Dáil Éireann díospóireacht -
Wednesday, 4 Jun 2008

Vol. 656 No. 2

Leaders’ Questions.

Deputy Enda Kenny

I wish to raise the serious issue of rising prices. Consumers, businesses, farmers and fishermen have experienced and are experiencing a massive increase in the price of diesel, petrol and home heating oil. I was disappointed to hear the Minister for Finance, Deputy Brian Lenihan, say recently that people who complained about these price increases were whingeing. It is easy to dismiss such views as complaining when one is being driven around in a State car for which one does not have to fork out €100 for a fill of diesel on a regular basis. There are innumerable examples of commuters, hauliers, fishermen and others who have been screwed to the ground by these cost increases in petrol and diesel. The cost for a fill of home heating oil is now €1,000.

These costs come on top of other price increases, relatively stagnant incomes, the rising cost of doing business, the loss of competitiveness and increasing mortgage repayments. In the year to May 2008, the average price of unleaded petrol rose from €1.16 to €1.25 per litre. Five years ago, the price was 86 cent per litre. The increase in diesel prices has been even more dramatic, with the average price per litre increasing from €1.09 in May 2007 to €1.32 this year, an increase of 23 cent. Five years ago, the price of a litre of diesel was 78.2 cent per litre.

Deputy Caoimhghín Ó Caoláin

The cost of a litre of diesel today is 143.9 cent.

Deputy Enda Kenny

It is more expensive at some pumps than at others. I am referring to the average price.

As the Taoiseach is well aware, the major factor in the increase of fuel prices is the price of crude oil on the international market. In this State, however, there is another factor. This is the combination of taxation through VAT and excise duty which is levied on volume. More than 50% of the price of petrol and 40% of the price of diesel is made up of taxation. The impact of VAT means large whirlwind increases for the Government when the price of petrol and diesel rises and it takes in even more in taxation. For every 5 cent rise in the price of either, the Government takes in an additional 1 cent. Does the Taoiseach consider it right that, at a time of increasing economic challenge, the taxation system should increase the pain for consumers when oil prices are rising so dramatically? Does he have any proposals to revise the mix of excise duty and VAT so the taxation system will not be used to make a bad situation worse, when we face undoubted economic challenges?

The Taoiseach

There is a misguided view that increases in fuel prices will yield a benefit to Government, as if the consumer has that extra money to spend and will continue to spend the same amount of money on other goods and services. Clearly, where people have a certain level of income and must use vehicles, the increased VAT yield from an increase in fuel prices is offset by the reduced consumer spend in other areas. People are still working with the same income but a greater proportion of that income will be spent on fuel than would otherwise be the case. It is a fallacious argument, therefore, to suggest that there are increased revenues for the Government overall. In fact, there is less consumer spend with the rest of their salaries due to the increased cost of transport.

The price of fuel is an international phenomenon. There is an agreement at eurogroup level not to unilaterally bring forward tax adjustments domestically. There is a need to take on the structural impact of increased energy prices across the board. VAT content on auto diesel and other fuels used in the course of business is a deductible tax credit, so VAT may be reclaimed by hauliers, fishermen and other businesses. With regard to excise duties, fuel used by farmers and fishermen is treated very favourably in comparison to other sectors. There is no sound economic rationale for reducing VAT or issuing VAT reductions, especially as these price benefits will be taken either by wholesalers or producers, thus leaving the public subsidising an unsustainable fuel price level from public funds. That is in line with the position taken by almost all our European colleagues.

In 2001, the then Minister for Finance, Mr. McCreevy, reduced the higher rate of VAT from 21% to 20%. He had to reverse that change in the following budget as the reduction was not passed on to consumers. That has been the experience.

