Motor Vehicles (Duties and Licences) Bill 2013: Second Stage

I move: "That the Bill be now read a Second Time."

I am pleased to open the debate in the Dáil on the Motor Vehicles (Duties and Licences) Bill 2013. The primary purpose of the Bill is to give legislative effect to the increases in motor tax rates and trade plate licences contained in the financial resolution on motor tax passed by the Dáil on budget day, 5 December 2012. The new rates apply to motor tax discs and trade licences taken out from budget night for periods beginning on or after 1 January 2013. The Bill provides for the same increases in motor tax as contained in the financial resolution, namely, an increase of 7.5% applied across most categories of vehicle and to trade licences. The average increase for vehicles taxed on the basis of CO2 is 19.8%. It is anticipated that the proposed increases in motor tax rates will raise approximately €86.5 million extra in 2013.

Members will recall that in budget 2012, my colleague, the Minister for Finance, announced a review of the carbon banding applying to vehicle registration tax and motor tax, with a view to having a revised taxation structure in place for the budget. The Government's twin priorities have been to ensure the continuation of the positive environmental impact on vehicle emissions and the protection of the tax base. Under the new motor tax structure, the A band is split into four bands that correspond with the restructuring carried out by the Minister for Finance for VRT purposes: 1-80g/km, 81-100g/km, 101-110g/km and 111-120g/km. There is also an additional zero emissions motor tax category to provide an additional incentive for electric cars. Band B has been split into two 10g bands.

The revised banding recognises that ever more fuel efficient cars are becoming available and allows for the differentiation of the environmental incentive in favour of the most environmentally friendly vehicles now and into the future. The reduction in tax for electric vehicles recognises that there are no emissions at the point of use of these vehicles. The changes ensure a strong environmental incentive remains in place for purchasers of new cars to buy the clean option, and for the motor trade to place the cleanest options on the market in this country. The restructuring also responds to the challenge of maintaining the motor tax base because, while the move to lower emissions cars is welcome from an environmental perspective, it has represented an increasing loss of income to the local government fund for the funding of local services.

Since the introduction of the CO2-based system in 2008, the number of vehicles taxed on the basis of CO2 has increased by approximately 5% year on year. At the end of January 2013, the CO2 fleet contained nearly 448,000 cars comprising 24% of all cars on the road.

Of these, over 403,000 are taxed at the three lowest bands. In 2012, for the first time, over half of all new cars purchases were in the A band, with the lowest rate of tax.
As the number of vehicles based on CO2 has increased, with their attendant low rates of tax for the most energy efficient bands, receipts from motor tax have shown a parallel decline, from €1.06 billion in 2008 to €1.01 billion in 2011. Income would have been in the region of €954 million in 2012 if no increases in rates had taken place in the last budget. This would have been a reduction of 5.5% over the previous year. Once the older cars are all replaced by cars taxed on CO2 over the next 15 years or so, it is estimated that total motor tax from cars would fall by more than 40% if the taxation structures were to remain unchanged. In the current economic circumstances, and given the need to maintain a diversified and stable taxation system, this loss of income must be addressed with a gradual rebalancing of the rates paid on the old engine capacity system and those paid on the CO2-based system.
In 2012, €46.5 million of motor tax income was transferred from the local government fund to the Exchequer. This year, an amount of up to €150 million will be similarly transferred. These are necessary measures towards the reduction of the national debt. The wording of an amendment to the Local Government Act 1998 to allow for the legislative underpinning of this year's transfer is close to finalisation and an additional section to the Bill will be introduced on Committee Stage. It is intended to word the amendment in such a way that the amount of the payment in late 2013 will have regard to the balance in the fund when all commitments provided for in the 2013 Revised Estimates for public services have been met. It should be noted that the projected income to the local government fund from motor tax in 2013 is in excess of €1.15 billion. Accordingly, the balance of funding available to local authorities will be the same as last year even if the maximum of €150 million is transferred.
I should stress that the Government is committed to supporting the local government fund and it will retain the bulk of the income from motor tax to be used to fund local services. Deputies will be aware of the significant role the local government fund has played in the financing of local government since it was established in 1999. The establishment of the fund and its funding from motor tax receipts has created an important link between the amount of tax paid by motorists and the visible and concrete service they get for that tax in terms of investment in the road network.
In seeking to maximise income to the fund, I will be bringing forward a Bill shortly to close off the arrangement whereby a vehicle owner can declare retrospectively that his or her vehicle was off the road. Provision will be made for a declaration to be made in advance that a vehicle will be taken off the road. This change is designed to close off a loophole that disadvantages compliant taxpayers, and it is expected to bring in an additional €55 million in a full year.
Turning to the provisions of this Bill, it contains six sections and a Schedule. Sections 1 and 6 are procedural. Section 2 sets out that the rates apply to licences taken out for periods commencing on or after 1 January 2013. Section 3 provides for the Schedule to the Bill, with the new rates, to replace the existing Schedule in motor tax legislation. Section 4 provides for the increase to apply to vintage or veteran vehicles. Section 5 provides for the increases that apply to trade plates and replacement trade plates.
I would like to highlight to the House what the new tax rates mean in real cash terms in relation to private cars and goods vehicles which make up over 91% of the national fleet. For private cars, taxed on the basis of engine size, the extra cost will be between €14 and €38 a year for vehicles up to 1700 cc. This cohort covers 69% of all cars taxed on engine capacity. For cars up to 2.5 litres, the annual increases will be from €44 to €75 and for those from 2.5 litres upwards, which account for 2.4% of the engine capacity fleet, there will be an additional €90 to €126 per year.
Rates for private vehicles taxed on the basis of CO2 are increased by between €10 and €92, with the level of increases graduating upwards from the most environmentally efficient A bands to the least environmentally friendly G band. The increase for the lowest band, the new band A1 below 80g/km, is the lowest of any increase in motor tax, and the rates of increase up to band A3 at 110g/km are below the average applied to the CO2 tax structure. This continues the message, in place since 2008, that the lower emissions vehicles will attract the lower rates of motor tax.
For goods vehicles, the effect of the 7.5% increase will vary depending on the size, in weight terms, of the vehicle. Some 90% of vehicles in this category are at the lowest level of charge, meaning that owners will pay €333, representing an annual increase of €23 or 44 cent per week.
The vehicles that make up the remainder of the national fleet consist mainly of agricultural tractors - 2.6%, motorcycles - 1.5%, vintage vehicles - 1.1% and small public service vehicles - 1%. All these vehicles have a separate tax class with a concessionary rate of tax on or under €102 after the increase of 7.5% has been applied.
A 7.5% increase is also proposed for trade licences, or trade plates as they are known. These are the registration plates used by motor traders on vehicles which are temporarily in their possession in lieu of taxing such vehicles. While there are strict restrictions on the use of the plates, they are transferable between vehicles. The increase for a pair of trade plates will be €48 per annum.
I also want to point out a couple of minor technical amendments from the financial resolution. One is in section 3 relating to the amendment to Part I of the Schedule to the Act of 1952. Prior to 1 January 2011, passenger cars were categorised as category A vehicles for VRT purposes. Section 102 of the Finance Act 2010 amended section 130 of the Finance Act 1992 to provide that a category A vehicle means a category M1 vehicle. While the financial resolution referred only to category M1 vehicles in the paragraphs setting out the new rates for private cars, some of the later paragraphs in the Schedule, which are not being amended in this Bill, refer to "a Category A vehicle or a Category M1 vehicle, as the case may be". Accordingly, for consistency throughout the Schedule, the amendments to subparagraph (d)(i) and (d)(ii) of paragraph 6 to the Schedule have been amended to reflect the latter wording. Also, and again this relates to section 3, rather than replace Part I of the Schedule to the Act of 1952 in its entirety, as has been the practice arising from previous rate increases and carried through to the financial resolution, only those paragraphs that contain rate increases are amended. This keeps the Bill as concise as possible.
A further technical amendment on Committee Stage may be necessary to increase from €99 to €119 as the threshold below which tax is payable on an annual basis, and this is being considered in conjunction with the Attorney General's office. This provision applies to vehicles that are charged concessionary rates of tax, such as agricultural tractors, island vehicles, small public service vehicles, school buses, etc. The intention would be to maintain the status quo for vehicles in this category.
This is a short Bill with the purpose of giving permanent legal standing to the increases in motor tax introduced by the financial resolution passed by Dáil Éireann on 5 December 2012. I commend the Bill to the House.

