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Dáil Éireann debate -
Thursday, 16 Jun 2022

Vol. 1023 No. 6

Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions

Fiscal Policy

Pearse Doherty


1. Deputy Pearse Doherty asked the Minister for Finance if he will introduce an emergency budget with further targeted measures to support lower and middle-income families in response to the highest level of inflation recorded in 38 years; and if he will make a statement on the matter. [31502/22]

I wish to make a point of order before we begin. I do not lay fault at the feet of the Minister for Finance, but in my 12 years as Opposition spokesperson on finance I have not experienced a situation where the Minister for Finance has not been present. There are times when a Minister has to attend other international duties or events and we in the Opposition have always facilitated the change. I understand that that was requested in this case as well, but the Chief Whip needs to get his act together. The senior Ministers need to be here. That is no reflection on the Minister of State, but he does not have delegated responsibility on some of these issues and it cannot be the norm. I am very disappointed that the Government did not facilitate a swap for the Minister.

That said, the Minister of State, Deputy Fleming, is welcome. The first question relates to the need for an emergency budget to have targeted measures to support low and middle-income families. He will be aware that we are seeing the highest rates of inflation for 38 years and we need Government intervention. The idea of waiting until October and perhaps a social welfare Bill and a finance Bill at some later stage does not cut it with ordinary families and workers who are feeling severe pressure at this point in time. Will the Government bring forward an emergency budget with measures targeted at low and middle-income families?

I acknowledge the remarks the Deputy made about the Minister for Finance. He is chairing a Eurogroup meeting today. I think everybody is aware that he had his mother's funeral on the last day, which was totally unforeseen. Everybody understood that, but I take the point he makes.

The Deputy will be aware that the Government has responded in a timely and forceful manner to limit the impact on households of international commodity price-driven inflation. Interventions designed to address the increase in the cost-of-living issue worth approximately €2.4 billion have been introduced to date, encompassing welfare increases, income tax reductions, VAT and excise reductions, lump-sum payments and other measures.

Many of the drivers of inflation at present are global in nature and Ireland as a whole will be worse off than it would otherwise have been because of these international price changes. I think that applies to every country. The Government cannot prevent this, but what it can do is minimise the fallout for those sectors and individuals least equipped to absorb these international shocks. In this context, the Government is acutely aware of the impacts of rising inflation across household groups and has introduced this range of measures to help alleviate the burden on those worst affected by the price increases. For instance, the tax and welfare changes introduced in budget 2022 and more recent measures to mitigate the increase in the cost of living were strongly progressive, with the gains from measures more keenly felt by those in the lower income groups.

The Deputy will appreciate that while the Government's response has been forceful, the people's and taxpayers' resources are not infinite. Ireland's public debt is among the highest in the world. In fact, Ireland's personal debt is one of the highest in the world as well, so when we combine both, the Irish people are one of the most indebted nations worldwide. Borrowing costs are rising and the European Central Bank is no longer backstopping the issuance of public debt. Furthermore, we must be careful to avoid a scenario in which fiscal policy inadvertently creates second-round effects, leads to an inflationary spiral and threatens the overall sustainability of the public finances. The Government's response continues to be to mitigate the fallout from price increases while recognising that a balanced approach is needed to ensure that we do not make the problem worse. While the various measures that we have introduced were not technically a series of emergency budgets, they were a series of urgent measures to deal with the situation up to now.

That simply does not cut it. The mantra coming from the Government that we are going to do nothing until October's budget at the very earliest is something that it feels it should be proud of. The Government needs to listen to where ordinary people are at. Every single day they are feeling that squeeze. They are seeing it in food prices that have gone up by 5%. They are seeing it in energy costs that have gone up by 57%. The ESRI report today talks about average families looking at up to €40 per week.

The Minister of State referred to insulating or trying to protect those on low and middle incomes, but the reality is that it has not happened. The Minister of State should not just listen to me. If he listens to those on the front line, whether the Society of St. Vincent de Paul, One Family or Social Justice Ireland, they will all tell him that more needs to be done. We recognise that the Government cannot insulate everybody from the inflationary pressures that we are seeing and that are turbo-charged by the war in Ukraine, but it can do more. That is why the Irish Fiscal Advisory Council and the Central Bank says there is space to do more at this point in time. Why is it that the Government refuses to deal with the serious pressing needs of so many households at this point, right here and right now?