Deputy Enda Kenny

I have to assume that the Minister for Finance is speaking for the Government when he says people are whingeing when they are concerned about rising prices. The Taoiseach is well aware there is no VAT on food. The average person's weekly income is now squeezed to the limit with increases in food and fuel prices and mortgage costs. The amount of disposable income available to people has greatly diminished, as is evident in the leaking of confidence in so many sectors of the economy. I listened to a young fisherman a few evenings ago speaking from Kilmore Quay in the constituency of the Minister for Arts, Sport and Tourism. He said that diesel for five days steaming in his trawler cost €18,000, with perhaps no fish at the end of that because the quotas are so small. I also spoke recently to a haulier in Cork. Sending his truck to Belfast requires 300 litres of diesel for the trip there and back. That cost is ultimately passed on to the consumer.

I am disappointed that the Taoiseach does not have an initiative with regard to the mix of excise duties and VAT to ensure they are not used as a further battering ram against the hard pressed consumer. Last week, Deputy Bruton and Deputy Coveney brought forward an imaginative and creative proposition to take back from electricity generators the windfall profits resulting from the carbon allowances given to them and in respect of which they have earned profits of €300 million per year. They got the carbon allowances for nothing. The Deputies proposed that the profit be given back to the consumer through a reduction in the lower rate of VAT from 13.5% to 12.5%. That would impact on the cost of household goods. It would also have an impact on newspapers, accommodation and the construction industry at a time of serious decline in activity in those sectors.

Is that not an example of creative and imaginative thinking with regard to what the Government could do? It could take back a windfall profit of €300 million per year from electricity generators and give it to the consumer. Would the Taoiseach favour taking back that €300 million in the first instance? He might not agree with our proposal of a reduction in the lower VAT rate from 13.5% to 12.5% but would he agree in principle to taking it back? We can then decide how the €300 million can best be used in the interests of the hard pressed consumer.

The Taoiseach

It is important to point out that the revenues available to the ESB and others are factored into their capital programmes for providing alternative energy sources.

Deputy Enda Kenny

The consumer is paying for it.

The Taoiseach

Yes, but if the people who will pay for it are to be the generators, they will simply pass it on. They have factored that money into their capital plans to move——

Deputy Enda Kenny

They have got them for nothing, as the Taoiseach knows.

The Taoiseach

——to alternative energy sources. With regard to reducing the lower VAT rate from 13.5% to 12.5%, that would cost approximately €400 million in a year. The likelihood is that any reduction in the VAT rate would be absorbed by retailers and wholesalers and not passed on to consumers. That was the experience of one of my predecessors, as I said earlier, when he reduced the 21% VAT rate to 20% in budget 2001. He subsequently had to reverse that decision. In any event, changes to taxation could only be considered as part of an overall budgetary process which, as people are aware, will be challenging anyway. To consider such proposals outside that overall process could lead to unanticipated difficulties in terms of secondary economic effects as well as the effects on the wider society and the environment.

Deputy Eamon Gilmore

Last Friday, I was in the National Rehabilitation Hospital on Rochestown Avenue, which is in my constituency of Dún Laoghaire. I met there two young men, both of whom are paralysed from the neck down. In both cases the paralysis is the result of diving accidents. One young man was diving into a swimming pool when on holiday in the United States while the other hit a sandbank when diving into the sea in Australia.

The two young men were due to be discharged from the National Rehabilitation Hospital 18 months ago. The discharge from the hospital was first delayed because two bungalows being built for the young men, through Cheshire homes, were delayed due to a problem in the Department of the Environment, Heritage and Local Government. That was eventually solved and the two bungalows were ready for occupation at the beginning of this year. However, the young men cannot now be discharged from the hospital because the Health Service Executive has not provided the money it had originally promised to employ the carers the two men will require to live independently in the bungalows.

My colleague, Deputy McManus, raised this issue on the Adjournment last Thursday. She was told by the Minister of State, Deputy Hoctor, that the funding for additional services for people with a disability is under review in the context of the Health Service Executive's overall service levels and funding position for this year. The money for the carers for these young men was provided in 2007 but, as the bungalows were not completed in that year, it could not be drawn down. However, now that the bungalows are completed, the money is not available for the carers. The result is that the two young men are in the hospital for 18 months longer than necessary. It is cruelty to have them confined to a hospital when they should be outside, living independently. Two beds in a hospital that is hard to get into are being occupied unnecessarily, while two bungalows built with taxpayers' money are lying idle in Greystones because the money to engage the carers has not been provided by the Health Service Executive even though it was previously promised.

