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Dáil Éireann debate -
Wednesday, 3 Dec 1997

Vol. 484 No. 1

Financial Resolutions 1998. - Financial Resolution No. 4: Value-Added Tax

(1) THAT in this Resolution—
"the Principal Act" means the Value-Added Tax Act, 1972 (No. 22 of 1972);
"the Act of 1997" means the Finance Act, 1997 (No. 22 of 1997).
(2) THAT the rate of value-added tax on the supply of livestock and live greyhounds and the hire of horses be increased from 3.3 per cent. to 3.6 per cent. of the taxable amount or value of such goods and services, and that, accordingly, the Principal Act be amended in subsection (1) (inserted by the Finance Act, 1992 (No. 9 of 1992)) of section 11 by the substitution in paragraph (f) of "3.6 per cent." for "3.3 per cent." (inserted by the Act of 1997).
(3) THAT the rate of flat-rate addition to prices of agricultural produce or agricultural services supplied by unregistered farmers be increased from 3.3 per cent. to 3.6 per cent., and that, accordingly, section 12A (inserted by the Value-Added Tax (Amendment) Act, 1978 (No. 34 of 1978)) of the Principal Act be amended by the substitution in subsection (1) of "3.6 per cent." for "3.3 per cent." (inserted by the Act of 1997).
(4) THAT this Resolution shall have effect as on and from the 1st day of March, 1998.
(5) IT is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).
Resolution No. 1 provides for an excise duty increase on tobacco products from midnight tonight which, when VAT is included will amount to 10p on a packet of 20 cigarettes, withpro rata increases on other tobacco products. This increase is expected to yield £0.8 million in 1997 and £24.8 million in a full year and will increase the CPI by an estimated 0.16 per cent. It is expected that the increase of 10 pence will reduce projected cigarette consumption by 0.9 per cent. Following the increase, consumption in 1998 is expected to be 1.4 per cent less than in 1997.
Resolution No. 2 provides for excise duty increases on leaded and super unleaded petrol which, when VAT is included, amount to 4 pence on a litre or approximately 18 pence on a gallon with effect from midnight tonight. It is estimated the increases in the rates will result in additional Exchequer yield this year, inclusive of VAT, of £0.88 million from leaded and £0.16 million for super unleaded. These changes are expected to increase the CPI by 0.075 per cent.

How much in a full year?

On unleaded it will be £12.6 million and on super unleaded it will be £2.89 per cent.

Resolution No. 3 provides for reductions in the rate of vehicle registration tax on category A vehicles. On cars with an engine of a cylinder capacity up to and including 2,500cc the rate of VRT is being reduced from 23.2 per cent to 22.5 per cent. For cars with an engine of a cylinder capacity exceeding 2,500cc the rate of VRT is being reduced from 29.25 per cent to 28 per cent. Both rate reductions come into effect on 1 January 1998.

Resolution No. 4 provides for an increase from 3.3 per cent to 3.6 per cent in the level of the flat rate farmers' refund with a similar change in the VAT rate on livestock, live greyhounds and the hire of horses. The flat rate scheme is a simplified and practical method of applying value added tax to farming. It compensates unregistered farmers on an overall basis for the VAT charged to them on their purchases of goods and services. This will be achieved without applying the normal VAT rules on registration, record keeping and returns.

The amount of the VAT rate is arrived at by calculating the VAT payable on agricultural inputs as a percentage of agriculture sales. The Revenue Commissioners calculated, on the basis of macro economic data for the past three years, that a flat rate of 3.6 per cent is needed to achieve full compensation. Traditionally, the VAT rate on livestock has been maintained at the same level as the flat rate addition. This is administratively more convenient for farmers and their customers. These changes will take effect from 1 March next year and are worth £8 million to Irish farmers in a full year.

Fine Gael will not oppose the proposed increases in excise duty on tobacco products or the proposed increases on vehicle registration tax or value added tax, but we will oppose the increased hydrocarbon tax. This substantial increase in tax on petrol will penalise those who have to travel a long distance to work. Because of the very expensive house prices in or near the main urban centres people have to go further afield to buy affordable houses which, in turn, means they have to travel substantial distances to and from work. The cost of those journeys will be increased by this increase in petrol taxation. The Taoiseach may argue that increasing petrol taxation is our contribution towards achieving the targets set at the Kyoto summit for a reduction in global warming. He would argue that motor cars run on petrol are one of the biggest contributors to global warming. On the other hand, it is fair to say that most people who use a car to go to work do not have a choice. Public transport is inadequate in newly developing areas. CIÉ provides public transport in some of the older suburbs. However, there are many new suburbs and towns around Dublin where there is virtually no public transport. Many areas in my constituency with substantial populations do not see a bus from one end of the week to the other, nor are they near a railway line. Anyone who wishes to get to work must use a car, be a consumer of petrol and pay this tax.

This in one of the few taxes to be increased in the budget. The Taoiseach and the Government have adopted an easy approach. This is a convenient target. When it comes to bridging the gap between revenue and expenditure every Minister for Finance is tempted to increase the excise duties on hydrocarbons. The truth is that this increase falls disproportionately on those who make the effort to go to work. Those who are not working do not need to spend the same amount of money on petrol. Likewise, this increase falls disproportionately on those in rural and outer suburban areas. This tax would be more readily accepted if a proper public transport network existed, but that is not the case.

Will the Taoiseach enlighten the House as to what percentage of the £361.36 cost of 1,000 litres of hydrocarbon light oil is represented by the duty? What proportion of the retail price is tax and what proportion is the actual price of the product?

Despite my inclination to smoke tobacco occasionally, the Labour Party will not be voting against the excise increase on tobacco, the VRT or farmers' VAT provisions. After the Taoiseach's explanation, I am confused about farmers' VAT. It will contribute an additional £8 million, approximately, to the farming community and, therefore, it is to be welcomed.

