I welcome the Minister of State at the Department of the Environment, Community and Local Government, Deputy Fergus O'Dowd, to the House.
Motor Vehicle (Duties and Licences) Bill 2013: Second Stage
Question proposed: "That the Bill be now read a Second Time."
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 applied in respect of motor tax paid after budget night for periods beginning on or after 1 January 2013. The Bill confirms the increases in motor tax contained in the financial resolution, namely, an increase of 7.5% applied across most categories of vehicle, and to trade licences, in particular in relation to the engine capacity of pre-2008 cars and commercial vehicles. The average increase for vehicles taxed on the basis of CO2, namely, cars manufactured from 2008 onwards, is 19.8%. These increases will raise some €86.5 million extra in 2013.
In budget 2012, 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 this 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 now split into four bands which correspond with the restructuring carried out by the Minister for Finance for VRT purposes. There is also an additional zero emissions motor tax category to provide an additional incentive for electric vehicles. 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 continuing differentiation of the environmental incentive in favour of the most environmentally friendly vehicles. The reduction in tax for electric vehicles recognises there are no emissions at the point of use of these vehicles.
These 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.
The restructuring also responds to the challenge of maintaining the motor tax base because, while the move to lower emission 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 about 5% year-on-year. The CO2 fleet is now just one quarter of all cars on the road, and 90% of these are taxed at the three lowest bands. In 2012, for the first time, over half of all new car purchases were at 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 about €950 million in 2012, if no increases in rates had taken place in the budget.
Once the older cars are all replaced by cars taxed on CO2 in 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 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. This is more than the increase expected from the tax changes, but is a necessary measure towards the reduction of the national debt. The payment, which will not be made until late 2013, will have regard to the balance in the fund when all commitments to local authorities have been met. The projected income from motor tax in 2013 is in excess of €1.1 billion, and accordingly the balance of funding available to local authorities will be some €960 million, even if the full amount were to be transferred. I confirm the Government remains committed to supporting the local government fund which will retain the bulk of the income from motor tax to be used to fund local services.
The Bill contains six sections and a Schedule. Sections 1 and 8 are procedural. Section 2 sets out the rates that will apply to licences taken out for periods commencing on or after 1 January 2013. Section 3 is a technical amendment to raise the annual tax threshold above which owners of certain categories of vehicles can obtain a half-year or quarterly disc. Section 4 sets out the new motor tax rates for most vehicles. Section 5 provides for the increase to apply to vintage or veteran vehicles. Section 6 provides for the increases that apply to trade plates and replacement trade plates. Section 7 provides for the transfer from the local government fund to the Exchequer. The amendment limits the transfer to a maximum of €150 million and is confined to 2013 only.
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.
We will now proceed with the debate. The group spokespersons will have six minutes and all other speakers will have three minutes.
Cuirim fáilte roimh an Aire Stait go dtí an Teach. I welcome the Minister of State to the House.
The Fianna Fáil Party is opposed to the Bill on the basis that in our view it is a continued Government attack on motorists struggling to make ends meet. Financial incentives were put in place in 2008 and this encouraged drivers to switch to fuel efficient cars with low CO2 emissions. It was a core feature of efforts to tackle climate change. We suggest the 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 goalposts in the middle of the game. It is interesting that in defence of this proposal, the Minister of State, Deputy O'Dowd, points out that the amount of tax that has been generated since 2008 has reduced and the number of vehicles taxed on the basis of CO2 has increased by about 5% year-on-year and that a quarter of all cars on the roads are CO2 cars of which 90% of these are taxed at the three lowest bands. This is the reason receipts from motor tax has shown a decline from €1.06 billion in 2008 to €950 million in 2012.
I suggest it has more to do with the downturn in the economy rather than anything else. The Society of the Irish Motor Industry has stated new car sales are down 10,000 on last year and it has always said that more tax will be generated from increasing the sale of cars rather than increasing taxation. I am sure the Minister will see some merit in that argument because when the scrappage scheme was introduced and then extended there was no question that not only did it maintain jobs in the motor industry but there was an increase of employment in the motor industry because there was a subsequent increase in car registrations. I know that every Government sees the motor industry as offering an opportunity to generate income from the low hanging fruit. The proposals contained in the Bill mean that not all the money will be ringfenced but that some of the money raised from the increase in taxation will transfer to the central Exchequer. We, on this side of the House, have always said we support any measures that will try to stimulate and improve the economy and we support any measures that will try to get us back to eliminate the budget deficit and get us back on an even keel. However, some elements of the fiscal policy and taxation that the Government pursues are open to question, in particular taxation in the motor industry.
