Richard Bruton
Question:64 Mr. Bruton asked the Minister for Finance his views on recent trends in consumer prices; and if he will make a statement on the matter. [19698/06]
Priority Questions.
Consumer Price Index.
Inflation, as measured by annual changes in the consumer price index, CPI, was 3.8% in April. A large part of the recent pick-up in the annual inflation rate is owing to external factors such as higher oil prices and interest rate increases by the European Central Bank.
On budget day, my Department forecast that CPI inflation would average 2.7% in 2006. That forecast was based on the usual technical assumption of unchanged interest rates. My Department will publish updated forecasts in the autumn.
On an EU basis, Ireland's harmonised index of consumer prices, HICP, was 2.7% in April, compared with 2.4% in the euro area. Ensuring that our inflation rate moves back towards the euro area rate is important to our remaining competitive.
Maintaining a moderate rate of inflation remains a key priority of economic policy because of its importance to competitiveness. The Government is doing its bit to contain inflation by implementing responsible fiscal policies. In addition, we have not increased excise duties for the last two years, and we are promoting greater price competition by removing the 1987 groceries order. We are also seeking a reasonable wage deal to maintain and improve our international competitiveness. We are investing in public infrastructure that will enhance our ability to produce more goods and services and keep inflation down in the process.
Does the Minister agree the trend is particularly worrying when one compares Ireland with the rest of Europe? In December our inflation rate was below the European average, but we have swung the other way, with a rate 0.7% above it on the latest CSO figures. While inflation affects all European countries, it is far worse here than anywhere else. Against that background, is the Minister for Finance concerned at comments made yesterday by the president of the European Central Bank who highlighted internal problems, which are controlled by government, as one of the core issues of inflation in Europe. Is the Minister aware that if one looks at government sectors, which the president of the European Central Bank highlighted, including transport, telecommunications, education, housing, utilities and health, Ireland is three points above European inflation in these areas? In the areas in which government has a real say in the trend of inflation, either through regulation or direct pricing, Ireland is seriously out of line and is becoming more so? Does the Minister believe the Government needs to look at pricing and regulation to ensure we have a more competitive environment for consumers?
Looking at the trend over a period of time, since we joined the euro area some years ago, the figures at the back end of last year showed, for the first time, a coming together of the European and the Irish average inflation. The Irish average inflation before that was much higher. Part of that is a function of domestic demand which is greater here than in European countries. One of the problems of the failure to reignite growth in continental European economies quite apart from the structural issues of their economies regarding the flexibility of labour markets etc. is the inability to create domestic demand. Domestic demand, while it has increased the composition of our economic growth in recent years, also brings with it the ability of people to spend their money. We have higher income earners than in many parts of the euro area.
The Deputy referred to gas and electricity prices. These are regulated industries and prices in these sectors are determined by regulators. Increases in recent years partly reflect the global increase in oil prices, over which we do not have control. If one looks at health and education, it should be noted that these sectors have relatively small weights in the basket of consumer goods and services and hence their impact on overall inflation is relatively low.
If one looks at transport, telecommunications and even oil, our inflation rates are growing much more rapidly than those in Europe. There is no reason our transport and telecommunications costs should rise more rapidly than those in Europe. In the past 12 months, there has been a 15 cent increase in the price of a litre of petrol whereas there has been only a 9 cent increase elsewhere in Europe. Something is happening in Ireland which is not happening elsewhere in Europe. Let us not forget we got the tag of "rip off" and the Government carries some of the blame for that because it has allowed this inflationary spiral and fuelled it with Government take in those sectors. That is where the Minister stands accused. He needs to deal with this issue before it again becomes a live one and Ireland becomes the most expensive place in Europe.
Insurance, including motor insurance, premiums are down to 1999 levels as a result of Government initiatives——
Donie did all that.
——which were, in some cases, opposed by Members of the Opposition in trying to represent vested interests. There is no room for complacency in terms of our competitiveness, of which we must be mindful. Making the comparison with European economies, the difference is not 0.8% but 0.3% on the harmonised index of consumer prices inflation versus the euro area since 1999.
Looking at the relative inflation performances of Ireland and the euro area since the beginning of monetary union, the inflation rate in Ireland has been reduced from the highest in the euro area between 1999 and 2003 to being broadly in line with the average in the past two years. Where an economy is growing strongly and is at or about full employment, as is the case in Ireland, this can lead to excess domestic demand as people spend the additional money in their pockets putting upward pressure on prices and inflation. This particularly arises in the services area, which are domestically produced rather than imported. It is a side effect, albeit an undesirable one, of an economy which is doing well.