Ordinary motorists who are already struggling with increased fuel costs have been hit by significant increases affecting all 1.359 million motor owning households in the country. These increases in the Bill to give effect to the changes announced in the budget are expected to yield an additional €100 million yearly. The choice to buy clean and green vehicles has been hit with further increases on top of last year's hikes. The purchaser of a band A car has seen hikes of almost €100 since 2011 in their tax while band B cars have seen an increase of up to €130. The average rates of motor tax will be €315 for vehicles based on CO2 emissions compared with €512 for cars taxed on the basis of engine capacity. These costs are disproportionately borne by those motorists who in good faith availed of incentives to buy low CO2 emission vehicles in the past.

We believe that we must have a motor taxation system that is not simply a revenue grab by the Government. There must be fair, transparent and predictable motor taxation frameworks which incentivise families to purchase environmentally friendly cars and provide a stable revenue base for Government. The continued targeting of environmentally friendly cars on top of last year's changes is a regressive move by Government that cannot be defended on purely revenue-based grounds.

In our pre-budget submission we earmarked an overhaul of the motor taxation system that would also yield a €100 million increase but not rescind the environmental platform that we built up while in government. Our vision for the motor taxation regime is one that recognises the fact that motorists contribute around €4 billion to the Exchequer through taxation, VAT and excise duty. They need a fair and transparent system that allows them to make long-term decisions on car purchases without the fear that the Government will hike up their taxes in the near future.

The decision to incentivise low CO2 emission vehicles is having a real impact on Ireland's efforts to contribute to tackling climate change. A total of 88% of new vehicles registered since 2008 are in the A to C bands, as motorists have responded to the incentives and switched from high-emission cars to low CO2 emission vehicles. The switch was made on the basis of the financial incentives provided. The Government is now further jeopardising that progress. The connection between the rate of tax one pays and the CO2 emissions from one's car was at the heart of the introduction of the CO2 based bands in 2008. It ensured a link in the motorist's mind between driving an environmentally friendly car and paying a low motor tax rate. This Bill obviously further erodes that connection. It downgrades the importance of environmentally sound practices at the heart of broader public policy.

The measures designed to incentivise clean and fuel-efficient cars were a direct response to the growing threat of climate change as laid out in detail in the seminal Stern report. Unabated climate change could cost the world at least 5% of GDP each year. If more dramatic predictions come to pass, the cost could be more than 20% of GDP per annum. The cost of reducing emissions could be limited to around 1% of global GDP and people could be charged more for carbon-intensive goods. What we do now can only have a limited effect on the climate over the next 40 to 50 years but what we do in the next ten to 20 years can have a profound effect on the climate in the second half of this century.

A recent Eurobarometer survey found that the issue that Irish people ranked as being "most important" to them personally was the cost of living, which was ranked highest by 44% of respondents. Car sales dropped by 12.5% last year, illustrating the challenges the motor industry faces, which this Bill will only serve to worsen. How seriously can we take future promises on incentivising environmentally friendly purchases when previous commitments are not being honoured? Rising fuel prices in recent years are a growing concern for motorists and these motor tax increases further hit already hard-pressed households. Fears about the potential impact of the Iranian embargo and the volatile situation in the Middle East, exacerbated by the euro crisis, mean that the €2 barrier for a litre of petrol could potentially be breached this year. The proposed tax increases further penalise motorists on top of these broader global developments.