I understand that. The inflation situation has been increasing. Aside from the budgetary effects that came in on 1 January, we did introduce measures very quickly and promptly after that in February. Everybody knows that included the €200, including VAT, energy credit to every electricity account holder in the country. Everybody should have received that by now. More importantly, there was a reduction in the public transport fare for people who cannot afford a car to travel to work and who rely on public transport. Then we had the additional €125 fuel allowance increase. That is also for working families in particular, as people with the medical card would have been exempt from the cost of the drug payment scheme, which has reduced from €120 a month to €100 a month and it is now on its way down to €80 a month. That is €40 a month that many households and working families are benefiting from. We announced temporary excise cuts as well. That has now been extended to mid-October, into the budget time. Further measures were announced in April and May, including the VAT on electricity.

I do not know if the Minister of State really believes what he says and that the Government has done enough. Let me put it like this: the Irish Fiscal Advisory Council told the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach that inflation has benefitted the tax revenues of the State. Inflation and growth have given a bonanza of €2 billion, yet since the start of the year what the Government has introduced has given €1 billion back, so there is space. That is what IFAC is telling the Minister. There is space to do more.

The Minister of State mentioned the €200 credit for every household and said that everybody should have got it. It was so poorly designed that we have situations where people living in Wexford, for example, social housing tenants, only received €25 because the credit was split between those who share meters. The Government has not provided the support and protection that is needed. The OECD called the Government out and said it provided limited protection to poorer households, so it is allowing them to wither on the vine. What is needed is an emergency budget, an increase in social welfare rates in response to inflation, an increase in the minimum wage, the introduction of cost-of-living cash payments to lower and middle- income households, the removal of excise on the cost of home heating oil, the slashing of childcare fees, to put a month's rent back into renters' pockets and ban rent increases. That is what is needed. Otherwise, what the Government is doing, in my view, is shameful.

I will take up the last point in particular about putting the rent back in renters' pockets. If the Government had ever suggested anything like that, the Deputy and the party opposite would be the first to say this is a subsidy for landlords. That is exactly what would be said, and that is the way it would work out-----

Not if the Government bans rent increases.

-----and when landlords know, there would be an increase.

In fairness, we can do a lot but we cannot do everything to mitigate it. The measures to date have been well over €2 billion. Recently, our concentration is also on employment and the hospitality sector.

Many places cannot even open on Mondays and Tuesdays, such as restaurants and places serving food. One of the solutions was to reduce VAT to make it more economical for people to go to those places and to get employment back up. The best insulation we have against poverty is people getting back to work. We now have 2.5 million people in the workforce, which is a record high, even higher than it was pre-Covid. For those 2.5 million families, that is the best insulation against poverty.

Banking Sector

Matt Shanahan


2. Deputy Matt Shanahan asked the Minister for Finance the steps that he and his Department are taking to provide further consumer choice to the Irish retail banking sector particularly with the exit of two banks (details supplied) from the domestic market; and if he will make a statement on the matter. [31004/22]

My question relates to the steps the Minister of State and the Department are taking to provide further consumer choice in the Irish retail banking sector, especially with the exit of the two main banks.

I thank the Deputy for raising this issue because it is one that affects hundreds of thousands of people, especially since Ulster Bank announced its withdrawal from the Irish market as part of the NatWest group, and KBC has announced likewise. The retail financial services sector is going through a major period of change. In the past year, we have seen a number of announcements from the main retail banks regarding their operations in the State, including reductions in the branch network throughout the country. While decisions relating to the business models of regulated firms are commercial matters for the boards of those organisations, the Department of Finance, the Minister and the Central Bank cannot interfere with those commercial decisions. We can, however, ask them to ensure a consumer-focused approach is their top priority when dealing with affected customers.

On the specific issue of the banks leaving the market, the Minister, officials and I met with a range of providers of retail banking services last month, particularly in respect of current accounts, including the remaining banks, An Post and credit unions, to discuss what they will do for impacted customers. The Irish retail banking system is concentrated by international standards but that does not necessarily mean competition does not exist between those particular players. The changes that have recently taken place in the Irish retail banking sector are a reflection of the wider challenges the banking sector is facing, not only in Ireland but abroad, and because of these changes the Minister has instructed the Department to undertake a broad-ranging review of the retail banking sector.

The issues raised by the Deputy will be considered by the review currently under way as part of this work in assessing the current landscape for the provision of retail banking services in Ireland and its likely evolution over the coming years. The team will also look at the size and structure of the sector in Ireland and similar-sized open economies in the EU and OECD. That report will be published later this year.

As the Minister of State outlined, KBC and Ulster Bank are leaving the Irish market and because of that approximately 900,000 account holders need to find a new home. That process is ongoing, to a degree, but it is causing a lot of anxiety for people. Some of those customers have left the banks they are now going back to, possibly because of disputes over a number of years or when they were refused credit, and now find their choice has been reduced. The Minister of State spoke about the accommodative actions the existing banks are providing for new accounts but it is probably a fact now that Ireland's regulatory regime is not attractive to new entrants. Our major problem is the lack of choice in the banking sector.