In terms of EU comparisons, the harmonised index of consumer prices is used by the EU member states and the European Central Bank. It is a statistical measure using a basket of goods which has been agreed between all member states so that we have a common inflation index to compare member states and the euro area as a whole. The basket of goods is revised periodically but currently the main item where it differs from the consumer price index, which is our national inflation index, is the exclusion of mortgage interest and some types of insurance.
I acknowledge there has been an increase in the April figure compared with the previous one. Hopefully, we will not see further interest rate increases, although we cannot anticipate what will happen with the European Central Bank. The first of the interest rate rises last autumn comes out of the base in the autumn. Depending on oil prices, were everything to stay static, one would hope there would be some moderating influences in terms of year on year inflation by the end of the year.
Decentralisation Programme.
Joan Burton
Question:65 Ms Burton asked the Minister for Finance his views on whether an all-party review of decentralisation is required in the national interest to conform more closely with the recommendations of the national spatial strategy and take account of the census figures; his further views on the potential loss of expertise and corporate knowledge as a result of the Government’s decentralisation programme; if he is planning to address these concerns by allowing Secretaries General to replace agencies earmarked for decentralisation with other agencies; his further views on whether this measure will gain sufficient applicants to meet decentralisation targets; and if he will make a statement on the matter. [19445/06]
I state the Government's full commitment to the decentralisation programme and reiterate that its policy on the relocation programme is unchanged. To date, more than 10,600 people have applied to the central applications facility and, despite consistent negative commentary, no political spokesperson has said that any town or county should be dropped from the programme. I take this opportunity to express my disappointment at the consistent criticism of the programme. This criticism is unfair to the thousands of public servants who have signed up for decentralisation and who are now making arrangements to establish their homes and families in new locations.
I also reject the suggestion implicit in the question that the decentralisation programme was not properly planned. Contrary to suggestions from some commentators this was not an announcement hastily cobbled together for political purposes to fill a gap in the Government's budget. This programme was first proposed as far back as 1999. It had its origins in the very positive experience that Government, staff and customers of the public service had of previous decentralisation programmes. Following that announcement at the end of 1999 the Government received a wide range of views, ranging from trade unions and individuals to groups representing the towns seeking the relocation of staff to their areas. In all, representations were received on behalf of over 130 towns across the country seeking the decentralisation of either sections or whole Departments to their areas. This response showed the groundswell of support for the idea from all corners of the country.
As well as these submissions, the Department of Finance faced a constant stream of parliamentary questions and representations from local representatives anxious for news of commencement of the programme. One thing of which the Government could not be accused was of rushing to announce the programme. A long period of deliberation took place before it made its announcement on 3 December 2003.
A wide range of factors were taken into account and balanced against each other in selecting the locations for the new decentralised offices. These included the need to achieve a fit with the national spatial strategy, the existence of transport links and the locations of existing decentralised offices. The aim was to establish viable clusters of work units within a region, either in the form of self-contained locations or clusters of sites located geographically close to each other or to existing decentralised offices.
In regard to the implications of decentralisation on delivery of service, the terms of reference for the decentralisation implementation group explicitly included the examination of how decentralisation might enhance the efficiency and effectiveness of the public service. To this end the group asked that all organisations participating in the programme should prepare detailed implementation plans including not just risk assessment but also mitigation strategies. A wide range of issues, including the potential loss of expertise and corporate knowledge, are addressed in these plans. The plans were prepared and submitted to the implementation group which subsequently reported that the overall quality of the plans was good. Since then those organisations listed as early movers have prepared further updated versions of their implementation plans.
The implementation group has met the Secretaries General of decentralising Departments and is satisfied that the implementation of the programme is being managed in a professional and carefully planned manner. The group is currently meeting the chief executives of a number of State agencies to discuss the planning framework in place, to assess progress to date and to hear about the challenges arising and steps proposed to address these challenges.
The Government is satisfied with progress to date on a number of fronts, including the level of applications to the central applications facility, property acquisition, assignments of staff etc., but I am conscious that a number of issues still have to be resolved.