I would like some explanation as to why particular hydrocarbons were selected for additional taxation. Why was diesel excluded? Twenty pence per gallon is a hefty increase, one of the biggest in taxation on fuel in any budget. With the amount of travelling required by those working, this increase will have a knock on effect throughout the economy. The Government should look at this again.

Would the Taoiseach tell me if I have got the figures right? I believe he said that the excise on leaded petrol will generate approximately £12.6 million. The excise on super unleaded will yield £2.89 million, a total of £13.5 million. This seems a relatively small amount for an increase of 18p per gallon.

The leaded petrol increase will yield £12.6 million in a full year and the super unleaded increase will yield £2.89 million.

What is the thinking behind this increase? If the excise increase applies only to leaded and super un-leaded petrol, I presume there is no increase on ordinary unleaded. The thinking may be to avoid increasing the tax on the least polluting hydrocarbon. If this is so, is the Taoiseach aware that recent research in the UK and elsewhere casts doubt on this assumption? Some research indicates that unleaded petrol may not be as environmentally friendly as we thought. If this is the case, why is the Taoiseach proposing that leaded and super unleaded be singled out for such dramatic increases? If it is not for environmental reasons, is it purely for economic, financial or fiscal reasons? Has any recent research been done to indicate that unleaded petrol is not the saviour we thought it to be? I do not know if this is correct but were any such reports considered before this proposal was put forward?

Deputy Bruton has adopted a reasonable approach on the excise increases. However, coming from a Border county, I agree with his decision to oppose the steep increase in the price of petrol. It is not so many years since petrol stations were closing down along the Border and it was impossible to find a petrol station in any Border town. That imbalance has been somewhat redressed in recent years. It is great to see petrol stations open in Dundalk, Lifford, Ballyshannon, Bundoran and other Border towns in Cavan and Monaghan. I fret to think of what the effect of this measure will be on those who have invested large amounts of money in recent years in Border counties, creating jobs and attracting customers from Northern Ireland. Has this been taken into consideration before this increase was announced? It is a steep increase, almost 20p when everything is taken into consideration. I do not know when such an increase was imposed before. This is a tax on people living in rural areas.

I come from a part of the country where CIE is non-existent. Its services do not go beyond Donegal town or Letterkenny. Deputy Blaney is aware that CIÉ transport does not go near Fanad, Gweedore, the Rosses or Cloughaneely. People in those areas depend on privately run transport if they do not have cars. They must make arrangements to go to hospital, for example, as people are dependent on a few entrepreneurs. Transport in rural Ireland is necessary. One cannot shop or go to a service or mass without transport, and this provision will place a significant burden on people in rural areas. I cannot support the measure and hope that its implications have been considered. I will not need a whip to oppose it.

Increased transport costs will have an immediate detrimental effect on manufacturing and service industries as well as the individual road user. Resolution No. 2, which relates to hydrocarbons, is outrageous. Deputy McGinley has spoken of the effect of this proposal on Border county business, as will I. This is particularly important now we are coming up to Christmas, as existing prices act as an additional incentive to shoppers from the North to bring their much valued custom to Cavan, Monaghan, Donegal, Sligo, Leitrim and Louth. What of people in those counties who have invested in their forecourts and service stations? What does this measure offer them? There is a projected increase for the Government coffers of £15.5 million, but all Members realise that a greater cost will be borne particularly by people in the Border counties, who are most distant from the seat of power. This measure sums up the budget. It has failed to meet normal and reasonable expectations, and it is consequently a great disappointment to the people.

I welcome the increased duty on tobacco products as my party leader did. However, this will lead to a substantial increase in the price of tobacco products and could lead to a lucrative smuggling trade. This happened in the past when consumer products were more expensive here than in the North. The Taoiseach must refer to that incentive for increased cigarette smuggling, as such cigarettes are already available on the streets of Dublin.

I also agree with Deputy John Bruton that the tax on hydrocarbons is another blow to rural Ireland. Whatever meagre benefits will derive from the increase in the price of petrol or diesel will be diluted, as one of the greatest disincentives to living in rural Ireland is the cost of transport. We have bad roads, and now we have what Deputy Stagg described as a historic increase in the price of a gallon of petrol. The Taoiseach should refer to this in his reply.

The decrease in VRT is very welcome, but the scrappage scheme has been discontinued. The motor industry lobbied strongly for it to be continued, as it was very successful and led to large numbers of jobs in that industry as well as high returns in revenue. This measure will go some way to alleviate the effects of losing that scheme, but there will probably be a fall in the number of new cars purchased next year.

I have seen the Taoiseach in Shelbourne Park on a few occasions.

He has not been there as often as me.

The Taoiseach is known to take an interest in greyhounds.

Deputy Deenihan gives me a few tips every now and again.

Croke Park did better than Shelbourne Park.

I hope they are bad ones.

I have not led him astray yet. Why has there been an increase in VAT on the supply of live greyhounds? The Taoiseach may not be aware the greyhound industry is on its knees. I cannot see the relevance of this increase. Why single out the greyhound industry? The Taoiseach seems to be indicating that will come down.

Is the Taoiseach sure it will come down? The refund will go up, but will the duty also go up?

Those are taken collectively in the calculation.

Perhaps the Taoiseach could clarify this in his reply. If the opposite is the case, I welcome it.

The average price of 20 cigarettes is now more than £3. Although I support the increase in the excise duty on tobacco, surveys show there is a large amount of smoking among unemployed and low income families. This provision will add an extra burden to that sector of the community, as they can least afford to pay this increase.

I have no problem with the increase in excise duty on tobacco, as I am a non-smoker.

None of the Westmeath Deputies smoke.

It depends on what kind of smoke one is talking about.

