Would the Minister like to make an opening statement? No. Amendments Nos. 1 and 2 are related and may be discussed together.
Finance Bill 2023: Committee Stage
NEW SECTIONS
I move amendment No. 1:
In page 3, between lines 10 and 11, to insert the following:
“Amendment of section 121 of Taxes Consolidation Act 1997
1. Section 121 of the Taxes Consolidation Act 1997 is amended in subsection (4A)—
(a) in paragraph (aa)(i), by the insertion of “subject to paragraph (ab),” before “€35,000”,
(b) by the insertion of the following paragraph after paragraph (aa):
“(ab) Notwithstanding paragraph (a), the cash equivalent of the benefit of a car ascertained under paragraph (a), for the year of assessment 2023, shall—
(i) where paragraph (aa)(i) applies, be computed on the original market value of the car reduced by—
(I) the amount specified in paragraph (aa)(i), and
(II) €10,000,
and
(ii) where subparagraph (ab)(i) does not apply, for the vehicle categories A, B, C and D set out in column (1) of Table B to this subsection, be computed on the original market value of the car reduced by €10,000.”,
and
(c) by the insertion of the following paragraph after paragraph (b):
“(ba) For the year of assessment 2023, Table A to this subsection shall apply as if—
(i) the lower limit of “52,001” shown in column (1) were replaced by “48,001”, and
(ii) the upper limit of “52,000” shown in column (2) were replaced by “48,000”.”.
I thank the Cathaoirleach and his colleagues for facilitating the taking of Committee Stage of the Bill. I will deal with amendments Nos. 1 and 2, which are being taken together, I will make some points for the record and then I will engage with Members.
These sections amend sections 121 and 121a of the Taxes Consolidation Act 1997 by providing for the recently-announced changes to the vehicle benefit-in-kind, BIK, calculation. The Government remains committed to the environmental rationale behind the current emissions-based vehicle BIK regime, which has been in operation since 1 January 2023. In the current inflationary context, however, the Government recognises the difficulty experienced by some people facing BIK increases under the new regime. To that end, I am making temporary changes to BIK for the current year, which will help to mitigate some of the increases associated with the new emissions-based calculation.
The amendments provide for the application of a universal relief of €10,000 on the original market value, OMV, of a vehicle in categories A to D, inclusive, in order to reduce the amount of BIK payable. This will also apply to vans and electric vehicles; however, it will not apply to cars in emissions category E, the highest emissions category. For electric vehicles, the OMV deduction of €10,000 will be in addition to the existing relief of €35,000 available for such vehicles. This means the total relief for 2023 will be €45,000. In addition, the lower mileage limit in the highest mileage band, which is currently 52,001 km, will be reduced by 4,000 km with the highest mileage band now entered into at 48,001 km. All measures will be backdated to 1 January 2023 and will remain in place until the end of the year.
I welcome the U-turn by the Government on this issue. Just a couple of weeks ago the Minister's predecessor was arguing black and blue that people had enough time regardless of the cost-of-living crisis, which was put forward as an argument by me and others in terms of the changes to BIK.
The principle of how we apply taxes and try to change behaviour is one that I support. That is why this received support during the Finance Bill, I think in 2019. It is about trying to move to alternatives that are more environmentally friendly. In light of a cost-of-living crisis, I welcome the fact that the Minister has approached this in his first Finance Bill, because I know Ministers for Finance do not like to bring forward Finance Bills outside the normal schedule. Therefore, a very sensible position has been adopted by him unlike his predecessor, who stuck with what was legislated for regardless of the impact it had in the middle of a cost-of-living crisis.
I am interested in the way the Minister and his officials have approached this, because what we have not done is go back to where it was. It is a different proposal. The main proposal is not the reduction in the number of kilometres; it is the deduction of €10,000 from the original market value. Will that leave those subject to benefit in kind better off than where they were last year, in certain circumstances? Perhaps the Minister will talk us through how this would work for an individual.
As the Deputy has said, this was legislated for in 2019. It is fair to say that some companies changed their fleet of vehicles and took on board the legislative change that was enacted but had not yet come into effect but not all did so. There have also been difficulties in the supply chain with new vehicles over recent years. When I came into office, I was aware this could be an issue and, to be fair to my predecessor, he flagged this and said that it was something we would have to watch early in the year as individual applications became apparent. Of course, individuals did make known the direct impact it was having on them. I spent some time personally examining individual cases to see how I could learn from them. I worked with my officials and we have devised a sensible temporary solution.
I will outline a few examples of what the impact of the changes we are bringing forward would be. In the case of a category C vehicle, such as a Skoda Octavia, with a value of just over €29,000 and mileage of 43,000 km, the BIK tax liability last year would have been €151.55 per month. Under the new regime, if it was not changed it would become €227.33 per month. As a result of the changes we are bringing about, it is being reduced to €143.33. In that case, there is a very modest reduction relative to what it was last year. That would be the exception rather than the norm. For many people it means less of an increase in BIK. An example of that would be an Audi, a category D car worth €49,000 with a mileage of 42,000 km. Last year, the BIK would have been €255 per month. Under the new regime, it would have increased to over €430 per month. That has now been reduced to about €342. It has been reduced, but it is still an increase, in particular for cars that are less environmentally efficient.
That will give the Deputy a sense of the impact of the changes we are making. We have gone from five mileage categories under the old regime to four under the current regime. We have kept that change but the entry point to the highest mileage band is now 48,000 km. There are some who will benefit from that change. People made the case that they had to drive for longer to get a lower BIK. We considered that in the round and have made changes that are sensible. I will examine it in the months ahead in the lead up to the autumn finance Bill.
Does the Minister have any concerns about the method he has used to deal with the reduction? A sum of €10,000 will be deducted from the original market value of a car. That figure is not calculated for the purpose of BIK. For example, a category B car with 40,000 km will mean a multiplier of 15.75. The BIK will be €1,572 Euro and tax at 52% will be €890. That is the saving people are making compared to what has been legislated for heretofore. That is also the increase people are facing when this measure expires. In the case of the example of the Audi, the figure is higher because the BIK multiplier is 20.
In some cases, the cliff edge has become larger. The concern is whether this will be extended again. What is the Minister's message to employers? There was a three-year lead-in period which has now been extended a bit further. An individual in category B, such as somebody with a car valued at €28,000, will now be better off to the tune of a couple of hundred euro than they were last year. Their tax liability has decreased but will increase by about €820 next year. The cliff edge has become a lot more severe for such people.
In considering what changes I was going to make, I also had to take into account what could be operationalised. The Revenue Commissioners and payroll software providers would have to apply changes. The advice was to minimise the number of changes. If we went into the body of the table, started changing all of the rates and made significant changes that would probably have resulted in a much longer delay before people felt the benefit of the changes. The advice was to keep the changes as simple and straightforward as possible. I decided that a reduction in the market value of a vehicle and a change in the entry point to the higher mileage band was the simplest and most effective way of bringing about a reduction in the increase for many although, as Deputy said, it results in an actual reduction for some in the BIK relative to last year.
My message is that companies need to transition. Companies with employees who are using company vehicles need to make the change where they can to lower emission vehicles. The principle has been retained that the BIK is higher for less environmentally friendly vehicle. That will continue. Today, with the support of the committee, we are legislating for a temporary change to the end of the year. The principles we set out in 2019 in the previous Government, which I am retaining here, will continue into the future. I will examine this further in the months ahead. There will not be a change to the overall principle. Companies who have fleets of vehicles need to continue to change and buy into more environmentally friendly vehicles for all of the right reasons.
The Minister said companies that can change should. We know the purpose of the 2019 amendment and the principles of that are very solid. As a society and economy, we should aspire to achieve a reduction in the number of high emission vehicles and the transition to electric vehicles. It is obvious that companies relying on fleets would be one of the first sectors or subsectors of the economy to make that advance. Clearly that advance has not taken place to the degree that anybody would like.
I have a number of questions. What more needs to be done? It is clear that there has not been the kind of transition that we would have expected. Where are the gaps? How does the Minister propose that firms be better incentivised to replace high emission vehicles with expensive electric vehicles?
My next point is related. If the proposition were to change and the 2019 scenario was implemented on 1 January of this year, all of the burden would fall on the workers who have no option whatsoever other than to take a company car to allow them to do their job. I am glad the Minister took the very responsible decision to review the position and not proceed with the 2019 change this year. However, the reason he did so is because of his acknowledgement that we are living in a high cost environment.
Prices are continuing to rise and even if they are stabilising, they are still high. We have an inflation problem this year, as we know from the ESRI which restated that point today. High costs will be a feature of this economy. Will the Minister keep this under review? Will he keep the option to extend this temporary arrangement into next year, if the current circumstances still prevail for workers across the country?
I thank the Deputy. It is important that we give a clear message to businesses. To be fair, we should acknowledge that many changed the nature of the vehicles they were providing to their employees. We heard from those who were impacted negatively by the changes, but many others were not and a lot of companies did the right thing and had the resources to do so. It is important that I, as Minister, and we collectively send the message that the change and transition has to continue. The direction of Government and public policy generally is to try to incentivise the use of more environmentally friendly vehicles.
Regarding the specific tax measures, while the relief of €10,000 will be applied to the OMV vehicles liable for BIK, the other elements of the new BIK regime will remain in place. It means that even with a reduction in OMV, electric vehicles will continue to benefit from a preferential rate of BIK. For companies who want their employees to pay a lower rate of BIK, they know what needs to be done to ensure that is the case. The rates range from 9% to 22.5%, depending on mileage and fossil fuel vehicles will remain subject to higher be BIK rates of up to 37.5%. There are other measures in our taxation code that incentivise the purchase not just of energy efficient vehicles but other equipment. That is the thrust of Government policy under the climate action plan.
Would the Minister accept that it is not happening quickly enough and the purchase of electric vehicles is still relatively expensive?
