I move amendment No. 2:
To delete all words after "Dáil Éireann" and substitute the following:
— the annual rate of consumer price inflation, as measured by the European Union's (EU) Harmonised Index of Consumer Prices, picked up sharply over the course of last year, and stood at 6.9 per cent in March - the highest reading since the series began in 1997;
— the key driver of this increase is increases in wholesale energy prices as a result of the rapid rebound in global demand, and more recently, the war in Ukraine;
— price spikes have also been seen for a range of other commodities, including fertilisers, metals and food;
— global supply chain disruptions and the imbalance between demand and supply that emerged as the economy re-opened have also added to inflationary pressures;
— more recently, as a result of the war in Ukraine and Russia's role in global energy supply, oil and gas prices have risen further and these increases will feed into higher inflation over the coming months;
— pass-through price effects are being experienced in the cost of fuel internationally, and Ireland imports over 70 per cent of the energy we use, compared to an EU total of almost 60 per cent;
— recent measures taken by the Government are targeted to mitigate cost of living increases, and increased fuel and energy prices in particular;
— Budget 2022 contained a large range of measures to protect households from the rising cost of living, including a personal income tax package worth €520 million and a social welfare package of over €550 million, and specifically, there was an increase in the weekly rate of the Fuel Allowance by €5 to €33 a week so that €914 was paid to eligible households over the course of the winter and an additional lump-sum payment of €125 was paid to the 370,000 households receiving the Fuel Allowance in mid-March 2022, with a further €100 again to be paid in April;
— from April all residential electricity customers will see the Electricity Costs Emergency Benefit Payment of €200 (including Value Added Tax (VAT)) credited to their accounts, and this measure is expected to cost circa €400 million;
— the National Retrofit Scheme includes specific measures to support householders in taking actions to reduce energy bills, including up to 80 per cent grant funding for low-cost, high-impact measures such as attic insulation;
— a further package of measures, to the value of €320 million, was introduced with effect from 10th March, reducing the excise duty on petrol, diesel and Marked Gas Oil (MGO) by 20, 15 and 2 cent per litre respectively, and these measures are being extended to 12th October, 2022, with an additional 3 cent reduction for MGO;
— there is an €18 million package of emergency support measures for licenced hauliers to address cost pressures arising from current high fuel prices;
— VAT will be reduced from 13.5 per cent to 9 per cent on gas and electricity bills from the start of May until the end of October, and there will also be a reduction in the Public Service Obligation (PSO) levy to zero by October 2022;
— in this context changes to carbon tax rates are having a relatively small impact on current energy prices, with the Budget 2022 carbon tax increase, which came into effect in October last year, adding approximately 2 cents per litre in tax to petrol and diesel; and
— the increase in rates for home heating fuels such as kerosene, gas, and solid fuels was delayed until 1st May, 2022, to mitigate against impacts during the winter heating season, and the May, 2022, increase will add approximately €21.56 to a 1,000-litre fill of kerosene and 20 cents (VAT inclusive) to a 12.5 kilogram bale of briquettes; and
— carbon tax is a key pillar underpinning the Government's Climate Action Plan to halve emissions by 2030, and reach net zero no later than 2050;
— the Programme for Government: Our Shared Future committed to increasing carbon tax and the Finance Act 2020 provides for a 10-year trajectory for carbon tax increases to reach €100 per tonne of carbon dioxide (CO2) by 2030;
— a significant portion of carbon tax revenue is allocated for expenditure on targeted welfare measures and energy efficiency measures, which not only support the most vulnerable households in society but also, in the long term, provide support against fuel price impacts by reducing our reliance on fossil fuels;
— previous analysis undertaken using SWITCH, the Economic & Social Research Institute tax and benefit model, to simulate the impact of the carbon tax increase and the compensatory welfare package has confirmed that the net impact of the combined measures is progressive and households in the bottom four income deciles will see all of the cost of the carbon tax increase offset, with the bottom three deciles being better off as a result of these measures;
— in the long run, the best way to protect Ireland from the impact of international fossil fuel prices is to reduce our dependence on them, and we will achieve this through the progressive decarbonisation of Irish society and through the steps that will be taken to meet the Government's commitment to reach net zero greenhouse gas emissions by 2050;
— furthermore, recent analysis undertaken by the Department of Finance using SWITCH has confirmed that the suite of recently announced measures more than offset the carbon tax increases for all income deciles, with the following measures being included in the analysis:
— the lump-sum increase in the Fuel Allowance of €100;
— a cut in the VAT rate on Gas and Electricity from 13.5 to 9 per cent;
— a reduction in the PSO levy of €58.57 annually; and
— an extension of the cut in excise duty of 15 cent for diesel and 20 cent for petrol from 31st August, 2022, to the Budget Day in October;