The assessment of those involved in the industry is quite clear. AA Ireland stated the following:

There is no way to dress it up: the car tax increase announced today will push up the cost of living for car owners affecting almost every household in the country. For vehicles bought from next year onwards there is some justification for an increase or fairly soon every car on the road will be tax band A, such is the progress being made on emissions. However for the cars already on the road this is a tax increase, pure and simple.

In addition, Mr. Conor Faughnan, director of consumer affairs with AA Ireland, said:

Drivers of older vehicles will feel harshly treated. Those pre-2008 cars are already highly taxed and they are not luxuries; in many cases ordinary motorists can barely afford to keep them on the road. For anyone who bought a low-emission car on a low tax promise, this is the day when that promise was broken. It is clearly an act of bad faith affecting over 300,000 motorists who believed the promise and bought a cleaner-greener car in the last four years.

The Society of the Irish Motor Industry, SIMI, stated that the "motorist is already paying enough tax to be on the road and new car sales are down 10,000 on last year. We have always said that more tax would be generated from increasing the sale of cars rather than increasing taxation".

My party is opposed to the Motor Vehicle (Duties and Licences) Bill. It marks a continued Government attack on motorists struggling to make ends meet, with rising living costs betraying the incentives set out in 2008 to purchase environmentally friendly cars. The financial incentives put in place in July 2008 to encourage drivers to switch to fuel-efficient cars with low CO2 emissions were a core feature of efforts to tackle climate change. This Bill exacerbates last year's increases and further erodes the progress made in placing environmental concerns at the heart of public policy. It penalises those motorists who took the decision to use environmentally friendly cars by shifting the goal posts in the middle of the game.

I wish to focus on the Minister's comment to the effect that the bulk of road tax will go back to local authorities. It is important to remember that the road tax take is diminishing. The provisions to be enacted next week on the property tax will also form the basis for the funding of local authorities. The Minister expects to obtain a specific amount of money from these measures but in the event of him not achieving his targets, can he say today that local authorities will be subvented? Can he assure the House that they will not be penalised in the way they were last year for the failures vis-à-vis the household charge, despite the inadequacy of the preparations put in place prior to the authorities collecting that charge? Let us look at the various forms of income for local authorities. The road tax take will be down, the property tax may not meet the Minister's expectations, commercial rates will definitely be down, as will development charges and planning fees, and any other income streams for the local authorities will be insignificant, whether they be library fines, fire service charges and so forth. That being the case, will we see a further erosion of funding to local authorities?

I am particularly conscious, in this debate, of the difficulties local authorities are facing in terms of their road maintenance and restoration programmes. We all know of the progress that was made on the national primary routes throughout the country in the past number of years. We also know that there has been much progress with regard to many secondary roads. In recent years, however, with the fall in the level of funding being provided to local authorities for basic road maintenance, let alone restoration or resurfacing, the detrimental effects on our road infrastructure are becoming very evident. This is particularly true with regard to non-national, county and local roads. Some of my constituents have turned up at my advice clinics with invoices for repairs to their cars. I know from talking to councillors that this is the most pressing issue in my local authority area. Will the Minister give a commitment to address this? Will he carry out an audit across the local authority system? The situation is reaching crisis point. What procedures will the Minister put in place to address this? How can local authorities access funding to address these problems? In County Offaly, for example, 40% of the roads have a peat foundation, which is not the case with the roads in many other counties. Obviously, the maintenance and restoration costs associated with peat-based roads are higher than with other roads.

What equalisation process can be put in place by directing centralised funds to local authorities? Could the fund from the road tax take be used? Has the Minister devised a mechanism to address this issue, which is now approaching crisis point? In Athboy, for example, a St. Patrick's Day parade cannot take place because of the state of the road in the town. This is merely the tip of an iceberg that is coming towards us. It is incumbent on the Minister to give a commitment to the House, in the context of the Bill which continues the practice of using income from motor taxation to fund roads throughout the country, to consult the relevant authorities throughout the country, assess the situation nationally and devise a mechanism by which this issue can be tackled as soon as possible in order to stop the rot. There must be a constructive effort to address this issue and the means provided to do so. There must be a greater and fairer distribution of resources to those who need them most.

I use County Offaly as an example. Roads in that county are affected by their peat foundations. Other counties are affected by excessive rainfall, development or sand pits. In some cases planning requirements are not adhered to and there are poor enforcement regimes, leading to poor road conditions. Improvements in these areas must form part of the overall solution. A solution must be proposed, debated and agreed very soon before matters get out of hand, because we are at crisis point.

Fianna Fáil agree that savings need to be made, but we do not believe this can be done simply by increasing tax and regressing the progress on low CO2 emissions in recent years. That progress will be negated by what was done last year and by what is proposed in the Bill

The Irish motorist, the motor industry and businesses that rely on private transport vehicles have sharply felt the effects of the recession in terms of motor related costs, car sales and employment in the industry. Budget 2013 included new measures that will have a further effect on both consumers and car dealers.

The Irish motor trade was and remains a significant employer in this State. The sector accounted for 49,600 employees at the beginning of 2009 but had shed 14,300, or 29% of its workforce, by the end of that year. Sales of both new and used cars are down as the customer feels the bite of lower disposable income, restricted lender financing and higher motor related charges.

It is essential for our economy that people can operate vehicles to get to work and to do business. A balance, of course, must be struck with the need to raise revenue and protect the environment. The balance in this Bill has been set wrong. It puts too much burden on motorists and does not target fuel inefficiency enough.

Successive changes in motor tax, VRT and excise duty costs have added to the strain on the industry. Fuel duty on petrol and diesel has already seen five changes since 2008. Irish motorists will be spending €1,400 a year more on fuel than they did just three years ago if current forecourt prices are maintained. In total, motorists are paying 23% VAT on motor fuel in addition to mineral oil tax and carbon tax of 58.8 cent per litre on petrol and 47.9 cent per litre on diesel.

