Dáil Éireann debate -
Wednesday, 7 Dec 2005

Vol. 611 No. 5

Financial Resolution No. 1: Mineral Oils.

The Taoiseach

I move:

(1) THAT for the purposes of the tax charged by virtue of section 95 of the Finance Act 1999 (No. 2 of 1999), that Act is amended, with effect as on and from 8 December 2005, by substituting the following for Schedule 2 to that Act, as amended by section 64 of the Finance Act 2005 (No. 5 of 2005):

Rates of Mineral Oil Tax.

Description of Mineral Oil	Rate of Tax
Light Oil:
Leaded petrol	€553.04 per 1,000 litres
Unleaded petrol	€442.68 per 1,000 litres
Super unleaded petrol	€547.79 per 1,000 litres
Aviation gasoline	€276.52 per 1,000 litres
Heavy Oil:
Used as a propellant with a maximum sulphur content of 50 milligrammes per kilogramme	€368.05 per 1,000 litres
Other heavy oil used as a propellant	€420.44 per 1,000 litres
Kerosene used other than as a propellant	€16.00 per 1,000 litres
Fuel oil	€14.78 per 1,000 litres
Other heavy oil	€47.36 per 1,000 litres
Liquified Petroleum Gas:
Used as a propellant	€63.59 per 1,000 litres
Other liquified petroleum gas	€10.00 per 1,000 litres
Substitute Fuel:
Used as a propellant	€368.05 per 1,000 litres
Other substitute fuel	€47.36 per 1,000 litres
Coal:
For business use	€4.18 per tonne
For other use	€8.36 per tonne

(2) 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).

The resolution provides with effect from midnight for reductions in the non-auto rates of mineral oil, gas, kerosene and LPG, which, when VAT is included, amount to 1.8 cent on a litre of kerosene and 1.2 cent on a litre of LPG. These rate reductions are expected to impact primarily on the cost of heating fuel. It is estimated that the cost to the Exchequer of these reductions will be approximately €1.5 million this year and €22.7 million next year. The measure will reduce the consumer price index by approximately 0.015%.

An Ceann Comhairle

For the benefit of Members, this will be similar to a Committee Stage discussion.

Mr. P. McGrath

I welcome any move that will reduce the cost of home heating oil. Kerosene is also more environmentally friendly than other home heating fuels. I would like the Taoiseach to clarify a number of issues. With regard to the reductions, which are effective from tonight, were oil companies surveyed over the past week or two to ascertain what prices are being charged and to ensure this reduction will be passed on to the customer? These major oil companies could easily absorb the reductions. By how much will the price of kerosene reduce?

The Taoiseach

By 1.8 cent per litre.

Mr. P. McGrath

In recent days, I was thinking about filling my oil tank, as it needs to be filled. I made inquiries and the price I was quoted was 57 cent for a litre of kerosene. It will be interesting to see whether we will get the 1.8 cent reduction on a litre of kerosene. I ask the Taoiseach to guarantee that the Office of the Director of Consumer Affairs, or whichever agency deals with pricing, ensures this price reduction is passed on to the consumer. It will not amount to much. A couple of thousand litres per year will amount to a €20 reduction. However, we should try to ensure it is passed on to the consumer rather than absorbed by these oil companies.

Mr. Rabbitte

Like Deputy Paul McGrath, I am happy to welcome this resolution. Am I correct that it is about halving the excise duty? A considerable windfall came the State's way as a result of the increase in fuel prices. A reply to a parliamentary question suggests there has been perhaps as much as a €94 million windfall to the State from the additional VAT revenue. That figure may be projected for next year rather than this year but there has been additional VAT as a result of the increase in fuel prices.

It raises a question not so much of opposing or welcoming this resolution but of what the Government might have done with a refund. The Taoiseach said it will be €22.7 million in a full year. The Exchequer is still a considerable winner at a time when the increase in fuel prices has caused acute hardship for people in disadvantaged circumstances. That is especially so for older people who depend on the fuel allowance and on a modest pension. I have received a number of letters from people around the country on the early arrival of inclement weather this year. I am sure the Taoiseach has received similar letters. One old lady said she had to spend most of the week in bed because of a lack of heating in her home in a County Cork town. The €9 per week fuel allowance which has not been increased since 2002 until today has been fairly paltry.

