I thank the joint committee for inviting us to brief you on the disabled drivers and disabled passengers tax concessions scheme. I am head of the indirect tax policy section in the Department of Finance. My colleagues from the Department are Mr. John Burke and Mr. David O'Sullivan, and from the Revenue Commissioners national excise section, Mr. Ciarán Coyle and Mr. Paddy Barrett. I have asked the clerk to circulate my opening statement and some background material to the members.
In my brief opening statement I will outline the background to the development of the current scheme for disabled drivers and passengers, the benefits and operation of the scheme. I will speak on the report of the interdepartmental review group published in June 2004 and I will update the committee on recent developments on the medical board of appeal for this scheme. After the opening statement I will be happy, with the assistance of my colleagues, to answer questions.
The disabled drivers scheme dates back to 1968 when relief from road tax was made available under legislation for persons with a disability meeting specific medical criteria. Since 1968, the scheme has been extended and amended on many occasions. In the background material which I have asked the clerk to circulate to members a table sets out various changes made to the scheme over the years.
In 1969 excise relief on fuel was made available to persons in the scheme. In 1972 VAT relief was introduced and in 1976 VRT relief was included. This brought the total relief available to 50% of the purchase price of a car. Over the years the medical criteria have been broadened to include four additional medical grounds in 1989 and one additional medical ground in 1993. The statutory basis for the current scheme is section 92 of the Finance Act 1989 and supporting regulations were made in 1994, 2004 and 2005.
Access to the scheme is on the basis of medical criteria set out in section 3 of the 1994 regulation and I have included a copy of this in the material circulated by the clerk. A person who qualifies under these criteria is issued with a primary medical certificate by the senior area medical officer of the local section of the Health Service Executive. Possession of this certificate then qualifies the holder to claim the benefits of the scheme as a qualifying driver or a qualifying passenger. The legislation also provides for an appeals procedure where the primary medical certificate is refused, with an independent board of appeal appointed by the Minister for Finance on the nomination of the Minister for Health and Children. The regulations include non-profit organisations involved in transport of persons with disabilities.
The benefits of the scheme for qualifying persons are set out in the legislation. Briefly, they consist of full relief on VAT and vehicle registration tax, VRT, in the year of purchase, subject to the limits detailed in the opening statement, relief from excise duty up to a maximum of 600 gallons per year, and exemption from road tax. The average total annual value of the benefits for people in this scheme is estimated at €5,250 per claimant. In the first year a claimant receives benefits relating to the purchase of the car, in subsequent years the benefits received are fuel relief and road tax.
A practical example of what this means is given in the review group's report. The group took the example of a Ford Mondeo car, with an open market selling price of €21,695. The total benefit in the year of purchase, including VAT, VRT, road tax and excise relief was €9,659. That meant the relief amounted to 44.5% of the purchase price of the car.
The most recent data on the overall scale and scope of the scheme available from the Revenue Commissioners shows the total number of claimants in the system at the end of 2004 was 8,900. This is made up, in rough terms, of approximately 3,500 drivers and 5,500 passengers. The total cost of the scheme, excluding road tax in 2004 was €45 million. When road tax is included, the cost is estimated at approximately €50 million per annum.
In 1998, an interdepartmental group was convened to review the operation of the scheme. The group was chaired by the Department of Justice, Equality and Law Reform and had representatives from the Departments of Finance and Health and Children, the Revenue Commissioners and the Department of Social and Family Affairs.
The terms of reference of the group were to examine the operation of the existing scheme, including the difficulties experienced by the various groups and individuals involved with it and to consider the feasibility of alternative schemes, with a view to assisting the Minister for Finance in determining the future direction of the scheme. The group finalised its report in September 2002. Following consideration by Government, the report was published in July 2004.
I will briefly outline the key issues and recommendations of the report. It sets out in detail the history of the scheme, the current benefits, the Exchequer costs and the requests to broaden the eligibility criteria. It shows the escalating costs of the scheme, which increased from approximately €5 million in 1994 to €36 million in 2003 and to €45 million in 2004. The report shows that similar schemes in other countries are relatively less generous. It deals with the difficulties associated with the medical criteria, the pressure to broaden or extend these criteria and the potential large-scale numbers that would be involved if the scheme were broadened. It states the three main areas of concern are restrictive access to the scheme, insufficient resources for the appeals system and increasing pressure on the passenger side of the scheme.
The report makes a number of recommendations, divided into short-term immediate recommendations and longer-term recommendations for the future development of the scheme. The immediate recommendations relate to streamlining the appeals process. The longer-term recommendations are not costed, and they include replacing the medical criteria with a mobility focused assessment system, separating the driver and passenger components and converting the passenger scheme to a direct payment system. It also suggests introducing a minimum age limit for beneficiaries, increasing the period for which a vehicle must be held from two to three years, and equalising the reliefs available for drivers and passengers. As set out in the report, the Department of Finance reserved its position on a number of the recommendations in the absence of a full examination of the associated costs and implications and consideration of other options for the most effective use of resources for persons with a disability.
With regard to developments since 2004, as I have already stated, the Government considered the report of the interdepartmental review group in June 2004. It decided to implement the improvements to the appeals process with immediate effect. It also decided that the Minister for Finance would consider the longer-term recommendations on an ongoing basis in the context of the annual budgetary process, having regard to the existing and prospective cost of the scheme.
The priority since then has been to improve and revamp the appeals system, which was one of the three main areas of concern identified by the group. Following the Government decision, the Minister signed regulations in 2004 to expand the number of doctors on the board of appeal from three to five in order to facilitate more frequent meetings of the board. The second amendment to the regulations is technical, and is aimed at discouraging repeat appeals by appellants who do not meet the criteria. This was identified as a logjam in the appeals system by the review group report.
In addition to these changes recommended by the review group, it was decided, having examined the operation of the board of appeal, to put in place new and streamlined arrangements. The purpose of this was to enable the backlog to be cleared as a priority and provide a better service to clients. This involved an additional amount of €300,000 being provided in the Estimates of the Department of Finance for this purpose. A full-time medical consultant was appointed by the Minister in March 2005 in order to oversee the clearing of the backlog. New administrative and IT support systems are also being put in place.
While the board is independent in the exercise of its functions, new reporting arrangements are also being put in place so the Department of Finance can monitor its operation more effectively. A liaison person has been nominated within the Department to deal with the board on operational matters arising. In April 2005, the Minister signed further regulations increasing the number of practitioners on the board to ten. This should ensure that panellists on the board of appeal will always be available to service meetings of the board. These changes enable the board to operate in a much more satisfactory and streamlined manner, to deal with appeals more speedily, to clear the backlog and to provide a better day to day service to clients of the scheme.
The issues raised in the interdepartmental review group's report with regard to the more general future development of the scheme are complex. They raise fundamental issues on the intended scope and purpose of the scheme. Some of the recommendations would extend the scheme while others would constrain it. In line with the Government decision on the report, the Minister will continue to consider the recommendations in an annual budgetary context. In this regard, the key challenge is to seek to ensure that the current scheme is managed effectively and efficiently and that any changes will have the optimum outcome in terms of effective use of resources in promoting access and participation for persons with a disability.