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Dáil Éireann debate -
Tuesday, 26 Jun 2007

Vol. 637 No. 2

Other Questions.

Tax Code.

Tom Hayes


80 Deputy Tom Hayes asked the Tánaiste and Minister for Finance the environmental goods currently in the 21% VAT band which are to be subjected to review under the terms of the programme for Government. [17306/07]

The programme for Government contains a commitment to examine the scope for reducing the VAT rate on environmental goods and services from the standard VAT rate of 21% to the reduced rate of 13.5%. This is just one of a number of initiatives in the programme aimed at delivering a cleaner environment.

In carrying out this examination, account will be taken of the growing range of environmental and renewable energy products which present opportunities to reduce our dependence on conventional energy systems and can make a contribution to tackling climate change. For example, energy efficient insulation materials, renewable energy systems, including wind, solar and geothermal systems, and the options arising in the bio-energy crop sector will be examined.

In considering a change in VAT arrangements for these, or indeed any other, goods and services, it is important to bear in mind that the treatment of goods and services is subject to EU VAT law with which Irish VAT law must comply.

It is important, however, to point out that the reduced rate of VAT of 13.5% may currently be applied to insulation materials and renewable energy systems where these products are supplied and installed as a single contract and where the VAT-exclusive cost of the goods does not exceed two thirds of the total VAT-exclusive charge to the customer. The bulk of supply and install contracts are likely to meet this so-called "two thirds" rule, resulting in the reduced VAT rate of 13.5% being applied. Consequently, under existing VAT arrangements, the reduced VAT rate can apply to environmental products where they form part of such a supply and installation arrangement.

The reduced VAT rate of 13.5% also applies to the supply of all fuel products, including wood pellets, used for home heating and light. The Republic of Ireland is one of only eight member states that apply a reduced VAT rate to the supply of fuel products used for home heating and light.

The purpose of our proposed VAT review is to examine whether there is scope within EU VAT law to further extend the application of the reduced VAT rate in the area of environmental goods and services. This and other measures under the programme for Government clearly demonstrate the Government's commitment to addressing the environmental challenges that we face.

Will this review be completed in time for the 2008 budget so that we will see some of these proposals reflected in next year's Finance Bill? The Minister seems to be watering down expectations on the basis that most of the VAT concessions are already available if allowed for within certain contracts. Is the Minister considering green spot rating of products to allow for differential VAT rates on products according to their energy efficiency? Many products already have differential rating. Is this what the Minister has in mind to allow consumers pay a lower VAT rate on the same product if it has a lower energy use rating?

The examination can consider all these issues. The law on VAT is a very technical area. EU VAT directives are the determining and over-arching legislative basis upon which these VAT issues are dealt with and we cannot take unilateral action to do what we wish regarding reductions in VAT, even though the public sometimes thinks we can. We must be in compliance with VAT law and that is often determined by the state of our VAT law in respect of goods and services at the time of the implementation of the directive. This explains the differing rates of VAT applying to various goods and services in different jurisdictions and which can often be a source of confusion to the public who question the reason we cannot move to those rates at this stage.

The examination will be comprehensive and will seek out the best way forward. As regards its timeliness, I will seek to have the examination completed as soon as is possible and practicable. In respect of any changes in our taxation arrangements, these are matters to be considered in a budgetary context, taking into account the overall state of the economy, and I will deal with them in the normal way.

In light of the fact that value added tax is a fundamentally regressive tax, will the Minister in the course of his review consider the possibilities of reducing VAT in a number of areas in order to relieve the burden on low income families in particular? What is the Minister's reaction to the proposal by the Irish Congress of Trade Unions that in order to combat the pressures on workers of cost of living increases, particularly since the advent of Towards 2016, the Government should reduce the rate of VAT from its current level of 21%, which is the second highest indirect tax in Europe?

There are various rates of tax in existence and I refer to the rate of 0% on foodstuffs which is an important protection for Irish consumers and a rate which is not available in every other jurisdiction in the EU.

The question refers to a programme for Government commitment specifically in respect of environmental goods and services. It is in such a context that the examination will take place. It will be limited, being directed at that commitment, with no wider review envisaged. These are matters for consideration at the time of every budget. I continue to emphasise that it is not merely a case of asking why we should not change specific rates. There are considerations to do with EU law on VAT with which we must comply. The area is very technical and requires expert advice before one makes any moves.

I will allow a final brief supplementary question from Deputy Burton, as we are running over time.

Is the intent behind the Minister's proposal to favour activities, services or goods that help reduce energy consumption or carbon emissions and, correspondingly, to punish or penalise those activities that result in excessive carbon pollution or are excessively inefficient from an energy perspective? What is the fundamental purpose of the proposed review of VAT? Perhaps the Minister might enlighten us.