Does this measure have anything to do with harmonisation, North and South? I believe the International Monitoring Commission reported on the laundering of fuel North and South and so on and made specific proposals in that regard. I am curious to know if that has been a factor in the thinking behind this resolution or if it is considered that it might make that practice more difficult.

Mr. Gormley

The Green Party welcomes this resolution. Like Deputy Rabbitte, my colleague, Deputy Eamon Ryan, wondered if it had anything to do with the smuggling operations which take place. I assume it is also to help people, particularly the elderly, who find it difficult at this time of year. We are having a very severe winter already.

The Green Party wanted to see this Government embrace eco-taxation and energy taxes. As the Taoiseach may well know, the ESRI has clearly outlined how this can be done and how it can assist those on lower incomes. That is why the Combat Poverty Agency has welcomed these measures. In the long-term, I would like this Government and future Governments to introduce measures which assist householders in reducing their heating bills by providing better insulation in homes and by investing more in solar panels which would pay for themselves over a period of years. That is the type of innovation the Green Party would like but, regrettably, it has not happened.

This budget has tinkered around with energy saving measures. The Minister has gone a little bit down the road in regard to biofuels. The budget has been disappointing overall in terms of what has been achieved. We should look at what Gordon Brown has done in the United Kingdom where one can get reductions if one invests in energy saving devices. That has not happened and, unfortunately, it is short-sighted.

As the Taoiseach knows, we had a debate last week on climate change, which we need to combat. The committee this Government set up has stated clearly that houses in this city which are not 4 m, or 12 ft, above sea level are vulnerable to flooding, so we have a hell of a lot to do. As the Budget Statement outlined, this is the biggest ecological challenge we face. Much more must be done, and more innovation would be very welcome.

Caoimhghín Ó Caoláin

I welcome the proposition in Financial Resolution No. 1 and any move towards the harmonisation of prices for home heating oils, North and South. This will be welcomed by consumers south of the Border. I want to see harmonisation of prices among a raft of other considerations on an island-wide basis. The reduction of almost 50% in the excise duty on kerosene from €31.74 to €16 per 1,000 litres and of just over 50% on liquified petroleum gas from €20.86 to €10 per 1,000 litres is a welcome and substantial reduction in the excise duty. Is this the first step or is it the only one towards the harmonisation of rates applying North and South because I am of the view more needs to be done? Will the Taoiseach outline that detail? I would have preferred a situation in which the difference was eliminated.

While this will be welcome from a consumer point of view, a critical issue was not taken on board in the Minister's Budget Statement which relates to the same area, namely, home heating fuels. The fuel allowance has been increased from €9 to €14 per week with effect from the first week in January. While the increase is welcome, although it should have been doubled to €18, there is another very important factor, namely, oil delivery companies will not make a delivery worth less than €200 and sometimes more depending on what part of the country in which one lives. Many senior citizens in local authority tenancies converted to oil-fired central heating who heretofore only received €9 per week would have to wait X number of weeks before being able to pay €200. Could they always have soundly set aside that €9 in order to accumulate the minimum price payable for a delivery of oil? One can see the difficulty. The allowance will increase to €14. I wish it were more, but whatever the level of increase, it should be paid upfront. It might be best paid in a credit form so that it would then be spent on what it was intended for, and that heating would be the consequence of the provision. Unfortunately, in some cases, it is not always the result and for the very reason that I have explained in regard to the minimum delivery levels that oil distribution companies operate. Perhaps in the Taoiseach's neck of the woods the minimum delivery is at an even higher level than in my constituency.

I urge the Taoiseach to take this on board. It is not sufficient to increase the fuel allowance, it must also be brought forward as an upfront payment which would be made at the outset. It should be paid in advance over X number of weeks so people can afford to have a delivery of the fuel of their choice appropriate to their needs. I welcome the measure and I would appreciate if the Taoiseach would explain if further steps are intended.

Mr. Naughten

Will the Taoiseach clarify the figures? The briefing note presented by the Department states that in a full year the cost of the allowance is €24 million which is approximately €3 million more than the Taoiseach stated. In 2007 the cost is estimated at €46 million. This is the lower end of the reduction at €24 million so it should be higher than €46 million over the two-year period. One of the main reasons for this measure is fuel laundering across the Border. The measure is commendable from that point of view but I regret that other home heating fuels have not been included. Green diesel is used in many parts of rural Ireland. The omission of a reduction in excise duty on diesel is a disappointment, both from the point of view of households and agriculture. There was a golden opportunity to encourage the blending of up to 3% biofuel in home heating oils as a mechanism to incentivise and stimulate the biofuels sector. It is a disappointment that this option was ignored in the budget.