I kick up holy smoke. The increase in hydrocarbon fuel prices concerns me. That is very serious for a rural area. In an isolated area one depends on a car for transport, as there is a lack of transport in such areas. Concessionary fares and travel passes are no use to many people in rural areas.

An increase in hydrocarbon fuel prices has a knock on effect for a huge array of industries from the service to the manufacturing sectors. That means an increase in the price of the product. Industries will not take reduced profits, they increase prices which feeds its way into inflation. It will have a knock on effect in terms of the projections being made. Given that we are in an unusual position, what amount will be taken between tonight and 31 December due to this increase?

The VAT flat rate addition for farmers is being increased from 1 March 1998. I may be one of the few who understands the concept since I worked with farmers. I welcome it. It is valued at £5.3 million in 1998 and £8 million in a full year. It compensates farmers who are not registered for VAT on their inputs. If registered they would be able to recoup the tax on the inputs and likewise on the sale of livestock.

I am disappointed there are only 14 lines in the Budget Statement addressing agriculture. The Government has reneged on young farmers. Where is the money for the recommencement of the installation aid scheme which had been suspended? Some £6 million is all it would cost in a full year.

The Deputy will have to address his remarks to the resolutions before the House.

This relates to the resolutions and is very important in the control of farmyard pollution scheme. I welcome rural renewal relief which is not covered in the resolutions. The farming organisation wanted to call it countryside renewal relief but I suggested the title, rural renewal relief and I am pleased it is being commenced on a positive pilot scheme.

The rate of reduction in vehicle registration tax is a disappointment to the SIMI who sought a reduction of 3 per cent. The Department of Finance is a conservative Department. It took a long time and much hard work before the car scrappage scheme was introduced but it proved to be a productive and fruitful scheme.

What has that to do with petrol?

The rate of reduction in VRT will be a source of disappointment but we are gearing up for a reduction in the years ahead.

For 16 years I have come here on budget night. I confess I am totally cynical about any help being given to the Border region by any party or people who live close to me and from whom I expected it. The Border area, particularly County Louth, has been consigned to a modern day hell or Connacht and nobody gives a fiddler's curse. The current Taoiseach addressed the former Taoiseach, Deputy John Bruton, as follows according to the Official Report at column 999 on 22 January 1997:

Will the Taoiseach justify the increases of 11.5p for a gallon of. petrol.? They filter through to the public and are a charge on transport. Cars are no longer a luxury for the vast majority of people. The increases are penal and are against the spirit of removing the burden of taxation. They may appear lower when expressed in terms of litres, but this cannot disguise the size of the increases in terms of gallons, especially when the high powered cars of today use so much petrol.

My colleagues from the Border areas will express their views on this issue. The Government never appears to listen to anything regarding Border areas, indeed it does not have any Deputies from the region.

Another field marshal in the soldiers of destiny, Deputy Dermot Ahern, castigated my colleague Deputy Donal Carey and the Government for appointing him

a token Minister of State with responsibility for the Border areas because the Government, in appointing Ministers and Ministers of State, decided not to appoint anyone from the Border region. What chance is there for Border areas as far as input at the Cabinet table is concerned?

I absolve Deputy Carey but not Deputy Ahern. He had his feet under the Cabinet table. What went wrong? He certainly has not done anything for the Border area. These two quotations should be included in a classic hall of fame for political nonsense. Will the Taoiseach tonight define that illogical statement he made 11 months ago? If he felt that way at that time why did he allow the price of petrol to increase today by 20p. There would be more commonsense remarks in a gas-works than here. The reality is that this is a talking Chamber and has no effect.

The Border area has been decimated for 20 years while the Ulster troubles lasted and nobody gave a tinker's damn. One has to live in the Border area to realise that. To watch the cars going across the Border at the weekend to Newry leads me to despair. How many more cars will go over the Border between now and Christmas, exporting their money to England? It is a shame the Government is insensitive to the Border region. It has a token Minister, a Minister which the local Argus newspaper said acted as a kind of John the Baptist — the man who went before — and who promised a seventh heaven for Dundalk and County Louth when Deputy Dermot Ahern, the Minister for Social, Community and Family Affairs, got the keys of the kingdom. He has the keys for the past six months and there has been no joy for the Border area. The Tánaiste has announced jobs all over the place but none for County Louth. Tonight the Government has copperfastened its neglect of the Border area by omitting County Louth from the seaside resorts initiative. It has totally ignored a county that is palpably in need of help. The Fine Gael consortium Government——

Consortium Government?

It had a variety of colours. The Government has only one colour.

It was a very good blend.

The Fine Gael Government designated Clogherhead. There was a great opportunity to extend that designated area extended to Carlingford and Omeath and in particular, Blackrock, the home town of the Minister, Deputy Ahern. That he failed to do so shows the Minister's insensitivity——

I draw the Deputy's attention to the fact that we are on resolutions Nos. 1 to 4 and the question of designation does not arise.

It is in them.

It does not arise under these resolutions.

If Deputy Penrose could speak about farming surely I can——

That was quite in order.

I want to register my annual protest against all parties who have failed to identify the need for remedial help for the Border area and who continually hone in on the most vulnerable area of petrol taxation. Tomorrow the price of petrol will be significantly higher in the South than in the North. This will result in the exportation of hundreds of thousands of pounds to the British economy between now and Christmas. When people cross the Border to shop they do not just buy petrol, they also buy drink, the Sunday joint and electrical goods. The ladies may also have their hair done. I hope before I leave this Assembly there will be recognition by some party of the needs of County Louth and the other Border counties.

I welcome the opportunity to speak to these Resolutions. The proposed increase of 10p, or approximately 3 per cent which is just above the rate of inflation, on a packet of 20 cigarettes is the minimum acceptable. If a lower figure was proposed we would be accused of promoting the tobacco industry. I would not object if it was twice the amount proposed.