I raise this with the Taoiseach for two reasons. First, I want something to be done.I appreciate I am putting it to the Taoiseach cold this afternoon. I want something done to get the two men discharged from hospital and into these bungalows with the Health Service Executive providing the funding, as it should be doing. Second, I raise it because it is not an isolated problem. We had a similar example on RTE's "Morning Ireland" this morning and my colleague, Deputy Shortall, raised an issue at the Committee of Public Accounts last week about three houses in Castlepollard, County Westmeath, which have been idle for seven years because the necessary funding has not been provided to enable the people concerned to take up occupation. Again, those are examples of where the right hand of the HSE does not appear to know what the left hand is doing.

I have two questions for the Taoiseach. Can he assure me that somebody in Government will take action to get the pieces of this pulled together so that those two men can come out of hospital to the bungalows that were built for them? Will the wider problem of the left hand not knowing what the right hand is doing be resolved at some stage in the HSE?

The Taoiseach

I empathise with the dilemma those two gentlemen are in at the moment in terms of being placed outside the hospital setting. The placement of adults with spinal injuries outside acute hospital settings is a challenge in many parts of the country. The development of services in this area is something that has been required and I am sure is ongoing. Specifically, in regard to the two cases raised, I will take up the matter with the relevant health authorities to see in what way the matter can be resolved.

Generally speaking, there are plans within the HSE to develop rehabilitation services. I acknowledge the tremendous work and service pressures under which the National Rehabilitation Hospital has operated for many years. It has provided an excellent service. I have known people, including friends of mine, who had cause and reason to use the services and have nothing but praise for the excellent staff there. I visited the National Rehabilitation Hospital during my time as Minister for Health and Children. I acknowledge that it is an excellent facility that does tremendous work and brings great improvement to people who on the face of it one would not have expected to recover as well as they do there. There are plans to continue to develop the service because that is required. There is a need to try to provide services outside Dublin because the National Rehabilitation Hospital takes on the responsibility for almost the whole country because of the specialised injuries that are involved. I will take up the point made by the Deputy in regard to the two individuals and ascertain the position.

Deputy Eamon Gilmore

I thank the Taoiseach for agreeing to pursue the issue of the two unfortunate men involved. I hope that this will produce a result for them that has not been possible to achieve to date. My colleague, Deputy McManus, raised the issue on the Adjournment last week. In a case like that we should not have to ask the Prime Minister to resolve and address the issue.

The case is not isolated. I am told there are four cases in total with similar difficulties involving the housing scheme in Greystones built by Cheshire Ireland. Deputy Shortall raised the issue of the houses in Castlepollard that have been idle for seven years. There seems to be a consistent problem of dysfunctionality in the HSE. On the one hand a service is provided or a house or other facility is built by taxpayers' money and then one finds that it cannot be operated because the moneys required to either hire the staff or get the service up and running is not provided. That aspect of the problem needs to be addressed as well.

The Taoiseach

The fact that there are problems in this particular case is part of the wider issue I have acknowledged in terms of making rehabilitation services generally available and as good as people would like and expect them to be. I am aware of many instances where things work out very well. Perhaps the Deputy knows such examples also. One should not characterise the fact that there is a problem to mean that the system does not work at all. There is obviously a particular issue here with which I am not au fait. Deputy Gilmore mentioned the fact that, unfortunately, the housing was not available last year and therefore the money that would have been allocated for the care of those people went to someone else who was awaiting service in some other area, and that the situation repeated itself this year. I do not seek to suggest that there are adequate reasons the issue has arisen in these particular cases. It would be remiss of me to say that, but obviously there is a need to try to address the issue and solve the problem as quickly as possible. I know what the Deputy has had to say about it.