As I have already said, more than 10,600 civil and public servants have made applications through the central applications facility to relocate. That facility continues to receive new applications every week. It is anticipated that interest will increase further as timetables firm up and buildings are completed. To date, 1,500 people have been assigned to posts destined for new locations and are being trained in their new roles in readiness to move. This 1,500 represents over 20% of the Civil Service part of the programme. Some 200 of these have already relocated and it is expected that up to 1,000 will have moved by the end of this year or early next year.
Discussions are ongoing with the unions in respect of the various human resource aspects of the programme. There are challenges in a programme of this size but I remain confident that these can be addressed with the active co-operation of all parties involved in the implementation effort.
Does the Minister share the Taoiseach's concern, expressed in recent interviews, that there is no appetite within the statutory agencies for decentralisation? Proof of that is that workers in FÁS are on picket duty today because they find it difficult to accept a policy of so-called voluntary decentralisation that is linked to their promotional prospects.
The Labour Party's proposal for an all-party review is an olive branch because decentralisation is important to the country. In July the census figures will be released and will tell us a great deal about population movements. The national spatial strategy and decentralisation should be reviewed in light of that information.
Why should I not regard this decentralisation programme as one more shambles and joke perpetrated by this Government? The Taoiseach has acknowledged this, as has the Minister of State at the Department of Finance with responsibility for decentralisation because he is switching bits of Departments around. It may be the last joke that Charlie McCreevy played on this House before he left. We know that his view of the State agencies would be that if FÁS is not willing to go to Birr, who needs FÁS?
What is the Minister's reaction to the Taoiseach's confession on the sofa with Sam Smyth that the Government got it wrong and there is no appetite for decentralisation? It is caught on the horns of a dilemma between guaranteeing that the programme is voluntary and insisting that people's career and promotional prospects are linked to it. The Labour Party's proposal is for an all-party review. Will the Minister indicate why he must hang tough on this when it risks destroying our public service?
All the risk analysis I have seen shows that, for instance, in certain Departments all or most of the senior expertise would be lost. We are facing a meltdown in the Civil Service, especially in the statutory bodies, if this 53-centre relocation goes ahead with no proper consultation or planning. The taxpayer must bear the cost and many public service bodies will be destroyed. Maybe that was the joke the former Minister for Finance, Mr. McCreevy, intended to play on us. Perhaps he is having the last laugh in Brussels.
Unfortunately, what is laughable is the Deputy's inability to listen to the details of the reply which confirms that the suggestion that this was hastily cobbled together is untrue. Every time I answer questions in this House I must contend with the same tired old rhetoric on this matter, particularly from this Deputy who talks out of both sides of her mouth about the muted support of the Labour Party for this process.
In response specifically to her supplementary questions, the Taoiseach did not say anything new. The decentralisation implementation group has always said that implementation of the programme should be on a phased basis. The group set out timeframes which recognised the differing business requirements of individual organisations, the central applications facility take-up for certain locations and the property solutions available. The implementation group proposed this revised timeframe and the Government agreed to it last year. The original timescales envisaged for the programme when first announced were very ambitious and required the full and active co-operation of all the parties involved. It was clear from an early stage that the issues which surfaced would take a considerable period to resolve. The setting of ambitious targets, however, was the best way to drive the programme forward and has enabled us to make significant progress.
In regard to Navan, I assume the Deputy is referring to the recent media coverage surrounding the relocation of the probation and welfare service. The original decision provided for the relocation of approximately 100 staff in the headquarters of the probation and welfare service to Navan. It was realised early on that approximately 80 of these staff are case officers working in the Dublin area and, to make up this shortfall, several other organisations will move to Navan in accordance with Government policy. These include the national property services regulatory authority, the new coroners agency and the new unit responsible for the management of human resources for Garda civilian staff. The original number of posts going to Navan remains unchanged.
Birr seems to be becoming a cause célèbre for certain Deputies but I would love to see them go there some time. Discussions were held on three occasions under the auspices of the Labour Relations Commission to see if progress could be made in respect of Birr. The latest of these meetings concluded in the early hours of this morning. These continuing efforts by all the parties to use the offices of the Labour Relations Commission to find a solution is heartening. This is the only way it will be possible to arrive at a resolution which will allow meaningful talks to commence on the substantive issues around the implementation of the decentralisation programme. I strongly support using all the established and dialogue mechanisms.