Are there any other measures that the Minister is considering over the next period of time that would further incentivise the transition, not just of fleets of company cars, but of vehicles more generally towards EVs?
I want to put on record - and companies know this - that there is a tapering off of BIK relief for EVs to continue into 2024 and 2025. We want companies to make change now and it is important for their employees that they would do so. On the tapering mechanism, the changes will operate in parallel with the preferential BIK treatment for EVs to the end of 2025. This means the quantum of the relief, in practice, for 2023, will go from €35,000 to €45,000, with the additional €10,000 that we are providing today coming off. As this additional relief is only applicable for 2023, the tapering of the EV BIK relief will remain at €20,000 next year and at €10,000 in 2025. It should be noted that the EV BIK extension forms part of a broader series of generous measures to support the uptake of EVs, including a reduced rate of 7% VRT; VRT relief of up to €5,000; low motor tax of €120; Sustainable Energy Authority of Ireland, SEAI, grants; discounted toll fees; and 0% BIK on electric charging. The incentives are significant but we will keep that under review and the direction of policy will not change. I want to give the message to employers that there is a reprieve for a number of months for the remainder of this year but I am not providing any guarantees on 2024 and beyond.
In cash terms, the heaviest polluting cars will benefit more from this change than the lowest emission cars. Does the Minister accept that? That goes against the principle of what is being attempted. On the percentage of taxes paid it will be the opposite but if you have a sports utility vehicle, SUV, or a high polluting car your benefit through this change is over €1,000, whereas if it was a category A or B car it would be €800 or less, depending on the mileage range. That goes against the principle of what is being attempted.
The Minister says he will keep this under review. When a Minister says something will be kept under review, that is sending a signal that it may not come to an end at the end of the year. We want to encourage businesses to move in this direction. Is this a case of mixed signals or is the Minister looking at a tapering because, as has been said, the cliff-edge has become more severe in some cases? Where companies have not moved they are looking at €800 to €1,000, in some cases, of additional taxation next year on employees.
The other two questions I have for the Minister are as follows. Does the Minister have any estimation of the number of individuals this will apply to and the number of vehicles we are talking about that have not moved? Does the Minister have any indication of the cost of this measure?
I support the amendment, which is a common-sense one. I get a sense that some want magic to be achieved, to vote to give relief and keep the principles in place. We are trying to implement a cost-of-living measure and the principles are intact here. It will not be perfect in every case and not everyone will get the same benefit. There will be some of that but overall this is a common-sense amendment and it reflects where we are with the pressure on people, including those who are at work. This is a worthy amendment and the Minister is clear that the incentives for companies to switch are still there. We cannot budge from those incentives; they have to be extremely clear. There is a gain here if companies are the first to change their cars. That means we will have more EVs in circulation in time, which is the key and what the motivation behind the amendment is about.
I do not have a number for how many individuals are impacted by these changes. Unfortunately the BIK data for employers is not broken down into the different forms of benefit that are taxed so I do not have that data and by extension I do not have the costs for what we are proposing.
On the point that the reduction is greater for those with high emissions vehicles, it is also the case that the increase provided for in the Act was higher in the first place so we are reducing that by means of the change we are making and we excluded category E. That is a policy decision I made because the vehicles Deputy Doherty is referring to would most likely fall into category E. It all underlines the need for this switch to be made. There are no mixed signals and I want to make it clear that the policy position is settled and that we want companies to invest in more environmentally friendly vehicles with lower emissions. Our BIK system will reflect that. As is always the case in the lead-up to a budget, we will examine the detail of each issue and we have to examine the impact of the change being made today at the end of the year. I will have to examine the detail of that. The thrust of policy remains the same and the principle is unchanged. The signal I am sending to companies is to make the change for the sake of their employees as much as for all the other reasons.
Does the Minister propose any method of calculating the data so that come either the tax strategy papers or the run-up to the budget next year we would have an indication of whether we are talking about 500, 5,000 or 50,000 vehicles that fall into this category? Is there an easy way of doing that?
It is not easy but I will engage further with Revenue to see if that information can be obtained. I would like to have that data, but at the moment, the way it is reported by companies into the Revenue system does not provide that level of granularity. I would like to have that and we will see what we can do in that regard but I cannot promise it.
Amendment agreed to.
I move amendment No. 2:
In page 3, between lines 10 and 11, to insert the following:
“Amendment of section 121A of Taxes Consolidation Act 1997
2. Section 121A of the Taxes Consolidation Act 1997 is amended, in subsection (2)(b)—
(a) in subparagraph (vi), by the substitution of “€50,000,” for “€50,000, and”,
(b) in subparagraph (vii)—
(i) in clause (I), by the insertion of “subject to subparagraph (viii),” before “€35,000”, and
(ii) in clause (III), by the substitution of “2025, and” for “2025.”,
and
(c) by the insertion of the following subparagraph after subparagraph (vii):
“(viii) the cash equivalent of the benefit of a van ascertained under subsection (3), for the year of assessment 2023, shall—
(I) where subparagraph (vii)(I) applies, be computed on the original market value of the van reduced by—
(A) the amount specified in subparagraph (vii)(I), and
(B) €10,000,
and
(II) in any other case, be computed on the original market value of the van reduced by €10,000.”.”.
Amendment agreed to.
SECTION 1
Question proposed: "That section 1 stand part of the Bill."
Section 1 deals with a number of agricultural sector reliefs that are being extended so I welcome this. I have a number of questions on the technical details on the extension of the stock relief and the young trained farmer relief. I also mention the registered farm partnership stock relief. Can the Minister clarify the changes that are being made in subsection 1(a)(i) on the definition of SMEs and the impact that will have? Can the Minister also clarify the changes that are being made and their effect under subsection 1(a)(ii) with the changes from €10,000 to €60,000 and the relief it applies to? I ask the Minister to also clarify the changes that are taking place in subsection 1(c)(iii). If the Minister has the information at hand, have the Revenue or the Department calculated the annual cost to the Exchequer in respect of each relief that has been impacted by section 1?
I will go through the points raised by the Deputy. Subsection 1 amends the Taxes Consolidation Act 1997. The Deputy has highlighted subsection 1(a)(i), which updates the legislative references in the section to revise the agriculture block exemption regulation, ABER. The reference is used in the context of the definition of "micro enterprise" and "small enterprise" as provided for in article 2 of annex 1 to the ABER. No changes are required to be made to the definitions of "micro enterprise" and "small enterprise" as contained in article 2 of annex 1 to both the previous ABER and the revised ABER.
Subsection 1(a)(ii), as the Deputy says, reduces the threshold for publication of relief granted under section 285D, from €60,000 to €10,000. Subsection 1(b) amends section 604B of the 1997 Act to extend the capital gains tax, CGT, relief that is currently available for the purchase, sale or exchange of land in order to achieve the consolidation of farmland holdings, thus reducing the fragmentation of farm holdings and improving the operation and viability of consolidated farms. The amendment extends from 30 June this year to 31 December 2025, the latest date on or before which the initial purchase, sale or exchange of land must occur for the purposes of CGT farm consolidation relief.
The amendment extends, from 30 June this year to 31 December 2025, the latest date on or before which the initial purchase, sale or exchange of land must occur for the purpose of the capital gains tax farm consolidation relief.
The Deputy mentioned subparagraph (c)(ii), which amends section 658A to update the legislative references from the previous agricultural block exemption regulation, ABER, to the revised one. The reference is used in the context of the definitions of microenterprise and small enterprise provided for in Article 2 of the Annex I to the ABER. No change is required to be made to either subjection as the definitions of microenterprise and small enterprise are contained in Article 2 of Annex I to both the previous ABER and the revised ABER.
The costs of these reliefs are generally comparatively low. I do not have a forecast to hand but we can follow up on this and provide the information in writing to the committee.
Many would not be familiar with the outworkings of the ABERs. The definition of SME obviously changes to take account of the regulations. In practical terms, will the change to the definition have any impact on the scheme?
No. It does not have any practical impact. It is just a matter of definitions.
That is fine.
There are two sections that deal with the publication thresholds, entailing a change from €60,000 to €10,000. Could the Minister clarify that the practical implication is that where a relief in excess of €10,000 has been granted – I believe farm safety equipment applies – it will be published. Previously the threshold was €60,000. What is the motivation behind the change? Is it to do with state aid?
Yes, it is. We have no discretion. It arises from the agreement reached at EU level. Were we not to do this, we would be involved in a breach of state aid rules. We do not have any national discretion on the question.
That is fine. I thank the Minister for the clarification.
Question put and agreed to.
SECTION 2
I move amendment No. 3:
In page 5, to delete lines 19 to 24 and substitute the following:
"
|
1 May 2023 |
€483.34 |
€483.34 |
€425.45 |
€425.45 |
€425.45 |
€0.00 |
€164.23 |
€111.14 |
€142.76 |
€79.17 |
€9.36 |
|
1 June 2023 |
€532.12 |
€532.12 |
€466.10 |
€466.10 |
€466.10 |
€0.00 |
€164.23 |
€111.14 |
€142.76 |
€79.17 |
€9.36 |
|
1 September 2023 |
€589.03 |
€589.03 |
€506.75 |
€506.75 |
€506.75 |
€0.00 |
€164.23 |
€111.14 |
€142.76 |
€79.17 |
€9.36 |
|
11 October 2023 |
€606.39 |
€606.39 |
€526.83 |
€526.83 |
€526.83 |
€0.00 |
€164.23 |
€111.14 |
€142.76 |
€79.17 |
€9.36 |
".
This relates to the Schedule for mineral oil tax contained in the Finance Bill. Amendment No. 3 concerns the mineral oil tax, particularly the rate of excise applied to home heating oil and marked gas oil. It provides for a zero rate for home heating oil under the energy tax directive from 1 May to 31 October. The effect of the measure would be that a 900-litre fill of home heating oil would see a reduction of €125. It is a cost-of-living measure, taking cognisance of the fact that 37% of households that rely on home heating oil have received no fuel-specific support since the cost-of-living crisis began. The measure would cost €57 million, according to the Department of Finance.