The motor tax system received a significant overhaul in 2008 as the Government moved from an engine based tax to a carbon emissions based tax, in line with most other western European states. The number of EU countries with CO2 related car taxation went up to 15 in 2009 and Germany moved to the system in 2010. This move from engine capacity to emissions based taxation had the intended effect of shifting consumption towards more environmentally friendly vehicles.

However, it also had the effect of collapsing motor tax receipts and negatively impacting on the used car sales market, as cars registered before 2008 stayed in the old tax system based on engine size. The motor tax system is currently attaining its desired outcome, that of directing consumers away from fuel inefficient cars. The system must be made to take into account the carbon emissions of an engine, engine capacity and the value of a car in a fair, progressive, tax positive manner.

This must all be done in conjunction with a target based climate change policy like the one recently published by my colleague Deputy Brian Stanley. It must also find ways to support motor based industries which may make the shift to greater fuel efficiency but will still have to deal with a high and rising cost of doing business.

Over the last few years the cost of staying on the road for many motorists has climbed considerably while public transport alternatives have also risen in cost and services have been cut. There are many more people today who need private transport more than ever. This is a problem from an environmental point of view which is key to all our policies in the face of climate change, but this problem is precipitated by the large cuts to public transport which is more environmentally friendly and efficient but requires political will, planning and vision if it is to be provided properly.

Many people are left with no alternative but to use private transport and they are being forced to pay more now for something they have no choice in.

On average, motor tax on private cars registered from July 2008 will go up by €53 a year. These vehicles have already had their motor tax raised in previous years and considering those increases, this is quite a large hike. For some people this will be the last straw that makes private transport unavailable to them, given the very tight budgets many people operate on today.

Businesses also are on tight budgets. Small businesses which employ many people across the State and which the Government claims to want to help will be hurt also by this budget. Goods vehicles which are needed for doing business and for employing people will be, on average, taxed €117 more a year. This might not put goods vehicles off the road but could have the negative effect of workers getting fewer hours or pay cuts in order to shore up profit for the business, as is unfortunately a far too regular practice.

Vehicle registration tax, VRT, is also set to go up by as much as 3%, making it more difficult for people to upgrade to more environmentally and economically friendly vehicles which would be liable for less motor tax. This is a particular problem for many of the taxi drivers I am in contact with through my office. They will, through new regulations, have to upgrade their vehicle regularly to keep up with more regular testing after nine years. These are people who are already struggling to pay their electricity bills and fill their taxis with petrol. It is also worth noting that higher VRT makes upgrading to more fuel efficient and environmentally friendly vehicles more difficult for motorist who otherwise would like to do so.

Ordinary people seeking to drive to work, small businesses seeking to transport their goods, even school buses, tractors, hearse and construction vehicles are now less affordable and people are once again hit harder by this Government, for no other reason than its unwillingness to tackle those on high earnings.

The system of taxing motor vehicles must be reviewed and future-proofed by redesigning the motor tax bands to reflect carbon emissions, engine capacity and vehicle value. This will make the system progressive. The more expensive and inefficient the car, the more motor tax is paid. This will also maintain the incentive to purchase environmentally friendly vehicles.

This reviewed system would, I believe, generate more revenue and this increase on current revenue take could and should be redirected in order to reduce excise duty on petrol and diesel. Fuel costs are having a detrimental effect, not just on consumers but on businesses as well. Hauliers, for example, last year pointed out the need for a rebate on fuel costs in Ireland. The Government listened, and I welcome that. I believe coach owners are also being listened to.

Cost pressures on the haulage sector have seen haulage licence numbers drop by 1,300 in the last three years, leading to an estimated 10,000 job losses. Similar helpful measures must be looked into for other businesses for which petrol and diesel are a large part of their expenses. In its budget submission, Sinn Féin put forward a budget-neutral way of cutting excise duty on fuel by 5%. This was not adopted but would have had a very positive effect on the balance sheets of many businesses and household budgets.

Increasing motor tax revenue can be done in a way which is fair and continues to encourage a move to more environmentally friendly vehicles if we follow the approach of scaling rates on the basis of vehicle price, CO2 emissions and engine capacity. Doing this would allow the State to help struggling businesses, which would only further help the local economy, protect jobs and stimulate further the motor industry.

People do not see the benefits of these taxes. There are now numerous taxes attached to the motor industry, with tolls, metres, VRT, road tax and others but people do not see any benefit in local authority areas. We will drive people out of work because we will prevent them from using their own vehicles because costs are too high. We will cut down on revenue income by making it too expensive to drive.

There is a disparity in pricing between garages. The north side of Dublin seems to be dearer than the south side of Dublin, I do not why. The Minister should examine this and tackle garages, bringing them into the committee to explain the disparity across the city and State as a whole. Other European countries have moved towards tax based on emissions but we are moving away from that. We gave motorists a kick in the teeth in 2008 when we incentivised them to have CO2 friendly cars but now we have reneged on that in a further blow to motorists. This is being driven by a loss of revenue not environmental considerations on emissions.

Sinn Féin opposes this Bill because it is out of proportion to what is needed to generate proper revenues in the industry, to address problems in the industry as a whole and to make it fairer. It is not fair to look at this as a revenue raising exercise, we must look at it in terms of emissions and our meeting European targets in this area.

This Bill is about charging more and delivering less, the hallmark of this Government. The cost of going to work, leisure or school, particularly for those in rural areas without access to public transport, has reached a stage where people cannot afford to travel. At the same time, public transport is being withdrawn. In my constituency, 30 people have contacted following the withdrawal of a school bus service. That will result in 20 parents having to drive their children to school.

The major increase in motor tax in the Bill is more of the same, taking money from people's pockets and causing the domestic economy to deflate even further. Last year, motor tax rates increased by as much as 40% in some cases and here we see further increases.

Originally motor tax was ring-fenced for the local government fund to provide services. Since its peak in 2009, the local government fund has fallen by €348 million, from €1 billion to €652 million and the Minister told us in his opening remarks that a further €150 million will be transferred back to the Exchequer this year. That leaves €500 million, the exact figure due to be taken in at best by the property tax. Local authorities have lost income from commercial rates, metered water, development contributions, planning fees and many other areas. Their incomes have fallen substantially but at the same time motor tax costs have risen. Taking into account increases in lower emission bands last year, some categories saw increases of as much as 92%.