The purpose will be to encourage changed behaviour and the greater utilisation of more energy-efficient means of providing goods and services as a means of contributing towards greater energy conservation and raising public awareness of the importance of avoiding unnecessary energy use. That is the background to the review.

I am aware that Mr. Gordon Brown, in his capacity as British Chancellor of the Exchequer, has written to the EU Commission suggesting that it formulate a proposal whereby member states might apply reduced rates of VAT to energy-efficient products and energy-saving materials as an incentive for the private consumer to make more sustainable decisions.

I have no difficulty with the Commission examining such an approach and introducing proposals to the ECOFIN Council on the matter. It is in line with such efforts to establish policy initiatives. Upon examination, what can be done to facilitate far greater use of such technologies will be done.

Does the Minister for Finance have proposals regarding those suffering from fuel poverty, for example, the elderly, most of whom must use coal and other high-carbon fuels?

That is outside the scope of this question, which deals with VAT.

Will the Minister take that into account?

We have ensured that income support for people on social welfare and pensions has risen well in excess of inflation, the figure for last year being between 8% and 12%. We were able to consider such increases to assist people. There have been changes to fuel allowances and so on, for example, by extending the period for which people are eligible for such supplementary schemes, in an effort to deal with fuel poverty. That includes what has been happening with community-based initiatives for the insulation of social housing, elderly people living alone, and disabled persons' grants. All those are efforts to ensure that those most vulnerable to fuel poverty receive the necessary assistance so that it is not a serious problem for them.

Departmental Expenditure.

Shane McEntee


81 Deputy Shane McEntee asked the Tánaiste and Minister for Finance the expenditure reviews which have been completed in the first six months of 2007. [17317/07]

The value-for-money and policy reviews process encompasses formal value-for-money reviews, as well as all other policy reviews conducted and commissioned by Departments which have an impact on value for money. Under the new arrangements, the Government approved some 90 formal value-for-money reviews to be carried out for the period 2006-08. That programme of reviews focuses on significant areas of expenditure and major policy issues.

Details of the programme of reviews have been placed in the Oireachtas Library. I also wrote to the Chairman of each select committee on 5 October 2006 setting out the reviews to take place relevant to that committee's remit. The reviews, when completed, will normally be published and submitted to the relevant select committee for consideration. Responsibility for carrying out each review and for publishing and submitting it to the Oireachtas committees rests with the individual Departments and offices.

To date in 2007, seven reviews have been completed under the new arrangements. These are:


Report Title

Office of the Houses of the Oireachtas

Expenditure Review of the IT Service Level Agreement

Environment, Heritage and Local Government

Online Motor Tax

Agriculture and Food

Laboratory Testing for Plant Health, Feedingstuffs, Fertilisers, Forestry and Crops


Grant-in-Aid to Ordnance Survey Ireland

Social and Family Affairs

Unemployment Benefit/Assistance for atypical workers

Communications, Marine and Natural Resources

Public (Exchequer and EU) Supports for Aquaculture 2000-2005

Justice, Equality and Law Reform

Irish Prison Service Capital Expenditure Review

I am also informed, based on the latest information available to my Department, that 69 of the 92 reviews scheduled for completion under this current round to end at the end of next year are either completed or under way. Of these, 20 reviews have been completed while a further 14 have reached the stage where they are quality assessed by an independent party before being finalised and published.

If the Deputy wishes to receive information on progress in regard to individual reviews, I suggest he pursue the matter with the relevant Minister.

Does the Minister agree this is a totally pathetic outturn from what was to be a very important element in getting value for money? That only seven reviews out of the requirement of 30 per year have been completed, in even the very unambitious programme the Minister published, is way behind schedule. The Minister read out the topics which I conservatively guess represent approximately one quarter of 1% of public spending which is under scrutiny in these reports. This is not scrutiny in any meaningful sense.

Will the Minister immediately lift the embargo on any value for money reviews being conducted in the Department of Health and Children, one of the Departments which spends the most money in this State, much of which is not giving the value we should get from it? Will he also lift the embargo on examining value for money in the Office of Public Works? Again, the fact it is involved in decentralisation is offered as a spurious reason why it should not come under scrutiny.

Will the Minister implement, as was intended when this legislation was introduced in the Dáil, the proper mandate to have a rolling programme of expenditure review which considers at least 25% of public spending each year? Let us have meaningful scrutiny in the House.

That is available to committees anyway. Taking this specific structured review of value for money, we are talking about approximately €6.5 billion of expenditure being reviewed. We can have ambitious programmes of reviewing 25% of public spending and not get it done properly or we can do it properly in respect of what is achievable and what should, and can, be done. It is not exclusively through this structured review that review of value for money continues when we have capital appraisal guidelines and the output statements from Departments. They will be set against performance next year as against outputs — what people expect to get for the money they spend. I have put budgetary reform processes in place which would generally be regarded as improvements as well.