Thankfully, the cost of home heating oil has started to come down in recent weeks, which is to be welcomed, but we saw over ten months of last year a significant increase. There is support for those who use gas to heat their homes. This is primarily the method used by many here in the capital city, the Minister's city, namely Cork, and elsewhere, but 37% of households use home heating oil as their primary heat source. In the Border counties – including my constituency, Donegal – and elsewhere, two out of three homes use home heating oil to heat their homes. The cost saw dramatic increases last year. Thankfully, it is decreasing. I believe that what I propose is a cost-of-living measure that recognises that no support was provided to those who use home heating oil. The decision of the Government last year was to increase excise duty on home heating oil, thereby increasing the overall cost. It plans to do this again in May of this year, which is absolutely not acceptable. The decision coming into effect on 1 May will add €19.40 to a fill of home heating oil. What happened last year and the Government decision that will come into effect on 1 May will see a €39 increase in the cost of home heating oil. This is permissible under the energy tax directive. What I propose can and should be done. It is a question of whether the Government is willing to support the one third of households who did not benefit from the reduction in VAT on gas because they do not use gas and instead use home heating oil as their primary method of heating their homes. They have seen significant rises without any direct fuel-specific support since the cost-of-living crisis began.
We will come to the temporary business energy support scheme, TBESS, later. We pointed out to the Government that it was seriously flawed, for several reasons. One in particular is that many companies did not use piped gas as fuel. The Government now recognises there will be a scheme at some stage – we do not even know what it will look like – for companies that use other energy sources, such as liquified petroleum gas and oil. The same needs to happen for households.
I will put my note on the record and we can have an exchange at that point. This amendment proposes that the rate of mineral oil tax applied to non-propellant uses of kerosine be reduced to zero until 31 October 2023. It also seeks the reduction in the rate of motor oil tax applied to marked gas oil from €131.47 per 1,000 litres to €111,14 per 1,000 litres until the same date, the end of October this year.
As the Deputy will be aware, mineral oil tax comprises carbon and non-carbon components. The carbon component is generally referred to as carbon tax and the non-carbon component is often referred to as fuel excise or fuel duty. Regarding the Deputy's proposal to set the motor oil tax rate on kerosine to zero, it should be noted that the motor oil tax on kerosine comprises the carbon tax alone, as no non-carbon charge applies to this fuel. Furthermore, the proposal to set a rate of 11 cent per litre on marked gas oil would also undermine the carbon tax regime.
As the Deputy will be aware, the significant rise in energy prices we have seen in the past year is attributable to external global market factors. The long-term carbon tax policy sets out gradual annual increases to the carbon tax rate. The 2020 programme for Government committed to increasing the amount charged per tonne of carbon dioxide emissions from fuels to €100 by 2030. The Government followed through on this commitment by introducing the legislation in the Finance Act of 2020 to provide a ten-year trajectory for carbon tax increases to reach €100 per tonne of carbon dioxide by 2030. 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.
It is important to note that a significant proportion 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 also, in the long term, provide support against fuel-price impacts by reducing our reliance on fossil fuels. Removing the carbon tax for the period in question would not effectively address the current fuel-price trends and would affect revenues allocated for expenditure on fuel-poverty prevention. Therefore, I cannot accept the Deputy's amendment.
The difference is that we are seeking to uphold the policy on the carbon tax because we see the benefits from an expenditure point of view regarding the resources the tax provides to deal with the fuel poverty, invest in environmental methods of farming and support the just transition. On budget day every year, my former Department, the Department of Public Expenditure, NDP Delivery and Reform, publishes a paper setting out exactly where the money is spent. If we start making changes and undermining that revenue base, the whole principle will no longer be valid. That is the main reason I am not going to accept the Deputy's amendment. There are other ways in which we are supporting households to meet the cost of living. We do not need to go through all of that, or perhaps we can, but it is important to protect the revenue from the carbon tax because of the reasons for which it is being used.
Is carbon tax hypothecated in Irish tax law?
It is not in law but the practice is hypothecated.
It is not in law.
That is correct.
There is no legal impediment to reducing the level of mineral oil tax on home heating oil, which is colloquially called carbon tax. The €57 million by which we would be reducing the cost to individuals of heating their homes could be obtained from any other source of revenue. The argument put forward is that if this is done, it will take away from investment available for energy transition. However, that position is not hypothecated in law.
It is correct that it is not legally hypothecated. The question is whether the Deputy would really put it back up at the end of October. Would he go ahead with the carbon tax changes that are due to come into force in May and again in October?
I have been very clear on that. We should not put up the price of petrol and diesel and thereby make families poor. We need a just transition.
Is the Deputy saying he would pause, not reverse, the carbon tax?
Yes, I would. Sinn Féin's policy is very clear in this regard. If we look at the issue of price and whether continuing price rises will deter people from jumping into a car, we need only consider what has happened in the past year or year and a half, when the price of petrol and diesel went through the roof. At some points, a litre cost €2.20. That did not stop people from using their car to get from A to B. People in my community still need to get to appointments with the dentist, doctor or nurse and to get to their place of work. In many cases, there are no real, accessible alternatives to driving. We need to see the necessary investment to ensure people can transition to alternatives. We have just had a discussion on another environmental tax, which I agree with, as I did in 2019. Taxation can be used to encourage change, but the change we want people to make must be available and affordable. That is the issue I have.
Going back to the core of it, this issue is not hypothecated in law. This means that if it is done, it would not be taking away €57 million from investment that is earmarked from carbon tax resources. It can be done through other taxation methods. All of these moneys go into one big pot and the Government tells us it will act on the principle that the pot will be used to invest elsewhere.
More than a third of households across the State - 37% - did not get any direct energy supports from the Government. I am not at all disputing the necessity of support for our capital city and elsewhere but I am pointing out a reality. If the situation were reversed, such that everywhere else bar the likes of Dublin got energy supports, there would be an issue. If we look at the data from the Central Statistics Office, CSO, we can see that in our larger cities, 97% or 98% of households use gas as the primary method of heating their homes. There is support there for them. It might be only a little support but it is there. The same is not true for households that use home heating oil. In my constituency, two thirds of households use it, as is the case in Galway, Roscommon and Leitrim. The interesting thing about those constituencies is that they are the ones with the highest levels of poverty and deprivation and some of the worst-insulated homes. That is a factor here.
The Government is making a conscious policy decision. If it were to poverty-proof measures and make decisions based on the evidence, it would of course be reducing the cost of home heating oil temporarily, just as it has introduced other types of supports. This legislation does not include a single reference to carbon tax. It is colloquially called that but it is mineral oil tax. There is no impediment to making a decision to reduce the cost for families to heat their homes in the coming months. I strongly urge the Government to do so. We can debate other measures the Government is taking to support vulnerable households as much as the Minister wants. That is fine. However, it does not take away from the fact that for 37% of households, the Government is increasing the cost of keeping their homes warm this year. It does not take away from the fact that in the middle of a cost-of-living crisis, there was no direct support for those householders to keep their families warm. It does not take away from the fact there is no legal impediment to providing that support.
The reality is that the €57 million this would cost is small in the scale of the overall budgetary arithmetic, with a €6 billion surplus being forecast for this year. It is a measure that should be supported. To call a spade a spade, because the Green Party is in government and because the mineral oil tax is colloquially called a carbon tax, the Government will not budge on this, no matter how cold it gets and how hard-pressed householders are to keep their houses warm this year.
It is not just about the €57 million. The Deputy acknowledged he would not make any changes to carbon tax in May. That increases the cost further. He said he would not make any changes to carbon tax in October, which increases the cost further again. It is the thin end of the wedge. The Deputy is not really in favour of carbon-----
I am referring to my amendment
I know, but the Deputy acknowledged in our exchange that this would not be the end of it. I do not think even he would suggest putting the tax back up in October, but he definitely would not go ahead with the other increases in carbon taxes in October or May. It is not just about €57 million in the context of the overall public finances. Last year, we collected close to €800 million in carbon tax. There is a published paper showing the amount of financed expenditure from carbon tax this year is €623 million and how that money is broken down. Whether or not it is legally hypothecated, the money is tracked, it is all there and it is transparent as to where it is spent. The Deputy said a third of households in Ireland got no direct energy supports. That is not true. They got the electricity credit, four of which have been applied.
They got no direct supports to heat their homes.
I ask the Deputy to bear with me.
I ask the Minister to quote me properly.
The Deputy referred to energy supports. Electricity is energy and people have had four electricity credits. We also cut excise on transport fuels, which we will discuss presently. That went to every owner of a vehicle that uses fossil fuels. We also reduced the VAT on electricity. Those changes have been made. It is not possible to have a perfect response such that every single group has a bespoke measure just for it. We have come forward with a very strong cost-of-living package in the past couple of budgets and again since the most recent budget. We cannot address every micro-issue that is raised, albeit it might be an important issue.
This is not a micro-issue. More than a third of people in this country use home heating oil to heat their homes.
Will the Deputy bear with me? He is saying that this proportion of householders does not get direct support. That is not the case.
These householders do not get direct support to heat their homes.
The Deputy wants to drive a coach-and-four through the policy on carbon tax, which is about raising money that will be used for retrofitting, agri-environmental farming and fuel poverty measures. It allows for the supports we have been able to provide, including the expansion of eligibility for the fuel allowance. Every year, we publish information on how that is funded and the amount that comes from carbon tax. The Deputy does not really back the carbon tax but he is tip-toeing away from it rather than saying he does not support it. That is the reality of his position, as I see it, when he makes clear the changes he would not make later this year.