I debated the ring-fencing of the carbon tax fund with the Minister for Communications, Energy and Natural Resources. I was told that was never done and it was not possible. We both know that the local government fund was taken from a ring-fenced motor taxation fund. This is not about motor tax or carbon tax or property tax, it is general taxation under a different name. The property tax might be predominantly spent at local government level but there is no guarantee that it will all be spent at that level.

The Minister said in his opening contribution that there would be increases for the lower categories of up to 1,700 cc of between €14 and €38 per year. My car is smaller than that and I had an increase of €50 so I do not know where he is getting his figures from.

The car must have high emissions.

It is a Yaris, a small car with an engine that is less than 1,000 cc and it went up by €50. I doubt it will destroy the planet on its own. The numbers appear to be wrong.

Was that last year?

No, it was in the last month.

The Minister also mentioned how an increase of €23 per year is just 44 cent per week. The problem here is a failure on the part of the Government to look at the cumulative effect of all of these charges. People were genuinely insulted when the Minister came out with the remark that the household charge is €2 per week. It is not the Minister's money, it is the money in the pocket of a person who is struggling, who has an income that is falling and utility bills and mortgage or rent payments that are going up. The cumulative effect of those increases is destroying families. It is insulting to reduce it to that sort of statement, as if nothing else was happening. The Minister should consider the impact on people's households.

Many people have no choice but to use their cars. Many public transport services are being discontinued or towns are being bypassed as a cost-saving measure. The like of the national transport provider is in a serious deficit position. Some of these services can only be viably delivered if they are subsidised and there is not the ability to subsidise them.

Although not of the Minister's making, there is an unsustainable settlement pattern. For its size, Ireland has one of the largest road systems in the world because of how our settlement pattern has developed. That brings with it a need for road maintenance that must be taken into account. In the region of 700,000 people travel to and from school or work by car every day. In parts of Kildare, approximately two thirds of people commute. Combined with high fuel prices and falling wages, this imposes serious additional financial pressure. RTE broadcast a programme not that long ago about Rochfortbridge, which, ironically, is seen as a dormitory town. It showed how people are failing even to be in a position to seek work because of the prohibitive cost of transport. Most of them can only rely on private transport. We must look at this in a broader context.

On the Local Government Fund, the Minister is stating that this year €150 million of motor tax income is being taken from the Local Government Fund to the Exchequer. I recall the advertisements that were placed by the Department last year when there was pressure on residents to pay the household charge and there were all sorts of wrong claims made about how this would go towards maintaining parks, playgrounds and all sorts. The local authorities now have very significantly less, and they will have less again. Essentially, people will be asked to pay more and they will see a reduced service.

Roads all over the country are failing. Deputy Cowen pointed to the type of foundations in the road system in parts of the midlands, which includes parts of Kildare, and the level of usage. We have not really recovered from the two recent severe winters. If the roads are neglected in the way they were, I see us in years to come going back to do what a predecessor of the Minister did, that is, waging a war on potholes. We are starting to see them appear in numbers and as the Minister will be aware, around the country there is competition on the more extreme cases.

Grants for road maintenance have fallen from €363 million in 2007 to €232 million this year. Local authorities contributed €406 million from their budgets to regional and local roads in 2008 and this has fallen to €175 million last year. They are not willingly decreasing the amount. They have no choice but to decrease it because in many cases the level of discretionary funds is such that they simply do not have the money to spend. After wages, heat and light, insurance, running waste water treatment plants, etc., are decided, one sees what is available for the roads fund.

The Minister for Transport, Tourism and Sport, Deputy Varadkar, on Question Time the other evening, spoke of the considerable difference in the amounts spent on road maintenance and improvements by local authorities across the country. Some spend as little as 8% of their budget on it while others spend as much as 66%. That comes down to the level of discretion available. At this stage, one of the issues that needs to be considered in that context is the needs and resources model, which is a most discriminatory model because it looks at the historical situation and areas which are rapidly developing simply do not have those needs counted. In the case of the disabled person's grant which is being examined, for example, some local authorities cannot come up with the necessary local contribution. One can see that the level of discretion is better in some local authorities than in others. Often the local authorities that are regarded as wealthy are not wealthy at all because those are the ones which have a limited ability to draw down funds. That may account for the low level of funding that is distributed to road maintenance from some local authorities. The matter needs to be looked at seriously.

The major issue of the destruction of the environment is the other really important element of the Bill to which others have correctly drawn attention. The way this tax is designed, it will not reward good behaviour. In fact, it reverses what had been done on the culture change in the kind of vehicles people choose. It is immediately clear from the changes being made that no good deed will go unpunished by the Government. As I stated, motor tax has increased several times since the Government came to power and in each case those who made the conscious move towards lower-emission engines were punished severely. This Bill continues that trend. A 92% increase, as I mentioned earlier, applies to those in band A for emissions. If one did good several years ago by trading down the emissions bands, one is severely punished today. Encouraging positive environmental behaviour through taxation is a tried and tested method and there are wider societal advantages in doing so. It makes good economic sense because at some point if we do not meet our targets, we will have to buy carbon credits. Whether or not such targets are included in a Bill, Ireland has international obligations. However, such taxation requires trust on the part of the taxpayer and that trust is being destroyed by the approach adopted because we are not rewarding positive behaviour.

The approach on carbon tax is the same. Essentially, putting it into a general fund rather than ring-fencing it means it is not a carbon tax at all. It is merely another tag that the Minister puts onto general taxation. The revenue it generates should go into a fund to provide for retrofitting, wind energy etc.

