Dáil Éireann díospóireacht -
Tuesday, 23 Jan 1996

Vol. 460 No. 3

Financial Resolution No. 2: Excise — Hydrocarbons and Substitute Motor Fuel.

The Taoiseach

I move Financial Resolution No. 2:

(1) That in this Resolution—

"the Act of 1994" means the Finance Act, 1994 (No. 13 of 1994);

"the Order of 1975" means the Imposition of Duties (No. 221) (Excise Duties) Order, 1975 (S.I. No. 307 of 1975).

(2) That the duty of excise on mineral hydrocarbon light oil imposed by paragraph 11 (1) of the Order of 1975, shall, in lieu of the rate specified in section 84 (1) of the Act of 1994, be charged, levied and paid, as on and from the 24th day of January, 1996, at the rate of £307.65 per 1,000 litres.

(3) That for the purposes of the rebate of duty on mineral hydrocarbon light oil provided for in section 56 (3) of the Finance Act, 1988 (No. 12 of 1988), section 89 of the Finance Act, 1990 (No. 10 of 1990), shall apply as on and from the 24th day of January, 1996, as if the reference therein to section 40 (1) of the Finance Act, 1989 (No. 10 of 1989), which, by virtue of section 84 (2) of the Act of 1994, is construed as a reference to section 84 (1) of the Act of 1994, were instead a reference to paragraph (2) of this Resolution.

(4) That the duty of excise on hydrocarbon oil imposed by paragraph 12 (1) of the Order of 1975, shall, in lieu of the rate specified in section 84 (3) of the Finance Act, 1994, be charged, levied and paid, as on and from the 24th day of January, 1996, at the rate of £243.75 per 1,000 litres.

(5) That the duty of excise on substitute motor fuel imposed by section 116 (2) of the Finance Act, 1995 (No. 8 of 1995), shall, in lieu of the rate specified in the said section 116 (2), be charged, levied and paid, as on and from the 24th day of January, 1996, at the rate of £243.75 per 1,000 litres.

(6) It is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

This resolution provides for an excise duty increase on petrol, including unleaded, which, when VAT is included, amounts to 1p on a litre or 4.5p on a gallon, and an excise duty increase on auto diesel which, when VAT is included, amounts to 1p on a litre or 4.5p on a gallon with effect from midnight. There is also, technically, an excise duty increase on substitute motor fuel which, when VAT is included, amounts to 1p on a litre or 4.5p on a gallon.

Mr. D. Ahern

Members on this side of the House, particularly those who live in Dundalk in which there is a successful industry as my constituency colleague, Deputy McGahon, is aware, are particularly unhappy that, yet again — Governments of which my party formed part also did this — extra expense is being added to cigarette smokers and the beleaguered tobacco industry. This issue has been the subject of discussion in recent days and it must be accepted that we are reaching the point of diminishing returns. Because of the advice being given many people, particularly males, have changed their habits and given up smoking, but some, no matter what the cost, will continue.

It has to be borne in mind that this industry is the source of employment for many people and because of cutbacks some of them have been let go in Dundalk. I did not realise until a few minutes ago that there is a cigarette factory in Deputy Eric Byrne's constituency. When my party introduced a Resolution to increase the price of cigarettes I did not speak against it in the Chamber and then walk through the lobbies to vote in favour. I expect Members of the Government parties to do likewise tonight.

In relation to the increase in the price of petrol, unfortunately, Governments of which Fine Gael has formed part have not addressed the difficulties encountered in Border areas. I am aware that we will receive another lecture from my constituency colleague, Deputy McGahon, to the effect that all Governments have neglected these areas — I can speak about macro as well as micro economics — but a number of issues are looming of which I hope the Taoiseach is aware. The blind pursuit of economic and monetary union will have an effect on Border areas, particularly if Britain fails to participate.

When my party entered Government in 1987 — Deputy McGahon will bear testimony to this — the town of Dundalk was on its knees. Thankfully, the position has changed and many of the petrol stations which closed down have been reopened by people with business acumen who decided to take a risk and sell petrol at a much keener price than anywhere else in the country and to at least try to match prices in the North. Petrol was 30p a gallon dearer in petrol stations 20 miles from Dundalk. These people are now reaping the benefits because of petrol price increases in the North and Government action. They are attracting half their customers from the North — for the first time in 20 years people living north of the Border have come South to buy their petrol. We welcome this. This Resolution, however, may lead to a reversal.

Many petrol station owners along the Border will be concerned about this proposal which points to the Government's lack of commitment. Not one member of the Government or Minister of State represents a Border area. It is a pity the Taoiseach did not put a hand on Deputy McGahon who might have been able to exert some influence.

When Deputy Dukes was Minister for Finance he had cups of tea at the Lisdoo Arms and told us what the Government of 1982-86 would do, including the designation of certain parts of Dundalk. However, it welched on the proposal to introduce the 48 hour rule. Thankfully, it was introduced by my party when it entered Government in 1987, regardless of whether it was in keeping with EU rules. Deputies McGahon and Harte must acknowledge that it had an immediate effect.

I hope that in 12 months' time, irrespective of which Government is in office, we are not told that further price increases are being imposed on petrol. If so, the beleaguered motorist, particularly in the Border region, will suffer. Those who derive their livelihoods from the motor industry in that area will suffer more than their counterparts in other parts of the Twenty-six Counties. The risk taken by those in towns such as Dundalk of reducing petrol prices has been thrown back in their faces by this increase. The price of petrol has not been increased in a budget for some considerable time and this increase is one of the worst features of what, in effect, is a very poor budget. I am not trying to score political points in this regard. It is pointless coming in here and speaking against an issue and then voting for it. Members should put their money where their mouths are.