In respect of the loss of corporate knowledge through the relocation of staff to the country, the Deputy should consider the story of the Revenue Commissioners in a previous decentralisation programme. The Revenue Commissioners told the Joint Committee on Finance and the Public Service last year that they set up decentralised offices with 900 staff in the mid-west in the early 1990s. At the time 10% to 12% of staff in the Collector-General's office opted to relocate. When staff who were employed in other Revenue posts are included, that figure increases to 25%. As a result, some 75% of decentralising staff were new to the Revenue organisation. The Revenue Commissioners regarded this as an opportunity to examine its internal efficiency and, consequently, significant improvements were made to processes, systems and work practices which were implemented in the course of the decentralisation. That experience by Revenue can be replicated in the current decentralisation process.
House Prices.
Paudge Connolly
Question:66 Mr. Connolly asked the Minister for Finance if he intends to introduce a more equitable stamp duty regime on house purchase; and if he will make a statement on the matter. [19451/06]
Any proposals concerning the rates, structure and impact of stamp duty are a matter for the budget. I have acted already in several respects to reduce the burden of stamp duty on low value properties and on first-time buyers. New houses are generally exempt from stamp duty. Considerations of equity within the stamp duty code must be balanced by requirements for equity in the overall tax system. It is a question of ensuring that a fair share of taxation is paid all round.
Does the Minister agree that there appears to be no end to the present spiral in house prices with the advent of 100% mortgages which lending agencies are prepared to give us? The rates drawn up do not reflect the market price. The rates for first-time buyers are punitive. If a person wants to bid more than €381,000 for a house, the price will automatically rise by €11,400 before he or she bids. This works against the first-time buyer, especially when compared with the 4% stamp duty rate in Britain. It is punitive for people in the housing market in this country or who want to move up and keep the property business alive.
Does the Minister agree that the €40,000 stamp duty take on the average house bought last year is punitive? Does he agree with the guidelines for the purchase of a site for a house? People who want to buy a piece of land to move out of a county council house and off the housing list, or from an apartment must pay a rate starting at €10,000. Where does the Minister think this will come from? It moves up in increments of €10,000. This does not reflect the market. The rate for a site for a house costing €100,000 is 7%, it is 8% for a house costing €120,000 and 9% for a house costing €150,000. That is on top of the price of the house. Anyone looking to buy a site in proximity to a town will get nothing for €150,000. This is the case throughout the country. The Minister must agree that these tables must be revised. Has he any intention of revisiting these tables? Will he ensure that they reflect the recent market trends?
House prices have gone through the roof. A house priced at €250,000 seven years ago would have been a mansion whereas this is now the price of a standard house, in particular in the Dublin area. A price of €381,000 does not give first-time buyers a fair opportunity. A total of €2 billion in stamp duty is paid on housing transactions and this is a hefty imposition on people who are trying to better their situation. It is not fair to the consumer and these guidelines should be revised to reflect the market. I ask the Minister again to state his plans for that change and whether he will take on board that pricing structures have gone through the roof.
Changes to the current stamp duty regime must be approached with caution as even minor amendments may significantly alter the dynamics of any housing market. I have no plans at present to introduce changes although the position is kept under review at all times. It is important to stress to the Deputy that there have been increased contributions from capital taxes generally as a result of the tax reforms introduced by the Government. I would have thought that people who regard themselves as being broadly on the left of the political spectrum would welcome such an idea, that the level of taxes on workers' income would be reduced. To have a sustainable budgetary position, one must decide what percentages are to be provided by other parts of the revenue line. If income tax has been reduced in the past ten years as a proportion of the total revenue collected from 36% to 30% and capital taxes have increased their contributions from 4% to 11%, corporate taxes have increased their contributions from 10% to 15%, and thankfully there are many more corporations and many more people at work.
To ask a Minister for Finance about his plans in the period between budgets will never obtain a clear answer because these are matters for consideration at appropriate times in the financial year and they can be kept under review. If it is the case that sites are costing €150,000 on the outskirts of towns in County Monaghan, it may be a sign that things are not quite as bad up there as people led me to believe.
I do not know whether they are quite so bad but sites in the towns are closer to €200,000 and this is reflected around the country. I do not know whether this is a reflection of how well counties are doing or of the money being pumped into them, but that is the reality. Will the Minister consider raising the limit to reflect the way the market has gone? Will he then consider a flat rate, a realistic rate for first-time purchasers?