There was no direct support from the Government for 37% of households to heat their homes. The argument I have consistently made is that for people who use gas to heat their homes, there was a measure to support them. The Minister referred to micro-issues. A situation in which 37% of households do not have any direct support to heat their homes is not a micro-issue. That situation applies to 66% of people in the Border areas.
In using that phrase, I was referring to specific issues. The Deputy is saying there is no measure that benefits only those 37% of households. That is, in effect, what he is saying.
There is a measure that benefits those who heat their homes by gas. There is no piped gas in my county of Donegal. There is not an inch of pipe in it. It does not exist. Even if people wanted to use gas, they could not do it. A total of 37% of households right across the board were left out of a policy decision to reduce the cost of heating homes. A policy decision was taken that was half-baked in looking only at gas. It could have looked at home heating oil as well. We are not looking to pursue micro-issues; we are looking for equality. There is no reason that a household in Donegal, Wexford or west Cork should be any more left to the side than a household in Dublin 4 or elsewhere in Dublin.
Why should they? There was a measure from the Government to support those households, rightly so, because of the cost-of-living crisis and the cost of keeping houses warm. We have seen the cost of gas increase dramatically but home heating oil increased more than gas. That is the point. The amendment extends this measure until the end of October. Why the end of October? It is because, let us be honest, it would be reviewed in the budget. It would be reviewed in the context of a cost-of-living crisis. We never said, however, that we should get rid of carbon tax on home heating oil. We never said that previously because carbon tax has been here for decades, as the Minister knows.
The issues are that we are in the middle of a cost-of-living crisis and there is something we can do to alleviate the burden on those homes at present, in the same way the Government is bringing forward a measure for businesses using LPG to power their plant to keep down increasing costs. A measure was introduced by the Government relating to gas for businesses but it now recognises that as it left so many businesses to one side it is unfair, and it will bring forward a scheme that will capture those types of businesses. The Government has done exactly the same thing for households. It has brought forward a proposal for gas, where households primarily use gas to heat their homes, but there is nothing on offer for those who use home heating oil. In fact, there is - the Government will increase the cost. That is the problem.
The amendment is very clear. It is a very simple decision. I will press it to a vote. It is about reducing the cost for a fill of home heating oil by €125 or a decision to further increase the cost of home heating oil for those families come 1 May.
I will add a few points. We brought forward various measures that benefit households most in need irrespective of where in the country they are located. These include bullet payments on fuel allowance for people who are genuinely in need and qualify because of the means test and their specific household circumstances, and the way in which we extended the eligibility for that measure. There have also been changes in health and education costs, permanent changes in welfare, and a reduction in public transport fares. I am looking at the way we are spending the very money the Deputy said we will find elsewhere. I am not sure where the Deputy said we will find it, but he said we will find it from elsewhere. Of the €623 million in the current year, €291 million will go to residential and community energy efficiency to help many of those households the Deputy represents that are using oil at present. Of course, we need to help them to make the transition, and make their homes warmer, more comfortable and cheaper to run. That is why the Government has invested massively, using these proceeds for targeted social protection interventions. Some €218 million will go towards incentivising farming in a greener, more sustainable way, including €81 million for a new scheme, and there will be €33 million for the continuation of 2020 carbon tax investment programmes in other Departments. That is how we will spend the €623 million.
The Deputy made the case for households that rely on oil as their main source for heating. The most effective thing we can do to help those households over time is to transition their homes to be better retrofitted so they are warmer and more comfortable, and reduce the running costs of those homes. That is what we are focused on. That is the long-term future. It is why we must have these proceeds so we can fund that change. We will not agree on the detail of it but the Deputy's case is not just about €57 million between here and the end of October. I do not believe for a moment it is. The Deputy is putting a much bigger issue on the table. He is not really committed to the principle of carbon tax. If he were, he would not be saying he would not do this, that or the other. We just will not have the proceeds to make the transition. That is my argument back to the Deputy.
As the mover of the amendment, I will finish on this point. The amendment is very clear. It is about reducing to zero mineral oil tax on home heating oil until the end of October in the middle of a cost-of-living crisis. The Minister talked about measures he is taking. I am not taking away from him on that but, on top of that, the Government also reduced the cost for households, regardless of their income or how many millions they earn a year, of heating their homes if they use gas. In my constituency, however, the Government has decided to increase, regardless of how poor households are, the cost of heating their homes. There is a fundamental issue of equality. The fact the Government thinks it can get away with ignoring 37% of households, with no direct measure to support them in reducing the cost of heating their homes and, indeed, bringing forward a measure to increase that cost in the middle of a cost-of-living crisis, is scandalous. It is not appropriate, fair or equitable. It is on that basis we brought forward this amendment. It is the recognition of all that, including recognition of the equality of it, the cost-of-living crisis and that these households, in the main, are in some of the most deprived constituencies, when it comes to poverty indicators.
Amendment put:
The Committee divided: Tá, 3; Níl, 6.
Tá
- Doherty, Pearse.
- Farrell, Mairéad.
- Tóibín, Peadar.
Níl
- Durkan, Bernard J.
- English, Damien.
- Matthews, Steven.
- McGrath, Michael.
- McGuinness, John.
- O'Callaghan, Jim.
Amendment declared lost.
Question proposed: "That section 2 stand part of the Bill."
Section 2 contains the staggered increase of petrol and diesel. The reduction will be phased out and by the end of October the price will be higher than what it was before the reduction because the Government plans to increase both types of fuel with an increase in mineral oil tax come budget time. That is legislated for in the Schedule. We have seen fluctuations in petrol and diesel and thankfully the price has started to come back down, although if we were to remove the excise reduction on it we are probably looking at rates of about €1.90 or thereabouts, €1.9184, for petrol and diesel. That could increase over the next months. Is this something the Government is willing to keep under review if prices start to creep up to €2 and beyond? Would the Government look at this measure again? Has the Department undertaken any assessment of the price impact of the recent ban on Russian refinery petroleum products and what impact it may have on the price? Is this something the Minister is willing to keep under review?
In effect what we are doing here is extending the excise reductions but also, as the Deputy acknowledges, providing for a phased restoration across three different points on 1 June, 1 September and 31 October. There is a cost associated with this section in the order of €383 million. The base assumed that these rates would have gone back up fully at the end of February. To answer the Deputy's question directly, no. We are legislating so it is our intention to proceed in line with the legislation, although of course we always keep everything under review. I am not giving any specific commitment on whether we would make a change if prices come in at a certain level. We keep everything under review including this issue, but our intention is to proceed in line with the way that we are intending to legislate here today. The Deputy acknowledges the changes we have seen at wholesale level. I watch commodity prices very closely, including the cost of a barrel of oil. I watch the exchange rate in terms of weakness of the dollar in recent times, which helps because it is priced in dollars of course. We have seen the price of Brent crude fall back significantly from well over $120 to perhaps around $75 or so at the moment. The question of how that works its way through is determined by a number of factors as the Deputy well knows, including refining costs, the exchange rate and so on.
To the Deputy's other question, there is no specific assessment done of the Russian issue to which he referred in terms of refinery products.
However, it is something we keep under review. I intend to proceed in line with the legislation in section 2.
Question put and agreed to.
SECTION 3
Question proposed: “That section 3 stand part of the Bill.”
Although we tabled no amendments, the section deals with reducing VAT rates to electricity, gas and the hospitality and tourism sectors. I spoke at length regarding the inequality of having a measure for those who use gas primarily, and nothing for those who use home heating oil, so I will not repeat myself. We see from a reply to a parliamentary question that while the projected cost of the reduced VAT rate applicable to electricity and gas, up until the end of October is €86 million, the net benefit to a household is €38 in respect of electricity. That is just under €5 per month. With gas, it is less; the total benefit during the whole period would be €26 for the average consumption per household according to a parliamentary question that was replied to by the Minister.
We are looking at reduced VAT on electricity, but the Government has refused to examine what is happening in other countries regarding the certainty that governments are providing. Members that share the Eurogroup with the Minister are providing certainty for households in the form of price caps on energy bills. This happened in more countries over the winter period. Germany is one of the latest countries to announce a price cap for their citizens. I do not suggest that we replicate exactly what Germany, the Netherlands, Austria or many other countries are doing, but the principle has been adopted in many countries across Europe. It provides a sense of certainty. In some cases, it is a case where 85% of someone's electricity consumption last year will be priced at this rate. Then, for example, the Netherlands looks to see what the companies are buying the gas and electricity in for, and refunding them appropriately, not the "blank cheque" kind of sloganeering that Fine Gael has been involved in. It has suggested that this type of measure is about blank cheques. If it was, then why are Germany, the Netherlands and Austria doing it? Why has France done a version of it? Why are so many countries across Europe doing this?
It was reported so in the media that the Government would look at this type of measure. Has the Minister examined what Germany is doing? Has he assessed whether that would be appropriate in an Irish context? If not, will the Minister take an opportunity to speak to his colleagues on the Eurogroup and ask them what they are doing regarding energy costs for their citizens, and how that could be adopted, reshaped, twisted or altered in an Irish context to provide a meaningful support to households and to provide certainty during very volatile periods?
The truth is that different countries have adopted different approaches to this issue. The focus now is on ensuring that the reductions we have seen at the wholesale level are passed on as quickly as possible to customers at the retail level. That is where our focus needs to be, and to encourage the companies in that regard. We went from a peak of approximately £7 per therm of gas to about £1 per therm now. The long run average has been approximately 50p, so it is still double that, but far below where it was just last year. The companies have benefited from that dramatic improvement in the wholesale market. Of course, I hear what they say about hedging and the way they sign up to futures contracts, but I welcome the fact that we have seen some reductions beginning to be passed through to customers. Rather than Government interventions on price, the focus should be on the market delivering those reductions back to consumers.