The Government is also placing our obligations to reduce emissions in serious jeopardy. Transport makes up 21% of the national emissions profile and most of it falls outside the emissions trading scheme. We are expecting a climate Bill. Last week we were told it would be next week. We will wait for that. On the example of today's behaviour, it is obvious that the priority for Government is not being backed up by the practical delivery of measures that change people's behaviour.

I will finish on a couple of points. On the settlement pattern, it is intended to produce a new national spatial strategy.

It is clear, if it was not previously, that the way we have gone about our settlement has caused and will cause us very serious problems in future. I do not believe it is possible to dissociate that from the kind of provision in the Bill. There may be a way to unpick that. Clearly if cars are going to be put beyond people's reach given the costs, on the other side we must provide public transport to allow people to function. Clearly we are doing neither.

The primary purpose of this Bill is to give a permanent basis in law to the increases in motor tax rates and trade-plate licences contained in budget 2013. For licences commencing on or after 1 January 2013, flat-rate increases of between €10 and €92 apply to private vehicles taxed on the basis of carbon emissions. Rates for private electric vehicles were reduced to €120 per annum. Increases of 7.5% apply to all other vehicles. Trade-plate licences also increase by 7.5%. The Bill provides that the new rates of motor tax and fees for trade plates apply to licences taken out for periods beginning on or after 1 January 2013, and that veteran and vintage vehicles will be exempt from the new regimes.

A review of the carbon banding of vehicles for VRT and motor tax was carried out in 2012. Following the review, the lowest emitting bands A and B were broken into six separate bands for motor tax purposes, along with a further zero-band for privately owned electric vehicles.

The proposals under budget 2013 will result in an across-the-board increase of 7.5% on cars registered before 2008, meaning cars with a 2 litre engine will see the annual tax bill jump from €660 to €710. A more modest 1.4 litre car will increase from €358 to €385. The smallest cars with a 1 litre engine, such as mine, will go from €278 to €289 per annum. In pure monetary terms, it is true that cars with higher emissions will continue to see their tax bill increase, with the least eco-friendly cars seeing an increase of €92 per annum. The owners of cars with lower or no emissions will see their tax bills fall. Emission-free cars bought since 2008 or electric cars bought before then will see their tax fall by almost a quarter, to a flat rate of €120 per year.

While increased taxes on cars are required given the economic situation the country is in, I suggest that they are heading in the right direction, given that those with the most environmentally friendly cars are still required to pay less tax. People who will be looking to buy cars in the future should consider smaller cars that have smaller engines and therefore emit less carbon dioxide, help our climate and make a contribution to dealing with climate change. People should also consider purchasing electric cars where possible. I call on the manufacturers of these cars to work towards making them cheaper to own and easier to purchase than they are at present.

We should also consider the alternatives available for commuters who travel to work by car. People who avail of public transport can avail of the tax-saver commuter-ticket scheme, which was established as an incentive for the use of public transport. These public-transport commuter tickets can be availed of when travelling to work by public transport bus or rail services. The scheme extends to include Luas services and also applies where a ticket covers more than one operator, for example, an integrated ticket covering Luas, DART, Dublin Bus and Bus Éireann services. This is an incentive to encourage people to switch to public transport and reduce traffic congestion.

Employees receive tickets either as part of their salary package, in lieu of an annual cash bonus, or as a benefit-in-kind. Savings arise because tickets are not subject to tax or PRSI. Employees only have to pay tax and PRSI on the "money" portion of their salary. Employer PRSI is also calculated on the "money" portion of the employee's salary. There is a benefit to both the employee and the employer through the scheme.

Leap cards, which were introduced during the lifetime of the Government, are another incentive towards using public transport and are proving to be a huge success in their use across multiple public transport modes across Dublin. I understand that leap cards will eventually be extended for use outside Dublin, which I welcome.

Another alternative to travelling to work by private car is the cycle-to-work scheme, a tax-incentive scheme which aims to encourage employees to cycle to and from work. It also has health benefits and will help in tackling the problem of obesity. Under the scheme, employers can pay for bicycles and cycle equipment for their employees and the employee pays back through a salary-sacrifice arrangement of up to 12 months. The employee is not liable for tax, PRSI, levies or the universal social charge on his or her repayments.

Where possible, people should use public transport, particularly in cities. Where public transport is not available, I encourage the Government to examine major public transport solutions for areas that are clearly in need of such solutions, as well as previously proposed projects that have been put on ice.

The Bill provides for more taxation, pure and simple. It is additional taxation for almost every household in the country, effectively targeting lower and middle-income families once again. The AA has stated:

There is no way to dress it up: the car tax increase announced today will push up the cost of living for car owners affecting almost every household in the country... However for the cars already on the road this is a tax increase, pure and simple.

"Drivers of older vehicles will feel harshly treated" says [Conor] Faughnan. "Those pre-2008 cars are already highly taxed and they are not luxuries; in many cases ordinary motorists can barely afford to keep them on the road."

"For anyone who bought a low-emission car on a low tax promise, this is the day when that promise was broken. It is clearly an act of bad faith affecting over 300,000 motorists who believed the promise and bought a cleaner-greener car in the last four years."

We know that the greatest percentage increase in motor taxation was for those driving carbon-inefficient vehicles who will experience the greatest distributional advantage brought about by the changes in the Bill. This is simply a tax measure - another method of extracting tax from ordinary householders. We have a 19.8% increase on the back of huge increases last year - I recall them being between 40% and 50%. Some 82% of households will be affected by this increase. There are 1.8 million or 1.9 million owners of cars in the country. Recent statistics indicate that the purchasing power of a typical family has reduced by 10.8% in the past two years. That does not take into account, for instance, the cost of electricity and gas, the new water charge from 1 January 2014, and refuse charges. Nor does it include the cost of clothing, footwear or replacement furniture. The typical family with huge reductions in their purchasing power in recent years must now endure another tax targeted at them.

It also calls the Government's commitment to the motor industry into question.