Mr. McGahon

I agree with much of what Deputy Ahern said, but it is a little ungracious of him to start nit-picking. I realise that in the circus in which we participate and in the game of confrontational politics one must nit-pick, but I gently remind him that his party colleague, Deputy O'Hanlon, did not do much for the cigarette industry when he, as Minister, imposed a staggering increase on the price of cigarettes.

Mr. D. Ahern

I did not speak against it.

Mr. McGahon

For the past 14 years on budget night I have lamented the unfair taxation with which the cigarette industry is burdened every year. Like most other Members I believe smoking is injurious to health, but I also believe in the right of freedom to choose. It is necessary to contrast the hypocritical policy of all Governments — Deputy Ahern's included — to home in on the cigarette industry, which is in serious decline, with the propping up of the drinks industry which has wreaked havoc. It is a shame that Governments have been reluctant to curtail the advertising aspect of an industry that kills more people and wreaks havoc on more families than the cigarette industry.

I congratulate my cousin, the Minister for Finance, for listening to my entreaties on behalf of the workers of P.J. Carrolls. I thank him sincerely for listening to the other side of the family in that regard. He has looked after both sides of the family with equal success in recent times.

Mr. D. Ahern

Is the Deputy referring to QMP?

Mr. McGahon

I am looking at the Taoiseach.

The Taoiseach

I did not know I was related to the Deputy.

Mr. McGahon

The Minister, Deputy Quinn, listened to my lobbying in the past year.

We all know the cigarette industry is vulnerable to price increases on budget day and the industry accepts that will always be the case but, unfortunately, it has been taxed unfairly in many budgets — for example, last year's increase was double the rate of inflation. That is unfair by any standard, particularly as the industry subscribed £600 million to the Exchequer last year. When East European countries begin to get the largesse from Brussels, how will we raise such large sums of money? Six hundred million pounds is a sizeable contribution to the Exchequer of a small country.

The cigarette industry accepts it is in a precarious position in that their product raises question marks about health. It also accepts that each year on budget day Governments, including Fianna Fáil in ten years' time when we have spun full circle, will penalise the industry. It would be a shame if the goose that laid the golden egg were killed as that would lead to smuggling on a horrendous scale, it is prevalent at present. One has only to walk down Henry Street to see people publicly selling cigarettes at reduced prices. The cigarette industry estimates that at least £10 million is lost to the Revenue by such practice which is taking place under the noses of politicians and the gardaí, but nothing is being done about it. If we kill the cigarette industry, do Members believe smuggling will cease? It will not because large markets will open up between here, the continent and South America. Cigarettes are already coming in from those places and the Revenue loses out. Personal taxation, PRSI and company taxation will also be lost to the Exchequer.

We must support legitimate industry and close the door on brigands and bandits in the smuggling industry. I applaud the Government for imposing a realistic increase of 10p on a packet of 20 cigarettes. Deputy Ahern should acknowledge that this year's increase is 10p less than that imposed last year. He should stop nit-picking.

The increase of 1p per litre on the price of petrol is minimal but what Deputy Ahern said in that regard is true. All Governments, including his, in the past 25 years allowed the Border area to haemorrhage almost to death.

Mr. D. Ahern

I did not say that. The Deputy should not misquote me. I said that about cigarettes.

Mr. McGahon

The Deputy has bigger fish to fry and should leave that to the media to comment on. That increase will not really be felt in Border areas.

To comply with Revenue regulations, on 4 September last cigarette companies were obliged to append a stamp to cigarette packets at a cost of £1 million. This stamp is fool proof. It cannot be copied and every cigarette packet can be traced to its source yet, on a recent radio programme, Deputy Eric Byrne found fault with this system. As I said it is fool proof and cigarette manufacturers should be commended on introducing it. I hope that allays Deputy Byrne's concerns. In conclusion, I congratulate the Government on bringing in a realistic measure with a degree of sympathy and I again thank the Minister.

Dr. O'Hanlon

I join with Deputy McGahon in applauding the Government on the increase in the excise duty on cigarettes. I am consistent; I still believe it is right to increase the excise duty on cigarettes. I respect the opinion of all my colleagues from Dundalk in this House but there are nevertheless very good health reasons we should look forward to the day when people do not smoke cigarettes and to the day when children ask their grandparents what cigarettes were.

Having said that, I cannot go any further in applauding the Government because like my colleague, Deputy Ahern, I am very concerned about the increase in excise duty on the price of petrol and diesel. There is an increase of 4.5 pence in the price of a gallon of petrol and diesel, and about 14 pence per gallon on the price of super unleaded petrol.

Deputy McGahon referred to the fact that successive Governments allowed the Border area to haemorrhage almost to extinction. It was almost at the point of extinction during the lifetime of one Government, between 1982 and 1987. The start of that problem was an increase, in December 1982 and again in January 1983, in the excise duty on petrol. As a result, people started flocking to the Six Counties to buy their petrol. At one stage there was a differential of £1 per gallon in the price.

Everybody knows what happened during that period. In 1980 the town of Clones had eight petrol stations; in 1987 it had none. The situation was ludicrous because State vehicles in the town, the Garda and the fire brigade, had to drive seven miles to Smithborough for petrol. Post office vans, which used diesel, had to drive 15 miles to Monaghan. That was the situation in just one town along the Border. The Fianna Fáil Government which came to power in 1987 redressed that situation when Mr. Ray MacSharry introduced the 48-hour rule. But for that, as Deputy McGahon has said, the Border areas might have haemorrhaged to extinction; the town of Clones almost did.

