Dáil Éireann Debate, Thursday - 5 October 2023
80. Deputy Pearse Doherty asked the Minister for Finance if he or his Department are considering tax measures to support households with the rising cost of home heating oil; and if he will make a statement on the matter. [43391/23]
View answerAs the Minister is aware, the volatility in the international oil markets has seen a steady increase in the price of home heating oil. Home heating oil prices have increased by 30% in the past two months. More than a one third of households across the State use home heating oil as their main source of fuel. In this context, is the Minister considering tax measures to support households with the rising cost of heating, in particular those using home heating oil?
As the Deputy is aware, it is a long-standing practice of the Minister for Finance not to specifically comment on individual measures that may be part of the budget. With regard to kerosene used for home heating purposes, mineral oil tax and VAT at a rate of 13.5% are applied. Kerosene is also subject to the National Oil Reserves Agency, NORA, levy at a rate of 2 cent per litre. Mineral oil tax comprises a carbon and non-carbon component, as the Deputy is familiar with. The carbon component is commonly referred to as carbon tax and the non-carbon component is often referred to as fuel duty, fuel excise or fuel tax. Both the carbon and non-carbon components are excise. With regard to the application of mineral oil tax on kerosene used for home heating, the non-carbon component is zero and only carbon tax applies. The current rate of carbon tax is €48.50 per tonne of carbon dioxide emitted. For supplies of kerosene used for home heating, this equates to a charge of €122.83 per 1000 Litres or approximately 12 cent per litre. The 2020 programme for Government committed to increasing the amount charged per tonne of CO2 emissions from fuels to €100 by 2030. The Government followed through on this commitment by introducing legislation in the Finance Act 2020 to provide for a ten year trajectory for carbon tax increases to achieve this objective. This measure is a key pillar underpinning the Government’s Climate Action Plan to halve emissions by 2030 and reach net zero no later than 2050.
A further key component of the Government’s carbon tax policy is the allocation of revenues raised from these rate increases to fund just transition measures. It is important to note a significant portion of carbon tax revenue is allocated for expenditure on targeted welfare measures and energy efficiency measures, which not only support the most vulnerable households in society, but in the long term provide support against fuel price impacts by reducing our reliance on fossil fuels. With regard to VAT applied to kerosene used for home heating, it is important to note the Government has very little flexibility on kerosene from a VAT perspective. This is because it is subject to a VAT rate of 13.5% which is provided for by way of a historical derogation that allows us to maintain reduced rates to certain supplies under the VAT directive. These are known as parked rates and cannot go below 12%. If we were to reduce kerosene to 12%, the saving would be relatively small - approximately €20 per 1000 litres - but there would be a considerable additional cost to the Exchequer, approaching €900 million in total.
More than one third of homes across the State use home heating oil as their primary heating source. This rises to two thirds if you look at the border region, including my own county of Donegal. More than half of households in the south-east and western regions use home heating oil as their primary heating source. In the past two months, the average price of home heating oil has increased by nearly 30%, adding €240 to the cost of filling a tank. We know there is volatility in the international markets, as I have mentioned. However, there is a real risk these prices could rise further. Action can be taken to support them, and that is the point. It can be taken by reducing excise duty on home heating oil. In our alternative budget, Sinn Féin has shown how reducing the rate of excise on home heating oil on budget day, by €63 per 1,000 litres until the end of March, could reduce the prices to households at a cost to the State of €44 million. There are proposals. If there is a will, the price of home heating oil can be cut by €63 per fill in the upcoming budget. Is this a policy measure the Minister would consider?
I am aware of the volatility in the cost of filling or half filling a tank of oil. It is down to a number of factors. As the Deputy said, we have seen the price of oil increase very significantly in recent weeks. In the past 48 hours it has gone down by 5% or 6%, but who knows what will happen today or in the weeks ahead? Of course, the cost of refining is also a factor. The relative strength of the US dollar, given that oil is priced in that currency, is also a factor. The Deputy is effectively suggesting that the carbon tax on home heating oil would be reduced. I can say in the round that the Government is very conscious of the cost of energy for households across Ireland. There will be support in the budget for all households in terms of the energy costs they are facing. We recognise, coming into the autumn and winter months, that it will be a tough time for many. We provided extensive help last year, some of which was universal and some targeted. We will seek to provide further support next Tuesday, and we will lay that out in the House.
Since the energy crisis began, this Government has increased the price of home heating oil twice, and is planning to do so again next May, unless it changes track in the budget. Everything the Minister has said so far suggests that it will not. This is in addition to the increases we have seen in the market price. This is putting additional pressure on households, and there has been an unfair gap in Government policy when it comes to tax on household energy prices in the past year. VAT rates have been reduced for electricity and gas, but not for the 37% of households using home heating oil as their primary source of heating. There has been a measure, if you are heating your home with gas. However, if you are one of the more than one third of people who use home heating oil, which in my county rises to two thirds, there is nothing. Actually, it is not that there is nothing. The Minister for Finance will continue to increase the cost of home heating oil on you and your family. That is not acceptable. The price internationally has increased dramatically. The price to fill your tank has gone up by €240 in the past two months. There is an option for the Government to do what Sinn Féin is proposing, namely, to cut the excise duty, which is in the form of a carbon tax, in this year's budget. We have shown how it can make the necessary investments in a just transition with €540 million of investment in climate action. This can be done without penalising households who want to keep their families warm this Christmas, or without penalising motorists who want to get from A to B, whether that is dropping their kids to school, visiting a relative in the hospital, or travelling to work.
I am all too aware of the real-life impact of the increase in the cost of oil. When I was young, we grew up in a home where heating was provided by oil. I well remember my parents trying to put together money to fill or half-fill the tank of oil. I am very aware of the reality and of the burden this imposes on many families. As the Deputy says, it is subject to a lot of fluctuation. However, he is specifically proposing that we make a move on carbon tax. If I may say so, I think it speaks to the Deputy's general approach to the issue of carbon tax. He says he is in favour of the carbon tax, but every time there is an increase coming he is against it, and on some occasions seeks to reverse it. Of course, he never goes back to all of the revenues that were collected to say that he would deal with that, or reduce previous budgets where carbon tax was increased. The Deputy knows well that these revenues are in part used to alleviate fuel poverty. On budget day, we publish transparently exactly where the money from the carbon tax is going to tackle fuel poverty, to help farmers in their journey to reduce emissions, and to help households with retrofitting.
