Wednesday, 19 March 2008
Seanad Eireann Debate
Minister for the Environment, Heritage and Local Government (Deputy John Gormley): The purpose of the Bill is twofold: first, to provide a permanent legislative basis for the motor tax increases which were approved by Dáil Éireann by way of Financial Resolution on budget day, 5 December 2007, and second, to give statutory effect to the new carbon dioxide-based motor tax system which I announced in my carbon budget of 6 December 2007. The Bill contains seven sections and one Schedule, with the details of both the increased motor tax charges and the CO2-based system set out in the Schedule.
I will deal first with the increases in motor tax. The Bill is the necessary follow-up to the Financial Resolution passed by Dáil Éireann on 5 December 2007. The resolution has limited statutory effect and must be replaced by a Bill that provides a permanent legal basis for the motor tax increases, which came into effect on 1 February 2008. The increases are 9.5% for cars with a capacity of less than 2.5 litres and 11% for cars above that threshold. There was no increase for electric vehicles, but the motor tax on goods vehicles and all other vehicles also increased by 9.5%. A similar increase also applied to duties for trade plate licences, the registration plates used by motor traders on vehicles which are temporarily in their possession.
In considering the 9.5% increase for the bulk of the existing fleet, it is important to reflect on the fact that since the last increase in motor tax rates in 2004, inflation has increased by more than 15%. To give some perspective for the recent increases, the annual rate increase for the car of lowest engine size — up to 1000 cc — is €14, or 27 cent a week. For cars in the 1001 cc to 1400 cc range, the annual increase is between €22 and €28, or 42 cent and 54 cent a week. For cars in the 1401 cc to 1700 cc range, the annual increase is between €30 and €39, representing a weekly increase of between 58 cent and 75 cent. In summary, 95% of the car fleet — that is, cars with an engine size of less than 2 litres — will see extra costs of between 27 cent and 98 cent per week. In the case of goods vehicles, 87% of such vehicles will see an annual increase of €24, or 46 cent per week.
The clear purpose of the changes in motor tax rates is to increase funding for local government. Senators will be aware that the proceeds of motor tax are not paid into the Exchequer but are paid directly into the local government fund. This fund, which was introduced in 1999, is ring-fenced exclusively for local government purposes. It cannot be used for any other purpose. Motor tax receipts are supplemented on an annual basis by an Exchequer contribution paid into the fund. For 2008, motor tax receipts are projected to reach €1,080 million, with the Exchequer providing €545 million, giving total funding of some €1.6 billion. This represents approximately 30% of local authority current funding requirements. The fund is used primarily to finance regional and local roads and the general purpose needs of local authorities. The success of the local government fund can be measured by the ability of local government to respond to the ever-increasing demands for improved services in recent years. These demands have arisen due to an expanding population, unprecedented economic growth and higher customer expectations. The ability of the fund to deliver significant resources to local authorities has succeeded in limiting the direct financial contribution required of local businesses and communities through rates and charges.
The fund plays a key role in financing the improvement and maintenance of regional and local roads throughout the country. Regional and local roads serve an important economic role in the Irish context and they have a valuable contribution to make in delivering the vision of the national spatial strategy for sustainable, balanced development of our country. A total of 94% of the country’s roads are regional or local, and these carry about 60% of all road traffic and 40% of goods traffic. These roads are often the sole means of access for local economic activity. The National Development Plan 2007-2013 provides that some €4.3 billion will be invested by the local government fund and the Exchequer in the regional and local road network over the period of the plan. While responsibility for regional and local roads was transferred to the Department of Transport with effect from 1 January 2008, the fund will continue to provide significant resources towards the development and maintenance of the network. This year alone, €565 million has been provided from the fund for these roads. Together with the Exchequer provision, the total funding for regional and local roads in 2008 is €618 million.