I would have thought the Deputy might have referred to the fact that I raised rates and thresholds in the past.
To a realistic level.
What does the Deputy mean by realistic levels? They must be financially sustainable. I introduced an initiative on one occasion and the first-time buyers were happier than they would have been if I had not introduced the initiative. There is always the question of the ultimate effect such an initiative will have on the housing market and it is a case of balance because there are arguments for and against. The suggestion that I should just keep raising the rates and every purchaser would automatically benefit is something that must be taken into account from bitter experience.
I am concerned about the first-time purchaser, not about the guy who is buying a second house or is investing in property.
It helps those people also.
Paul McGrath
Question:67 Mr. P. McGrath asked the Minister for Finance if he has assessed recent trends in the housing market and the capacity of this market to destabilise economic progress; and the strategy of the Government to protect against such a threat. [19699/06]
Demand for housing has risen strongly in recent years. This demand has been underpinned by demographic factors, the innate strength of the economy and the impact of an accommodating monetary stance, including historically low interest rates. Housing supply has responded to demand with completions for 2005 reaching a historic high of about 81,000 units which, on a per capita basis, was among the highest in the world. House prices have also risen rapidly in recent years. As in the case of housing output, fundamental factors also largely account for the increase in prices. It is reasonable to assume that over time the large increase in new housing supply will restore equilibrium to the market. This should allow output to move gradually closer to sustainable demand and result in more moderate price increases.
There is currently a broad consensus among commentators such as the OECD and the IMF that the most likely outcome for the housing market is for what is termed a soft landing. However, we cannot be complacent by assuming this is inevitable. As I said on a number of occasions and acknowledged in the stability programme update published with the 2006 budget, the fact that the construction sector now accounts for a historically high share of economic activity and employment implies that the economy is vulnerable to any shock affecting this sector.
For its part, the Government continues to run a prudent, stability-oriented budgetary policy which gives it room for manoeuvre in the event of an economic downturn, whatever the cause. Its planned infrastructural investment programme is largely being funded out of current revenues rather than borrowing, while the careful choice of appropriate projects enhances the overall productive capacity of the economy and thus should underpin future growth.
In addition, I announced in budget 2006 that a range of specific property-related tax incentive schemes were to be discontinued on foot of a comprehensive review of the schemes undertaken by independent consultants in the course of 2005. In line with the recommendations of the consultants, the 2006 Finance Bill provides that the tax schemes in question, several of which include a significant housing component, will be discontinued subject to transitional arrangements. These arrangements provide for full tax relief on qualifying expenditure in 2006 and with decreasing levels of relief available in 2007 and in the period from January to end-July 2008, after which the relief will cease. The gradual phasing out of the tax relief schemes is designed to avoid any sudden shock to the construction sector generally, having regard to the current important contribution of this sector to the Irish economy.
The rate of inflation in the housing market in provincial areas in 2002 averaged 11.5%, 13% in 2003 and 11% in 2004 and 2005, and the corresponding figures in Dublin were much higher. Is the Minister aware this has added about 50% to the cost of a house for somebody entering the housing market, all within a period of four years? This is horrendous for people who are trying to get into the housing market.
Is the Minister aware that of the 81,000 units to which he referred, only about 4,000 are local authority houses and a further 2,300 are affordable houses? How does he expect that with housing inflation running as it is, people will be able to find a house for themselves?
The Minister referred to the tax take from housing. Earlier in the year he conceded that the tax take on new houses was running at 35%. A house costing €300,000 will give the Government a tax take in the region of €105,000. This gives the Minister an annual tax take in excess of €10 billion from family homes, which is approximately 25% of the Minister's total tax take and is extra to the tax take from infrastructure and commercial building. The tax take from the housing sector and the general building sector is remarkably high and this was conceded by the Minister in his reply. What percentage of the total tax take is this? It must be 25% or more. If even a fraction of this amount is taken out of the tax take, will there not be knock-on consequences for the services which need to be provided? What steps will the Minister take to avoid a sudden fall in the housing market?
As I have said on previous occasions, the increase in house prices since the mid-1990s is seen in the context of considerable structural changes and advances in the economy since then. Employment has risen by about 50% since the mid-1990s, while per capita wages have also risen significantly over that period. This has been supplemented by a reduction in the burden of income taxation. Demographic factors such as immigration and the increase in the cohort of 25 to 30 year olds have also been important in terms of the demand for housing.