The increase in excise duty on petroleum products is a retrograde step. For the first time in a number of years vehicles were coming to this side of the Border to buy petrol because while Fianna Fáil were in Government there were no increases in the price of petrol. The gap in the price of petrol was closed over the years specifically because of the impact it would have in the Border area. I agree with my colleague, Deputy Ahern, about the lack of commitment by the present Government to the Border area.

For the life of me I do not understand why the price of petrol was increased. I see no justification for it. Competitiveness in industry is particularly critical in the Border area. It is very difficult to compete with the North of Ireland in regard to the terms and facilities that are available to people establishing new industry there. We are trying to compete with them and the Government has just increased the price of an essential commodity which, in its own way, increases the cost of production. It was recently announced that the Government has approved of the ESB taking another £65 million from the people; this will also be detrimental to our competitiveness on this side of the Border.

I wish to make an important point about the crisis in the relative values of the Irish pound and sterling. Over the last 15 months we have watched the Irish pound go from 95p to its present value of almost £104p sterling. That has made it extremely difficult for labour intensive producers and manufacturers in this country to export their products. In my constituency the food processing and mushroom production sector is very highly labour intensive with small profit margins.

The increase in the value of the Irish pound has been totally ignored by the Government. In 1992 the Fianna Fáil Government took emergency steps in similar circumstances and redressed the situation in a couple of months. I expected some relief in the budget for this very critical situation. According to many economists the value of the Irish pound will go as high as £106p sterling and cause very serious problems. We have not heard from anyone in Government about that very serious situation. What do we get today? We get an increase in our production costs at a time when the labour intensive industries are already under pressure. I ask the Taoiseach to reconsider this tax. He must have some explanation for it because it is a retrograde step.

Mr. Harte

I came in to listen but I am tempted to contribute in view of the fact that three of my colleagues, my friend Deputy McGahon on this side and Deputy Ahern and Deputy O'Hanlon on the other side, all Border Deputies, have done so. The problems on the Border stem from the blind economic thinking of Fianna Fáil who created two different economies, one north of the Border, and one south of the Border. Until we realise that it is not possible to achieve political unity without economic untiy, we are going nowhere.

We can see what change the European Union has made both north and south of the Border; all that is happening in Ireland would not have happened without the European Union. We in the Border area, would not be where we are today, nor would there be peace in Northern Ireland. an outside force has compelled the Irish to see reality. Fianna Fáil broke the link between the Irish pound and sterling because it could not fulfil the promises it made in 1977. Within two years the economy which Jack Lynch said was buoyant was in dire straits. The Government had to get money somewhere.

I was sitting where Deputy O'Hanlon is now when I was suspended from the House for protesting against the break with sterling. I said that it was blindness — and not alone on the economic front — to enter a situation where we would be making Irish money foreign currency in Ireland. By making sterling foreign currency in the Republic, we made Irish money foreign currency in what Fianna Fáil used to call the Six Counties. Deputy Dermot Ahern in referring to the Republic of Ireland calls it the Twenty-six Counties. I thought we got away from that kind of jargon years ago. This is the Republic of Ireland.

Dr. O'Hanlon

This is the South of Ireland, the other is the North of Ireland.

Mr. Harte

No, it is the Republic of Ireland. I agree with what Deputy O'Hanlon said about the petrol filling stations in Clones. We experienced all that in Donegal. Petrol stations became monuments to the bad economic thinking of Governments and Ministers for Finance who did understand the effect the budget would have on cross-Border relations. On budget day decisions were taken without considering our feelings or aspirations in relation to Northern Ireland and we preached economic independence. However, the following day we returned to the old cliché of Irish political unity, which was a contradiction. When we talk about economic unity between North and South, we are really talking about economic unity between England, Ireland, Scotland and Wales. There is a group of people in Northern Ireland who will not alter their economic position in relation to Britain. We must first face economic realities when we talk of unity.

I remember the economic situation in the 1980s. I am convinced that the economic convulsions the South experienced at that time can be traced back to the break with sterling. We got a piggyback on sterling and on the British economy, which were weak. We decided we wanted a stronger economy. what we were told would happen when we joined the EMS did not — in fact, the opposite did. We have never really broken with sterling and we are now living in the worst of both worlds. If sterling becomes weak against our currency, we are in trouble, but if it becomes strong, we can devalue, as we have done three times. We devalued against sterling not European currencies which proves that it was wrong to break with sterling. If we are really thinking about political unity, we must settle our differences on that score whatever the European currency has in store for us.

I share Deputy O'Hanlon's view on cigarettes. I smoked 80 cigarettes a day until it became too expensive because of a growing family, the increase in the price and, above all, because I spent four hours holding a friend's hand knowing he was going to die that night. He made me promise that I would not leave his bedside until he died. He died of lung cancer and blamed cigarettes. He pleaded with me to give them up for the sake of my family. For those reasons, I stopped smoking 80 cigarettes a day in 1964 and I do not intend to smoke again. It would not bother me if the price of cigarettes increased by £1 a packet.

Nothing annoys me more than to see a young person, particularly a female, with a cigarette stuck in her mouth or in her hand.

Mr. McGahon

Why a young female?

Mr. Harte

Or a young boy.

Mr. McGahon

We need a gender balance.

Mr. Harte

If there was economic harmony between North and South, the problem of cross-Border employment would not be an issue. I give credit to the Minister for Finance because he is the first, since this obnoxious Act was passed in 1977 or 1978, who has listened. I lobbied all Ministers repeatedly to do something for cross-Border workers. This Act tells somebody from County Donegal working in County Derry or County Tyrone that they had better live in Northern Ireland or they will be taxed; in other words, if they do not want to pay tax in the Republic they should move to the North. That is partition and for parties which preach anti-partition it is a very big inconsistency. Border Deputies will know of people who received bills from the Revenue Commissioners in the Republic demanding in one case £15,000 and this worker did not know he had to pay this tax.