For 2008, I have allocated record levels of some €999 million in general purpose grants to local authorities from the fund. These grants are my Department’s contribution to local authorities to reduce the gap between the cost of providing an acceptable level of day-to-day services and the income they obtain from other sources. The amount provided this year represents an increase of some €52 million over the record levels provided in 2007 and is a clear signal of the Government’s commitment to the local government sector and a recognition of the importance it attaches to local democracy. I wish to ensure that local government continues to deliver for communities and businesses across its wide range of services. The additional income that will accrue to the local government fund due to the changes in motor tax rates will assist in delivering on that objective.
The second element of the Bill is to provide for the new motor tax system based on CO2 emission levels, which I announced in my carbon budget of 6 December 2007. This involves a fundamental change in the manner in which motor tax will be charged. The Bill gives effect to the commitment in the programme for Government to introduce measures to rebalance motor tax in favour of cars with lower CO2 emissions. It complements the new CO2-based VRT system that was given statutory effect under the Finance Bill, which was enacted last week. The move to a CO2-based motor tax system is clear evidence of the Government’s commitment to tackling climate change. Climate change is a profound challenge, and if we are to avoid the worst impact it is imperative that we reduce human-induced emissions of greenhouse gases and that we do so quickly. The Government has set itself the challenging target of reducing national greenhouse gas emissions by 3% on average over its lifetime. This target is ambitious, but it is in line with the scale of emission reductions recommended by the Intergovernmental Panel on Climate Change.
As we work towards meeting our existing targets and seek to rise to the challenge presented by our proposed EU targets for 2020, our efforts to secure global agreement on deep cuts in emissions must be backed by a commensurate level of ambition at home. The programme for Government and the carbon budget I delivered last December make it clear that we are up for the challenge. Following a review in 2007 of its strategy to reduce CO2 emissions from new cars, the European Commission concluded that limited progress had been made towards the central goal of limiting average vehicle emissions of new cars sold in the EU to 120 g/km by 2012. The Commission subsequently announced the framework of a new strategy that sets out an integrated approach towards achieving this overall objective.
Road transport generates about one fifth of the EU’s CO2 emissions, with passenger cars responsible for around 12%. Although recent years have seen improvements in vehicle technology, especially in fuel efficiency, which translates into lower CO2 emissions, this has not been enough to stem the growth in emissions due mainly to increased car ownership and increased car size. While the EU reduced overall emissions of greenhouse gases by 5% between 1990 and 2004, CO2 emissions from road transport rose by 26%. This was despite a reduction of more than 12% in average new car CO2 emissions between 1995 and 2004. A recent report by the European Environment Agency highlighted the challenge posed by these trends and concluded that much more needs to be done within EU member states if transport is to contribute to the demanding emission reductions required by the EU for 2020.
In Ireland, emissions from road transport increased by more than 180% between 1990 and 2006. This reflects growth from relatively low car ownership levels in 1990, a trend that seems set to continue. The Government is acutely conscious that more measures are required to stem this trend and these proposals on motor tax are just the beginning. A range of further measures have been proposed by the Minister for Transport in his recently published consultation document on sustainable travel and transport.
It is in this context that I am moving to a motor tax regime where the charge will be based on CO2 emissions. As I said, this will complement the new CO2-based VRT system which is provided for in the recent Finance Act. Both new tax systems have been informed by an extensive public consultation process. The initial consultation document on motor tax proposed a system based on a combination of CO2 emissions and engine size. However, I am of the view that, if we are serious about addressing emissions from cars, we need to move to a system based solely on CO2 emission levels. I am pleased to say that this view was shared by a large number of respondents to the public consultation exercise.
Senators will be aware that the new CO2-based motor tax system occupied much of the debate in the other House. In particular, issues were raised about the starting date for the new system and the impact of the new regime on the domestic second-hand car market. In response, I brought forward amendments on Committee Stage that sought to ensure greater equity in the operation of the new regime. As a consequence of these amendments, the following is the position in terms of the application of the new system.