The motor industry is very sensitive and critical to the economy. I know there is an argument that Government should not necessarily support the increased sale of cars as we no longer manufacture cars. We must import all of the cars sold here and we should not necessarily be stimulating car sales. However, car sales provide valuable employment not only in the area of direct sales but also trickling down into the care and maintenance of cars. I am not going into all the detail of this short Bill, but we believe that the continuing targeting of environmental-friendly cars on top of last year's changes is a regressive move. In our pre-budget submission, we earmarked an overhaul of the motor taxation system that would yield the €100 million increase the Government is seeking in this legislation but would not rescind the environmental platform that Fianna Fáil built up while in government.
Our vision for the motor taxation regime is one that recognises the fact that motorists contribute approximately €4 billion to the Exchequer through taxation, VAT and excise duty. They need a fair transparent system that allows them to make long-term decisions on car purchases without the fear the Government will hike up their taxes in the near future. It is very sad that the people who are being attacked now are those who purchased cars from 2008 onwards. From a cursory look at the cars in the car park in Leinster House, one will note that the vast majority of cars were registered in 2007 to 2012. We suggest the decision to incentivise low CO2 emission vehicles is having a real impact on Ireland's efforts to contribute to tackling climate change. Some 88% of new vehicles since 2008 have been purchased in the A to C bands. The switch was taken on the basis of the financial incentives provided. The Government is now jeopardising that progress. The connection between the rate of tax and the CO2 emissions was at the heart of the introduction of CO2 based bands in 2008. It ensured a link existed in the motorist's mind and more importantly in his or her wallet between driving an environmentally-friendly car and paying a low motor tax rate. The Bill further erodes that connection. It downgrades the importance of environmentally sound practices at the heart of broader public policy. The Government Members will agree there is a need to continue to tackle climate change. I will be interested to hear the Minister of State's response in this area, considering that we think this will increase environmental damage.
One of the groups lobbying against this measure has suggested that, on the basis that people had bought in good faith, the tax could be applied to new cars rather than current ones. AA Ireland claims that there is no way to dress up the situation and that the increased tax will push up the cost of living for car owners, affecting almost every household in the country. There would be some justification for an increase from next year onwards. Mr. Conor Faughnan went on to assert that drivers of older vehicles would feel harshly treated, as pre-2008 cars are already highly taxed and are not luxuries. In many cases, ordinary motorists can barely afford to keep them on the road. This is a disappointing development. The Government has not managed to justify the increases as a means of advancing environmental friendliness. It is a smash and grab, another opportunity to raise some money. I appreciate that the Government needs every penny it can get, but it could have looked for it from someone other than motorists. Fianna Fáil tabled alternative proposals in its pre-budget submission.
I welcome the Minister of State. Since he has outlined the Bill's purpose and the increases in the vehicle registration tax, VRT, I will not repeat them. No one likes increases, but we must consider the country's social needs at this time. The increases are expected to yield an additional €46 million each year. If the Opposition opposes this measure, where would it find that money? When we came up with negative proposals on the county council, that is, where to make cuts, we were asked from what programmes that money would be taken. In pure monetary terms, cars with greater emissions will continue to be more highly taxed. Eco-friendly cars saw an unwelcome tax increase of €92, but the owners of cars with lower or no emissions will see their tax bills decrease again. The emission-free cars bought since 2008 or the electric cars bought prior to that will see their tax bills decrease by almost one quarter to a flat rate of €120 per year. We must encourage the use of electric cars. I have raised this matter with the Minister for Transport, Tourism and Sport, Deputy Varadkar. We must engage with it further.
As less tax will need to be paid on environmentally friendly cars, people will be encouraged to buy cars with smaller engines that produce less carbon. We have done what was necessary. Many countries that have rolled out the new electric car technology have introduced incentives. We use some, but not all, of those. A greater uptake of charging points around the country is required. We could also offer free parking for electric cars. They are not ideal for all long journeys, but we should encourage them for city commuting, where most CO2 is produced from transport. Also possible are financial incentives at the point of sale and education campaigns in order that people can understand the benefits of owning electric cars.