On the proposed increase in the price of petrol, I understand what the Deputies opposite are saying but they are being selective. It is not proposed to increase the price of lower octane unleaded petrol, the petrol used by most people.

By those with new cars.

Neither is it proposed to increase the price of diesel, the fuel used by most sales representatives. The proposed increase should not result in a significant increase in the rate of inflation. It is an environmentally-friendly measure and should be supported in that light.

Vehicle registration tax is being reduced at a cost of £13 million. There has been a phenomenal increase in new car sales in the capital city. They should continue to increase despite the cessation of the car scrappage scheme. I understand the motor industry would like to see a larger reduction, although I am confident it will continue to prosper.

As someone who represents a rural constituency, I welcome the proposed measures relating to a flat VAT rate for farmers. This is a welcome step in difficult times.

I am certain the car stock in the constituency of the Deputy from Laois does not include many registered in 1997, 1996 or 1995. It is a rural county in which there is much poverty. It is mainly poor people who own cars which run on leaded petrol. Following the removal of public services they have to travel to towns and villages to conduct their business. The Government is responsible for the closure of post offices. The Minister for Health and Children, Deputy Cowen, when Minister for Transport, Energy and Communications, closed one post office per week. Now he is withdrawing services for the old folk. It is the old and the poor in rural areas who will be hit most by the proposed increase in the price of hydrocarbons.

Petrol in the Taoiseach's constituency is 10 per cent cheaper per litre than in the constituency of the Minister for Public Enterprise, Deputy O'Rourke.

She does not have to pay for it.

When did the Deputy win back his seat?


Order, please. Will Members desist? This is a limited debate and many Members are offering. The more interruptions there are the less time Members will have to make a contribution.

I understand the Deputy was re-elected on the coat-tails of Deputy John Bruton and is never available to meet his constituents.

The Minister has never been to Mullingar and does not know how the other half lives.

The Minister should behave herself.

The population of the Minister's constituency is declining.

That is not the case.

It cannot be denied that there are poor areas in County Westmeath.

The statistics show that the population is increasing.

The population of Athlone may be increasing but what about the population of rural areas where services are being removed?

The Deputy should address his remarks through the Chair and the Minister should remain silent.

I have been constantly interrupted. There is poverty in rural areas. The Minister of State, Deputy O'Dea, seems to find this amusing.

He is a city gent.

I always find the Deputy amusing.

On his first day in the House Deputy Healy-Rae put down a marker on behalf of the people of south Kerry. There is poverty in the Gleann and its car stock does not include many registered in 1997, 1996 and 1995. There is also a big hole in the pier. These are the people on whom the Taoiseach wants to impose this increase. In the main they own leaded petrol-fired cars and are already discriminated against. The same can be said about the people of Donegal who are represented by Deputy Blaney. The price of petrol in these two constituencies is 10 per cent higher than in Dublin and the Taoiseach wants to increase it by a further 10 per cent. I informed the former Taoiseach that I was opposed to the Resolution agreed to last year and all other Resolutions of this nature as they discriminate against those in rural areas.

The Deputy voted in favour of it.

The Government has no concept of what is happening in rural areas. There is a need for rural renewal. Its members breeze in and breeze out in big Mercedes cars, the fuel for which is paid for by the taxpayer. It does not matter that they do only nine miles to the gallon.

Did the Deputy travel by bike?

On super unleaded.


The Government is dependent on the support of two gentlemen over there and, if they understand it correctly, this is a 10 per cent charge on rural communities; yet they are laughing at it.


I am quite sure Deputy Healy-Rae will be concerned as he too drives a Mercedes. I agree with Deputy Carey that, whereas this might be seen to be dealing with an ecological problem, car owners living in rural areas use this type of petrol, the price of which is being increased to such a spectacular extent. I can remember that, whenever twopence or threepence was imposed on a gallon of petrol, it led almost to a revolution.

I will deal now with farmers' flat rate of VAT, with a corresponding increase in the livestock rate. My colleague, Deputy Penrose, charged with responsibility in this area has calculated, as has the Taoiseach, that there will be benefit-in-kind for farmers. Will the Taoiseach say what will be the VAT implications in the case of animals being exported, particularly within the bloodstock industry, for example, horses suitable for jumping, and the greyhound industry? Since we have already established a good trade overseas the implications of penalising the export of such animals could be significant.

There is no doubt but that the reduction in VRT will not compensate for the cessation of the motor scrappage scheme and will not go any way towards meeting the submissions of the motor industry. It will affect not merely the industry but its many employees. There is also the matter of its implications in Border regions and for the tourist industry overall, both of which will suffer.

It is very easy and fashionable to refer to the current popularity of taxing cigarettes and tobacco but will the Taoiseach give consideration to the implications for that industry which also employs quite a number of people? Will he not agree that, while this extra imposition can be justified from a health point of view, he should have regard to its consequences on employees within the industry? Can some method not be devised of assisting the industry to change its operational methodology so that it can continue to employ the same number of people, bearing in mind that earlier attempts to curb cigarette smoking failed? My present concern is that, since many such employees will have no possibility of alternative employment, they will probably become redundant on account of these penal taxes. Will the Government not do something, as in the case of Croke Park which, from the point of view of GAA followers, was imaginative?

But what about those people who become ill?

They are making it even worse for them.


If the House is to make any progress, Members must adhere to the rules. Deputy Ferris is in possession and should be allowed to make his contribution without interruption.


I am trying to be reasonable and suggest measures for consideration by Government which might alleviate the position.

The Deputies who continue to interrupt are on my list to be called but, because of their continued interruptions, time may not permit of their contributions.

The point I had been making about this penalty on the tobacco industry was not so much to convey the message that I condone cigarette smoking — I no longer smoke — but rather to suggest that the Government has a responsibility to all those employed in their manufacturing processes. The industry should be assisted in some way to substitute their production methods for others which will sustain valuable employment.