The new CO2-based motor tax system will take effect from 1 July 2008. In the first instance, it will apply to new cars that are registered on or after 1 July 2008. It will not apply to second-hand imports that were registered abroad prior to 2008. In addition, anyone who registers a low CO2 emitting new car in the first six months of 2008 will be switched to the lower CO2-based motor tax rate on first renewal of motor tax after 1 July 2008. Finally, cars that are first registered abroad from 2008 and subsequently imported to this country will come within the CO2-based motor tax system. This will ensure equity between cars that are registered here as new from 2008 and future imports of equivalent second-hand cars. I should make it clear that cars registered before 2008 will continue to be taxed in future years under the existing motor tax system related to engine size.
There will be seven CO2 bands, commonly referred to as the seven white labels, A to G. The same bands will apply in respect of VRT, so there will be commonality of approach between the motor tax and VRT systems.
The motor tax rates are set out in paragraph 6(d) of the Schedule to the Bill and are graduated as one moves up through the CO2 bands. For the lowest band, A, which corresponds to CO2 emissions not exceeding 120g per kilometre, the motor tax rate will be €100. The top band, G, will attract a rate of €2,000. This reflects CO2 emissions of more than 225g per kilometre. The top rate of €2,000 will also apply to a car when its CO2 emissions level cannot be confirmed by the Revenue Commissioners by reference to the relevant EC type approval certificate or EC certificate of conformity and the Revenue Commissioners are not otherwise satisfied by reference to any other document produced in support of the declaration for registration pursuant to section 131 of the Finance Act 1992. This parallels the approach which will apply in the case of determination of the VRT rate for a car. The clear objective of the new motor tax system is to influence the purchasing decisions of consumers. Purchasers of cars with low CO2 emissions will be rewarded while a premium will be charged on vehicles with high CO2 emissions.
Every year, more than 150,000 Irish people decide to buy a brand new car. It is a decision that is not made lightly. Considerations like affordability, functionality, economy, safety, performance and even colour have traditionally come into play for people when deciding on the car that best suits their needs. From now on, when people decide on what car to buy, they will add a new factor. They will think carbon, so to speak. With the new taxation system for cars, this decision to think carbon can save them thousands of euro.
A key part of both the motor tax and VRT initiatives will be a new mandatory labelling system for cars based on CO2 emission levels. Requirements relating to the display of information on a car’s fuel economy and CO2 emissions were introduced in 2001 on foot of an EU directive. All new passenger cars offered for sale or lease in Ireland must, therefore, already be accompanied by a fuel economy label that displays information on the vehicle’s fuel consumption and its carbon dioxide emissions. Experience has shown that the existing labelling requirements are not sufficiently consumer-friendly and that an improved design would be beneficial to car buyers. The new label will include consumer-friendly information on a vehicle’s CO2 emissions and fuel efficiency. The label will be similar to the energy rating label that already exists for many consumer electrical goods and is already familiar to consumers. I am preparing separate legislation to give effect to these proposals. The new labelling regime will be accompanied by an active public information campaign which will promote the purchase of fuel-efficient cars.
Senators will be aware of the importance of motor tax to the funding of local authorities. As I said at the outset, motor tax receipts are paid directly into the local government fund which is ring-fenced exclusively for local government purposes. There has not been an increase in motor tax rates since 2004 and the rate of inflation in the intervening period was more than 15%. The 9.5% increase for the majority of vehicles is well below this figure.
The fundamental changes that are contained in this Bill, in terms of moving to a CO2-based motor tax regime, are designed to achieve financial neutrality in the context of income to the fund. We are clearly breaking new ground with the overriding objective of progressively reducing CO2 emissions from cars. As we move forward, there will be a need to keep the new arrangements under review to ensure the environmental objective is delivered while at the same time protecting this important source of funding for local authorities. I thank Senators for their attention and look forward to a constructive and informed discussion on the Bill.