The Government has made available alternatives to travelling to work by car. For example, people can avail of rail or bus taxsaver commuter tickets, which were established as an incentive to use public transport. I will not go into the details, but it makes savings for people who use Luas, DART, Dublin Bus and Bus Éireann services. It incentivises people to switch to public transport and reduce traffic congestion. Car pooling is another measure. It should be extended throughout the public service, including Leinster House. Savings arise because tickets are not subject to tax or PRSI, in that employees are only required to pay tax or PRSI on the money portion of their salaries. The Leap card introduced by the Minister is another incentive.
One must consider the balance when introducing an incentive and whether CO2 can be reduced using other methods. Any increase in taxation is unwelcome. The last CO2-based system was introduced in 2008 and has led to a major decline in motor tax receipts. Although the previous Government's stated intention was to ensure that the switch would be revenue neutral, we found out that it actually incurred a significant cost. The tax base shrank by nearly 50%. From where will we get this money?
Technology is improving. As mandated by the EU, a greater proportion of cars are more efficient. This is welcome. A mechanism to drive further environmental improvements through taxation will not always be available, as the scope for results has tightened. However, European legislation constantly raises the bar in respect of CO2 emissions. This is only right. The engines being used by the motor industry across Europe are what are called Euro 5 engines. Vehicles in this category meet all CO2 limits set down by the EU, but most manufacturers have engines that comply with Euro 7 standards, which are Ireland's standards. They have lower emissions and more fuel efficient vehicles are surpassing the current levels required by the EU. Our cars are becoming more environmentally friendly.
Changes have been made and the A1 band has an 80g/km ceiling, but the Minister of State has addressed this point and I will say no more. 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, other methods of raising funds are available, for example, different forms of taxation. If a judgment was based on a vehicle's open market selling price, OMSP, the revenue would increase by €12 million in one year. However, this avenue has not been chosen. If every vehicle in the country made zero emissions, we could consider basing our tax rate on the OMSP. There is a great deal to be said for this approach.
I welcome the Minister of State. According to the briefing document, the increases in the CO2 bands A and B are 53.8% and 44.2%, respectively. The average change is approximately 7.5%. We established the system to try to reduce emissions, but it would also reduce revenue by 40%. It has become an unfortunate feature of our circumstances that, in the taxpayer's dealings with the Exchequer, it is a case of heads the Exchequer wins, tails the taxpayer loses. Similarly, development levies and stamp duties were ignored in respect of the household charge. We try to be environmentally sensitive. When that works, we increase charges. Broadly, I accept what the Government is trying to do in terms of cars. The situation poses the Exchequer's revenues a considerable difficulty.
On Committee Stage, I will discuss how, according to page 6 of the briefing document, the assessment of motor tax on commercial goods vehicles is governed by the unladen weight. I will ask the Minister of State to examine this proposal. The key element is not unladen weight, but laden weight per axle. Vehicles of the same unladen weight can do substantially different damage to infrastructure. Some cause potholes and some do not.
The polluter pays principle rewards people who reduce emissions and in the same way we could have a "potholer pays" principle if we changed the way in which we tax heavy goods vehicles. That is the reason I tabled the amendment.
There is the issue of using tax as payment for roads. We ignored cost-benefit analysis from the Economic and Social Research Institute in building motorways with a capacity of 55,000 vehicles per day on routes that in some cases had less than 10% of those vehicles on them. It was massive over-investment for which the motorist and road user is being asked to pay. Mr. Peter O'Keeffe at An Foras Forbartha Teoranta was doing cost-benefit analyses of roads in the late 1960s and the late Mr. Garret FitzGerald recommended the reading of an article by Mr. O'Keeffe in Administration in 1964. I did some work with Mr. John McCarrick, the Kildare county engineer, on the evaluation of the Naas bypass. We had the analysis to know when road investment is worthwhile and when it has the level of traffic to justify investment, but in the era of easy money from Brussels, we ignored that analysis, which left debt liabilities but not enough activity to reduce the debt-to-GDP ratio. In future, any construction of motorways should be accompanied by tolls and studies to prove the roads are worthwhile. Nevertheless, everyone would like if a motorway could be financed from a common pool and there were no charges.