I would agree with that.

I thank the Minister. That was the only point I had been making. I had not been justifying the smoking of cigarettes because I know how detrimental it is to people's health.

I agree with my colleague, Deputy McGahon, but may not be as colourful in my usage of words.

I hope the Deputy will not be.

No doubt when I will have been a Member of the House for 16 years I may be of the same view. Nonetheless, an increase of 20p on a gallon of petrol is a huge one which will have devastating effects on Border regions. All of us who represent rural areas, especially Border regions, have been aware over many years that one of the major attractions for people living south of the Border was to travel North for their petrol whereas over the past three to four years that worked in reverse, proving to be of immeasurable benefit south of the Border. There will be a difference of approximately 10p or 12p in the price of a gallon of petrol between the two regions when no doubt people will again travel North to shop, with a consequent devastating effect on the service industry.

As regards public transport, which we must also consider, the only CIE bus I have seen in County Leitrim over the past 20 years is one, without wheels, housed in a museum, going nowhere. In addition, the Minister for Public Enterprise is allowing money be spent on the Dublin to Sligo rail line as far as Mullingar——

That was what Deputy Dukes agreed to.

——so that nothing moves between there and Sligo. I do not know how people from that area will move about since there is no public transport available to them. The massive increase of 20p per gallon of petrol cannot be sustained and will have to be reconsidered.

I agree with the sentiments expressed by the Taoiseach, when Leader of the Opposition, as Deputy McGahon said——

He has now developed amnesia.

My last hope is that Deputy Blaney, who represents a Border constituency, knows the serious effects of this massive increase. There is no way he could support a Government imposing such a 20p increase which will have a devastating effect on the socio-economic benefits in Border areas, including those I represent.

The issues of increased excise duties on cigarettes and petrol, reduction in VRT on cars and increasing farmers' flat rate of VAT from 3.3 per cent to 3.6 per cent should be debated within the context of their net effect. I am not a smoker and have very little sympathy for those who smoke and must pay for their cigarettes. Nonetheless, there is no evidence that increasing their price necessarily leads to a reduction in their usage. If their increased price is being promoted as a health preventive measure, I have yet to see evidence that is the case. I would be more than happy to support an increase in the price in cigarettes if the additional moneys yielded were directed to increasing available funds for preventive medicine, particularly those allocated to hospitals where people are literally dying awaiting cardiac surgery. A relative of mine died just two weeks ago having awaited triple heart by-pass surgery for 18 months.

While this knock-about debate may be fine, there are serious issues at stake in relation to the smoking of cigarettes and our environment generally. When talking about the protection of jobs within the tobacco industry, we should ask ourselves: what are we protecting; alternatively, should we not be examining some method of replacing those industries rather than encouraging their continuation? I know there are at present some 100 people bringing court cases against tobacco companies here because of the adverse effects of cigarette smoking. While familiar with the argument that adults smoke of their free will and, therefore, should suffer the consequences, we must also remember that their adverse consequences result in massive bills for public health services in addition to innumerable deaths resulting from lung, stomach, lip and throat cancer.

The money raised through the price increase on cigarettes should be designated to improve the availability of cardiac surgery for those waiting for it as a result of smoking cigarettes. We should use it to find alternative industries to the tobacco industry. At a time when money is flowing we should use this income in a way that would be beneficial to society. Regardless of criticism of people's choice to smoke cigarettes, we should not have a situation where people are dying while waiting for cardiac surgery. It is criminal and obscene that this is happening in 1997.

There are many arguments about the effect on the Border counties in the context of petrol prices and I have no doubt there is some validity in those arguments as was the case last year. Arguments are also put forward based on the experience of people in rural areas, although it is also an issue for urban areas, particularly larger urban areas where people have to travel long distances and do not have an adequate public transport service available to them. I regret that Luas is being delayed.

It will be underground.

That is what the Labour Party and Garret Fitzgerald want.

I regret the manner in which Luas is being delayed but I do not propose to examine that issue tonight. What is the rationale behind increasing leaded and super unleaded petrol? I know super unleaded is as environmentally damaging as leaded and I am not arguing that there should not be a very large disparity between the prices of these types of petrol. What will be the impact of increasing the price of leaded and super unleaded petrol? Most of those with cars which can use only leaded petrol cannot afford to change their car to an unleaded version. This comes at a time when the scrappage scheme has been abandoned. Unless we provide those who have to buy leaded petrol with a realistic alternative to allow them to buy unleaded, we are only penalising them. It is a curious irony that as the budget increases the price of leaded petrol, we are returning £1,000 to those on £50,000 per year who can afford to buy the cheaper petrol while we are giving £100 per year to those who cannot afford to do so. These are questions which should be examined. If this is being promoted as a way of improving the environment and cleaning the air, the original intention of having a difference in price between unleaded and leaded petrol, then we have to enable people to choose cars which use unleaded petrol. Otherwise we are merely collecting more revenue.

Regarding VRT, we are forgoing £13 million on the purchase of new cars — perhaps it also applies to imported secondhand cars. If related to new cars then it could be argued that it would have some of the effect I was arguing for in relation to giving people the option of buying a new car which used unleaded petrol. However, it seems odd to be assisting the import of second-hand cars which may or may not be capable of using unleaded petrol.

I attended the presentation of SIMI, the representative body of motor car dealers. It is a professional group which made a very professional case. However, I was not convinced by the argument that the sales of motor cars would be affected if this cut in VRT was not applied. We seem to be handing back money in circumstances where we have not thought through the wider impact apart from the desire of the State to take in as much revenue as possible.