Senator Paudie Coffey: I welcome the Minister and have previously said that his attendance in the House is appreciated. There are two core elements to this Bill and the Minister outlined them in his contribution. There is an element of motor tax that relates to the raising of revenue and the ring-fencing of local government funds. This is part of a wider debate on the funding of local government and general local government reform that could be held another time. The other core element of the Bill relates to the CO2emissions-based motor tax system that is to be introduced.
I believe that talking about these two elements of the Bill brings about a conflict in thinking. In one respect we are trying to promote lower CO2 emissions but in another respect this is an important revenue raising exercise for local government. That conflict will need to be resolved. I accept that is the system we operate and that local government funding in general will have to be reviewed in the future.
With regard to the Minister’s proposals, on which he has been questioned in the Lower House, do they go far enough to reward those who are thinking green and taking action to lessen their car usage and CO2 emissions? People are genuinely making an effort to reduce carbon emissions. As the Minister has outlined there is a huge dependency on the car. While the general thrust of the Bill will, I hope, raise awareness of the amount of CO2 emissions being produced here I hope it will reduce it. The Minister outlined the challenges.
I wish to point to some figures produced by the motoring industry. The motorist in Ireland today is probably one of the most taxed. There is a dependency on the car not by choice but as a result of Government policy or, perhaps, Government inaction over a number of decades. I live in County Waterford. Waterford city is the capital of the south east region. The public transport networks that link the regions with Dublin are still poor. I am sure the Minister will agree with that because he is making proposals within Cabinet. In the rural hinterland, in the villages and towns, there is limited connectivity with regard to public transport. To get to work or college, people are dependent on the car. This has huge implications.
The Government’s take from the motorist for 2006 — I am sure it has increased since then — for motor related taxes was in excess of €5.5 billion, an 8.6% increase over 2005. The VRT on cars in 2006 was €1.25 billion, an increase of 12% on 2005. The total Government revenue from fuels in 2006 was in excess of €2.5 billion, which has increased substantially in recent years. The VAT take on fuels increased in 2006 to €496 million, a 12.2% increase on the 2005 take. Motor tax in 2006 was more than €879 million, a 9.6% increase on 2005. The Minister will get the record for breaking the €1.8 billion ceiling in his proposals for 2008. He has gone through the roof of €1 billion in collecting motor tax on the backs of Irish motorists, that is, from people who need a car. It is not that they are going there for the fun of it or to joy-ride. They need their cars on a daily basis to go to work, school or college. I am not sure if the Minister is proud of that record. Local government needs the funding but there are other ways of collecting the revenue. The sum of €1.08 billion in 2008 appears excessive.
The Minister is introducing two systems of car tax. Under the existing system cars will continue to be taxed on the basis of engine size while under the new system there are seven CO2 bands as in the proposed VRT system. Following a close examination, Fine Gael sees some problems with it. Amendments were tabled in the Dáil but were ruled out of order. The Labour Party also tabled some amendments. I appreciate that the Minister compromised a little with regard to them and took on board some of what we said.
There are problems with the new system. The increase of 9.5% in the current motor tax system for smaller engines is unjustified. These are small engine cars that are not contributing enormously to the CO2 emission problems and the increase bears little relationship to the environment. It is a tax increase on the backs of people who are already behaving in an environmentally friendly fashion. It is estimated this tax increase will raise an additional €83 million, hitting every household and every family in the country, due to the dependency levels.
If the Minister was sincere about encouraging greener cars he would freeze the tax rate on smaller cars. That proposal was made to him and it would not cost the Exchequer a huge amount. It would reward people for having smaller engines and thinking greener. It reminds me of the very welcome greener homes scheme, introduced for heating homes, where the pioneers of renewable energy in their homes were penalised for introducing renewable technology into their homes before the greener homes scheme was introduced. No retrospective grants were made available. These were the people who invested in renewable technology, who were thinking greener and were penalised. Those who then availed of the scheme received grant aid for their homes. This is a similar situation where those who have been thinking green should be rewarded.