Mr. D. Ahern

According to the Minister, they will pay it by direct debit.

Mr. Harte

It does not matter how they pay it. At least this Minister has made an attempt to do something; Deputy Ahern's party when in Government did nothing to alleviate the problems of cross-Border workers.

Mr. D. Ahern

We brought in a PAYE allowance of £800 a couple of years ago.

Mr. Harte

After considerable pressure. The Minister for Finance, Deputy McGahon's first cousin, is the first to recognise the problem.

Mr. McGahon

No advertising here.

Mr. Harte

I am not paying him tribute because he is Deputy McGahon's first cousin, but I would like to say well done because he has listened to the voice of reason from Border areas.

Mr. Cullen

At the outset, I confess that I am, unfortunately, a heavy smoker.

The Taoiseach

The Deputy is not from the Border region.

Mr. Cullen

Although I am not from the Border region, I have an interest in the issue. As regards companies like P. J. Carroll and Players, it is often forgotten that apart from the employment they create, they have provided considerable sums of money for events which have done much good for the country internationally. For example, P. J. Carrolls was involved in the Irish Open golf tournament for many years. It made an enormous difference in making Ireland an attractive venue for those who wanted to play golf. One only needs look at the money spent developing golf courses over the past number of years to see the tremendous contribution made to tourism and employment. It should not be forgotten that Carrolls not only has an effect in its area but nationally. Much of the income it earned over the years was not distributed among shareholders in terms of profits but was invested in events that would not otherwise have got off the ground and which had an international impact which has been good for this country.

The 10p increase on 20 cigarettes will not make any difference to me, although I wish I could give them up. However, it will affect old people, this is typical of this Government. Many old people are smokers and they will have seen the minimalist increases granted to them earlier by the Minister for Finance. They enjoy a cigarette sitting by the fire in the evening and the 10p on a packet of 20 will make an enormous difference to them over a week or a month. I would lay odds that the increases in pensions and social welfare will be clawed back substantially in this measure and in the increases in ESB costs to be implemented this year.

I feel very strongly about the increase in the price of petrol, diesel and super unleaded petrol. It demonstrates the skewed judgment and mismanagement of the economy by this Government. On numerous occasions when he was on this side of the House the Taoiseach's brother, the Minister for Enterprise and Employment, Deputy Richard Bruton, very capably enunciated on the artificial costs we have in the context of our competitiveness. The cost of transport is one of the greatest costs we, as an island nation, suffer that puts our competitiveness at risk. Central to the efforts of the Government, to economic drive, economic growth and employment creation must be our competitiveness in moving goods to the United Kingdom or the European mainland, yet these increases are being imposed, and they are not marginal increases. It is interesting that, for the first time, we see the increases in litres instead of gallons. What we are looking at are quite substantial increases of 4.5p per gallon on the cost of petrol and diesel and 14p on the cost of super unleaded petrol. These increases are extraordinary in the context of this country's requirements compared with those of any other country operating in Europe. Being the only country without a land link to Europe, our costs are very substantial indeed. If, after consultation with the Minister for the Environment, the Minister for Finance were to say that the reason he was doing this was that he recognised that county roads are at the point of collapse and he needed to create income to enable the Government to do something substantial about them, I might have a different view. However, not one penny of the money taken from the motorist in this manner will go towards solving that problem. I wonder if this Government is in touch with real people because, even before the massive flooding, not least of which occurred in my own county of Waterford and in my neighbouring county of South Tip-perary, roads were disintegrating. Since then that disintegration has been accelerated.

The Taoiseach

That is fairly distant from cigarette duty.

Mr. Cullen

I am talking about the increases on petrol and diesel and I am legitimately referring to the state of county roads.

The Taoiseach

What is the connection between that and flooding?

Mr. Cullen

If the Taoiseach cannot understand it, I suggest he sit back and listen to what I have to say.

Mr. Rabbitte

Is the Deputy suggesting we grow tobacco?

Mr. Cullen

The Deputy should quiten down; he has not contributed a word since he went into Government. The point I make is legitimate. The Government has seen fit to penalise Irish industry, and particularly those directly involved in transport, by imposing very substantial increases on the price of a gallon of petrol, diesel and super unleaded petrol. What I was suggesting was that if the Minister for Finance, after consultation with the Minister for the Environment, had recognised that there was a serious problem with county roads and he was introducing this measure to raise substantial funds to do something about them, he might have a case. There would be nothing illogical about that because there is a direct connection between the motorist and the road.

Mr. Rabbitte

Does the Deputy mean it is driving people to smoking more?

Mr. Cullen

The Deputy should be quiet. I know he cannot understand this. Living in his ivory tower, it is a little bit beyond him. Telephoning television stations late at night is about the most he is up to.

(Interruptions.)

Mr. Rabbitte

What is the point?

Mr. Cullen

That is the reality for people like me who live in the real world and who talk to people daily about their problems, and there are real problems out there in spite of this nonevent of a budget and the hopeless attempts to do something to meet people's expectations.

I would love to have the opportunity to talk about the PRSI adjustments but that will be for another forum. It will cost more in administrative costs to put them in place than there will be benefit to anybody, employee or employer.

We have to make choices in our fiscal policy. Some choices are limited by the requirements of the Maastricht Treaty and in terms of good management of the economy. Where we have choices with regard to creating artificial tax barriers over which we have control, the Minister should not have intervened in such a negative way to further erode competitiveness in Irish industry. That is what he did in this budget today.