I will address the question of why the Government, some months ago, did not go down the road the Deputy has suggested. Different countries have adopted different approaches, and we have discussed that at the Eurogroup and ECOFIN meetings that I have attended during the past three months. We could not have confidence regarding what the cost of doing that would have been to the State. Our colleagues in the Department of the Environment, Climate and Communications, in particular, monitor other markets and the approaches other countries have taken. We opted for providing direct supports to households through electricity credits, the social welfare system, the fuel allowance and so on. However, now we are at a point in the cycle where it is about applying downward pressure on prices, rather than the Government stepping in to put caps in place.
Every country across Europe is in that same position, where their energy companies, given what has happened in the wholesale markets, will want to see the suppliers reduce costs for consumers. In Germany, the Netherlands, Austria, France and Poland, and countries like that, it is really important for them because what they are doing is subsidising the difference between the lower cost that they have guaranteed for the citizens, and what the energy companies are providing. They are doing that, and looking for downward pressure, but they are recognising that it is not happening immediately. That is why they have come in, in the middle of a cost-of-living crisis, and said they are going to ensure that the price of electricity cannot go above a certain level, and give people that certainty and breathing space. It is a major mistake for the Government not to do the same.
We are now in a position where the energy credits have run out, in the main. Energy that is consumed by people in the next number of weeks will not be supported by Government, depending on when bills fall. It will be charged at the full rate. The rates that are being charged are the highest that they have ever been, with the exception one company and there is now no support for them.
I acknowledge that there are different ways to do this. A fast way to do this was the energy credit. It had major problems. There are holiday homes lying idle, and they have got €800 credit on their bills. It was not done on the basis of consumption, whereas a cap is based on consumption. A cap, depending on the model that is used, can look to ensure that people are not consuming more, because it is applied it. For example, under the German model, it was 85% of consumption last year. There are all of these inbuilt benefits. These countries are not doing this for just a week or a month. They are guaranteeing it for the rest of the year. Germany only moved at Christmas. The wholesale markets were starting to go down at that time.
Genuinely - and I say this seriously - I think it is pathetic to go on social media and see Fine Gael Deputies asking people to sign a petition to get energy companies to reduce their costs, when they know fine well that they have the ability, and they actually have the responsibility and duty, to protect these individuals from the huge energy price increases. The Government also opposed a windfall tax. I am conscious the Minister was not on the committee at the time, but his predecessor, in this committee, argued against a windfall tax on energy companies. He said it would be counterproductive to investment and all the rest. That was about this time last year.
Of course we want energy companies pass on reductions and reduce their prices as quickly as possible. As the Minister said, some of them will argue that they bought well in advance and so on and so forth. I do not know the validity of that. I am not able to get under the bonnet of when these companies bought and at what prices. However, there are ways of dealing with that by way of taxes that can be applied such as windfall taxes and so on. There is a duty in the middle of all of this to support individuals, and I strongly urge the Minister, at the next meeting of the Eurogroup, to talk to his German counterpart, to talk to the Dutch, and have a conversation with them. They have the exact same issues as the Minister.
They want to see the prices reduced. In the meantime, they are also saying they will not allow their citizens to be put under serious pressure with the cost of energy.
At a family wedding last weekend, I spoke to an old friend who now lives in Australia. He had a lot to say about the Irish Government. I will not repeat some of his words because some of them were quite unparliamentary. However, he told me he came home and paid an energy bill for his father. It was €800. What world are we living in when €800 is the bimonthly bill for a household in west Donegal? These bills are going to roll into these households in coming weeks. The Government says it is not going to intervene, bar Fine Gael taking out a petition on social media and Fianna Fáil saying it wants companies to reduce prices. What are they going to do about it? They will call on the companies to reduce prices but, in the meantime, they are not really going to do anything. The spin from Government has been that we are coming into the summer months. The Central Statistics Office, CSO, is very clear that in the three months from March to May, households consume as much electricity as they do between October and December. Between March and May 2021, households consumed more electricity than between October and December. There will be no big drop in bills unless prices come down or the Government intervenes.
Without having the full details of what every country is doing, I can tell the Deputy that the broad thrust of discussion at EU level has been about withdrawing those types of supports and arrangements. We have seen that in the UK, although it is not part of the European Union. That has also been the talk among many of my colleagues around the table at EU level. Policymakers at EU level are encouraging governments to begin withdrawing those supports, rather than stepping in and putting in place market caps or price caps.
The Deputy spoke about problems with the electricity credits. It was an imperfect intervention but at least we know what that measure cost. I did not know the cost of intervening with a market price cap at the peak of the cycle.
Of course the Minister did.
We also did not know when it was going to peak or at what level it would peak. We cannot step in and provide a guarantee for each household that it would cost no more than X, without knowing what Y, the price on the market, will be. That cannot be costed.
Of course it can.
At least we knew what we were having to fund by way of an Exchequer intervention. The Deputy referred to the windfall tax. I heard my predecessor on a number of occasions make the point that the most effective way to do this was through the EU, and having an EU agreement. That agreement was reached last autumn and we are now legislating for it. The Minister for the Environment, Climate and Communications, Deputy Eamon Ryan, has brought the Bill to Cabinet. It is going through the committee and will go through the Oireachtas. The solidarity contribution from the fossil fuel companies and contribution from the non-gas electricity generators will provide resources for the State. Some of that will be this year and some of it will be next year. The commitment we have given is that it will go back to the users in one form or other, whether through Government intervention or reduced network charges. However, I do not support the idea that we should step in and put an actual cap on the price that people should pay. I cannot cost that.
I agree with the Minister for an obvious reason. There is a certain amount of turbulence in those markets and also in the financial markets. By way of comparison, the UK, as opposed to the European Union, moved into that area recently and then withdrew from it quickly. It made two or three attempts to do so. One thing we do not need is instability or doubt. The situation that has prevailed has worked well. Every effort has been made.
I know gaps will be found in the provision of assistance and so on but let us compare that with the 1970s when energy supply dried up. We seem to have forgotten that. Supply dried up and we had no energy at all. We could queue for as long as we liked with tin cans to collect motor fuel. The reason for that was some countries in the then European Economic Community did not want to pay the higher prices. A question arose as to whether the better option was to have supply at a higher price or to interfere and have no supply. I believe the decision by the Government is the correct one at the present time.
We live in difficult times. I do not know if that is generally recognised. The Silicon Valley Bank domino effect is in the marketplace. It will affect everybody in one way or another, to a greater or lesser extent. How countries across Europe handle that situation will be hugely important. At this stage, we should pursue the strategies that have worked so far in the present climate and wait for something that may or may not happen. It is a thorny situation to be in. That is my belief based on referring to the past and looking at what happened across the water in the UK.
Let me just deal with this issue of costs. The Minister has made reference to this, so he knows well that energy suppliers hedge and buy in advance. When we met with some of the energy companies they told us they buy eight or nine months in advance. At the start of the invasion of Ukraine, we met with the energy companies and the regulator and they made the same point. They told us that the price increases we were seeing were not caused by the war but by what happened six or seven months previously, during the lead-up to the war, when Russia used energy as a tactic before it started the war. They also made the point that come September or October 2022, we would see a spike in energy increases because the war would have put the price way up and so on.
When the Minister's colleagues in Germany, the Netherlands, Austria, Poland, France and other countries are costing proposals like this, they look at the wholesale markets. They look at where prices are going in the future. If we decide to cost something now with a view to it lasting three months, we can look back and see where wholesale prices have been in the past. When we costed our proposal, we looked at the prices but we also built in a increase of about one third to cover potential increased costs. It did not materialise but it was there as a buffer. That is what is normally done in terms of measures. For example, the Minister's temporary business energy support scheme, TBESS, has upper limits. Energy prices could theoretically increase to the upper limits. How much would that scheme cost if energy prices were to hit the upper limits for all businesses? Does the Minister know?
How much would the TBESS cost?
Yes, if energy were to spike as far as the upper limits for every business.
We have put a cap on the benefit.
Yes, but if energy prices increased to the point that every business hit the cap, what would it cost? I think it would cost in the region of €25 billion.
I remind the Chair we had that discussion before this committee, and it was-----
Not with this Minister.
With respect, the Deputy is rehashing it.
With respect, I am speaking.
Allow Deputy Doherty to finish his point.
The scheme would cost in the region of €25 billion. I would never argue that the Government has brought forward a scheme that had a price tag of €25 billion. The price tag was €1.2 billion. The reason is there were assumptions built into it with regard to the likely cost, by looking at where energy prices are. We know that TBESS did not cost a fraction of that. Only €40 million was drawn down. However, this is done in countries throughout Europe. There are ways of doing it. Some countries do not have a cap but if a country wants to put a cap on it, it can do so to make sure the upper limit does not go above a certain amount. There is, therefore, a way of doing it. The problem boils down to this. Energy prices are sky high. The credits are gone and the bills are still rolling in. The cost-of-living crisis is real and there is no further support for these households. However, half of the Minister's colleagues in the Eurogroup have introduced measures, some of them a couple of weeks ago.
Conservative Governments, such as in Germany, just introduced this a number of weeks ago and are saying that they are providing certainty to their citizens. It is a major mistake not to do the same here.
This section deals with hospitality and tourism. It is clear from the publication of the advice that the Department was opposed to the extension of the 9% VAT rate. It stated it would have a marginal impact on inflation. The Minister is familiar with the arguments it made. I have always made the case that the Minister should have the entitlement and the right to make a decision, bearing in mind the advice that comes from officials. Given that his officials are of the view that there is no economic case for extending the reduced 9% VAT rate, including the impacts of inflation, and that there was a decision to extend it, will the Minister talk to us about his consideration for doing so?
I thank the Deputy. On the question of a price cap and what he is suggesting, of course one can make assumptions and predict what is going to happen in the market in the months ahead. The difference between us is that I will not place a bet on the markets with taxpayers' money, which is what Deputy Doherty would be asking us to do. He criticised the interventions that we have made, but at least I can cost them and factor them into our fiscal budgetary plans, which is what we have done. I would be concerned about us intervening and setting a cap, and sending a signal and perhaps even a target price to these companies, which should in fact be reducing the price they charge to consumers.