According to the note I received on the budget the VAT refund to unregistered farmers will cost £8 million in a full year. This is an issue I have raised on numerous occasions during my 15 years in the House. I fail to understand why we consistently use this device to enable farmers to reclaim money when there is no evidence that they paid VAT. Refunds of £8 million at 3.6 per cent would mean a turnover of £200 million. Why are a number of farmers — perhaps the Taoiseach could explain how many — who are not registered availing of this facility? Why are they not registering for VAT like every other normal business, applying the VAT to what they sell and claiming it from the Department of Finance or the Revenue Commissioners? It seems we are refunding £8 million on purchases of £200 million per annum, which is an extraordinarily high figure. Eight million pound is only the increase, not the total amount. Some years ago refunds amounted to £70 million and it is probably far in excess of £100 at present. How much is being refunded under this scheme and on what amount of purchases is it being made? How many farmers are not registered for VAT and what proportion are they of the total number of farmers?

In general, the contribution of farmers to tax revenue is exceptionally low, amounting to about 23 per cent of the average amount paid by the PAYE sector. I have no wish to attack farmers in general and I know there are farmers whose income is not high enough to pay tax. However, massive amounts of money — up to £1,500 million in the last year — comes from the EU for Irish farmers. The recent household survey indicated that the average income for farmers is higher than that for householders in urban areas; that they have newer and more expensive cars and bigger and more expensive houses. I am not simply saying this: it is based on facts found by agents of the State when examining the household income of various categories. It boggles the mind that we are handing back in excess of £100 million in VAT refunds to people who are not registered for VAT. On the basis of a 3.6 per cent refund that must run in excess of £300 million to £400 million of purchases. That seems an extraordinary figure and I fail to understand why we continue with this system and that we do not insist that the people doing this should charge and reclaim VAT in the normal way.

Before calling Deputy Michael Ahern I wish to advise the House that nine Deputies are offering and the question must be put at 9.30 p.m. I ask for some consideration and brevity.

I will be brief. I welcome the increase in the price of cigarettes. I inhale myself but I do not have any objection to this increase. Smoking is a bad habit and if this increase helps people to give it up, it will be worthwhile. I do not believe the increase will affect jobs; it did not do so to any great extent in the past.

On the increase in petrol prices, there is no increase in the price of unleaded petrol or diesel which is the main fuel used here. The Deputies opposite who made a great deal of noise about the increase in the price of super unleaded petrol drive Porches, Mazarattis and other big cars. There are not too many of those in my part of the country so it will not have any great effect.

Is there no one with cars in the Deputy's part of the country? I remember when the Deputy came to my parish on a train.

A number of the Deputies opposite would be in that league. With the cessation of the scrappage scheme the reduction in VRT is welcome as it will help in the sale of new and second-hand cars.

Farmers are entitled to the increase in VAT refunds. With the reduction in milk, grain and beef prices the majority of farmers are finding it difficult to make ends meet.

What about the drop in cattle prices?

Deputy Ahern should tell his Minister.

Acting Chairman

Deputy Ahern, without interruption.

On the question of farmers registering for VAT, it is to the benefit of the State that they do not. If every farmer registered for VAT, most of them would be in a net refund position. The reason many farmers do not register is because they do not want to pay the additional cost of employing an accountant or bookkeeper to do the work for them. I welcome the Minister's decision to increase the VAT refund which will help many farmers with a milk quota worth £30,000 or less. They need this additional benefit given by the Minister in the budget.

Acting Chairman

I call Deputy Ring and I will then call Deputy Higgins. I ask Deputy Ring to have regard to the number of speakers wishing to contribute.

I will be brief because I am very upset. A scud missile landed on the people of the west today, the increase in the price of petrol. The increase would not be too bad if one were living in Dublin because the people there have the DART, they will have Luas in a few years' time and various services——

We gave the Deputy Knock Airport.

I can tell the Minister about that. There was a great deal of talk about Knock Airport but it was former Taoiseach, Garret FitzGerald, who provided the money. I do not want to talk about Knock Airport but about the people in Belmullet and in Louisburg who do not have any public transport. If people living in north Mayo have to travel to hospital, they do not have the services of Iarnród Éireann. They have to provide their own transport. A recent report indicated that there is a high rate of poverty in Mayo and Donegal. Some of the people living in these areas drive cars that are 13, 14 and 15 years old because they cannot afford new vehicles, yet the Government will take from them the small increases it has given in social welfare by increasing the price of petrol. Some of these people have to travel 75 miles to Castlebar, or 100 miles to Galway, to see a doctor or attend a hospital, but the Dublin 4 brigade do not understand that.

We are from the north side of Dublin.

The people in these areas are being hit again as they have been in recent months. It is wrong that rural Ireland is being attacked. People are leaving these areas to go to England and elsewhere. This Government promised to revitalise rural Ireland but what did it do? It fired a scud missile on the west by increasing the price of petrol by 20p per gallon. That is a disgrace and the Taoiseach should examine it again because it is wrong to do this to the people living in the west.

All the interest groups lobbied various public representatives from both Government and Opposition parties, but the only thing the people in the west like is——

No. These people have black and white televisions. They go home at night, light the fire and have a little smoke.

The Deputy should get off the stage. This is Dáil Éireann. The Abbey is down the road from here.

The Taoiseach thinks this is very funny but it is not. The people I am talking about do not have any theatres or clubs to go to. All they have to enjoy at night is a cigarette.

A Deputy

And they have to walk to the shop to buy them.

And the pint. What about the pint?

They cannot afford to go out for a pint because of the increase in the price of petrol. The cigarettes were an easy target. I realise people say smoking is a hazard to health but the people selling illegal imported cigarettes are not paying taxes on them. The people selling drugs are not paying tax either, yet the Minister attacks the people driving 14 or 15 year old cars who enjoy smoking a cigarette while watching television at night.

What about the pint?

I told Deputy O'Rourke about the pint. The Deputy's party put an end to the pint tonight. The people I am talking about cannot go to the pub because of the increase in petrol prices.

We never touched the price of the pint.