The role of lower interest rates from our participation in the economic and monetary union, EMU, has also been important. For instance, real interest rates, that is, mortgage rates adjusted for the impact of inflation, have been close to zero since 2000, compared with typical rates of around 7% in the early 1990s. Financial market liberalisation, competition and innovation have also played a role by improving access to credit. These fundamental factors largely account for the increase in prices since the mid-1990s.
The Deputy will have to table a separate question if I am to give an accurate figure for the contribution made by building materials, for example, in the context of the overall tax take. If he tables a question to that effect, I shall see whether Revenue can provide him with the details. The fact is we all acknowledge that the current contribution of the construction industry is equivalent to twice the European average in terms of gross national product. That is a factor of the process of national development, the fact that our demographics are so different from the continental economies, for example, as well as greater domestic demand. The strong preference that people in this country maintain for the acquisition of private property as a means of pension provision for the future is another consideration.
The Minister referred to real interest rates, real money and so on. An ordinary couple paying €300,000 for their house must make repayments amounting to between €1,300 and €1,500 per month. If the economy takes a downturn, the consequences for them in terms of the increased interest rates they might face are serious, not to mention the other serious consequences if one of them must give up work. Does this not conjure up grave consequences for the future of the economy? When this is factored into the take the Minister has from the building sector and the knock-on effects, will this not have to be examined seriously in the context of preparing a budget at the end of the year?
One has to take these figures into account and the state of the construction industry, given that it represents 12% of national output. We must take into account what the relative health of the construction industry would be in trying to project forward Revenue figures, given the good contribution it makes, as I have acknowledged. This is true in terms of the building industry, the materials that go towards the construction of residential and other properties and the stamp duty payable based on the conveyancing of those purchases by developers or other private owners. These facts must be taken into account. It is extraordinary in some respects looking back over the past decade, that the affordability of housing is still sustainable.
As the Deputy has said, repayments of up to €1,500 are commonplace. Given that average industrial wage earners now have on average a take home pay of €11,400 more than eight years ago, that helps to put in context why, perhaps, it is now more affordable for people to make those types of repayment as a percentage of total disposable income. Wages growth has well outstripped inflation and there has also been tax reform which has made the difference between the net and gross disposable income in Ireland the narrowest in any OECD country. A much younger cohort of people is coming into the market because of the changing demographic profile. Their earning capacity and the types of jobs being created in the economy that bring them into the market are such as to give rise to this unprecedented growth. People in the construction industry and commentators in general, including economists, have been forecasting a cooling off in the requirements for increased output in the housing sector for at least four or five years, yet housing output is again at record levels this year, compared with 2005.
Is it not of concern to the Minister that 50% of the uptake in new housing last year was accounted for by investment properties bought by investors getting into the market? Is this not of concern to him vis-à-vis first-time buyers and young people trying to get on the property ladder?
It is important we try to ensure that first-time buyers have access to the market. We have taken some initiatives in that regard. It is to be hoped that the success of social and affordable housing initiatives will see a greater contribution from that sector than before. A great many interventions have been introduced, some of which have been successful and some less so. Ultimately, supply and demand will dictate the market.
Tax Code.
Dan Boyle
Question:68 Mr. Boyle asked the Minister for Finance if the vehicle registration tax relief for flexible fuel vehicles and the excise relief for biofuels measures announced in the 2006 budget have been introduced; the number who have applied for each of the measures; the number of approvals granted in each instance; and if he will make a statement on the matter. [19446/06]
Vehicle registration tax, VRT, relief for flexible fuel vehicles, as announced in the 2006 budget, was provided for in the Finance Act 2006 with effect from 1 January 2006. We have been informed by the Revenue Commissioners that, to date, 12 flexible fuel vehicles have availed of the VRT relief, although this low number reflects the fact that legislation underpinning this relief was only enacted in late March. It was also announced in the budget that the VRT relief for hybrid electric vehicles, in place since January 2001, would be extended to the end of 2007. By the end of April 2006, 922 such vehicles had availed of the relief since its inception.
A new large-scale scheme of biofuels excise relief was also announced in the 2006 budget as a development from the preceding pilot biofuels excise relief scheme that has been in operation since 2005. The new scheme will provide for excise relief on up to 163 million litres of biofuels per annum, cost more than €200 million over five years, starting this year, will when fully operational result in CO2 savings of more than 250,000 tonnes per annum, meet a target of 2% transport fuel market penetration by biofuels, help reduce our dependency on conventional fossil fuels, and stimulate activity in the agricultural sector.