Mr. M. McDowell

I do not have any brief for tobacco, having given up smoking cigars about a year ago. I am only a passive smoker now. The last decent gasp of Havana smoke I got was during negotiations which led to the non-inclusion of the Progressive Democrats in Government in which the Minister, Deputy Quinn blew two entire Havanas into my lungs. Nothing is too good for the working class, I have discovered.

I am interested in the second resolution — increasing the price of petrol which is to raise £12 million in extra taxes for the Government and increasing the price of diesel which will yield over £8 million in a year. Because it is expressed in litres it is regarded as practically nothing, but it is to collect a further £20 million and somebody has to pay it.

I am particularly interested in what the Border Deputies on both sides of the House had to say about the North/South issue in this context. It is worthwhile reminding ourselves that a single worker earning £300 in Newry is £20 a week better off than a single worker earning £300 in Dundalk — and that is before they pay different prices for petrol. It would cost an employer in Newry an extra £1.67 to give an extra £1 in take-home pay to a Newry worker whereas it costs an employer in Dundalk £2.54 to give a £1 increase in take-home pay.

It is worthwhile reminding ourselves too that the weakness in sterling which has been mentioned by several Deputies is an important issue. There are 60,000 vulnerable jobs dependent on a decent exchange rate between the punt and sterling. Let me give an example relating to motoring and petrol which might bring this home. High levels of direct and indirect taxation have created an economic border on the island. If a person on £300 a week living in Newry wants to buy a 1.3 litre hatchback car, he needs 38 weeks' take-home pay to buy it, but if he lives in Dundalk he needs 56 weeks' take-home pay because the car is nearly 50 per cent dearer in the South than it is in the North.

What concerns me about the petrol and diesel increases is that they are hidden transport costs which will affect the competitiveness of this country vis-à-vis Northern Ireland. It is worth reminding ourselves that this is not an isolated increase in energy costs because the Government is proposing to bring in increases in electricity charges which will seriously affect our fundamentals in terms of energy pricing.

In regard to the ESB proposal I do not accept the proposition that it was right to give an undertaking to the workforce in the ESB that all the new investment will take place by the ESB. I believe that breaches EU law in relation to competition and we have not heard the last of that yet.

When it comes to petrol and diesel, it is not insignificant that an extra £20 million is being raised in this way, that buying diesel in the South will be more expensive than buying it in the North and that it will set the industries located in the South, which are in competition with each other — in Newry and Dundalk — at a further disadvantage. We should not forget what we are doing here tonight. The increase may sound tiny when put in terms of litres, but when it is all added up, it is an extra £20 million in revenue to the State next year. That will be paid by ordinary people moving around the country. This increase was not necessary. We could have lived without it. The State could have lived within its means if some decisions had been made in today's budget which were not made. This is an unnecessary tax and it will damage Ireland's competitiveness vis-à-vis the United Kingdom, and jobs will be lost, in a subtle way, which is difficult to appreciate when we are talking about a penny or two on a litre of petrol. It does not sound much of an increase but it will affect Irish costs and the relative attractiveness of the Republic as a location for industry. From the figures I have quoted, it is already obvious that one part of the peace dividend for Northern Ireland is that, under English tax laws, it is far more attractive to industry than the Republic of Ireland, and the last thing we need to do in that context is to run up energy costs in the South.

Mr. Leonard

This budget echoes the budgets of the early 1980s when excise increases were imposed on petrol. Increases in the price of petrol were imposed in various budgets and prior to budgets and there were so many that they devastated the Border region. Last week we had a meeting about the Delors package with traders and community groups in Clones and the view was expressed that the retail traders in Clones never recovered from those tragic years.

In 1982 and 1983 there were many deputations to the Minister from the chambers of commerce in the region. I recently read some of the notes taken by me when we met the then Minister, Deputy Dukes. We highlighted the damage that had been done as a result of the excessive excise duties imposed on petrol and diesel. When we asked for some concessions his reply was "We cannot legislate for a region". That Government was certainly in a position to legislate against a region at that time.

Mr. Harte

To cover up the mistakes made by Fianna Fáil.

Mr. Leonard

Deputy Harte referred to Fianna Fáil's blind economy. In the Border region I represent we built up the food and mushroom industries under Fianna Fáil Ministers.

An Ceann Comhairle

Let us keep to the resolutions before the House.

Mr. Leonard

I am speaking on the resolutions.

An Ceann Comhairle

Only matters that are relevant now should be referred to.

Mr. Leonard

This is relevant because we are talking about an excise hike on diesel and petrol which will have serious cost implications. I am talking about the food industry about which I made representations prior to this budget because of the problems being experienced in the Border region. It is expected that before the end of this week the exchange rate will be £1.05 sterling against IR£1.

Mr. Harte

Fianna Fáil in office did nothing for the Border region.

Mr. Leonard

I did not interrupt Deputy Harte and I do not expect him to interrupt me.

An Ceann Comhairle

Deputy Harte should cease interrupting.

Mr. Leonard

I made those representations but there is not a single word about the food industry in the budget. The food industry is currently in such a serious position that the processors have asked the primary producers, who work to very low profit margins, to accept a 20 per cent cut in production fees. As I said, I made representations to Ministers but what did we get? We got a hike of approximately £20 million in transport costs alone. Transport and the exchange rates are the two main problems facing us, and they are aggravated by the change in packing regulations. Because of that change a producer exporting 24 tonnes of cartoned product to England must have half that amount palletised and, as a result, costs are doubled.

All of the problems of which I have become aware in the past 20 years originated when Fine Gael and Labour were in Government.

Mr. E. Kenny

This is nonsense and the Deputy knows it.