— overall, in net terms, all households see increases in disposable income, with lower income households seeing the greatest proportional gains, reflecting the progressive nature of the measures;
— the Government has very little flexibility on kerosene from a VAT perspective because it is subject to a VAT rate of 13.5 per cent, which is provided for by way of an historical derogation that allows Ireland to maintain reduced rates to certain supplies under Article 118 of the VAT Directive known as parked rates and cannot go below 12 per cent, and were the Government to reduce kerosene to 12 per cent the saving would be very small, but there would be a considerable additional cost to the Exchequer (€216 million to the end of October) because all other areas currently subject to the 13.5 per cent rate to this level would also have to be reduced to 12 per cent, as we are only allowed have two reduced VAT rates under EU law, accounting for about 25 per cent of economic activity and, as well as fuel used for heat and light, also include construction, housing, labour intensive services and general repairs and maintenance;
— each year, some 1,300 people die prematurely in Ireland due to air pollution from solid fuel burning, and it is estimated that there are over 16,200 life years lost, while many people also experience a poor quality of life due to the associated short-term and long-term health impacts of this form of pollution;
— turf cutting by citizens for use in their own homes is a traditional activity across many peatlands, but measures are required to reduce the emissions associated with burning peat, while respecting these traditions, and no ban on the burning of peat is being proposed, but a regulatory provision will be made to prohibit the sale of sod peat in larger agglomerations while allowing the traditional sale in rural areas; and
— final regulations will be agreed by the Government in the coming weeks which will ensure that, while measures are introduced to enhance air quality, they will not impinge upon traditional local practices associated with sod peat, including localised rural trading and the sharing of turf with family members and neighbours, and this approach will facilitate rural communities to continue to cut and burn sod peat for their own domestic purposes, while also reducing the use of sod peat in urban areas.
On behalf of the Minister for Finance, I welcome the opportunity to respond to the Sinn Féin Private Members' motion on the rising cost of home heating fuels and in particular its view that the 1 May carbon tax increase should be cancelled and that the excise duty on home heating oil should be temporarily removed. I will also address the proposed new regulations relating to solid fuels.
At the outset, I wish to state that I am happy to move the Government amendment to the motion. The Government fully recognises the seriousness of the current inflationary crisis in the fuel sector and the impact that this is having on broader society. However, the causes of the spiralling increases in fuel costs are beyond the control of Government. Therefore, it is not possible, as Sinn Féin has acknowledged in its motion, to insulate fully all households from every price increase.
We are living in unprecedented times. The global and extreme nature of this crisis is not something anybody could have envisaged a few months ago. The energy market is experiencing a perfect storm of global supply chain disruptions and the ongoing war in Ukraine. It is these issues that are driving the current rise in prices and not, as some would have us believe, the tax on energy products. Ireland's taxation of fuel is based on EU law, as set out in the energy tax directive, ETC. This directive prescribes minimum tax rates for fuel with which all member states must comply. Ireland applies excise duty, in the form of mineral oil tax, MOT, to fuels used for motor or heating purposes. MOT is comprised of a non-carbon and a carbon component. The carbon component is also referred to as carbon tax. Kerosene for home heating has a non-carbon component rate of zero. The carbon component is currently €84.84 per 1,000 l.
Deputies will be aware that the programme for Government committed to increasing the amount that is charged per tonne of CO2 emissions from fuels to €100 by 2030. This measure is a key pillar of the Government's climate action plan to halve emissions by 2030 and reach net zero no later than 2050. Deputies will also be aware that a significant portion of carbon tax revenue is allocated for expenditure on targeted welfare measures and energy efficiency measures, which not only support the most vulnerable households in society, but also, in the long run, will reduce our reliance on fossil fuels. It is also important to note that the Government has very little flexibility on kerosene from a VAT perspective. This is because it is subject to a VAT rate of 13.5%, which is provided for by way of a historical derogation that allows us to maintain reduced rates to certain supplies under Article 118 of the VAT directive. These are known as parked rates and cannot go below 12%. If the Government were to reduce VAT on kerosene to 12%, the saving would be very small, at €20 per 1000 l, but there would be a considerable additional cost to the Exchequer. This is because we would also have to reduce all other areas currently subject to the 13.5% rate to this level, as we are only allowed have two reduced VAT rates under EU law. As the 13.5% rate currently applies to about 25% of all economic activity and, as well as fuel used for heat and light, also includes construction, housing, labour-intensive services and general repairs and maintenance, it would cost in the region of €216 million to the end of October.
