrol has been attributable directly to duty and tax. As far as the consumer is concerned, he is principally troubled by the fact that the price of a gallon of petrol has increased from 36p to 88p during the term of office of this Government.

I know we have had an oil crisis but it seems pretty clear from these figures that the Minister for Finance has got a great deal more out of that oil crisis than the Arabs have. It is also pretty clear that on the calculations the Minister has given us that of all the items he has gone after nothing has been so savagely hit as the price of a gallon of petrol. When he came into office the price of a gallon of petrol was 36p. The increase since then is 52p.

The Minister on occasions tried to justify some of the savage increases he has imposed in this area by saying that he was trying to produce a reduction in the consumption of petrol and thereby assist our balance of payments. However, he has just told us that consumption is increasing. I suggest he calculated that it would increase and if there was a fall in the consumption of petrol the Minister for Finance would be extremely concerned and that what he has been doing is raising revenue on petrol at a savage rate. He has done this possibly in the belief, although it is difficult to understand how anybody in this country in 1976 could believe it, that petrol is a luxury item.

Anybody who examines the position will find it is clearly established that the great bulk of cars are used for essential purposes or at the very least purposes connected with employment. This is true even in an area like Dublin city but it is much more obvious in many areas of the country. There are substantial areas in the country where there is virtually no public transport. In those areas the car or the motor cycle is essential. Every increase in the price of a gallon of petrol is a direct increase in the cost of an essential item of living.

In many cases there are people who could not get to work, hold a job or earn any money if they did not have the use of a car or motor cycle. For such people an increase of this magnitude in the price of a gallon of petrol is intolerable. I do not think the Minister has grasped just how intolerable it has become. Of course when it is combined with other increases we will be dealing with under other sections it has really got out of hand. This is having a most serious effect on various aspects of our economy and is contributing to the demands for more and more income to try to keep pace with the cost of living. We are involved in a vicious circle to which the Minister is deliberately adding in almost every budget he brings in. Indeed he and his colleagues have been doing it outside of formal budgets too. Then they wonder why people are so uncooperative, why they will not agree to a pay freeze. With this kind of thing going on, that is quite unrealistic.

The effect of this kind of increase on tourism is obvious. Most of all the Minister ought to face up to what he has done and what he is proposing to continue in this section to those whose employment depend on the use of petrol. There is no justification whatever for running away from this issue, which must be faced and cannot be swept under the carpet. I should like to hear the Minister's attitude explained in imposing this kind of increase on persons for whom the car or motor cycle is essential if they are to maintain their employment. How does he think those people will operate? He talks at considerable length about equity, particularly in the taxation system. How much equity is there in a taxation system which allows an increase of 52p a gallon on a basic price of 36p to people who are dependent on a gallon of petrol? What about the treatment of people who are so dependent as against those who are not dependent? Would the Minister care to tell us the equity he sees in that? What steps, if any, has he taken to try to rectify the gross inequity brought about as a result of the increases he has imposed on the price of a gallon of petrol? I am not talking about the increases imposed by the producers or anybody else; I am talking specifically about the increases imposed by the Minister himself. How does he propose to remedy this inequity?

Mr. R. Ryan

The only reasons additional taxes are put on petrol are first, to discourage growth in consumption and, second, to collect revenue.

Mr. T.J. Fitzpatrick

(Dublin Central): Tell that to somebody else.

Mr. R. Ryan

When revenue has to be collected it will be collected by way of income tax or expenditures. If anybody else has any other idea of how to collect revenue I will give him a prize if he stands up honestly in public and says it. That is something people always avoid saying. They always say: "Collect it from somebody else. Let me off." That is the usual notion of tax reform. We had a perfect example of the Fianna Fáil approach to tax reform yesterday: "Do not impose tax on those who were exempt before and let the greater load be carried by those who are already within the net."

Mr. Colley

Now tell us about the equity in this section.

Mr. R. Ryan

The actual result of increases in the price of petrol arising from the quadrupling of the increase charged by the oil producers, other increases imposed by the distributors and increases in tax have to a large extent stopped the growth in oil consumption, and that means in imports. Therefore it has helped to stabilise the balance of payments problem which could have been exceedingly serious if we had not done as every country other than the oil producers had done and that is, increased the tax on petrol significantly. Even with our taxes petrol prices here are still lower than they are in certain European countries.