The Minister's colleague said that is not how it works.
Bear with me. One could make a reasonably accurate estimate of the cost. If one tells Mr. and Mrs Murphy that they will pay no more than a certain amount and one does not know for sure what the gross price the market provider will charge is going to be, one cannot accurately cost what this will involve. That is the reality from where I sit. Of course we look at different examples. Different countries have done different things but, in general, they are stepping back and withdrawing. We have seen that in the UK in the past number of weeks. As I see it, the focus from the political system should be on ensuring that these price reductions at wholesale level are passed on to consumers as quickly as possible.
On the 9% VAT rate for tourism and hospitality, I provided the economic assessment to the Deputy, which my Department completed. The document should be available publicly.
I thank the Minister for that.
I examined a range of factors when considering the Department's advice. I accept its advice that this should end. The question is one of timing. In that regard, my colleagues and I had to consider the fact that there are significant regional variations. Much is often said about the price of hotels in Dublin and much criticism is levelled in that direction. It is not a uniform issue around the country by any means. Smaller operators are in quite a different situation. Many are dealing with high costs at the moment. While some may absorb an increase in VAT, others would simply not be able to. It would definitely push up prices at a time when many households, as the Deputy has acknowledged, are really struggling with the issue. That was a factor for me too. I made a decision that provides certainty. We gave six months' notice.
I accept the Department's advice that the VAT rate should go back up. It will go back up, but it will go back up at the end of August as opposed to the end of February. That is the right decision. It provides adequate notice to the whole sector. At that point in our economic cycle, all the indications are that inflation will be at a considerably lower level. Allowing the VAT rate to go up at the end of February would have pushed up some prices. While the impact of inflation would perhaps not have been material in the overall context, it would have had a negative impact on some household budgets and would have affected the viability of many businesses at a time when they were struggling with high energy costs in particular. Those were some of the factors that I considered in making the recommendation to Government, which was ultimately accepted.
Can I clarify one thing? The Minister stated that he accepts the Department's advice that the rate should go back up. Was the Department's advice that the reduced rate should not be extended?
When one reads the assessment, it is clear that the Department's advice would be to not extend it. Taking into account a whole range of factors that I have gone through, my position and the Government's position was that a six-month extension was appropriate. I am not sure of Deputy Doherty's position. He was given the economic assessment. I am not sure whether he supports the decision to extend the reduced rate by six months but that is the way it is.
The Minister will know in a minute. My view is clear.
The Deputy has danced around the issue a few times.
It relates to the impact on the sector. We would be of the view that if the 13.5% rate is not going to impact tourism-related jobs, then 13.5% is the rate that we believe is appropriate. The Minister made the point that if we reduce something, we will never put it back up. That is not the case. There are countless examples of that. One has to be able to intervene with a lower rate of VAT at a certain point and one needs the ability to put it back up. There will be a broader discussion because a debate has been opened on this. That was an intervention to support a sector at a particular point. There is now a broader discussion on the comparison of the 9% or 13.5% VAT rate with our competitors. With the exception of Britain, we are at the higher end. A discussion probably needs to take place before budget time to be clear about whether 13.5% or 9% is the right rate for the tourism sector. I am not sure myself. It is a costly measure. Therefore, I would not advocate it. A strong argument has been made for the long term regarding whether we are out of kilter with some of our competitors. Britain is an outlier in all of that, since it has a higher rate than even us. I am not sure what the Minister's view on that is.
This is an election debate. It is not a debate for today.
That debate will go on. There is nothing more certain than that. I am providing certainty regarding what the Government will do at the end of August. That is what I propose we legislate for.
Question put and agreed to.
SECTION 4
Question proposed: "That section 4 stand part of the Bill."
Section 4 amends a number of schemes in the agricultural sector. It reduces the number of years that a person has from the date of transfer of the land or farm to qualify as a young trained farmer. Up until now, people had four years to be able to avail of this. It has been reduced to three years. I am interested to see why it has been reduced to three years. The Minister will be aware that in order to qualify as a young trained farmer, one has to complete a course and obtain a green certificate. There are a number of reasons why individuals may not be able to go on the course immediately once the land has been transferred to them. There have been many cases where demand for these courses has outstripped supply so even if individuals were available to do it, they may not be in a position to actually avail of the course. What is the motivation for reducing the term from four years to three years? Is this State aid? Is it something within the Department?
We have a major issue with young people taking up farming. I welcome the extension of this scheme, which is about supporting the transfer from an older farmer to a younger farmer. Over the four years between 2016 and 2020, we have seen a drop-off of more than 5,700 farmers in total. Only 5% of farmers are under the age of 35. We currently have more women farmers over the age of 80 than under the age of 40 who are considered to be actively farming. We need to look at policies all the time to encourage the uptake of young people into the agricultural sector.
Schemes like this are really important. This change makes it more difficult to avail of the scheme by reducing the time threshold from four years to three years. Why is that happening?
The Deputy asked some questions about the cost of these measures. My officials have now provided some costs, which I will quickly share, with the permission of the Chair. With regard to section 658A, which relates to slurry storage, the estimated cost was €1 million in 2022 and €9 million in 2023. The combined estimated cost in respect of section 667B, which relates to stock relief for young trained farmers, and section 667C, which relates to farm partnership stock relief, is €3 million for 2023 and the same for 2024. The cost in respect of section 81AA, which relates to stamp duty relief for young trained farmers, was €15.01 million in 2021 and €14.95 million in 2022. The cost in respect of section 81C, relating to farm consolidation relief, was €1.3 million in 2021 and €1.16 million in 2022. Section 285D, relating to farm safety, was only introduced in 2020. The cost in terms of tax forgone is expected to be approximately €1.5 million when introduced. The estimated cost of section 604B, relating to capital gains tax and farm restructuring, is €900,000 for the current year. I just wished to put those figures on the record.
Turning to the Deputy's question, to comply with the specific requirements of Article 18 of the new agricultural block exemption regulation, ABER, an additional amendment is to be made in respect of the young trained farmer relief. As a general rule, one of the conditions for obtaining the young trained farmer relief is that the person to whom land is transferred holds an approved agricultural qualification on the date of transfer. The legislation currently provides that, where a transferee obtains such a qualification within four years of the date of transfer, he or she may apply for a refund of the stamp duty paid on the transfer. To comply with Article 18 of the new ABER, this additional amendment will reduce from four years to three years the period during which a transferee may obtain an approved agricultural qualification following the transfer of land and still qualify for the relief. In order to ensure that those who have already acquired land but not yet obtained an approved agricultural qualification are not unfairly disadvantaged by this change, the amendment will not have effect for transfers of land effected before the date of enactment. The short answer is that this change is to comply with state aid rules as advised by the Department of Agriculture, Food and the Marine. The amendment reduces the period of time from four years to three years.
Question put and agreed to.
SECTION 5
I move amendment No. 4:
In page 8, between lines 7 and 8, to insert the following:
“(4) The Minister for Finance and Minister for Enterprise, Trade and Employment shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a progress report on the introduction of a scheme to provide financial assistance to businesses relying on oil and LPG as an energy source in the operation of their business.”.
We talked about LPG and oil in the context of businesses. This amendment would require the Ministers for Finance and Enterprise, Trade and Employment to provide a progress report within one month of the passing of this Bill with respect to the introduction of a scheme to provide financial assistance to those businesses relying on LPG and oil in order to operate. There is great frustration over the delay in introducing financial support for businesses that are dependent on LPG and oil and which are, for that reason, locked out of TBESS. Who designed this scheme and decided to lock a great many businesses out of it? It is just ridiculous. There are businesses that are really struggling. Again, this comes down to an issue of equality. I know what the Minister has said in the past about Revenue having concerns about energy sources that are not metered and so forth but it is only at the last minute that the penny is dropping for those in government that we do not have piped gas outside the capital and some of our larger cities and that, just like households, companies are using oil and LPG. These companies are really struggling and there has still been no announcement. We have the Finance Bill but still have no scheme in respect of LPG and oil. It is not acceptable. It is absolutely appalling that so many companies and regions of this State have been overlooked by Government in respect of this issue.
When will we see a scheme in respect of LPG and oil? Has the Minister made provision for the cost associated with any such scheme? Does he have an estimate of the number of businesses that rely on either LPG or oil as a primary energy source? Can he explain why support is not provided for these businesses through TBESS? When are we going to see something up and running that will support these businesses?
I thank the Deputy. This is an issue we have discussed in other fora and the Deputy has acknowledged the reasons we have put forward as to why it was not possible to include oil and LPG as part of TBESS. I will briefly recap a couple of those reasons. It is not possible to calculate oil and LPG usage in the same manner as with electricity and metered gas mains. For energy sources such as oil and LPG, it would not be possible to accurately determine the actual usage for each claim period, the relevant unit price for each claim period or the increase in that unit price and usage over the same reference period. LPG is supplied to customers in three different ways. Metered LPG is measured in cubic metres, bulk LPG is measured in litres and cylinder LPG is measured by weight. Kerosene oil is delivered by the litre. It would not be possible to accommodate such diversity within the TBESS system, the key feature of which is to treat like with like. In addition to using different methods to supply LPG, suppliers also use different billing methods depending on the method of supply with bulk customers receiving bills on an irregular basis triggered by delivery dates while others receive balance forward bills and smaller customers are invoiced for cylinders purchased directly from LPG stockists. This irregularity would make it difficult to calculate the difference in price from pre-war prices. Adding to the complexity, LPG prices vary by volume. Bulk customers pay a lower average price per litre on deliveries over 3 tonnes compared with users buying less than 3 tonnes.