As everybody knows, the motor industry is hanging on by its finger tips. There was a reduction of 10,000 in the number of cars purchased last year and a further reduction in cars purchased at the end of January this year. The Minister will probably refer to the re-registration of cars in July. As stated, the motor industry is on its knees. This additional tax will not be of assistance to the industry in terms of the sale of new cars or the retention of jobs. It will result in fewer cars being purchased and put more jobs in jeopardy.

The Minister referred to the roads fund. I am sure I heard him say that €150 million will be taken from that fund to pay down debt. We are already servicing debt that is not and should not be ours. This means the road funding available to the local authorities will be reduced again this year. Deputy Catherine Murphy mentioned that so far funding has been reduced from €363 million to €270 million. Road funding available for South Tipperary County Council, which is in my constituency, has been reduced significantly this year. Many county and minor roads throughout the country - this is particularly true in south Tipperary - are in an atrocious condition. I am regularly visited at my constituency office by people with invoices in respect of car repairs. I was recently visited by a man whose vehicle had been through an NCT and was deemed roadworthy, but had to be consigned to the breakers yard because of damage caused by potholes in the roads in his area. I went with him to see these roads, which were almost continuous potholes. This is evident throughout the country. We heard in the media today that a St. Patrick's Day parade has been abandoned because of potholed roads. Road funding should be used for the repair of roads throughout the country by the local authorities.

Deputy Seán Kenny's reference to alternative modes of transport caused me to smile. It is obvious the Deputy lives in Dublin. Unless one lives in a large urban area or city, there is little public transport. In most other areas, there is no public transport. People are dependent on their cars to get them to work, if they have work, to take their children to school, to go shopping or attend a football match. They do not have the option of the DART, Luas or bus services. These services are simply not available. Where they are available, they have been reduced. The Limerick-Clonmel -Waterford rail line was closed recently. This is happening not only in south Tipperary, but throughout the country. Alternative transport might be an option in Dublin but it is not an option throughout the country, particularly in rural areas.

I ask that the Minister communicate with his colleague, the Minister of State, Deputy Kelly, in regard to the rural transport initiative. The rural transport service in south Tipperary is well run. The Minister of State, Deputy Kelly, proposes to dismantle this service, which is community operated and run. It is an effective and excellent service, in particular for elderly people living in rural areas where there is no public transport. The Minister of State, Deputy Kelly, should keep his hands off the rural transport initiative that is working effectively in south Tipperary.

The increases proposed in this Bill will I am sure result in increased taxi fares in Dublin. The €100 million raised through this tax will result in a further €100 million being taken out of the economy. It is a continuation of austerity which will result in people having less money in their pockets to spend and less money to keep businesses open and people in employment. This is the wrong policy, which has been the hallmark of this Government since taking office.

I recently met a constituent who has owned a motor home for a number of years, which was purchased in England and imported into Ireland. The cost of registering the vehicle here at the time of import was €200. When the constituent inquired about the cost of registering such a vehicle now he was told it would be 13.3% of its market value, or €4,000, which is a very significant increase. I ask the Minister to look into that. It does not appear right that registration of such a vehicle could have increased from €200 to €4,000.

As I stated, this Bill is simply another form of general taxation targeted at families.

I thank the Deputies who contributed to this debate. I have noted what they had to say. As I stated earlier, any increase in taxation is unwelcome, in particular when it is the second increase in a few short years. It is an unavoidable fact that the new CO2 based system introduced in July 2008 by my predecessor resulted over time in a decline in motor tax receipts. As rightly pointed out by Deputy Healy, the manner in which this was implemented did not help the motor trade. While the stated intention was that the switch would be revenue neutral and provide an environmental incentive towards more fuel efficient cars, the tax was structured in such a way that in the absence of budget increases the effect by the time the switch to CO2 tax was completed over the next decade and a half would have been a shrinking of the tax base by 50%. Where do we get the money to fund local services if that fund shrinks by 50%? This will be exacerbated as technologies improve and, as mandated through the EU, a greater proportion of cars are ever more efficient in the future. As I stated, the majority of new registrations are in the lowest tax band. This year, for the first time, this is apparent. Without restructuring the lower CO2 bands, progressively more cars would be in the lowest taxation classes and differentiated rates of tax and a mechanism to drive further environmental improvements would no longer be available.

The changes we have made with an 80g/km floor for the A1 band will continue to provide an incentive to the trade and consumer to buy the lowest emission cars. A car at 80g/km represents a 33% increase in fuel efficiency and the same decrease in CO2 emissions compared with a 120g/km car. We are refreshing the signal to the market that maximum ambition in reduction in emissions continues to be the aim. Despite the negative impact on the public finances, the net result of the introduction of the CO2-based system is that the average car entering the national fleet is 22% more energy efficient than was the case prior to rebalancing vehicle taxation in 2008. This is welcome and will continue to be an essential objective of motor taxation, but maintenance of the revenue base is also essential in current circumstances.

Some purchasers of cars taxed on the basis of CO2 emissions may describe themselves as feeling cheated. It should be borne in mind that despite this being the second increase in two years, the vast majority of cars taxed on the basis of CO2 emissions still have tax rates which remain below the tax that would have been paid under the old system based on engine capacity. In restructuring the carbon banding we have also maintained the basic structure of the tax and improved the relative benefits of those who have bought or will buy the most efficient cars available in the market. For the budget increases to generate the necessary revenue as part of our approach to expenditure savings and tax increases, it has not been possible either to exempt from increases those older cars based on engine capacity which still make up three quarters of the private car fleet or to exempt commercial vehicles. However, it should be noted the rate of increase for these categories is less than the average for the CO2 fleet.

Deputy Cowen and others raised the issue of climate change, and these matters will be dealt with in the near future. We will bring forward a secretariat report as part of our publication of the heads of the Bill, which we hope will be next week. Deputy Cowen also raised the issue of fuel prices. The budget for 2013 did not include an increase in the price of petrol or diesel, nor was there an increase in VAT or a carbon tax on transport fuels which would also affect the price at the pumps.

There was no decrease either.

