Tuesday, 1 October 2019

Questions (67)

Pearse Doherty


67. Deputy Pearse Doherty asked the Minister for Public Expenditure and Reform the projected additional expenditure that will be committed to climate action measures; the way in which it will be ring-fenced for that purpose from an increased revenue from carbon tax; and if he will make a statement on the matter. [39625/19]

View answer

Oral answers (9 contributions) (Question to Public)

Next week's budget, which is being brought forward by the Government and Fianna Fáil, is on course to increase carbon taxes on households. Research has shown that this tax is regressive. I am sure the Minister will not dispute that. Research has shown it will hit families on the lowest incomes hardest without effecting behavioural change. In next week's budget, how much additional expenditure will be earmarked for climate action measures and how will increased revenue from the carbon tax hike be ring-fenced?

The Government's climate action plan sets out ambitious savings targets across all sectors of our economy.

The Departments responsible for the achievement of those targets are incorporating and developing policies and measures required to reach them. As part of the work that is under way, we are evaluating what role carbon tax will play.

In response to the particular questions the Deputy put to me, I understand that a change in carbon pricing does in particular have an effect on lower income families and citizens. This is something we have to take account of in any decision that we make. In response to the Deputy's point regarding how such revenues would be used, my intention, if a move is made on carbon taxation, is that all the revenue raised from it would be used either to reinvest back into changing our economy or to deal with some of the social issues to which the Deputy referred that could be caused by a change in carbon pricing. The balance of expert opinion regarding the role of carbon pricing and carbon taxation is that they can play a valuable role in helping economies, families and businesses adjust to the kind of behaviours that we will need to deal with the risk of climate change. I am well aware of the concerns about this matter. Any change that I propose will be gradual and my intention, if such a change is made, is to reinvest it in order to deal with issues to which the Deputy referred.

I am glad the Minister is aware that the tax he is proposing is regressive. Let us remind ourselves of what the ESRI's June report stated in the context of carbon taxes. The author stated categorically, "Carbon taxation is found to be regressive, with poorer households spending a greater proportion of their income on the tax than more affluent households." The report goes on to state that an increase in carbon tax would disproportionately hit rural households, particularly rural households in the lowest income quartile. Most worryingly, it suggests that single households with children are going to be the most affected by the Government's policy, which is supported by Fianna Fáil. It states that while the tax should be borne by everyone, the cost is greatest for the poorest households, and that households living in older dwellings and low-skilled workers have larger costs. On Wednesday last, at a meeting of the Joint Committee on Climate Action, the Minister's officials categorically confirmed to my colleague, Deputy Cullinane, that this carbon tax proposal is regressive. That is a fact which cannot be disputed. A carbon tax increase will hurt those on the lowest incomes in Irish society and that is backed up in the research. Given that this is the case and given that the Minister said it would be ring-fenced for climate action measures, can he outline how his Department intends to ring-fence this increase? Can he outline whether he plans to ring-fence any of the €400 million in carbon taxes that we bring in every year? Can he outline if he has the necessary statutory instruments in place to ring-fence the moneys that will accrue from the carbon tax increase? What measures will this regressive hike in taxation next year likely fund?

When the Deputy refers to the views of experts, I will quote back to him the Climate Change Advisory Council, which refers to a rise in carbon tax as an essential component of achieving decarbonisation. That was the recommendation and view of the panel whose job it is to advise all of us on the kind of change we need in responding to the challenge of climate change. The Citizens' Assembly reached a similar view. The Deputy made reference to the view of the ESRI. I am well aware of the opinions it has put forward regarding the income effects of carbon tax. Reports from institutions like the ESRI have also contended that a change in the price of carbon is a way in which we will be able to change behaviour and make the kind of long-term changes that are needed for our economy to respond to climate change and for citizens to be protected when that happens. I am aware of the income effects for lower-income citizens. If, therefore, a move on carbon is made, I will be looking at how we can respond to that particular issue. I am committed to this being a ring-fenced fund. I am looking at ways in which I can give confidence to the House and to the people that it will happen if we do make a move on carbon taxation.

If the Minister is talking about ring-fencing this tax, does he have the necessary statutory instruments to allow him to do so? It has not been done before. Hypothecation is not done in the context of the tax code. We have heard the Taoiseach talking about how the money is going to be ring-fenced. Is it going to be ring-fenced? Does the Minister have a statutory instrument to ring-fence this tax for climate change measures?

The Minister knows as well as I that a Government can raise taxes to achieve one of two purposes, namely, raise more revenue, which is completely justifiable, or effect behavioural change. With carbon taxes, it should only be about behavioural change. The reality is that we already have a carbon tax which was introduced in 2015 and brings in €400 million per year. It has not effected behavioural change and the Government has remained a laggard when it comes to climate action. We can see that from the targets that we are missing spectacularly. Behavioural change requires investment. It requires alternatives. The reality is there is no alternative being provided by this Government. It is not investing the necessary resources that we need, for example, in terms of public transport, energy efficiency or retrofitting. People who are going to be hit the worst as a result of this measure, going back to the ESRI research, namely, those on the lowest incomes, families with poor insulation and families in rural communities, need to have the alternatives. This is simply penny-pinching from people's pockets without having due regard to actually creating the alteratives that should be there. Can the Minister answer some of these questions, particularly in respect of whether he has the necessary tools to hypothecate this tax?

Many of the issues that Deputy Pearse Doherty is raising can only be dealt with in the context of the decision that is made on budget day and in the finance Bill that will follow. I am confident that if the House does make a move on carbon taxation, we will be able to give clarity regarding how that is ring-fenced. That is what we would love to do. The Deputy made the point that taxes have two different purposes. I agree with him. If a move was to be made on carbon tax, my intention would be to use the revenue in that area to further drive the change to which he is referring. The other questions that he put to me I will be able to answer in the context of the finance Bill if this decision is made. I wonder in the debate that is under way if the Deputy might offer a view regarding whether he thinks the Climate Change Advisory Council is right or wrong-----

-----in the context of the role that carbon pricing can play.

Carbon pricing can play a very important role but only when the alternative is there for citizens to actually change behaviour. The problem is that someone from west Donegal or Gaoth Dobhair, where the Leas-Cheann Comhairle is from, does not have the alternative of jumping on public transport - either a bus or a train - and travelling to the capital city or other parts of the county. We need serious investment in public transport, retrofitting and the alternatives. That is where the Government is failing spectacularly.