The process of applying for state aid clearance from the European Commission for this scheme is under way. Once approval has been granted, the Department of Communications, Marine and Natural Resources will advertise the scheme and set out the procedures for applying for the excise relief.
The Minister is basically saying that, under the first measure, 12 vehicles have been granted tax relief and, under the second, no additional tax relief has been granted. Does this not give the lie to the fact that these are not just green veneer measures in what the Minister for the Environment, Heritage and Local Government described as the greenest budget ever? Given the history of previous budgets, however, that was not a very proud boast. If it was a green budget, it was the most pallid of greens.
The second measure in particular is hard to accept.
Which one?
The excise relief for biofuel measures. That has already been the subject of a pilot scheme measure, and not a very successful one because of the limitations placed on the scheme by the Minister's officials. That took 18 months to secure approval from the European Commission. After making a subsequent announcement to extend that scheme, the Minister says the process of getting the EC to accept that it is not state aid has not yet begun, halfway into the budgetary year.
It has begun.
Where is the evidence? Why has it not begun since the Budget Statement or since the approval of the Finance Act?
It is being done.
Given ever-increasing energy prices, these types of initiatives are not even toe in the water measures. If the Minister is serious about trying to transfer energy dependence from imported and fossil fuels, his officials should be taking a more proactive role in these measures.
Do the VRT relief measures for flexible fuel vehicles apply to motors imported by individuals rather than the standard importation of large numbers of vehicles for dealerships? There might be an avenue open to people to avail of this relief because of better technologies in other jurisdictions.
In terms of both measures, what does the Minister hope the possible take-up will be by the end of this budgetary year? If he thinks that only several dozen people will have availed of the first measure by his next and final budget and the second measure will not yet have come into force, he will not be able to tell the House that he has introduced any measure that has been effective in terms of tackling energy dependency.
We are required to get state aid approval for this initiative.
The Minister knew that.
I know and I am applying for it.
It took 18 months the last time.
The Deputy should hold on and listen if he wants to hear my answer. He said I have not applied for approval, but approval is being applied for. The Commission must give its approval and we hope to have that in the coming months. I do not expect it will take 18 months as it did the last time.
I am tired of people coming into the House in a panic and asking why I have not done this, that or the other on directives. Even when we abide by EU regulations and requirements, the Opposition has another crib. What I have introduced, excise relief for 163 million litres of biofuels, is 20 times better than what was in place previously. I have implemented the full requirement I received from the line Department and we must get the initiative up and running. It will be done on that basis.
I presume flexible fuel vehicles imported individually rather than through dealerships would have the benefit of the VRT relief, but I will have to verify it. I do not have the information in front of me, but I will check it for the Deputy.
Rather than belittle the situation, which I suppose he will do anyway, the Deputy, since he is the green man, so to speak, should advocate to people the adoption of flexible fuel or hybrid electric vehicles. That would be a more constructive approach rather than trying to misrepresent my position when I have already made an application for this approval.
I thank the Minister for telling me what my job is. Part of my job is keeping him accountable for promises he made in this House.
The Deputy has been telling me what mine is.
He has not been living up to those promises.
I am.
There has only been approval for 12 vehicles in five months and no applications for the second scheme.
I am not buying the vehicles. Should I buy them as well to please the Deputy?
If the Minister announces a measure in the House, it is incumbent on him to encourage the take-up and use of it. He is willing enough to see property tax relief being used. Why is he not willing to see green tax measures being taken up?
What about the Deputy himself? What is he doing about it?
I put it to the Minister that it is because the vested interests he represents are not represented by people who produce biofuels or biofuel vehicles. If he were serious about measures such as these, he would put incentives in place. I asked the Minister what type of take-up would be in existence by the time of the next budget. He also told the House there had been 12 approvals, but I asked how many applications had been made for the first measure.
I do not have that information available but will try to get it for the Deputy. I am not in a position to state what impact the measure will have before the next budget until I get EU approval and get the measure up and running.
With regard to vested interests, I represent 13,000 people in Laoighis-Offaly, ordinary working people like those Deputy Boyle represents. I have been doing this for 22 years and have never represented any Shell or Esso company or anyone else. The Deputy should cut out the conspiracy crap.