My predecessor engaged with Revenue when TBESS was being designed to see if oil and LPG could be included. I re-examined the issue and engaged again directly with the Revenue Commissioners, whose clear advice and strong recommendation was not to include them. While the final decision does, of course, rest with the Minister, on issues such as this, I am always guided by the expertise and experience of the Revenue Commissioners. However, as a Government, we have decided that there will be a scheme. There will be grant support. This is being led by the Department of Enterprise, Trade and Employment. The Minister for Enterprise, Trade and Employment, Deputy Coveney, is working on this issue. He had meetings with his officials yesterday, for example. I hope the Department can bring forward details as quickly as possible but the Department of Finance is not the lead Department in respect of the grant scheme and it is therefore not an issue to be legislated for within a tax Bill.
With regard to the cost of the scheme, as Deputy Doherty will know, there is adequate headroom within the Department of Enterprise, Trade and Employment Vote to provide for the cost of a grant scheme for businesses that rely on oil and LPG. That is how it will be funded but I do not have an estimate of the number of businesses that might avail of such a scheme.
We have no timeframe, no costs and no number of businesses. Is that what the Minister is telling me about this scheme? Businesses have been left out since last year. There is no timeframe for when this scheme will happen, no estimate of the number of businesses affected and no costings.
What I am telling the Deputy is that the Department of Enterprise, Trade and Employment is working on this issue. This scheme was committed to in the press release issued when the Government made the announcement regarding cost-of-living measures. It is not a scheme the Department of Finance can lead on because it is a grant-based scheme for businesses. It is within the Department of Enterprise, Trade and Employment's remit. The Minister is acutely aware of the urgency of this and is actively working on it. He will provide an update as soon as he has solid information to convey to businesses and to the Houses.
To clarify, coming into the month of April, we have no timeframe, we have no costings and we have no idea how many businesses are affected.
As I have said, those updates will be provided by the line Department.
Does the Minister know?
I do not have that information because-----
As Minister for Finance, does the Deputy know how much funding is ring-fenced for this? Does he have an idea?
As the Deputy will know, there is a budget heading to the order of €650 million in the Department of Enterprise, Trade and Employment Vote for 2023 in respect of TBESS. There is therefore adequate capacity within the budget. The issue is getting a scheme up and running, rather than a financial constraint. It is about getting a scheme designed and operationalised. The Government and I want to see that happen as quickly as possible. The Minister for Enterprise, Trade and Employment is determined to do the same.
The business community knows that this scheme is being designed. There is a lot of engagement there. It is positive and correct that the Minister has reaffirmed today that money has been set aside to fund that. That is the important part. We all want to have it as quickly as we possibly can but it is really important that it was confirmed the scheme would be established in the announcement on the cost-of-living measures.
I am glad to be able it has been confirmed again that the money will be set aside to pay for that.
There is no scheme and nobody knows how much money any of the businesses will get. Am I wrong? Does any business know the level of grant aid support that is going to be provided to it? Does any business know when it will get it? There is no scheme. The Government does not have a clue. This has been a massive error since last year. These businesses have had to fund all of the energy cost increases themselves with no certainty about dealing with their bank managers about what is coming down the line. Not only is there no legislation for this scheme or no administration to underpin it but none of these businesses know what is coming. Will it be €500, €5,000 or €50,000? They do not have a clue. They do not know what rate will apply, what period it will apply from or what the eligibility criteria are. They do not even know if they will fall within the system. This is not good enough. It is ridiculous that this is being left.
It will be April soon and we will go into the Easter recess without a dickie bird notion of what is happening in terms of supporting businesses. That should have been dealt with at the start. This goes back to the mentality of the Government, which just forgot that there is a whole region out there that does not use piped gas but uses LPG or oil as a primary source. Those businesses were completely ignored and then the Government finds out that in respect of the scheme it brought in with a price tag - the Minister is so good at pricing things - of €1.2 billion, only €34 million is drawn down because the scheme is unworkable even for those who are eligible. It is not acceptable that the Government does not know. Businesses expected that as we are dealing with a Finance Bill, they would have some type of certainty. How long does it take to figure out that these businesses need to be supported and figure out what type of grant level is needed? I believe this is not a priority. If it was, it would have been dealt with. I know Deputy English has to speak up for his party but there are businesses in his community and county that are locked out of this scheme. It is not good enough.
The Minister is right. A figure of €1.2 billion has been allocated for TBESS. It was not allocated for this scheme but the money is there. What is missing is the actual scheme. What is missing is a number of Ministers coming together and recognising that for a lot of these businesses, it is an emergency. Their energy prices are going through the roof. Many of these businesses are holding on and telling their bank managers there is a scheme but they do not know what is happening. Credit is tightening. We have the situation in the international credit environment referred to by Deputy Durkan. It is not good enough. It does not take this long to come up with a scheme or give some certainty. We might have to deal with legislation and underpin it in legislation. That is fine but the Minister should just give these individuals certainty as regards what is coming down the line, when will it come down the line, what will it be and who will be eligible. I speak of the frustration of businesses in my community that have been locked out of this scheme and have been campaigning for months to get a scheme. They then thought they would have some certainty when this was announced a couple of months ago and still we are going into the Easter recess for two weeks and there is no certainty for them. The Minister cannot even say that we will know in two weeks' time. It is really not good enough. What has happened here in terms of this scheme is diabolical.
I hear the Deputy's frustration. If it was possible to deal with this issue in this Finance Bill, I would do so. I did follow up on the issue and engaged directly with the Revenue Commissioners but they reiterated their view and provided a strong argument as to why TBESS in the Finance Bill is not the best way of dealing with businesses that rely on oil and LPG. I accept that advice and recommendation in good faith. I wish it was otherwise and we could deal with it today and provide certainty. I discussed the issue with the Minister for Enterprise, Trade and Employment as recently as yesterday. It is a priority for him and his Department and I know they are actively working on it. There were meetings on it yesterday.
Regarding the estimate of the overall cost, the estimates of the cost of TBESS were provided by the Department of the Environment, Climate and Communications. They were not estimates from the Department of Finance but we will certainly work and be as supportive as we can with our colleagues in the Department of Enterprise, Trade and Employment to get a grant scheme up and running as quickly as possible. That was committed to. I represent those businesses too and hear from them on a regular basis. Dealing with this is a Government priority.
Amendment put and declared lost.
Question proposed: "That section 5 stand part of the Bill."
How many businesses are eligible for TBESS?
The information we have is about the number of businesses that have registered and have claimed. It is publicly available information. The costings-----
Let me rephrase the question. How did the Department cost the €1.2 billion for TBESS? What were the assumptions used?
My understanding is that the costings done by the Department of the Environment, Climate and Communications were based on a assumption of up to 400,000 businesses being eligible for this scheme.
How did the Department come up with the figure of €1.2 billion based on 400,000 businesses?
The actual cost was difficult to predict. This was due to the multitude of variables at play, which are not within the control of the Government. These include the average unit prices incurred by businesses for energy during the claim period and the corresponding reference period. This will influence how many businesses will satisfy the energy cost threshold, the contractual arrangements businesses have entered into and when those arrangements come into play or come to an end. These variables include favourable fixed-price contracts that might reduce the overall unit costs incurred by some businesses; changes to the price of energy on the wholesale market and the impact those changes will have on the retail market over the duration of the scheme; the level of energy used by businesses and the impact of any energy-saving measures on such usage over the winter months; and the number of businesses that ultimately make a claim for relief under the scheme. These were some of the challenges the Department of the Environment, Climate and Communications had to consider in arriving at an estimate of the potential cost.
Under the existing legislation, what is the maximum amount a business could draw down under the scheme?
As the Deputy knows, we increased the maximum benefit from €10,000 for a single-premises business to €15,000 and there was also an increase for businesses with multiple premises.
That is under the amendment we are dealing with. It was €10,000 under the existing scheme so how many months would it apply for? Did it apply for six months, which would mean a business could receive €60,000? Is that right?
It is from 1 September.
A business could receive €60,000 but the Minister has estimated that the 400,000 businesses that were eligible would only get €3,000 over the entire period of the scheme. Is that correct?
Could the Deputy repeat that?
The Minister said that based on a figure of 400,000 businesses, the price tag was €1.2 billion so the estimation is that, on average, businesses would get €3,000.
I think the Deputy is working out an average there.
Yes, the average.
This is the information we have from the Department of the Environment, Climate and Communications, which did the costing. It was based on potentially 400,000 businesses across the period. About half of that cost was budgeted last year and not much of it was used. Regarding the balance in 2023, we are seeing the drawdown-----
Using the same principle, which is that the Minister wants to cost it and wants certainty and all of that malarkey, 400,000 businesses could get up to €60,000 under the scheme. What is the upper price tag to which the State was exposed?
It should be noted that for a business to reach the €10,000 cap, it would have to have seen its costs for the relevant month in the claim period increase by more than €25,000 when compared to the same month in the prior year. Given that recent data show that less than 0.9% of businesses have bills in excess of €35,000, it is very unlikely that many will be subject to the cap and, in truth, that is the experience.
It is very unlikely that many businesses will be subject to the cap and that is the experience we have at present.
However, the Minister could not guarantee that. The Minister and the Department built in assumptions, which are very reasonable, but he made the point to the committee that he would not bring forward a scheme unless he could cost it properly. The argument against a scheme for households is that energy prices may go through the roof. What if they went through the roof for businesses? What is the exposure of the State to the TBESS? The only way that could be calculated is to multiply the number of businesses eligible by the maximum grant available. Is that correct?
That is always the absolute outer limit but, of course-----
What is the outer limit?
It is capped for individual businesses.
One multiplies by the upper limit of the cap. What is the outer-----
What the data show is that very few businesses are affected by the cap.
Of course, because energy prices did not increase. The assumptions the Department used are appropriate, but the Minister made the point that he would never introduce a scheme, because he does not know where energy prices go. If energy prices multiplied over that period, these companies would have reached the cap and, therefore, the exposure of the State would be in the tens of billions of euros. Is that not correct? However, is it not the case that it is appropriate when doing costings such as these, as the Department did, to use assumptions that are realistic and likely to occur?