There is a need for a greater link between the kind of economics Mr. O'Keeffe and Mr. McCarrick had combined with engineering to ensure we put the money into good and worthwhile projects rather than precipitating the difficulties in the national finances. We could reduce substantially the number of potholes caused by wrongly configured heavy goods vehicles in the country if we moved to a taxation system based on the axle load of a laden vehicle rather than the unladen weight of a vehicle. The current system was inherited from history but why would potholing ever cease if we did not design a tax system rewarding vehicles that do not cause potholes while penalising the vehicles that do? The Minister has the ability, in the schedule of taxation to tackle the problem and I hope that will be done in the next year. Much of the research that would assist in moving to a more environmentally and economically sensible way of configuring our road freight fleet has already been done.
I welcome the Minister of State. I generally speak after Senator Barrett in debates like this and I always tend to start by picking up on something he mentions. The weather, more than vehicles, is responsible for causing potholes in my area. We are now in the last week of March and every day this week we have looked out at snow falling, which is unprecedented for this time of year in this country.
This Bill is a piece of housekeeping that must be done following the budget, and we must implement the legislation today. I am a little amused by the pot of gold that Fianna Fáil continually identifies rather than dealing with the legislation before the House. To the best of my knowledge, nobody has ever found a pot of gold in this country, although we have had many fairies. If it is there, the Opposition Senators might tell us where it is because I would love to be able to find money today so as not to have to implement legislation like that before us today. I would like to be able to solve the problems generated by the party to which I have referred.
I would like to start on a positive note by welcoming the idea of motor vehicles being registered on a biannual basis. The motor industry has sought such an initiative for many years as everyone tries to get a car as early as possible in January in order to get the best value from it. It is a bit like planning an under-age hurling team in that if all the players could be born on the first day of the new year, it would make a big difference to when they can play. This will help the industry in many ways and I welcome the Bill's publication. Currently, as 80% of new car sales take place in the first quarter, we will see a massive difference because of this Bill, which will even out the motor industry's sales.
The rise in vehicle registration tax, VRT, will increase the price of new cars and used cars as a result. Will the Minister of State comment on this? I welcome the changes in bands but for some reason, band G was not touched at all this year. The system is based on emissions but as I understand it, the band would mainly contain bigger cars. People have referred to the number of bigger cars in the lot outside Leinster House and, generally speaking, people with bigger cars have more money. One would imagine we could take a little more from them rather than what is being done in the legislation.
Another issue has been brought to my attention by a number of people this week and I have been concerned about it for many years. People are cash-strapped and in many cases are only able to tax a car on a quarterly basis. The difference between taxing a car on a quarterly as opposed to an annual basis is 12.5% on a small car such as a Daewoo Matiz. Senator Barrett, as a statistician, may be interested in that, as it is a substantial amount for anybody who cannot afford to go beyond the three month tax period. The tax is €199 for the year but it works out at €224 if it is done on a quarterly basis. Can we do something to make that fairer either in this legislation or further down the road?
There is also the matter of the local government fund which will be affected by the Bill. As the Minister of State indicated, it will decrease from €1.1 billion to €960 million. There is a critical point below which the local government fund cannot go. Senators Keane and Harte and I are very much aware that at this stage, everything that can be adjusted downwards has been hit; therefore, I ask the Minister of State to take that into account. In this week we saw three employees of Cork County Council suspended because they saw a big pothole when they were returning from work and like any good employee, they stopped to repair it. A safety inspector was travelling behind them and as a result, the three gentlemen have been suspended. I fully appreciate that there must be a health and safety regime, which should be paramount, as there have been deaths of employees in local authorities on the roads. Nevertheless, I have learned that safety auditing on any individual piece of road work can run to 8% of the cost of the work, which is a substantial amount of money.
I made some checks with our own engineers this week on what was required for one year of work in the area I served as a councillor.
It required one qualified employee to spend one week surveying sites and conducting the audit on the work. There is a significant amount of red tape involved in safety audits. One cannot do anything now without 8% or more of the money coming out of the audit. Surely savings can be made on this and we need to review the legislation that has brought us to the point where a pothole cannot be filled without conducting a safety audit. This is what resulted this week. I would like the Minister to review this, although it is not directly related to this legislation. The local government fund is being trimmed to the last and we must examine where the money is being spent. Are we over legislated in this area?
I welcome the Minister to the House with which he is familiar and to which he is a frequent visitor. I also welcome elements of this Bill, in particular those dealing with carbon emissions. This is a constructive environmental approach. However, I would like to raise a few issues.