We were increasing our consumption in petrol at an annual rate of about 8 per cent before 1973. In 1973, our consumption was 233.72 million gallons, in 1974 it was 236.14 million gallons and in 1975 it was 235.37 million gallons. Those figures clearly indicate that the impact of the increased prices has been beneficial in that it has cooled the growth in consumption of petrol and made a very significant contribution towards correcting our balance of payments problem. Last year we would have been in a very attractive position in relation to our balance of payments had it not been for this quadrupling in the price of oil. Even as it was we ended up with a balance of payments deficit of an historically small size of £15 million——

Mr. Colley

For the wrong reasons.

Mr. R. Ryan

——as against £288 million in the previous year. That figure would not have been as low if we had allowed our petrol consumption to increase at the rate at which it had been increasing. We were therefore fully justified from the point of view of overall management of the economy and correction of our balance of payments problems in increasing the price of petrol by way of tax increases. Last year, 1975, was but one year, but this year the economy is picking up. There is a considerable growth in imports. Our balance of payments problem would become exceedingly serious within a few years if we did not take continuing steps to ensure that we do not have a return to the rates of growth in consumption of oil which were the pattern for the ten or 15 years leading up to 1973.

Like all other indirect taxes the tax on petrol is imposed because it is a form of expenditure which people regularly engage in. The increased duties at all times, not merely the last three years but long before that, indicated that notwithstanding the increased taxes, people were still disposed to engage in these expenditures. As the purpose of tax is to ensure revenue, which must be collected to pay for services which people want, then the sensible thing to do is to impose taxes which people are willing to pay even though they may grumble about it. The most stupid thing of all would be to impose taxes on orchids or something like that which people do not buy. That would be a useless form of tax. If a tax is to have any sense it must be on items people use.

Mr. Colley

The Minister knows, as does everybody else, that if his real concern were to reduce or to hold steady the import of oil, there are methods open to him which would be far more effective than any increase in price.

Mr. R. Ryan

Is the Deputy suggesting rationing?

Mr. Colley

That is one possibility.

Mr. R. Ryan

No country in the world has applied it.

Mr. Colley

The Minister for Finance is supposed to be concerned about conditions in this country. He has frequently had it put to him—I have put it just now—that what he has done is to impose gross inequity in the treatment of citizens of this country. I specifically asked him what he had to say to or about those citizens who are dependent on petrol to get to their employment. There are many such people.

In the course of his reply the Minister referred to yesterday's discussion and his version of equity. I invited him to tell us if he thought it equitable to impose increases of this level on the gallon of petrol in relation to those who are totally dependent on petrol to get to their employment and I am not extending it beyond that. The Minister studiously avoided giving me an answer and I repeat my question now. If the Minister thinks it is not equitable, what does he propose to do to relieve the burden on those people? Does he recognise that if he fails to do anything about it he should stop talking about equity in taxation? In this case taxation is being imposed in a manner that clearly is inequitable. Will the Minister tell us how he proposes to achieve equity under this form of taxation? If he does not do so he should stop prating about equity which, I suspect, he does not believe in except when it suits him for the purpose of getting in revenue.

Mr. R. Ryan

There is one thing I can say and it is this. The Government will not be a party to introducing rationing on petrol which apparently is the way Deputy Colley believes we would get paper equity. No country in the world has introduced rationing in peace time to deal with problems regarding petrol. It is very interesting to hear this is one of the great plans of Fianna Fáil. Probably it is because they are so preoccupied with their last 50 years that they have produced such a restrictive approach to the problems of our economy.

Mr. Colley

Of course what I said was that rationing was one way to approach it. There are others.

Mr. R. Ryan

Such as?

Mr. Colley

That is the red herring the Minister is following. I have asked him twice and I will ask him a third time and if he fails to answer the question this time everyone can get the message loud and clear. What does the Minister propose to do, if anything, to attempt to achieve equity in the imposition of this taxation on petrol in relation to those for whom the use of petrol is essential in their employment or to have any employment? That is a straightforward question. It is a crucial question for many people who will be interested to hear the Minister's answer, if he has any answer to give. I am giving him a third opportunity to express his view on that equity of which he has been so loud in praise in recent times.