We discussed this issue before and I took it up with Departments but I expect the areas which have been agreed will be dealt with within the timeframe about which we are talking. As I said, 69 of the 92 are in place at present.

The testing of plant is hardly a mainstream concern of people worried about value for money.

I have answered the Deputy's question. The total area——

The Minister should look at the answer he has given. It is ridiculous.

The total area under review — the 92 areas — covers over €6.5 billion. That is a significant amount of money. It is open to the committees and I have invited the Chairmen of the committees to monitor this process.

One cannot monitor plant testing.

That is only one of 92 areas. The Deputy should not suggest that is the issue.

The whole list is of that nature.

The issue is the €6.5 billion. The point I make is that there have been reforms in the budgetary process which are bringing greater accountability and a greater sense to the Oireachtas as to the outputs expected for the money being spent and which also ensure that during the course of next year — the first full year — we can mark that performance against the proposed outputs. Then we can have a really beneficial discussion beyond rhetorical counterblast about what we are doing in regard to these areas and where we are and are not getting value for money. These are important reforms in addition to these internal departmental reviews which take place. Important as they are in respect of €6.5 billion of expenditure, we also have the output statements from each Department and the performance targets set against them in regard to all areas of expenditure which will be available for committees to examine, detail and work on once they are published and people are brought before them to answer for the performance.

That is a fairer indication of the total value for money effort being made because it is in all our interests that taxpayers' money is spent, to the greatest possible extent, efficiently and effectively. Everyone is agreed on that. We use the committee system, the Oireachtas and these internal departmental reviews as the mechanism by which we can chart to what extent we are getting the outputs we expect for the money we spend and to hold people to account thereafter.

In the context of the review, has the Minister been able to give guidance to the HSE on the distinction between capital expenditure and revenue and current expenditure? Embarrassingly, the Minister had to come to the House some years ago to correct errors in the HSE's capital budget. In recent days, we have again seen the HSE underspend its capital budget by €90 million only to deny it is a problem as the money can be switched over to revenue. The difference between capital and current expenditure is fundamental. Leaving aside all this other fancy stuff, has the Minister been able to talk to the HSE to establish whether it has made another multi-million euro error in its distinction between capital and revenue? Has the Minister managed to ring and sort it out for them? There is no point talking about reviewing public expenditure if the HSE, which spends nearly €13 billion and rising per year, cannot distinguish between what is capital and what is current.

I call Deputy Caoimhghín Ó Caoláin.

Is the Minister afraid to comment? Has the HSE got the figures wrong again?

I asked Deputy Ó Caoláin to speak. The Minister will reply afterwards.

I am trying to be in order.

Sorry, I apologise.

Has the use of public private partnerships been looked at in the context of any of the reviews of which the Minister has advised the House this afternoon? Would the Minister support the initiation by the Comptroller and Auditor General of a full review of current and previous PPPs to compare Revenue costs and wastage to the long-term projected costs and potential costs of the alternative approach to such projects?

To answer the questions in reverse order, I am aware of Deputy Ó Caoláin's outright opposition to public private partnerships. PPPs can be and are used to meet public sector benchmarks. We establish if there is a way to carry out a project through public private partnership which is better than through the traditional procurement method. There is no doubt that the private sector is in a position to deliver projects far more quickly, unfortunately, than the public sector currently can. It is a reality those of us who support public services must ensure we deal with to get the efficiencies required. Taxpayers are agnostic in Tubbercurry and everywhere else about who builds a school as long as they get one. It is our job as the people who are accountable for taxpayers' money to ensure the process we use, whether traditional procurement or PPP, and the mechanisms we put in place confirm for taxpayers that we have adopted the most effective approach.

PPPs are a feature of our multi-annual capital programme and will remain so. I would hate to think where our roads programme would be were we simply depending on traditional public sector procurement and interaction between local authorities to build a motorway system.

I did not ask for a defence. I asked if it had been included in the review.

It is necessary to defend it because it is under constant attack from the Deputy's quarter.

Fair enough. We both know where we stand on this issue.

I do not agree——

Can the Minister not answer the question?

Let me answer your question.

As I move specifically to answer, I do not agree with the idea that we should continue to review every aspect of governmental activity when it is clear that we have already had a review of the issue under the schools initiative. We have put forward reforms and improvements, like the public sector benchmark requirements, which deal with a great many of the issues. We cannot continue to roll the matter over, argue repeatedly and expect that people will find schools on their doorsteps while we are here talking about it. Let us get on with the business we have been told to engage in. While we look at reviews and listen to what people have to say, Government has to govern and make decisions. I am satisfied the improvements in public private partnership processes are such as to provide the best possible value for the taxpayer. The public sector benchmark is our best guarantee of that. Where a PPP proceeds, it proceeds on the basis that it beats those benchmarks.