I refer to the fact that a substantial amount of this money will transfer to local authorities. It may well be that they need it but why we are paying a property tax? How many times will we be taxed in the same way for the same purpose? We are supposed to be given delivery of services and that is alleged to be the reason for the property tax, apart from the fact that we had our arm screwed out of its socket by the ECB, the IMF and all the other gangsters. Bin collections have been privatised and something peculiar will be done with water services. What services are we getting, given we are paying for them through road tax, as I said during the discussion on the property tax? How many times can we be bled for the same purpose? There is an element of chicanery in this that I do not like.
There is then the question of the polluter pays principle. That is implemented to a certain extent in the carbon emissions elements of legislation but not through the tax code. When Mr. Gormley was Minister for the Environment, Heritage and Local Government, he agreed with me when I made the point clearly to him that the appropriate thing to do if one is serious about pollution is to put the tax on petrol because then users pay directly proportionate to the amount of pollution they emit.
Senator Landy mentioned the issue of big cars out in the car park and said people who had big cars could afford them. There may be an element of truth in that but I would put that in the context of the Minister's statement about all older cars being replaced by cars taxed on carbon emissions. Why should it be an ambition to remove older cars? That sounds like a version of Government supported planned obsolescence. I say this with particular feeling because one of the largest cars in the car park is mine.
I did not know that.
The tax on vintage cars was the only one that was not increased.
It is beautiful Jaguar XJ6 3.1 litre for which I paid €5,000. The tax is touching €2,000 per annum and my insurance premium is approximately €1,000. I pay more than half what I paid for the car per annum. If I keep my car in good condition, which I do as I have it regularly serviced by the Jaguar company, I do not see why this exorbitant tax should be levied on it.
It is called saving the environment.
I cannot hear. There is some kind of squawking going on in the background. I am not quite sure what it is.
It is reality, not squawking.
Now all the cuckoos have started off.
The Senator is usually the cuckoo around here.
I would like the Minister of State to address the issues I have raised.
I welcome the Minister of State to the House. The Bill provides for increases in duties and motor taxation. We again are listening to populist politics from the Opposition. They would not introduce a motor or property tax but if that were so, they would have to increase income tax. This would mean we would have to take the money out of people's income tax and every service would be free. Almost 90% of the local government fund is generated from motor tax and it is equalised when distributed to the various local authorities. For example, the local authorities in Dublin and Cork have a large rates base and a significant proportion of the motor tax they collect is allocated to smaller local authorities to make sure they have the funding to deliver the services they have to deliver such as water and waste services and maintenance of roads and parks. That is what the local government fund and motor tax are about. In other words, we do not want to go back to 1977 when a Government entered office and abolished motor tax and rates. Now we have had to reintroduce property tax and increase motor tax rates to fund the country because it was bankrupted five years ago due to a lack of efficiency in spending.
The legislation will deliver more money for local authorities because they will have access to a wider tax base through property tax, water charges and increased motor taxation. Local moneys will stay in local areas to fund local services. The Minister of State referred to the reduction in motor taxation receipts following the changeover to a CO2 emissions-based system a few budgets ago. If that system remained in place, there would have been a 40% reduction in receipts in 15 years. That would not be sustainable because we would be unable to fund local services. Car emissions are lowering with the advent of new technologies and continuing research in the motor industry. It was ludicrous to encourage people to change to a lower emissions car which attracted a lower motor tax rate, although this was during the Celtic tiger era when money as plentiful. However, many younger people now own second hand cars which were made prior to 2008 and they cannot afford to change. As a result, they are paying high rates of motor tax to drive a 1 litre or 1.4 litre car to subsidise those driving much larger 2 litre or 2.5 litre cars that were bought post-2008. They pay half the tax young people pay for driving older cars.
I support the Bill. I agree with many of the sentiments expressed by Senator Barrett. As he said, cost-benefit analyses should have been done because some motorways should not have been built as they were not cost efficient. However, motorways were one of the positives from the Celtic tiger era. Road fatalities have reduced as a result of the motorways and improvements in our road network generally. It is important that local government continues to be funded. Almost €1 billion of the yield from motor tax goes back to local government, with 30% for local roads, 60% for general purpose, while the remaining 10% goes to the Exchequer. Unfortunately, €46.5 million was taken by the Exchequer last year while, this year, €150 million will be taken to balance the books to get the country back up and running again. Tonight will be historic, as the bank guarantee ends at midnight. That is another step on the way.