Farmers cannot go for a pint because since Fianna Fáil came into Government, we have had nothing but social welfare officers knocking on doors asking farmers how many geese, sheep and cattle they have. That has to stop.

The Deputy is attacking the former Minister, Deputy Proinsias De Rossa.


I attended a public meeting recently where the people had a photograph of Deputy Proinsias De Rossa holding two sheep. If Deputy Proinsias De Rossa was Minister for Agriculture the IFA would be happy because he would do more for farmers than the people on the Government side of the House.

Acting Chairman

Deputy Ring has gone off on a number of tangents and we are running out of time.

The agricultural sector has been attacked. Today was a bad day for farmers and they have had bad days since the Government took office. I hope something will be done for them in the near future. There is a flight from the land in County Mayo and if it continues nobody will be left there. What is happening is a disgrace and the Government has done nothing to provide for farmers in the budget. I hope the Minister for Agriculture and Food when he was talking to the Minister, Mr. Cunningham, in the House of Commons did not know about the recent ban on the sale of boned beef in Britain.

Acting Chairman

Deputy Ring has departed from the subject of the debate.

I am speaking to Financial Resolution No. 4 which relates to agriculture.


Acting Chairman

I now call Deputy Higgins and ask him to show some restraint as a number of speakers wish to contribute before 9.30 p.m. Unless Members curtail their contributions not many Members will be able to contribute.

(Dublin West): This is not supposed to be a circus but an assembly of the elected representatives of our people who tonight are supposed to be discussing the effects of the serious measures proposed. I am interested but not surprised that apparently the conservative parties are in agreement tonight to lash an extra 10p onto the price of a packet of cigarettes. They do not represent poor people. Under the utterly fraudulent guise of assisting public health in some way, this is an extra tax on poor people. Cigarettes are a despicable and dangerous habit but an extremely addictive one. Unfortunately, because of the pressures of life it is an addiction to which many people from working class communities resort as one of the consolations they can afford. By adding that enormous sum onto the price of a packet of cigarettes the Government is imposing an extra tax which will hit those people hardest.

The Minister, Deputy Ahern, could not resist sending out his press statement on the benefits of the budget. He boasts that a single person on long-term unemployment will now have £70.50 per week and that a couple on long-term unemployment assistance will get an increase of £4.20 per week. If they are unfortunately addicted to cigarettes, at a stroke, at least £2, if not more of that increase per week, will be immediately taken back. The increase in the price of a packet of cigarettes is not an incentive to stop smoking. That is a fraudulent claim and nobody believes it. If the Government or successive Governments were interested in coping with cigarette addiction they would not sit on their hands while cigarettes are advertised and millions of pounds are spent annually on advertising them. Let us expose this increase for what it is.

In regard to petrol many parallel arguments apply. Who have cars that are not top of the range and registered in 1997? Poor people and low income workers. This increase is an attack on them and an excuse for not doing something effective about public transport, which would be the appropriate way to cut down on environmental pollution. I am mesmerised that under the heading Value-added Tax under Financial Resolution No. 4 there is a reference to VAT on horses for hire increasing from 3.3 per cent to 3.6 per cent. I do not know what is meant by that, but there is a distinct failure to close one of the most glaring and scandalous loopholes in taxation. Millionaire stud farmers from the plains of Kildare and other plains earning up to £1 million a year from top class stallions will not pay an extra penny in taxation on the fees they charge. Yet, the unfortunate people addicted to nicotine, on low income or in receipt of social welfare have been hit over the head, and that is a disgrace.

Deputy Bruton asked me about the incidence of duty and VAT per litre of motor fuel. Value added tax on leaded petrol is 67.27p, on unleaded petrol it is 64.77p, on super unleaded it is 66.16p and on auto diesel it is 58.01p.

That is a lot.

I do not have time to deal with everything, but regarding the arguments on this, there has not been any increase in the price of unleaded petrol. I listened carefully to the pleas made by Deputies about aspects of this. They should join those of us who care about our health, that of our constituents and the environmental and health aspects of this issue. I will not give a lecture on the ozone layer, but cars up to ten years old can be easily converted to take unleaded petrol.

Will the Taoiseach provide a grant for that?

With the large sales of cars, particularly in County Meath, there are hardly any old cars left. Leaded petrol because of its lead content and super unleaded petrol because of its benzene content are an environmental and health hazard. The lead content of petrol has contributed greatly to increased levels of lead in the atmosphere and it is a health hazard, particularly in regard to childhood development. That has been proved scientifically. There are no known safe levels of benzene and it is a recognised carcinogen. Deputies will remember when I introduced legislation on health safety in this House many years ago all those matters were debated and one of the issues on which everybody argued was that we should run a campaign to highlight the advantages of unleaded petrol over other grades of petrol. That is what successive Governments have done.

Ten months ago the Taoiseach said it was too expensive.

It is the right thing to do. Unleaded petrol accounts for about 68 per cent of total petrol consumption. It is anticipated this will increase to approximately 73 per cent in 1998, which will represent a 5 per cent increase and, therefore, we are making a real input. Tax on unleaded petrol is currently approximately 4p per litre of which 3.5 per cent is excise duty.

On the issue of the flat rate scheme for farmers, farmers' outputs in terms of food is generally zero rated while many of their inputs are taxed at the standard rate. Thus, under the normal VAT system most farmers who are registered would be in a permanent repayment position. There are approximately 100,000 farmers of which approximately 2,000 are registered. This system has worked effectively for a long time.

Ninety eight per cent of them are not registered. Only 2 per cent are registered. That is a scandal.

That is the case for all types of reasons and it also benefits the State in many respects. We are giving back £8 million to farmers and I am horrified the Deputy did not support us because all the Meath farmers will be delighted with that measure.