I ask the Minister of State to refer quickly to processes that might be undertaken to allow An Post and the credit unions to compete more favourably in the Irish banking market, particularly at the retail end.

I hear what the Deputy said about the regulations not being conducive but it is all about providing financial services. Every single financial service provided in Ireland does not have to be provided by a regulated body in Ireland. Such a body can be regulated in any EU country and provide services in Ireland. For example, and I do not want to overemphasise it, there are 1.6 million Revolut account cardholders in Ireland today. That is very significant. Notwithstanding the narrowing of the banking structure, changes are happening. There is an increasing range of banking and financial services available to customers who choose those products.

I will say to customers of the two institutions that are leaving to be proactive and start opening their accounts in their new financial institution as soon as possible. I encourage people to go to the credit unions and An Post. The latter opened 30,000 new current accounts in the first three months of this year. The credit unions are already in situ in some of those banks that are leaving, in particular, Ulster Bank. The local credit unions have stands there a couple of days a week. I met several credit unions whose staff have moved in so when people come to their bank, the local credit union has a stand in the premises and branches that are scheduled to close. I ask people to be proactive and not wait until the last minute.

The retail banking sector is very important but what most people are now concerned about is access to finance and access to credit, especially if they are in the construction and manufacturing sectors and, in particular, the agricultural sector at present. There are major headwinds in those areas in terms of where people can go to access finance. That is a big problem. I accept that Revolut is in the market here for retail services, but is there anything the Department can do to put pressure on the system or to bring in legislation to allow people to access funding from eurozone banking? At the end of the day, we are members of the EU and yet we are excluded from any accessing of European banks. It is very difficult, unless you are a large-scale conglomerate, to try to access funding for large-scale project work. Those that can are well able to do it but smaller manufacturers, and the farming sector in particular, now have very limited options to access funding.

On the farming sector, the Deputy mentioned credit unions. As he knows, they have a very good product called cultivate. Several credit unions in all the provinces provide that scheme, which provides 50,000 unsecured loans to farmers. It may not be a lot in the context of the scale of some farming activity, but it is quite significant for many farmers. That is an important source of new finance in that sector.

I also say to people that the Central Bank is most keen on, and the Minister and the Central Bank are both stating this, the importance of the closure of these institutions in Ireland being conducted on an orderly basis. Generally, people will have six months to close their accounts and open new accounts when they get the relevant letters. I ask people to be proactive and not wait until the last minute. The Deputy knows we cannot stop the banks leaving Ireland. We have AIB and Bank of Ireland and I definitely believe that with NatWest, which is also investing in Permanent TSB and taking a 20% stake in it, we will have three major banks operating in Ireland in the immediate future, one of which, Permanent TSB, has significant State investment.

Fuel Prices

Pearse Doherty


3. Deputy Pearse Doherty asked the Minister for Finance if he will reduce the rates of excise duty applied to petrol and diesel to the lowest rates permissible under the Energy Tax Directive in response to the rising cost of fuel; and if he will make a statement on the matter. [31503/22]

In the past year, we have seen petrol and diesel prices skyrocket. People are seeing that very clearly. I am sure the Minister of State sees it himself as he passes the petrol pump stations. In my village, we see petrol prices of €2.25. We are told that diesel prices will rise very soon. We all wish that every household and community had excellent public transport but that is not the case. Will the Government take further measures to reduce the price of fuel at the pump by reducing the rate of excise charge, providing an immediate reduction in the price of petrol and diesel, given the astronomical prices people are faced with today?

Again, this is a very significant issue affecting many people. Ireland's taxation on fuel is governed by European Union law set out in various directives, commonly known as energy tax directives, ETDs, which the Deputy will be aware of. These directives prescribe minimum tax rates for fuel, which all member states must comply with. These directives' provisions on mineral oils are transposed into national law under the Finance Act 1999, as amended, and provide for the application of excise duty in the form of mineral oil tax, MOT, to specified mineral oils, such as petrol, diesel and kerosene, that are used as motor and heating fuels. The mineral oil tax is comprised of a carbon component and a non-carbon component. The carbon component is commonly referred to as a carbon tax and the non-carbon component is often referred to as excise, fuel tax or fuel duty.

