Dáil Éireann Debate, Tuesday - 20 September 2022
60. Deputy Pádraig O'Sullivan asked the Minister for the Environment, Climate and Communications the engagement he has had with the Minister for Finance regarding a windfall tax on energy companies’ earnings; and if he will make a statement on the matter. [45676/22]
View answerThis question was submitted prior to the EU meeting referred to by Deputy Stanton. What engagement has the Minister had with the Minister for Finance regarding a windfall tax on energy companies?
As the Deputy will know, I have to be very sensitive because we are in the middle of a budget process. My Department and the Department of Finance have been exploring the potential to collect a portion of these windfall gains with a view to using the proceeds to support energy consumers. Subsequent to this, there have been significant developments at EU level, which we just discussed. At the Council of energy ministers on 9 September, which I attended, the issue of windfall gains was discussed in some detail. Outline proposals were set out and the Council of energy ministers invited the European Commission to make formal proposals. On 14 September, the Commission published a proposed regulation, which included measures aimed at addressing windfall gains in the electricity sector and in fossil fuel production. These proposals are expected to raise additional revenues which will be used to reduce the cost of energy for households and businesses. It is important that this proposal captures the windfall gains and minimises negative effects on consumers. The proposal will be negotiated throughout the remainder of this month with a view of it being approved at a meeting of the Council of energy ministers on 30 September. I fully support the objectives of this proposal and am working to ensure it fully addresses the issue of windfall gains in Ireland.
I wish to make two further points. First, it will be very difficult to get proposals that exactly fit our circumstances, including on the rate that would apply. For example, the Commission proposed a rate of €180 per megawatt hour and that they would be on the supernormal profits above that rate. My personal view is that we should look for a lower rate. Similar technical issues revolve around many aspects of this, which will make it easier or more difficult in different countries depending on the circumstance of each country. Therefore, it is not an easy approach.
Deputy Fitzpatrick and other Deputies asked earlier why I mention the European Union so much. In this instance, we do have to work collectively because this is a temporary measure in response to a wartime event, where energy has been used in this way. We do not want to divide; that is what the Russian Government would like us to do.
I should have said from the outset that we all know the backdrop to the discussion we are having. Some people might paint the windfall tax as a panacea for all our woes, which it certainly will not be. Many commentators have more or less said that in the past few weeks. An article I read said that the best benefit of a windfall tax might be in the name of social cohesion. I am not so sure if that is why we should be making these types of decisions. Many people will argue that the introduction of a windfall tax would be negligible in terms of its benefit for us domestically in terms of reducing prices. That said, the backdrop is still the same. Profit margins are going up for all electric and gas companies. Profit margins have increased by 10% for ESB and by 74% for Centrica. Internationally, Shell and BP posted massive profits of $11 billion and €14 billion, not to mention SSE, the parent company of SSE Airtricity, which reported £1.5 billion in profit.
Notwithstanding the likelihood of a windfall tax coming in, are other mechanisms being looked at including those that are being considered in the UK, such as the 25% profit levy?
I agree with the Deputy that the proposals coming from the European Union are just one element. They are among the four pieces in the jigsaw of measures that we will need to implement, as I mentioned earlier. We will not have the full details on them by budget day. We will have a rough estimate of what implications it might have for Revenue but it is only one element of the response we must take.
What we need to do is to continue with last year's process, which included a combination of social welfare measures targeted at the most poor and those who are most vulnerable to higher energy prices. There must be continued use of energy credits, such is the high cost of energy that is hitting and affecting every house in the country. It is appropriate to have timely, quick, easy to deliver and low-cost solutions such as the energy credits that we presented, as well as supports for businesses that will now be at real risk because of the tenfold increase in prices.
It is an evolving situation. We are right to do it through to early spring so that we can reassess the prices then. Even in the past three weeks, the international price of gas has fluctuated massively. These interim measures will give us the chance to get through the winter, with a review in the spring as to where we are then.
It was encouraging to hear other members of Cabinet and Government stating that in the event of the introduction of windfall tax, we would be looking at it over the totality of the year so that it would be retrospective. That is welcome.
I have another point in relation to something the Minister said at the end of August in an RTÉ "News At One" interview regarding such a measure being considered. He said that it would be done during the budget talks, which he has reiterated today. Has the Minister had meetings with the Minister for Finance addressing this in the budget? I know he cannot divulge their content, but will he confirm whether those meetings have taken place?
On the European solidarity windfall tax, who would be liable within the State in that regard? The Minister has spoken about how difficult it is to reform energy markets but we could all make the argument that perhaps we should have started this conversation earlier. We must do whatever we can at this time, however. The Minister has raised the fact that we are dealing with a wartime situation. It is fair to say that the biggest weapon Vladimir Putin has is the fact that we are all about to face absolute energy and financial carnage if the European Union and the wider western world do not get a handle on this and, at a domestic level, if we do not look after businesses, families and workers. It is absolutely necessary that we do all we possibly can. Otherwise, we will give Putin the win that he does not seem to be able to eke out on the battlefield.
I meet the Minister, Deputy Donohoe, every couple of days and, leading up to the budget, I am sure it will be close to daily, in my capacity as the head of two Departments and as the leader of my party. Last night, the Taoiseach, the Tánaiste and I met the Ministers for Finance and Public Expenditure and Reform.
We have had a series of those meetings where we consider all of these issues.
To respond to Deputy Ó Murchú, we need to get windfall taxes in. They are an important part of the process. It will not be easy and we will have to work with our European colleagues to make sure it happens. They will apply in particular to wind farms and other generators that are not burning gas. With regard to the solidarity contribution, the only large-scale company involved here is with regard to Corrib gas because it is the only one where we have at-scale fossil fuel production. The Deputy is absolutely right that the Russian Government is looking to divide. No market redesign will address this coming winter. I do not believe it is possible. Certainly, no one who has investigated and looked at this in real detail thinks we can do it in the six months through this winter during which we need protect people. We will have to have a series of measures as we look at market redesign. This is the approach we are taking.