Mr. Leonard

Fine Gael and Labour had complete disregard for the Border region. We did not want any handouts, we wanted fair play but we did not get it. I remember a previous Taoiseach telling people in Clones prior to an election that if goods were cheaper in the North they should buy them there. That was the encouragement they received at that time and it summed up the attitude of the Minister for Finance in the 1980s.

Mr. Harte

It would be partitionist to tell them not to do it.

Mr. Leonard

It sums up the attitude of the Minister for Finance who sat on the opposite side of the House——

Mr. E. Kenny

Fianna Fáil sent visa applications to America.

(Interruptions.)

An Ceann Comhairle

I must ask the Deputy to desist from interrupting.

Mr. Leonard

When Fianna Fáil was in power in 1992 it introduced a Bill which provided £50 million to help exporters who were experiencing great difficulty.

Mr. Rabbitte

The country was almost down the tubes, there was a currency crisis.

Mr. Leonard

Irrespective of whether the increases are due to excise duties, if the primary producers and processors do not get some help they will find it difficult to continue their operations. When Fianna Fáil was in power it took action to help producers and processors. I discussed the problems on several occasions with Deputy Bertie Ahern at that time. His swift response was to provide £50 million which ensured that the industry would continue. The business has been built up and there are now 2,000-3,000 working in the food industry. We are asking that this business be allowed to continue to have an export base, that is not outlandish. The Government has not done anything up to now for this industry and it is time the Taoiseach did something for it.

Mr. Kirk

These resolutions impact on the cigarette industry and have implications for transport costs. The presentation of the financial Statement would delude one perhaps that these two provisions would have a minimal impact. However, in 1996 the yield from the increase in cigarettes will be £21.3 million and £25.2 million in a full year. The estimated yield from the petrol increase in 1996 will be £10.8 million and £11.9 million in a full year. With the proposed increase of 1 p per litre of diesel, the estimated yield will be £7.7 million in 1996 and £8.2 million in a full year. These are two serious revenue impositions and if we were to allow a flippant debate on it the public may get the impression that very little was involved.

My constituency colleagues dealt at some length on its implications for the cigarette industry. Although this is a declining sector nonetheless it is a core industry in Dundalk. The Minister for Finance may endeavour to tell us that this provision will encourage people to smoke less and that, consequently, they will be healthier. While I do not doubt that cigarettes are a contributory factor to lung cancer, the Radiological Protection Institute has identified pockets of radon gas which is clearly a serious cause of lung cancer. I wonder if the Minister for the Environment will be making provision for special grants for remedial works as a result of radon gas.

At one time an increase in the price of petrol could have been the death knell of previously prosperous retail outlets on this side of the Border while at the same time enhancing the prosperity of outlets on the other side. Having represented a Border constituency for approximately 14 years I think we should try to establish an equilibrium so that the retail trade would not blow hot and cold and people could plan with reasonable certainty that they would still be in business 12 or 18 months hence. Clearly, the proposed increases on petrol, diesel and fuel will impact on everyone who owns a vehicle. Deputy Michael McDowell outlined the comparative costs North and South, it goes without saying that we are at a serious disadvantage on this side of the Border and this increase will exacerbate an already difficult situation. Increases in transport costs impact on business, industry and on every family who owns a car.

Mr. McGahon

Nonsense — at 4p a gallon.

Mr. Kirk

My constituency colleague should read the Principal Features of the Budget and he will discover the substantial estimated yield from this provision. This is money from the pockets of every vehicle owner and will impact on every aspect of life.

An Ceann Comhairle

Time is running out and I think it is fair that the Taoiseach be afforded an opportunity to reply. I propose to call him at 8.20 p.m.

The Taoiseach

At 8.25 p.m.

Mr. R. Burke

I do not blame him because he does not want that much time to defend the Minister for Finance.

The Taoiseach

That is not the case.

Mr. R. Burke

My colleagues from the Border constituencies outlined the problems that the increases in petrol, diesel and liquid petroleum gas will cause in their constituencies but lest it be seen as impacting only on Border areas, it will have an effect generally on the economy. It will be an added burden on the middle classes and those who own cars at a time when they are getting miserly relief in the budget. It will impact on tourism. Dublin Airport is in my constituency of Dublin North, one of the criticisms of the industry is the cost of self-drive holidays and this will further increase motoring costs. It will have an effect generally on trade in the economy as it will be an imposition on all companies, whether a service company with company representatives on the road or a manufacturing company exporting or selling products on the domestic market. These extra burdens are being placed at a time when the Government should have taken advantage of the booming economy it inherited from the then Finance Minister and Leader of Fianna Fáil, Deputy Bertie Ahern. Instead of taking advantage of the expansion in the economy the Government has a budget deficit and a 6.2 per cent increase on last year's expenditure while at the same time imposing excise duties which will impact on every householder who owns a car, a necessity for most people to get to work. This is an unnecessary imposition and the Government should have tackled its estimates properly but failed to do that because it is being pulled and dragged by the left and the far left and the Fine Gael Party has abdicated its responsibility. I ask the Taoiseach to reconsider this imposition.

Mr. Boylan

I would like to make the proper case for the Border counties.

An Ceann Comhairle

I will seek to facilitate the Deputy if time permits.

Mr. N. Ahern

I am not a smoker and I do not represent a Border county but the case for the Border counties has been well put. I think that all Governments have a schizophrenic attitude to the tobacco industry. We want the jobs in the tobacco industry but disagree with tobacco products for health reasons. I have no objection to the extra millions the Exchequer will gain from this increase but I object to making extra money for the criminals involved in selling tobacco products. The tobacco business has been almost taken over. In town, they are almost tripping over one another at every corner. Will the Taoiseach provide statistics on the loss this involves to the Exchequer? Can it be quantified? How many people have been arrested in the last year and how much tobacco has been confiscated? It appears selling tobacco on the street is increasing daily and this puts legitimate operators at a disadvantage. There is no point introducing this measure if it just improves criminals' margins, which is what it will do.