Regarding petrol, the policy of applying a high tax rate to leaded petrol is in keeping with a programme that has been set out but time does not permit me to go through the details of it. The European Commission decided five years ago to initiate a programme to provide a solid technical foundation upon which to base legislative proposals. Deputy De Rossa asked if there was such a programme. There is currently a draft Council directive relating to the quality of petrol and diesel fuel before the European Parliament which provides for phasing out leaded petrol by the year 2000.

The Taoiseach is not taking account of the tough terrain in Deputy Healy-Rae's constituency and in mine.

Comparisons were made with Northern Ireland. Border Deputies seem to be out of touch with what is happening on the other side of the Border because petrol and auto diesel are cheaper here, not the other way around.

What will the difference be after tonight?

After the proposed increase, leaded petrol will still be approximately 7p per litre cheaper, unleaded approximately 12p cheaper, super-unleaded approximately 12p cheaper and auto diesel approximately 14p cheaper. Deputy McGahon is out of touch with the position on the other side of the Border.

The poor people of south Kerry and Cork will be reduced to a Honda motorcycle.

I thank the Opposition for supporting three of the four resolutions.

Acting Chairman

As it is now 9.30 p.m. I am required, in accordance with an Order of the Dáil of this day, to put the following question: "That Financial Resolution No. 1 is hereby agreed to."

Question put and declared carried.

Acting Chairman

I am required, in accordance with an order of the Dáil of this day, to put the following question: "That Financial Resolution No. 2 is hereby agreed to."

Question put.
The Dáil divided: Tá, 77; Níl, 68.

  • Ahern, Bertie.
  • Ahern, Dermot.
  • Ahern, Michael.
  • Ahern, Noel.
  • Ardagh, Seán.
  • Aylward, Liam.
  • Blaney, Harry.
  • Brady, Johnny.
  • Brady, Martin.
  • Brennan, Matt.
  • Brennan, Séamus.
  • Briscoe, Ben.
  • Browne, John (Wexford).
  • Byrne, Hugh.
  • Callely, Ivor.
  • Foley, Denis.
  • Fox, Mildred.
  • Hanafin, Mary.
  • Harney, Mary.
  • Haughey, Seán.
  • Healy-Rae, Jackie.
  • Jacob, Joe.
  • Keaveney, Cecilia.
  • Kelleher, Billy.
  • Kenneally, Brendan.
  • Killeen, Tony.
  • Kirk, Séamus.
  • Kitt, Michael.
  • Kitt, Tom.
  • Lawlor, Liam.
  • Lenihan, Brian.
  • Lenihan, Conor.
  • Martin, Micheál.
  • McDaid, James.
  • McGennis, Marian.
  • McGuinness, John.
  • Moffatt, Thomas.
  • Moloney, John.
  • Carey, Pat.
  • Collins, Michael.
  • Cooper-Flynn, Beverley.
  • Coughlan, Mary.
  • Cowen, Brian.
  • Daly, Brendan.
  • Davern, Noel.
  • de Valera, Síle.
  • Dempsey, Noel.
  • Dennehy, John.
  • Doherty, Seán.
  • Ellis, John.
  • Fahey, Frank.
  • Fleming, Seán.
  • Flood, Chris.
  • Moynihan, Donal.
  • Moynihan, Michael.
  • Ó Cuív, Éamon.
  • O'Dea, Willie.
  • O'Donnell, Liz.
  • O'Donoghue, John.
  • O'Flynn, Noel.
  • O'Hanlon, Rory.
  • O'Keeffe, Batt.
  • O'Keeffe, Ned.
  • O'Kennedy, Michael.
  • Roche, Dick.
  • O'Rourke, Mary.
  • Power, Seán.
  • Reynolds, Albert.
  • Ryan, Eoin.
  • Smith, Brendan.
  • Smith, Michael.
  • Treacy, Noel.
  • Wade, Eddie.
  • Wallace, Dan.
  • Wallace, Mary.
  • Woods, Michael.
  • Wright, G. V.

Tellers: Tá, Deputies S.Brennan and Power; Níl, Deputies Barrett and Stagg.

    Question declared carried.

    Allen, Bernard.Barnes, Monica.Barrett, Seán.Bell, Michael.Belton, Louis.Boylan, Andrew.Bradford, Paul.Broughan, Thomas.Browne, John (Carlow-Kilkenny).Bruton, John.Bruton, Richard.Burke, Liam.Burke, Ulick.Carey, Donal.Clune, Deirdre.Connaughton, Paul.Cosgrave, Michael.Crawford, Seymour.Creed, Michael.Currie, Austin.D'Arcy, Michael.De Rossa, Proinsias.Deasy, Austin.Deenihan, Jimmy.Durkan, Bernard.Farrelly, John.Ferris, Michael.Finucane, Michael.Fitzgerald, Frances.Flanagan, Charles.Gilmore, Éamon.Hayes, Brian.Higgins, Jim.Higgins, Joe.

    Higgins, Michael.Hogan, Philip.Howlin, Brendan.Kenny, Enda.Lowry, Michael.McCormack, Pádraic.McGahon, Brendan.McGinley, Dinny.McGrath, Paul.McManus, Liz.Mitchell, Gay.Mitchell, Jim.Mitchell, Olivia.Moynihan-Cronin, Breeda.Naughten, Denis.Neville, Dan.Ó Caoláin, Caoimhghín.O'Keeffe, Jim.O'Shea, Brian.Owen, Nora.Penrose, William.Perry, John.Quinn, Ruairí.Reynolds, Gerard.Ring, Michael.Shatter, Alan.Sheehan, Patrick.Spring, Dick.Stagg, Emmet.Stanton, David.Timmins, Billy.Upton, Pat.Wall, Jack.Yates, Ivan.

    The question is: "That Financial Resolution No. 3 is hereby agreed to."

    Question put and agreed to.

    The question is: "That Financial Resolution No. 4 is hereby agreed to." Question put and declared carried.