Deputy Ó Caoláin is quite correct about the cost of a minimum delivery. Surely the Department of Social and Family Affairs could put in place a structure where the allowance of €14 per week could be paid directly to oil companies. Many oil companies have easy pay systems in place. Would the Department of Social and Family Affairs look at this as an option if people want to go down that route? In the long run such an approach would pay for deliveries of oil.

Mr. Durkan

I give a guarded welcome to this proposal on the basis that it reflects a response to a need. However, the response is not enough due to the degree to which fuel oil prices have increased, particularly over the past year. The cost of home heating oil has increased by almost 30% in the past 12 months. Other speakers referred to people on a fixed income who have great difficulty in meeting their household heating requirements in respect of oil. This measure, unfortunately, does not reflect the needs in regard to this issue.

My colleagues already referred to the fact that the single biggest way of making a saving in terms of home heating oils and other fossil fuels is by way of conservation and insulation of domestic dwellings, public buildings and offices. Notwithstanding other provisions in the budget on biofuels, the measures outlined fall far short of what is required at this time by way of encouraging alternative energy. I regret the missed opportunity to make a greater declaration of intent in this area and to address existing concerns.

Transport costs have increased at a phenomenal rate in the past 12 months. Every commodity delivered depends on transport. Road diesel costs have increased dramatically in the past year. This concession could easily have been extended to this area. The counter argument that will be put forward is that if one reduces excise duty it encourages oil companies to increase their share of the take but the fact is that consumers are at the end of the line and whatever concessions are made will in some way be reflected in what they pay. Given that such a heavy cost is placed on consumers in general and the industrial sector in particular, and since society depends on transport to such an extent, it would have been innovative and beneficial to the economy if some indication were made as to what might happen in the event of oil prices increasing further. Deputy Paul McGrath referred to road hauliers who are increasingly finding it difficult to make a living. Fuel costs are one of the major factors that have a bearing on their income.

I welcome the concession that has been made, which aims to address the issue of smuggling and, to a certain extent, global warming, to which my colleagues also referred. Oil imports and conservation need to be addressed in the energy Bill, to which I referred on several occasions in recent weeks, in a much more dramatic fashion than has been the case in the budget.

The Taoiseach

In reply to Deputy Rabbitte's question, the windfall for the State from increases in oil prices arise in regard to VAT not excise duty. The overall effect may not be as big as people think from their expenditure on other goods on which VAT is paid.

The difference in fuel prices between the North and South is a factor. There is no excise duty in the North on kerosene and LPG. VAT on fuel prices is 5% in the North as opposed to 13.5% here. Fuel prices have been driven by a number of factors, only one of which is excise tax. In this instance, we have moved to use our power to reduce the price to consumers. The cross-Border price differential which has been mentioned by a number of Deputies was an issue. There is a significant degree of illegal activity in fuels and apart from the obvious benefits to the consumer, a reduction in activity in this area should be an added bonus.

My officials will observe prices. They encourage consumers to seek the best price. Those who do not pass on price reductions will lose business. I assure Deputy McGrath there will be monitoring of this area.

The reason for the differential in prices is that the €24 million in 2006 includes the second half of the phasing to zero from December 2006. The €21 million only includes the costs attached to this resolution.

Deputy Gormley will appreciate that a large biofuels package was announced in the budget. I accept what he said but we have moved in the right direction. As for moving further in future, that is a matter for examination every year on the basis of the annual examination of the Estimates.

On the basis that most heating fuels, for example electricity and natural gas, are not subject to excise, the Government considered it appropriate to move towards zero rating for home heating fuels over the next few years. We have said that the aim is to move on this, so we have given that indication. The measure will help to alleviate the problem faced in particular by suppliers in Border counties due to zero rating in the North. In the case of kerosene, for example, from tomorrow, the VAT inclusive price of a standard delivery of 1,000 litres will fall by almost €18, with the price falling in total by around €36 per 1,000 litres when the full excise tax is removed. In the case of LPG, the reduction will be slightly more than €12 from tomorrow and almost €24 per 1,000 litres when the full excise is removed.

An Leas-Cheann Comhairle

The time permitted for this debate has expired, so I am required to put the following question in accordance with an Order of the Dáil of this day: "That the motion for Financial Resolution No. 1 is hereby agreed to."

Question put and agreed to.