Regarding excise on petrol, I listened to accounts of what happened in the Border counties in the last 15 years. I understand this increase will more or less bring prices in the South into line with those north of the Border. However, there are forecasts of a petrol war in the UK and the North. What will happen if that occurs? The price will have been increased and petrol will be more expensive in the South than in the North.

The Minister for Finance genuflected at the environmental lobby with a little paragraph on environmental taxes. However there has been a 1p increase on all types of petrol. The Minister should have used the opportunity to favour unleaded petrol. Will the Minister explain why EU approval must be sought for the increase in the price of super unleaded petrol? I am a little bewildered. The Minister made a statement about a commitment to the environment but then took a decision in the opposite direction.

Mr. Boylan

I will give the Taoiseach every opportunity to reply to the frivolous arguments made by the other side on the Border region. I represent the Border area and I intend to put the facts straight on diesel and petrol excise duties. I am amazed Deputy Burke fell into the trap set by his colleagues from the Border region. He obviously does not have the facts. At present, there is an advantage of 12p to 14p per gallon in southern Ireland as against Northern Ireland. There is a variation of from 1p to 3p per litre in the price of diesel or petrol in any group of petrol stations. I advise people to shop around. They have an advantage in southern Ireland at present as against Northern Ireland.

If a business collapses as a result of 1p per litre on petrol or diesel, it had already gone beyond redemption. That suggestion was frivolous and it does not stand up to any measure of debate. The reduction in the cost of LPG is welcome.

Mr. E. O'Keeffe

It is only a pittance.

Mr. Boylan

It gives a boost to the important mushroom and pig industries in the Border region.

Mr. Leonard

The mushroom industry does not use LPG.

Mr. Boylan

The budget sends favourable signals nationally and to the Border region. Regarding excise duty on cigarettes, I do not smoke, but a 10p increase is neither here nor there.

The budget will generate activity. People will be relieved there is no real increase in taxation and that there are opportunities for them to shop around and improve their lifestyles. People expected the price of a pint to increase by the usual 3p. However, the price remains the same and there will be no cross Border trading in that regard. The Government has done an excellent job today and I look forward to the benefits of the budget.

Mr. D. Ahern

It is the first increase in the price of petrol for years.

The Taoiseach

I wish to put the debate about petrol prices in context. Between 1984 and 1995, petrol prices decreased by 3 per cent compared to an inflation rate of 41 per cent in that period. With regard to auto diesel, similarly, there has been a decrease in prices over that 12 year period of 3.2 per cent as against——

Mr. R. Burke

Has the level of excise increased?

The Taoiseach

——a general inflation rate of 41 per cent. Points were made about the Border areas. However, petrol is cheaper on this side of the Border and it will be cheaper after the budget than in Northern Ireland. The same applies to auto diesel. The comparative advantage in terms of buying diesel or petrol is to buy it on this side of the Border.

It was interesting to listen to the Opposition Deputies. They mentioned things which happened in the 1980s but did not mention 1995 or 1996. All their anecdotes are 15 years out of date.

(Interruptions.)

Mr. D. Ahern

It is the first increase in the price of petrol for years.

The Taoiseach

It is consistent with their general approach of living in the past.

Deputy Noel Ahern made a number of interesting points with regard to smuggling tobacco. As the Deputy is aware, there has been a problem in this area and the Revenue Commissioners introduced a system to deal with it. The Deputy does not smoke but if he examines a packet of cigarettes he will note special Revenue stamps have been placed on boxes since 1 September.

It was previously impossible to deal with smuggled cigarettes because at the point of sale one would not know from where the cigarettes came. However, any cigarettes without the Revenue stamp, indicating that the duty has not been paid in this jurisdiction, can be seized and the seller prosecuted. This is not yet in force because the stamps have been required since 1 September but the penalty for selling unstamped cigarettes only comes into effect from 1 March. This is to allow people to clear stocks. However, from 1 March, a person selling unstamped cigarettes will be liable to a fine of £1,000 on each conviction. To coin a phrase, this will stamp out the problem.

A number of comparisons were made with the allegedly benign situation north of the Border. Deputy McDowell referred to the wonderful system of taxation and public expenditure control in Britain compared to Ireland. Commentators who think public spending is growing in this country and not in others should consider the following figures. In 1988, public expenditure in Britain was 38 per cent of GDP. This has increased to 41 per cent of income. However, in Ireland in 1988, public expenditure was 46 per cent of GDP; it is now reduced to 38 per cent of GDP.

Dr. O'Hanlon

Thanks to Fianna Fáil.

The Taoiseach

It is interesting to note that public expenditure in this jurisdiction, which has been governed by a series of coalitions of varying hues, has reduced while public expenditure in Britain — which has been governed by a monoglot Government of a particular anti public spending bias in terms of its oratory — has increased as a share of national income. This country is progressively reducing public spending. Furthermore, this Government, consisting of Fine Gael, Democratic Left and the Labour Party this year will have the lowest increase in public spending this decade.

Mr. R. Burke

It is 6.2 per cent.

The Taoiseach

The increase in public spending this year will be half or less the rate of increase in public spending which occurred when the Opposition was in office. This Government, consisting of Fine Gael, Democratic Left and the Labour Party, will have the lowest increase in public spending this decade. It will be half——

Mr. R. Burke

It will be 6.2 per cent.