In the budget for 2013, my colleague, the Minister of Finance, announced a rebate on diesel, which is a decrease, with effect from 1 July 2013 for the transport sector and extended it to the bus sector in the recent Finance Bill, and this is welcome.

The Government is very committed to the local government fund. Despite the fact that the amount to be transferred from the fund to the Exchequer is higher than last year, income retained in the fund for local services following the transfer will be the same as last year. As the fund is not permitted to run an overdraft, the payment to the Exchequer will be limited to the balance of the fund at the end of this year when all other funding commitments have been met or to €150 million, whichever is the lesser. The amount will be decided later in the year in consultation with the Minister for Public Expenditure and Reform, Deputy Howlin.

Many Deputies spoke about various methods of getting the necessary resources for local government. I thank those who contributed to the household charge in 2012, as 72% of the people, the silent majority, decided to accept what the Government wished to do and paid in excess of €117 million against the wishes of Deputy Catherine Murphy and others. The money is for the purpose of providing local services.

There are 200,000 missing houses.

Deputy Murphy should not reorientate the debate now that she has lost.

I am just telling the Minister.

The silent majority is on our side, with 72% having paid, and those people want to ensure they are legally compliant.

There are 200,000 more houses than the Minister said there was.

We will stay with the Bill.

I am sure Deputy Murphy's constituency includes people living in rural areas, and 82% of people registered for their septic tank and those who advocated non-payment of the septic tank charge last September have cost people €45.

I do not know why the Minister is telling me this.

I did not hear Deputy Murphy mention this. People have paid €50 in recent weeks when they could have paid €5 last September, but people advocated that they should not do so.

The Technical Group did so.

Yes, it is a technical group.

Is Deputy Murphy a member of the Technical Group?

It is not a political party.

It is when it suits.

Equalisation remains a core principle of the general purpose grant allocation process. The amount of funding for equalisation in 2012 reflected the need to ensure that in an environment where all local authority revenue sources are under pressure, local authorities have the resources to provide a reasonable level of services. I remain committed to the principle of equalisation in the allocation of general purpose grants. In the current difficult financial circumstances for local authorities, it is critical that all citizens and all customers can expect a reasonable level of service provision from the local authority notwithstanding what we mentioned with regard to property tax, that 65% will be initially retained by the local authority.

I agree with all Deputies who mentioned the difficulties with local roads. It is a very serious problem which is getting more difficult. I have been in discussions with the Minister for Transport, Tourism and Sport about even greater flexibility on projects and the expenditure he allocates to the local government system. Local authorities already have much discretion over certain funds but not over all funds. The Minister has been in contact with the County and City Managers Association recently to see what can be done to ensure we have a basic level of maintenance for roads. The point was articulated in particular by Deputy Cowen, but the situation is replicated throughout the country because of the very difficult weather conditions we have had, particularly the rainfall in recent winters. This is now taking its toll on the condition of local roads. We are very conscious of this and we are seeing how we can help local authorities within their existing financial framework.

I asked somebody to check out the Toyota Yaris about which Deputy Murphy asked.

Was I overcharged?

For a pre-2008 Yaris or equivalent below 1,000 cc, the rate of increase in the budget is €14, but for a post-2008 Yaris or similar taxed on the basis of CO2 the increase for a rate of 111g/km to 120g/km is €40 and for a rate of 121g/km to 130g/km is €45. Deputy Murphy has confused me by mentioning €50.

It was not €23 for a 1,700 cc engine.

Perhaps the Deputy may have to review the situation with the local authority. Perhaps she is entitled to a refund based on this information. I hope she is. Every little helps.

Deputy Healy mentioned the rural transport service and I am very conscious of the good service provided in Tipperary, Kilkenny and surrounding counties where the rural transport programme is administered by Pobal on behalf of the National Transport Authority. A total of 35 rural transport groups are funded under the programme. These are managed mainly by voluntary management committees and Pobal makes specific funding allocations to the individual groups. The Minister of State, Deputy Kelly, is examining how we can integrate some of these services through the local government system. We have established a working group to see how local government and the existing service-----

Unfortunately reviews always mean reductions.

The Deputy is reading too much into it, and reading too much in the local newspaper.

I am not. Medical cards and SUSI were complete disasters.

If the Deputy listens he might learn a little bit. He is making a statement in the absence of information. We have established a national committee to examine this. I am very conscious of what the Deputy said. It is an important service and people in rural areas should expect a basic level of service in transport in the absence of even a good road from Clonmel to Kilkenny.

Absolutely, or in the opposite direction.

There is the potential for local government to have a positive role in its involvement in many local services and I do not think Deputy Healy would disagree with this, unless he is going to abandon his support for Clonmel Borough Council.

The Minister could close the road from Clonmel to Kilkenny if he wishes. Too many things have gone in that direction recently.

What direction?

To Kilkenny from Clonmel, such as the barracks and our acute psychiatric unit.

We are making up for lost time.

We can have this debate again, I am sure.

Many Deputies want more finance, which is understandable, and perhaps more ways of raising money, but they do not like the one we are discussing now. I suppose this is understandable in politics. Protecting and providing the funds we have to make the necessary improvements in the service or maintain the level of service we have is exactly what the Bill is about. If we did not have this legislation we would not have the money in the fund to do the type of work advocated by Deputy Healy. There is no easy way.

The Minister is not doing it.

I know Deputies Murphy and Healy advocate increases in income tax and putting more on the working person to get the level of finance necessary to run our services.

No, the 595,000-----

We know where the so-called socialist parties stand on these issues.

The Minister will not tax them.

Deputies should allow the Minister to conclude.

I know Deputy Healy is against property tax, but I am surprised that socialists are against such a tax. I have not come across any easy way of raising revenue to provide services.

He will not take it off the rich anyway.

I have not come across any suggestions either from Deputy Healy or anyone else, except to increase income tax. If Deputies are against everything, including property tax and motor tax, I suppose that is life in politics, but they will not provide services for citizens which is what this measure seeks to do. I commend the Bill to the House.

Question put and declared carried.