I welcome the Minister of State to the House. When the Bill was taken in the Lower House, my party colleague, Deputy Dessie Ellis, acknowledged the need to review the system of motor taxation. He outlined a number of alternatives to what is proposed in the Bill. He highlighted that there was a need to review the system and to future proof it by redesigning the motor tax bands to reflect carbon emissions, engine capacity and vehicle value. That, in turn, would make the system more progressive and would place a lesser burden on people because motor tax could be raised in a fairer and more environmentally sustainable way, which the Bill does not provide for, and that is the reason we oppose it.
The Minister is aware that Irish society is heavily dependent on the use of cars, probably more so than our European Union neighbours. That is due, in part, to the failure to invest in a meaningful way in public transport provision which has led to us being reliant on a car to get to the shops, the post office, the Garda Station and to take children to school if one lives outside the catchment area. The failure to properly integrate the existing public transport provision has meant that in those places where the need for public transport is greater, such as Dublin, many people simply do not have the choice of travelling every day journeys by a means other than a car. This issue is particularly acute in some rural areas, especially in my county where regular public transport is not an option for many people and they have to rely on a car. As a result, the increased taxes on a private car will have a disproportionate impact on people and will have a massive impact on hundreds of thousands of struggling families who depend on the car to get to and from work, to take their children to school and go about their daily business. Increases in excise duty mean that people are already paying up to €400 more per year on fuel than three years ago. Motorists pay 23% VAT on petrol and diesel, in addition to other taxes and duties. The increase in motor tax for ordinary motorists will make life much harder for people. There is too much of a burden on motorists without targeting fuel inefficiency when we should be moving towards that. Perhaps the Minister of State will respond to my comments in terms of reviewing and future proofing the motor taxation system and the system he envisages for the future.
The Bill will impact negatively on struggling families and struggling businesses, especially the providers of small goods and services, thus affecting trade and jobs.
I welcome the Minister of State. There are a couple of very important points to be made in the debate. I have been in the insurance industry for many years. There is a social aspect to motor taxation as there is a social aspect to tax on alcohol as both are products that can cause death and suffering. We have to be cognisant of that fact. In Donegal there are a couple of lobby groups and politicians who, one week, call for the abolition of vehicle registration tax, saying it is illegal, and the next week the county councillors say young people need to be educated in motor vehicle safety. Those recommending the abolition of motor taxation or vehicle registration tax are basically saying that young people can get a bigger car cheaper and they expect them to be responsible. As an insurance broker I would have had a father or mother come to my office asking to have little Johnny put on their insurance, saying he was very careful and would only go out in the evening with his father to drive. I knew little Johnny was going around the street with the dust rising behind the car. We have a responsibility to families. There is a social tax aspect that has to be added to motor taxation as well as a revenue generation aspect. If there was no motor taxation and no vehicle registration tax, while others call for cheaper insurance for young people, the scenario would be that every young person would have a car, the result of which would be more devastation on the roads.
As in the case of alcohol, we have to put in place a certain social tax aspect for revenue generation that will discourage young people who do not need a car to be on the road. We must balance that with putting people off the road because motor taxation is too expensive, especially in country areas where there is no public transport worth talking about. It may be a debate for another day as to how to tax motor vehicles in such a way as to discourage young people from using them, while at the same time there is a need for revenue for the repair of potholes in areas such as Donegal and the road cleaning services. The debate on emissions is important and we cannot get away from it and, therefore, we have to balance it correctly. We do not have a choice. There are groups, especially in Donegal, who have called for cheaper vehicles for young people to get on the road but that is not helpful. A motor vehicle is a dangerous weapon as it can and does cause damage.
I commend the Bill to the House.
I will be brief. I compliment the Minister on his work and recognise that this is a procedural Bill. Quite simply, we need the revenue. There has been a fair attempt, in difficult circumstances, to distribute the liability evenly. Safety and other elements were raised by the previous speaker. I would like to see us take a more innovative approach as I do not see any difficulty with young people being on the roads per se. To increase motor taxation to such an extent as to disincentivise driving would be a negative approach, while at the same time I see where the Senator is coming from. I am driving since I was 17 years of age and it has enhanced my life. That I have driven for so long and in safety is positive. I would like to think the Government could bring forward a strategy for younger drivers who are in that zone where they could be more of a danger on the road without it being financially punitive but perhaps that is the only way. It is a discussion we could usefully have in the House on another day.
I commend the Bill.