The Taoiseach

——or less than the increase in public spending when the parties opposite were in office. It is important to make that point. I will give the figures to the Deputy. In 1991 when Fianna Fáil was in Government and had the now absent Progressive Democrats as its partner, public expenditure grew by 6.4 per cent. This year with Fine Gael, Democratic Left and Labour in Government public expenditure will increase by 2.5 per cent.

Mr. R. Burke

It will be 6.2 per cent.

The Taoiseach

Deputies in the Fianna Fáil Party and in the Progressive Democrats Party are the big spenders. They are the parties of tax and spend.

(Interruptions.)

Mrs. O'Rourke

The Taoiseach should remember the two budgets that were defeated.

The Taoiseach

They thought that the party would never end but I assure them that, as far as they are concerned, the party is now over.

Mr. R. Burke

Will the Taoiseach stop or Deputy Rabbitte will die laughing?

(Interruptions.)

An Ceann Comhairle

Order, please. As it is now 8.30 p.m. I am required, in accordance with an Order of the Dáil this day to put the following question: "That Financial Motions Nos. 1 and 2 are hereby agreed to."

Question put.

The Dáil divided: Tá, 80; Níl, 72.

Tá

• Ahearn, Theresa.
• Allen, Bernard.
• Barrett, Seán.
• Barry, Peter.
• Bell, Michael.
• Bhamjee, Moosajee.
• Boylan, Andrew.
• Bradford, Paul.
• Bhreathnach, Niamh.
• Bree, Declan.
• Broughan, Tommy.
• Browne, John (Carlow-Kilkenny).
• Bruton, John.
• Bruton, Richard.
• Burke, Liam.
• Burton, Joan.
• Byrne, Eric.
• Carey, Donal.
• Connaughton, Paul.
• Connor, John.
• Costello, Joe.
• Coveney, Hugh.
• Crawford, Seymour.
• Creed, Michael.
• Crowley, Frank.
• Currie, Austin.
• Deasy, Austin.
• Deenihan, Jimmy.
• De Rossa, Proinsias.
• Doyle, Avril.
• Dukes, Alan M.
• Durkan, Bernard J.
• Ferris, Michael.
• Owen, Nora.
• Pattison, Séamus.
• Penrose, William.
• Rabbitte, Pat.
• Ring, Michael.
• Ryan, Seán.
• Shatter, Alan.
• Finucane, Michael.
• Fitzgerald, Brian.
• Fitzgerald, Eithne.
• Fitzgerald, Frances.
• Flaherty, Mary.
• Flanagan, Charles.
• Gallagher, Pat.
• Gilmore, Eamon.
• Harte, Paddy.
• Higgins, Jim.
• Higgins, Michael D.
• Hogan, Philip.
• Howlin, Brendan.
• Kavanagh, Liam.
• Kemmy, Jim.
• Kenny, Enda.
• Kenny, Seán.
• Lowry, Michael.
• Lynch, Kathleen.
• McCormack, Pádraic.
• McDowell, Derek.
• McGahon, Brendan.
• McGinley, Dinny.
• McGrath, Paul.
• McManus, Liz.
• Mitchell, Gay.
• Mitchell, Jim.
• Mulvihill, John.
• Nealon, Ted.
• Noonan, Michael (Limerick East).
• O'Keeffe, Jim.
• O'Shea, Brian.
• O'Sullivan, Toddy.
• Shortall, Róisín.
• Spring, Dick.
• Stagg, Emmet.
• Taylor, Mervyn.
• Timmins, Godfrey.
• Upton, Pat.
• Yates, Ivan.

Níl

• Ahern, Bertie.
• Ahern, Dermot.
• Ahern, Michael.
• Ahern, Noel.
• Andrews, David.
• Aylward, Liam.
• Brennan, Matt.
• Brennan, Séamus.
• Browne, John (Wexford).
• Burke, Raphael P.
• Byrne, Hugh.
• Callely, Ivor.
• Clohessy, Peadar.
• Collins, Gerard.
• Coughlan, Mary.
• Cowen, Brian.
• Cullen, Martin.
• Davern, Noel.
• Dempsey, Noel.
• de Valera, Síle.
• Doherty, Seán.
• Ellis, John.
• Fitzgerald, Liam.
• Flood, Chris.
• Foley, Denis.
• Fox, Mildred.
• Foxe, Tom.
• Gallagher, Pat the Cope.
• Gregory, Tony.
• Harney, Mary.
• Haughey, Seán.
• Hilliard, Colm M.
• Hughes, Séamus.
• Hyland, Liam.
• Jacob, Joe.
• Kenneally, Brendan.
• Keogh, Helen.
• Killeen, Tony.
• Kirk, Séamus.
• Kitt, Michael P.
• Kitt, Tom.
• Lawlor, Liam.
• Leonard, Jimmy.
• Martin, Micheál.
• McCreevy, Charlie.
• McDaid, James.
• McDowell, Michael.
• Moffatt, Tom.
• Molloy, Robert.
• Morley, P.J.
• Moynihan, Donal.
• Nolan, M.J.
• Ó Cuív, Éamon.
• O'Dea, Willie.
• O'Donnell, Liz.
• O'Donoghue, John.
• O'Hanlon, Rory.
• O'Keeffe, Batt.
• O'Keeffe, Ned.
• O'Malley, Desmond J.
• O'Rourke, Mary.
• Power, Seán.
• Quill, Máirín.
• Reynolds, Albert.
• Ryan, Eoin.
• Smith, Brendan.
• Smith, Michael.
• Treacy, Noel.
• Wallace, Dan.
• Wallace, Mary.
• Walsh, Joe.
• Woods, Michael.

Tellers: Tá, Deputies J. Higgins and B. Fitzgerald; Níl, Deputies D. Ahern and Callely.

Question declared carried.