In response to the current fuel crisis, the Minister for Finance introduced a significant reduction in the MOT rate applying to petrol on 10 March. Inclusive of VAT, the reduction is in the amount of approximately 20 cent per litre. I know 20 cent per litre seemed a very big reduction some time ago but when we see the price at the pumps is €2 plus, it is not as significant proportionally as it was. In addition to the rate change, the Minister has also brought forward legislation in the Finance Act to provide for a temporary reduction of 1 cent per litre, inclusive of VAT, to MOT on petrol. It is important to note the effective MOT rate on auto diesel must be considered in ensuring compliance with the ETD. The current MOT rate on auto diesel is €405.38 per 1,000 l, which is €75 above the ETD minimum.

The Minister has done a lot in this area.

We could usefully refer to the report of the ESRI on this topic, which reads: "If the objective is to protect those most affected by rising energy prices, cutting indirect taxes ... is a poorly targeted response".

Is the Minister of State saying the Government is now acknowledging that what it has already done has been poorly targeted? A larger package - one where the vast majority of its measures are targeted - is needed. Other people are feeling the pinch, of course, which is why issues like excise also need to be considered.

Fair play to the Minister of State for mentioning that the minimum rate allowable under the directive is below the rate in Ireland at the moment. Let us be clear in that there are people who have to travel. Many are thinking twice before they get into the car, but they have to if they need to go to hospital or if they live in rural Ireland and need to go to work. Petrol now costs €2.25 per litre and diesel is increasing to the same level. It is predicted that diesel might even hit €2.50 in the next while. The current excise rate on petrol stands at 47 cent, but the minimum rate allowable is 36 cent. The current rate on diesel is 41 cent per litre whereas the minimum under the directive is 33 cent. This means that, inclusive of VAT, the Minister for Finance could reduce the price at the pumps tonight by 13 cent for petrol and 9 cent for diesel. That would not be enough, though. The Government also needs to engage with the Commission to get further flexibility on excise or VAT rates.

We know that prices will continue increasing, so for the Minister of State to say the Government will do no more is not acceptable for many of those who cannot get by any further.

Our ability to reduce excise duty is impacted by various EU directives. I have covered the current MOT rates on petrol and auto diesel extensively. The MOT rates per thousand litres are €465 for petrol and €405.38 for auto diesel. Prior to March, the MOT rate on petrol was €636 per thousand litres, which was reduced by €170, representing a substantial cut of more than 26%.

The ESRI report is interesting. I accept there has to be a balance. We must help working people, but perhaps better-off people who have larger cars that are less fuel efficient will gain disproportionately compared with poorer people. The ESRI report reads: "Instead, increases to welfare payments, the fuel allowance, and even lump-sum payments like the household electricity credit are better targeted at those most affected by energy inflation."

I love how the Minister of State selectively quotes reports. Maybe he should quote the ESRI’s report where it states the Government has scope to do more. The Irish Fiscal Advisory Council, IFAC, believes more targeted measures could be taken. The Central Bank also states that the Government has that scope.

The taxman has been benefiting from inflation in petrol and diesel prices. As prices have soared over past year, we have seen 12 cent more being accrued in VAT. The VAT take on petrol and diesel has increased by between 42% and 46%.

What I am discussing are temporary measures to give people a reprieve. They would form a small part of an overall targeted package, but they would have a broader application. The Minister of State has acknowledged there are limitations on what the Government can do. We also acknowledge that, but the House has the ability to reduce petrol and diesel prices tonight by 13 cent and 9 cent, respectively. That is a pressure we can remove from many families and workers. Will the Minister of State set out the rationale for why the Government will do not this? If it will not do that, will it take on board any of the other suggestions from the ESRI, IFAC or the Central Bank and introduce something instead of sitting on its hands while families are under massive pressure and more are slipping into poverty, including energy poverty?

The Deputy has again mentioned the ESRI report. I thank its authors – Ms Michelle Barrett, Dr. Niall Farrell and Dr. Barra Roantree – on their excellent report, which was funded by the Community Foundation for Ireland, whose chief executive wrote in the foreword, "Many of the 5,000 voluntary, community and charitable groups we work with will be looking at this report and no doubt will reflect on it as they make pre-Budget submissions to government." Essentially, the report is a great bank of information published by the ESRI at the request of the Community Foundation for Ireland. It will facilitate proactive, detailed and more informed, fact-based and data-based pre-budget submissions, which will help the Government to take everything into account, as suggested by the chief executive in the report.

Has the Minister of State no shame? One in three households is in energy poverty.

The Deputy knows there are different issues affecting VAT. He is aware excise is applied to a unit of fuel and remains the same regardless of the fuel's price. It is based on volume. Therefore, no extra revenue is raised from the excise duty if the price increases. VAT is different. People ask why excise duties cannot be reduced, but excise is based on volume, not price. However, I accept there have been extra VAT receipts, which have gone some of the way towards paying for some of the measures we have introduced recently.

Question No. 4 replied to with Written Answers.