I thank all the Senators for their contributions. As we are taking Committee and Remaining Stages today, I will not delay the House. Many of the points made make sense in their own right. When we examine what we have to do as a country and how we have to fund the road network and local government we have no choice but to do what we did in the budget. The key point is the relationship between car emissions and the tax to be paid. The lower the motor vehicle emissions, the less motor tax one pays. Notwithstanding that, motor taxation has increased for everybody. At the heart of what we are doing is ensuring the environmental benefit will continue. The reason for the increase is that more people are driving more environmentally friendly cars and the tax base was going down. If that was to continue for the next 15 years, we would lose at least €500 million and there would be no sustainability in terms of road repairs and safety issues.
The last point made was in regard safety for young people. While it is a fact that young people suffer greatly as a result of the accidents in which they have been involved, I agree with Senator Noone that we have to deal with the safety issue. The Department and the Oireachtas work with the Road Safety Authority to ensure roads are safer and that young people, in particular, are educated and understand what happens as a result of irresponsible driving. The number of roads deaths has decreased significantly in recent years. During the period when I was the Opposition spokesman on transport I recall Noel Dempsey, former Minister for the Environment, Community and Local Government, saying the Road Safety Authority message worked.
The agency is brilliant at getting its message across and has total credibility. May it go from strength to strength in that regard.
Senator Mooney raised the issue of climate change. The heads of a climate action and low carbon development Bill were published in February 2013 for consideration by the Oireachtas Joint Committee on Environment, Culture and the Gaeltacht. As part of the response to meeting our climate change obligations, the NESC secretariat was asked to look at the longer-term agenda and to focus on developing a basis for a socioeconomic vision to underpin an effective national transition to a low carbon future by 2050. The final report of the secretariat was released on 26 February for consideration by the joint committee. The committee is dealing with that report and is the main forum within the Oireachtas for dealing with climate change issues.
The question was asked as to why the motor tax increases for CO2 emissions vehicles were higher. While the level of increases for the lower CO2 bands in the last two budgets have been higher in percentage terms than for the rest of the fleet, they must be viewed against a structure that left the bottom rates very low. Even after the two budgetary increases, the average payment for owners of vehicles taxed on the basis of their CO2 emissions is €315 per annum which is significantly lower than the average of €511 for owners of pre-2008 cars. It must also be remembered that while the introduction of the CO2 bands was designed to encourage a switch to lower emission vehicles, the changes were also introduced on the second principle of revenue neutrality, which has not happened. As I said earlier, there has been a significant loss of motor tax income in recent years, which is why we had to increase the tax rates. Motor tax revenue receipts dropped from €1.6 billion in 2008 to €1.1 billion in 2011. Had that trend continued, receipts this year would have been in the order of €954 million. That level of income would make it impossible for us to provide what is needed.
Motor manufacturers are meeting the climate change challenge by developing cars with even lower emissions, and long may that continue. Senator Landy asked about the increase in the G band, which went up from €2,258 to €2,350. While this is the lowest increase in percentage terms, at 4.1%, it amounts to €92, which is the highest amount of money in any band.
Senator Norris has a most unusual car and I wish him well in it. However, with a 3.1 litre engine, I suggest he may be driving a jet engine rather than a car. I commend him for keeping it on the road. The Senator, and others like him who can keep Jaguars firing on all cylinders, deserve a zero rate of motor tax. The fact remains that we need the money. Everyone knows that if we do not take in the requisite income, we cannot sustain our local government services. One of the key policies underlining the changes being introduced by the Minister for the Environment, Community and Local Government, Deputy Phil Hogan, is that local government councillors will be responsible for the management of the local budget. The new property tax will also feed into local budgets and there will be an agenda, locally, to ensure greater efficiencies and reductions in costs. I hope those changes will be very constructive.
Sinn Féin representatives raised the issue of a three-pronged approach to taxation. We already tax on the basis of the emissions of vehicles but if we add size and value as parameters, that will not necessarily improve the environmental performance of the motor tax system. We have moved away from the size of vehicle basis used prior to 2008 because it did not produce any environmental gain. I do not know how price could be used as an environmental parameter. The current system is simple, very clear and effective and is reducing emissions. In that context, it is working.
I think I have addressed most of the points raised. If Senators wish to raise further issues, we can deal with them on Committee Stage. I know Senator Barrett is concerned about a specific issue, which we will deal with later. I thank all of the Senators for their contributions and the thought-provoking issues they raised.
Question put and declared carried.