Is the Minister saying he has not reviewed and will not review?

We reviewed it ad nauseam. While Deputy Ó Caoláin wants to go off and have a chat about it at the Committee of Public Accounts my intention is to be a member of a Government that will get things done for people. Deputy Ó Caoláin can go off and have a chat about it.

When did the Minister review it?

That is my answer to the question.

I asked the Minister a question.

I answered the Deputy's question twice. We disagree on this issue as I set out in my first point, and I do not expect the Deputy to agree with me on it.

That is my position and when Deputy Ó Caoláin's party has 84 seats he can come over and do whatever he wants.

The Minister is not prepared to look into the matter.

With regard to what Deputy Burton stated, the Minister for Health and Children will keep our capital programme under review. We need to implement our capital programme and with regard to this matter the Minister will report to Government in due course on the state of progress in any given area.

We will move on to Question No. 82.

May I receive the reply to Question No. 82 as a written reply and move on to Question No. 83?

Is that agreed?

I am always anxious to accommodate.


Question No. 82 answered in writing.

Carbon Budget.

David Stanton


83 Deputy David Stanton asked the Tánaiste and Minister for Finance the terms of reference of the carbon budget he plans to introduce; if this will be produced as part of the Estimates process; and the way choices on the allocation of this budget will be presented to the Dáil. [17324/07]

Eamon Gilmore


96 Deputy Eamon Gilmore asked the Tánaiste and Minister for Finance the way the proposed carbon budget, to be produced in conjunction with the annual fiscal budget will work in regard to the commitment in the programme for Government; and if he will make a statement on the matter. [17154/07]

I propose to take Questions Nos. 83 and 96 together.

The programme for Government indicates the Government will mandate the Tánaiste and Minister for Finance to present an outline carbon report in conjunction with the annual financial budget. As the programme for Government suggests, the content of a carbon budget will be a matter for the Government to decide.

As the Deputy is aware my colleague, Deputy John Gormley, the Minister for the Environment, Heritage and Local Government, has primary responsibility for the issue of climate change and so will have a major input into the establishment and configuration of the carbon budget. My Department will consult the Department of the Environment, Heritage and Local Government on all aspects of this.

The data collated for the carbon budget will be obtained from several agencies. Accordingly, it may take some time to put all this data together. The Government will consider the parameters of a carbon budget and will report in due course.

With regard to the carbon budget, will the Oireachtas be presented with choices in the same way as it is for the Estimates in the ordinary budget process whereby we can make decisions on various policy approaches? Will it be a dynamic process of this nature or will it record in a dead way what happened in the previous year?

As the programme for Government points out, the Minister for the Environment, Heritage and Local Government, who has primary responsibility for the issue of climate change, will produce an annual report outlining our use of energy in the preceding year, the progress made in meeting reduction targets and Government plans to meet the targets of the following year. An effort is being made——

The Minister for Finance will introduce this under the programme for Government. He cannot say it is the responsibility of the Department of the Environment, Heritage and Local Government. It is his carbon budget.

I will outline the general position but under the programme for Government the detailed issues of how we will proceed to meet the target for the following year will be a matter for the Minister for the Environment, Heritage and Local Government.

It is suggested in the Programme for Government that the Minister for Finance will do it and not the Minister for the Environment, Heritage and Local Government.

If Deputy Burton reads the programme for Government——

Let us not get into semantics.

It is not semantics.

The programme for Government points out that I will incorporate the carbon budget as part of my budget and the following day the detail of how we will proceed——

It does not sound like the Minister has internalised this idea.

I have internalised the idea.

The Minister sounds very enthusiastic.

I want to ensure we have a workable arrangement whereby we have the dynamic discussion Deputy Bruton mentioned.

It is another fairy tale.

Will each Minister produce an account of his or her carbon footprint on an annual basis with regard to travel and other energy-using devices to which Ministers resort?

It depends on the size of their shoes.

In many European parliaments Ministers keep an account of their carbon usage and it is reported. Governments purchase carbon offsets every time they take a long-distance hike and they invest in a tree somewhere. I invite the Minister to have an entire rain forest named after him——

To cut it down to answer all of the Deputy's questions.

Some Ministers in this Government have bigger carbon footprints than others. We know the Minister for Finance is unlikely to be one of them. It would be interesting to know what it is. Do the Minister's Green Party colleagues have him making a note of his carbon footprint on a weekly basis?

Along with bicycle clips.

It is important that the Opposition does not become so frivolous so soon.

The Minister is no fun. Now that he is the dauphin he has changed.

It is "no fun" day for Deputy Burton and she will have five years of it.

It could be done on the back of an envelope.

The Minister for the Environment, Heritage and Local Government will bring forward the full report in respect of all Departments and agencies.

Written answers follow Adjournment Debate.