While price trends are driven primarily by global factors, the Government made the decision to alleviate some of these impacts through the domestic taxation of fuel and other measures. Last month, the Government reduced excise duty on mineral oil taxes with effect from 10 March. This provided for a 20 cent reduction in the excise rate for petrol and a 15 cent reduction on auto diesel, with a proportionate 2 cent reduction for the excise on marked gas oil, or green diesel. These measures were VAT-inclusive and set to last until 31 August 2022. This was estimated to cost €320 million. Last week, it was announced that these measures would be extended until 11 October 2022. The Minister for Finance is also providing for a further reduction in the excise rate on marked gas oil which amounts to a VAT inclusive reduction of 3 cent, effective from 1 May until 11 October. The excise reduction extension and the further reduction in the rate applied to marked gas oil will cost an estimated additional €97 million. From 1 May, and effective until 31 October, we are also providing for a reduction in the rate of VAT on the supply of gas and electricity from 13.5% to 9%, resulting in estimated annual savings of €49 on gas and €69 on electricity bills for households. This will more than offset the 1 May increase in carbon tax, and will cost an estimated €46 million. The combined impact of the fuel tax reductions alone is over €460 million. These measures come in addition to the measures in budget 2022 and the February package of measures to alleviate the impact of the increased cost of living that households are undoubtedly experiencing at this time.
Budget 2022 included a personal income tax package worth €520 million for this year, alongside a social welfare package of over €550 million, whilst the February additional package of measures made changes to the value of over €500 million that included an increase in the energy credit to €200 including VAT, estimated to impact just over 2 million households; a lump sum payment of €125 on the fuel allowance which was paid in early March to almost 400,000 households, and an additional €100 payment announced in April; a temporary reduction in fares of 20% from the end of April to the end of the year to reduce the burden on people returning to the workplace and people using public transport, which will impact approximately 800,000 daily users; and a further reduction of the drug payment scheme threshold to €80, which goes beyond what is proposed in Sláintecare and will benefit just over 70,000 families. The working family payment budget increase announced on budget day has been brought forward from 1 June to 1 April. Other measures have included reduced caps for multiple children on school transport fees to €500 per family post primary and €150 for primary school children, and a reduction in the public service obligation levy to zero by October 2022. Earlier today, the Government agreed to the abolition of public inpatient charges for children.
The evidence confirms that the measures taken by the Government to date are progressive. Recent analysis undertaken by the Department of Finance, using the SWITCH model, has confirmed that the suite of recently announced measures more than offsets the carbon tax increases for all income deciles. In addition, the Government continues to drive public investment in energy efficiency, with an overall investment of €267 million this year, €118 million of which is allocated to making homes of those most at risk of energy poverty, warmer, healthier and cheaper to heat. We acknowledge the waiting list and the need to make further progress in reducing that backlog as quickly as we possibly can.
In response to increasing energy costs, new grant rates have been introduced that will cover approximately 80% of the typical cost of attic and wall insulation. These are very cost-effective upgrade measures that can be deployed rapidly and at scale this year. The typical cost savings from cavity wall insulation are €300 per year on a home heating bill. Cumulatively, the Government has spent approximately €2 billion to date on additional cost of living and welfare supports from budget 2022 to the present.
The programme for Government commits to introducing new restrictions on solid fuel so the environmental and health benefits that have already been brought to our cities and towns under the current low smoke zones can reach every part of the country. This is because, each year, some 1,300 people die prematurely in Ireland due to air pollution from solid fuel burning. It is estimated there are over 16,200 life years lost, while many people also experience a poor quality of life due to the associated short-term and long-term health impacts of this form of pollution.
The Government recognises that turf cutting by citizens for use in their own homes is a traditional activity across many peatlands. A balance must be struck between the need to reduce emissions and improve air quality, on the one hand, and respecting these traditions, on the other. It is important to note that no ban on the burning of peat is being proposed but, instead, as the amendment states, a regulatory provision will be made to prohibit the sale of sod peat in larger agglomerations while allowing the traditional sale in rural areas to continue. I understand that final regulations will be agreed by Government in the coming weeks that will ensure that while measures are introduced to enhance air quality, they will not impinge upon traditional local practices associated with sod peat, including localised rural trading and the sharing of turf with family members and neighbours. This approach will facilitate rural communities to continue to cut and burn sod peat for their own domestic purposes while also reducing the use of sod peat in urban areas.
In conclusion, the Government is deeply conscious of the negative impact that the rapid rise in consumer prices is having on society. Everybody in this House is aware that the reason for this significant inflationary pattern is because of matters completely outside the control of this Government but we have responded in the way I have outlined. Therefore, I ask the House to support the amendment the Government has put forward.