In costing any initiative, of course, one will have to make assumptions. That is what the Department of Environment, Climate and Communications did. It looked at the data. Recent data show less that 1% of businesses have bills in excess of €35,000. That is the evidence on which the Department would have relied in developing a costing of the TBESS scheme throughout last year. Of course, nobody can predict the actual costs the businesses will incur, but the evidence is the budget available for this scheme, currently, is significantly in excess of the actual claim and drawdown. The suggestion that it could have cost many multiples of the budget the Government has provided for the scheme is not credible.
However, the point I am making is that the Minister said he would not introduce a scheme where he cannot accurately cost the cost of the scheme. It is not credible, either. TBESS is a fine example of that with regard to the upper exposure of the State in scenarios that are really completely unlikely to happen, because of how energy prices are hedged in the market and so on and so forth. It was a short-term scheme with a window that is smaller than where energy companies buy on the market and, therefore, we were not going to see those types of spikes. That is why the estimations or assumptions that were used were appropriate, but the same applies to households. That is the point I am making. When it is decided to bring in a cap for three or four months and then review it, those spikes will not be seen because energy is bought on the market well in advance. The Minister is able to look at it. I wished to make that point and I think I have made it.
I will ask the Minister about some of the changes that are taking place with regard to this scheme. The costing used assumptions and all the rest, but it really got this wrong with regard to the eligibility of the scheme. There was €1.2 billion over a two-year period, over the entire six months, but €38.4 million was drawn down by close to the end of February. However, there are changes to the eligibility. I welcome those changes, some of which we argued for. Some of these changes will not take effect until 1 March. The Minister will still have money leftover at the end of the day. Why is it this cannot be applied from the earlier date, the same way the eligibility is applying from September? Why can the increased threshold and level of relief not apply from that same date?
It is a systems issue whereby one can apply, retrospectively, the change in the entry criteria. Instead of the 50% increase, it is now a 30% increase, with regard to the gateway into the scheme. That can be applied all the way back to 1 September. That change can be done retrospectively. It is a systems issue. The other elements cannot be applied in the same way and, therefore, are prospective in nature.
Why can the top-up grant not be provided to those companies if they are eligible from September? Why can a top-up grant not be available for them from March on?
The change in the rate of benefit to €15,000 requires state aid approval. That can only be prospective in nature. Going from 40% to 50% of the increase it has met under the scheme requires state aid approval. The advice I have received is that aspect can only be applied on a going forward basis.
Question put and agreed to.
NEW SECTION
I move amendment No. 5:
In page 8, between lines 7 and 8, to insert the following:
“Report on mortgage interest relief
6. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the introduction of mortgage interest relief on a temporary basis with respect to principal private residences to assist with rising mortgage interest costs, including options for its design and implementation.”.
This relates to the issue of mortgage interest relief. The amendment would require the Minister for Finance to lay before the Dáil a report on mortgage interest relief on a temporary basis, including options for its design and implementation, within one month of passing of the Bill. The Minister will be aware that interest rates that are rising across the mortgage market, although it is happening unevenly. Interest rates have risen suddenly and sharply for those on tracker mortgages. Those on variable rate mortgages whose loans are held by vulture funds have experienced the interest rates increase, without delaying in most cases, while the pass-on through has been slower among retail banks with respect to fixed and variable rates but they are expected to continue in the months ahead.
It is important to note that with regard to the average weighted interest rate on all outstanding mortgages, the State is already much higher than the European average, at 2.88%, compared to 1.89%. We have had people on the front line before the committee from the Money Advice & Budgeting Service, MABS, and others, use words such as "alarming" and "disastrous" in the context of what is happening to individuals.
We have heard of individuals who had their mortgage held with Pepper Mortgages and whose interest costs have increased by €2,100 per year by February. They will increase further, as Pepper passes on the new interest rates hikes. We have heard of another mortgage holder with Pepper whose interests costs had increased by €1,940 by February and they will go up again. This woman said that between the cost of electricity and food shopping increasing, she simply could not pay for it all anymore. That is where many families find themselves.
Another individual whose mortgage is held by Start Mortgages has had her interest costs increase by a whopping €4,320 a year, by January, which means it has gone up further since then. This is a mother of two. She has told me they do not drink, cannot afford to socialise and that every cent is accounted and budgeted for, every single week of every month. That is the reality that many families are facing. The Minister, when he was on this committee in opposition, was an ardent proponent of mortgage interest relief, at a time interest rates were half what are being charged by some of the vultures.
The amendment calls for a temporary, targeted mortgage interest relief, not the reintroduction of what we had in the past, which looked at all of the interest paid on a mortgage. Rather, it would look at the portion of interest that has increased since June of last year, with the State bearing the brunt of 30% of that and there would be a cap of €1,500. No individual would benefit by more than €1,500 per year. It would be applied for through the period of April, to the end of the year to principal private residences only.
Something has to give. People are experiencing serious mortgage rate increases. I have given an example of someone paying €4,320 more per year.
I have other examples where people are paying €5,000 more and that is before the March increase was passed on. We do not know what is going to happen with future ECB increases. Maybe what has happened in the international markets may have tamed its appetite for further increases. Inflation has continued to increase but the rate of increase has been dropping. Even where it is at now, it is one of the biggest cost of living pressures these households have seen. When they look at how much their annual food bills have increased, or the electricity or gas bills, it does not come close to the additional €4,000 or €5,000 they are now paying in mortgage interest compared with last year. I will not go into the whole fact that they should never have been sold to vultures in the first place. The Minister was instrumental in making sure that legislation never passed this committee at the time, along with Fine Gael. But they were sold to vultures and the commitments we got from political parties that now share government that people would be no worse off is completely untrue and misleading. It never was true and now they are facing thousands of euro of an increased compared with if they were with a retail bank, whether Permanent TSB or AIB.
Therefore, I am asking the Minister to consider this measure. I have been saying this since last year. We have worked with the Parliamentary Budgetary Office which is independent, as the Minister knows. It carries out costings and it has costed scenarios around mortgage interest rate increases, the caps that apply and the costs that would apply to them. I have said to the Government before, and to the Minister's predecessor, that it does not have to take our proposal. It can come up with its own. It could have a different cap, a different rate or a different entry level. It could do a base for trackers. It can do whatever it wants but at least come up with something because something has to give in relation to mortgage interest relief. It has to be temporary and targeted. It cannot be like the last scheme which lasted so long and people built it into the money they had so it had an inflationary effect. This is a different scheme which is temporary because of the cost of living. We do expect interest rates to subside in the future. I imagine they will not go back to where they were but we do expect them at a point to come back down a bit. This is about the temporary relief of the shock that many households are facing at this point.
I acknowledge the impact the changing interest rate environment has had on so many households and in particular those who have enjoyed historic low tracker rates for a long period have had a very sharp shock with the increases that have happened since last summer. Some variable rate customers have also seen increases and as some fixed rate customers come off their fixed rate period, they will also be repricing in a very different environment. I think people understand, although they may not agree, with what is being done by the ECB or the banks. I think people understand the reason why it is being done, which is to try to bring down inflation. It is in all our interests that we get inflation under control and down to a much lower level than it is today.
The Deputy has pointed to how, if you take the full body of interest rates charged on the mortgage book in Ireland, it is higher than the EU average. It should also be acknowledged that a lot of progress has been made on new interest rates. For new mortgages being issued, Ireland has gone from being probably the second most expensive for a very long time, to now being among the cheapest. I think it is now the third lowest in the eurozone and it is certainly below the eurozone average. It should also be acknowledged that a lot of progress has been made in respect of mortgage arrears. We now have the lowest level of mortgage arrears since 2010. That is a function of a number of things, including the strong economic performance in recent years, the fact that there have been forbearance measures and undoubtedly, it is also linked to the fact that interest rates have been low for a prolonged period. That has now come to an end, of course. I would make the general point that this is a modest finance bill that is principally necessary because of the measures that were due to end at the end of February and which we extending in the form of the VAT on gas and electricity, the changes to VAT in tourism and hospitality and the extension of the TBESS scheme as well and there is the extension and phased restoration of the excise. That is the primary purpose of this Finance Bill. It is not a budget. It does not provide for an overall budget. I understand the point the Deputy is raising. I am also receiving the emails. I have seen many individual cases and I acknowledge that for some, the increase in the interest rate has presented real difficulties for many people. I do not doubt that for a moment. But it is also the case that the introduction of mortgage interest relief right now would involve significant costs which would need to be considered not on an ad hoc basis but in the context of the range of other cost-of-living measures the Government is providing over a period.
The Deputy will be aware of what the OECD has said about mortgage interest relief. It has raised concerns about equity. He will also be aware that the commission on tax and welfare did not recommend the reinstatement of mortgage interest relief. As he has done before, the Deputy has referred to my previous comments in opposition but I think he knows full well what the context at that time was. Mortgage interest relief was due to end at the end of 2017 and in the course of our negotiation on the confidence and supply agreement, we did secure the extension of mortgage interest relief to the end of 2020 when it was ended. That was the context of the call that I made at the time. I think he knows that well. I do not propose to accept Deputy Doherty's amendment at this time because of the reasons I have outlined.
Amendment put:
The Committee divided: Tá, 3; Níl, 6.
Tá
- Barry, Mick.
- Doherty, Pearse.
- Farrell, Mairéad.
Níl
- Durkan, Bernard J.
- English, Damien.
- Matthews, Steven.
- McGrath, Michael.
- McGuinness, John.
- O'Callaghan, Jim.
Amendment declared lost.
Section 6 agreed to.
Title agreed to.
Bill reported with amendments.
I thank the Chair, the officials and committee members for taking the Bill today. I want to signal that I may wish to bring forward an amendment on Report Stage on an environmentally-related VAT matter to which I am giving consideration at the moment.
I thank the Minister and his officials, and all the members.