Mr. R. Ryan

The Deputy can keep asking all the questions he wants to ask but he avoids those I put to him. Does he endorse rationing? It appears that is the course he considers to be the appropriate way to achieve the paper equity which he considers desirable so that he can prove on paper that he is treating all people equally. The Deputy knows well that there are a multitude of factors governing where people live and work and the way in which they travel. There are various ways in which people can add to or minimise their costs or make their own choices. By leaving the free market to operate, which we and the whole world consider the right way to handle the question, people are free to make their own decisions. There are a multitude of other factors from mental and physical handicaps, from accidents of birth, location and movement of employment, none of which the State tries to control. If one wants a centralised system with the Government governing everything from birth to death one can achieve the kind of theoretical equity that Deputy Colley has produced. It is a wonderful debating point but this is not a chamber to debate issues for the entertainment of the audience. This Chamber is supposed to make laws for the better running of the country, laws that not only help the people but leave them the maximum amount of choice which any free society should leave to them.

Mr. Colley

That was a most interesting intervention by the Minister.

Mr. T.J. Fitzpatrick

(Dublin Central): Except that it did not make any sense.

Mr. Colley

I think it did if one unravels the speech. I think I know what the Minister meant but he may correct me if I am wrong. I was avoiding the red herring he kept introducing but I will deal with it now.

Ruairí Brugha

How we would run the country.

Mr. Colley

Apparently the Minister thinks there is only one possible way to discourage the use of petrol, namely, to keep on increasing the price. Of course the Minister is pitching it to a level that will not reduce consumption but will allow consumption. If he really means that this was the only way to do it and if he meant to reduce it, he should have increased the tax much more. However he had no notion of doing that. I said there were other ways to deal with this matter besides rationing. I told the Minister before, although he does not remember, of a rational approach to this whole problem. It is only one; there are others if a person devoted his attention to the matter. Would it ever occur to the Minister to say "Let us give real incentives to the use of small cars that will use less petrol"? Is it beyond the Minister's capacity to devise such a way——

Mr. R. Ryan

It is done already.

Mr. Colley

If it is beyond his capacity he has advisers who will produce something for him. I mention this as one example of the kind of approach that could be adopted if one were genuine. There are others but I am not going to continue telling the Minister how to do his job. When the Minister was finally forced into it, all the waffle we heard from him amounted to this: if people choose to live in parts of the country in which there is no public transport provided by the State, that is their hard luck; the Minister will continue to impose more penalties on them particularly with regard to increased taxes on petrol. This petrol is essential for them to get to their place of employment but if they do not like what the Minister proposes they have a choice. They can move out of the area. This is the Minister's answer to this question. For God's sake, let him stop telling us about equity if that is his approach.

Mr. R. Ryan

I believe in equity.

Mr. Colley

The Minister could have fooled us.

Mr. R. Ryan

Incidentally, the increased price of petrol will encourage the use of smaller cars. That is apparent already.

Mr. Colley

Will the Minister please deal with the situation of the person who is already using the smaller car and for whom it is essential if he has to have a job? Is it not true that the Minister's answer to that person is "You choose to live there, get out of it if you do not like it?" Am I wronging the Minister when I interpret him in that way?

Mr. R. Ryan

I said there are many factors which determine where a person lives.

Mr. Colley

Is the Minister saying it is a question of choice?

Ruairí Brugha

In the course of his remarks Deputy Colley spoke about a multitude of factors and choices. We told the Minister two years ago when he imposed an increase in the price of petrol that the person who must travel to work a distance of up to ten miles has no choice if there is no public transport serving his area. To work he must use a car or get up at 5 a.m. and walk. There is not much point in talking about choices in such cases. During the three years of office of the National Coalition the price of petrol has increased by more than 140 per cent. The tax has increased by almost 29p on a petrol price in 1973 of 36p. The tax nearly equals what the price of a gallon was in that year. The recent increase of 10p, on top of the previous increases, means that history is being made again but this time it is being made by the Government and not by the licensed vintners. I should like to add that the price of a small one is now cheaper than the price of a pint.

The Government are making history due to the fact that the price of petrol is dearer here than it is in the North or Great Britain. That is the first time that has happened in my memory. The level of increase here is socially damaging since cars are largely an essential in many areas. The level of increase has involved a significant increase in the real cost of living, upwards of £20 million in the more recent increase based on the calculations discussed a short time ago by the Minister and Deputy Colley. This is the policy of the Government, and the Minister for Finance, a policy that is significantly affecting the cost of living and, thereby, all factors. This is affecting a multitude of factors in life here. It is worth emphasising that the price of petrol is almost level with that on the Continent and that is no encouragement to tourists who contribute such a big amount to our economy.

Progress reported: Committee to sit again.