Arthur Morgan
Ceist:119 Mr. Morgan asked the Minister for Finance if he will soon publish his plans for energy taxes. [2775/03]
Other Questions. - Tax Code.
Tom Hayes
Ceist:120 Mr. Hayes asked the Minister for Finance if any revenue raised from a carbon tax will be ring-fenced for use to reduce other taxes or to introduce alleviation measures for low income families affected or for other measures to reduce carbon emissions. [5459/03]
I propose to take Questions Nos. 119 and 120 together.
I presume that Deputy Morgan's reference to plans for energy taxes relates to carbon energy taxes. As I said in my budget speech on 4 December 2002, Ireland has international obligations under the Kyoto Protocol to reduce greenhouse gas emissions. For this reason, the Government has asked the relevant Departments to advance the plans for a general carbon energy tax, with a view to introducing this from the end of 2004. Given the many implications of such a tax, both environmental and economic, there will be full consultations with interested parties on the design of the tax and a reasonable period is being allowed for its effective introduction.
It would be inappropriate for me to speculate at this stage as to what specific taxation measures may or may not be introduced, or whether any revenue from carbon energy taxation would be used to reduce existing taxes or would be used to fund necessary public services. In developing any tax, a range of issues will need to be considered including the effect on those on low incomes. With regard to the issue of ring-fencing revenue from carbon energy taxation my general approach is that I am opposed to hypothecation, that is, the earmarking of certain tax revenues for certain expenditures. It removes flexibility in public expenditure decision-making, which should generally be on the basis of the most cost effective outcomes, and ties the Government's hands in deciding priorities as part of the budgetary process. Another weakness in the effectiveness of hypothecation as a means of allocating expenditure is that, while the required expenditure may match the likely income from a particular tax in a given year, this is unlikely to remain the case in the long-term and both figures may diverge.
I am unhappy with the Minister's response because he has given no signal as to his intentions. This is in sharp contrast to the Department of the Environment and Local Government, which has made its intentions clear. Does the Minister support the Department's proposal to increase basic fuel costs? For example, the cost of peat would increase by 28%, coal by 26%, gas by 17% and home heating oil by 19%. Is that an appropriate range of increases? Does the Minister agree there would be a great deal of suspicion and resentment among the public regarding new taxes if they do not add to the Minister's coffers but are used to reduce other taxes or introduce energy improving taxes? Does he accept this is a different circumstance in terms of the general principle he espouses because he would increase the cost of living in terms of critical fuels? Does he also agree there must a quid pro quo for people who will have to pay these new taxes, if he is to gain public support?
I am glad the Deputy tabled this question. I hope there will be wider debate on this issue and I welcome his contribution. There are two big trains at different ends of the junction on this matter. Those who put forward pure environmental proposals want carbon energy taxation because the proposals will limit greenhouse gas emissions. The Deputy will be aware of the paper published by the Department of the Environment and Local Government, which very much favours carbon energy taxation.
On the other hand, that will mean an increase in taxation, higher cost of living for individuals and higher costs for industry. The purpose of the environmental proposals is to limit greenhouse gas emissions but there is a price to be paid. This matter has been referred to in previous budgets and in the last budget I stated we hoped to introduce carbon taxes by the end of 2004 but before doing so all the issues would have to be discussed by an interdepartmental group working in this area.
I welcome the debate because those who pursue carbon energy taxation neglect to tell the public there is a price to be paid. Deputy Boyle and the Green Party are advocates of such taxation but there is a price to be paid. There is also a view regarding whether such taxation will have the anticipated effect. I welcome the debate in this area and, before the Government makes a final decision, I hope it will take all the issues into account. It will not be an easy decision. If one advocated the position taken by Deputy Boyle and his colleagues, there would be significant energy taxation but if one is a realist, like me, one must ask what effect that will have on individuals and poor people and on industry in terms of escalating costs, which could possibly lead to job losses, unemployment and loss of Exchequer resources and the cycle we are trying to break? This is a major issue and I welcome the debate on it.
The Minister is the one who does not understand the debate.
I am afraid I do; that is the problem.
To introduce carbon taxation, one has to be wedded to the principles of hypothecation. One has to be willing to increase social welfare appropriately to avoid fuel poverty. One has to be willing to reduce employer's PRSI and social insurance payments to reduce the cost to industry. It is all about quid pro quo.The Department of the Environment and Local Government has put out the strong statement that it believes the “do nothing approach” regarding our current level of carbon emissions will cost the State €1.2 billion per year, annually, from to 2010. Does the Minister accept that as a valid figure and is it a price he is willing to let Ministers for Finance pay in future budgets?
The answer to the Deputy's question is "yes" we will be fined if we do not get our greenhouse gas emissions to the levels to which we signed up. That is not the same as saying carbon energy taxation alone will ensure we reduce our emissions to the appropriate level. That is what the great debate will be about.
If I was to take the position from which Deputy Boyle and other colleagues on the environmental wing come I would have introduced carbon energy taxation a long time ago. Many issues need to be considered. The macro-economic position must also be considered in this regard. We have time to debate this issue and I welcome contributions from everybody. If anyone has smarter ideas I will gladly take them on board.
Would the Minister not agree that if he continues to take his position of opposing any form of earmarking for the use of these funds, according to the Department of the Environment and Local Government's estimates the only impact on emissions will be in the region of 1.4%? That is a tiny impact. Would he not agree that if we are to achieve a change in attitudes and behaviour he will have to fund things such as improved efficiency in the home, changes in attitude towards public transport and improved behaviour regarding industrial processes? Would he agree that the key to achieving the Kyoto targets is behavioural change? Would he not agree that he must try to lead that change with sensible policies rather than collect the money and remain totally opposed to using it for anything other than general revenue purposes? Would he agree that that would lead to this proposal being stillborn in terms of genuinely changing the way things happen?
Would the Minister not agree that, as Deputy Boyle said, the key to this is the use of money to support policies which can make change possible? The Minister must contribute positively to the debate rather than simply sit on his hands.
Would the Minister agree that one of the most efficient ways of encouraging ideas regarding carbon and environmental taxes would be to offer recognition and support for insulation measures such as double glazing and central heating particularly to elderly people and those in local authority houses? Evidence from the EU is that such schemes pay for themselves in a very short time. Could the Minister say if he has given any thought to introducing such schemes to discourage the use of fossil fuels and, at the same time, make people more comfortable in their homes?
Those issues will be considered by Government in the lead up to its decision.
Written Answers follow Adjournment Debate.