The new CO2 based motor tax regime does little to address Ireland’s greenhouse gas emissions. The Government’s national climate change strategy 2007-2012 predicts that the rebalancing of motor taxes and fuel economy labelling will only save 50,000 tonnes of CO2 emissions per year. The increase in emissions in the transport sector from 2005 to 2006 was 682,000 tonnes. This increase in one year is almost 14 times greater than what will be saved over the years from the new CO2 motor tax system. It is clear there are wider problems in tackling the CO2 emissions. The CO2 based system will only apply to new cars after 1 January 2008. In respect of any imported car, after that date, people who have already taken the initiative and bought low emission cars will never see a reward for their good environmental behaviour.
In 2006 and 2007, people were thinking greener and they will not be rewarded. They paid higher VRT when purchasing their cars, compared to a similar type car bought in 2008. They will have a higher ongoing car tax liability because they were registered pre-2008. They will also have an ongoing liability in regard to their resale values.  Those who have a 2007 car, which I would consider relatively new, with the same CO2 emissions as a car bought in 2008 will be penalised again. The Minister admitted in the Lower House that he has a database going back to 2004 on which he could rely. I ask him to reconsider that issue and provide for retrospective car tax for those people who bought with good intentions because they have been penalised unfairly.
There are financial implications in regard to motor tax. It is proposed to raise a further €83 million for local government funds. There is a wider debate here to be visited again. There is a conflict in that we are either trying to raise revenue or trying to cut CO2 emissions. If the Government gets its act together by providing a good public transport system and car usage rates go down, where does that leave Government funds? Have we thought this issue through? If dependency levels are reduced, the amount of revenue raised will be reduced in real terms for local authorities. Therefore, there is a downside.
The Minister mentioned broad figures for emissions, a 180% increase, in the transport sector since 1990. Some 20% of our total emissions are produced by the transport sector. I call on the Minister to ensure connectivity for school transport and connectivity between villages and towns into the larger cities for public transport. The roll out of Transport 21 needs to be completed.
A large rural based population is dependent on the car. Essentially their day to day living is dependent on it, whether it be the school run or getting to and from work or the shops. The car is essential in rural areas. This will hit rural families to a greater extent where there is no public transport system than those in the city.
The CO2 emissions element of the Bill will raise people’s awareness and make them think when they purchase new cars. People should now look at their lifestyle and buy a car to suit their lifestyle rather than the lifestyle of someone else, as we see with the SUVs on the school run. This must be tackled and I applaud the Minister’s effort.
Senator Martin Brady: I am delighted to have the opportunity to speak on the Motor Vehicle (Duties and Licences) Bill. I congratulate the Minister for the Environment, Heritage and Local Government, Deputy Gormley, on the initiative he took to change the VRT regulations for greener and more fuel efficient cars.
I always seem to agree with Senator Coffey and I agree with his point on the lack of public transport. I witnessed this yesterday when I saw two parents spend the whole day driving children to St. Patrick’s Day celebrations and bringing them to football matches. It brought home the necessity of having a car in a rural area. There are no bus services from town to town.
I met another man and I will give Members a flavour of what people think. He told me that people are shagged altogether, so to speak, because they cannot have a smoke in a pub, they cannot get a bus or a taxi and if they get a hackney to go five miles they have to go 25 miles and are brought all over the world. They have no option but to walk everywhere. It is a fair point.
We must be conscious not to penalise motorists for playing their part in society in respect of climate change. Motorists feel they are penalised. We should justly reward them because a car is a necessity in many parts of the country, not a luxury. In cities such as Dublin, Limerick and Cork one can get a taxi in five minutes or a bus every ten minutes. We must be conscious that this is a different ball game.
The Minister’s initiative will, over time, bring about a considerable change in the public attitude toward energy efficient motoring and will have an impact on a much larger scale. The Minister’s intention is to influence the future buying habits of Irish motorists. All cars registered after 1 July will be taxed under the new regime. As Senator Coffey mentioned, an individual who bought a fuel efficient car before now or who buys one between now and 1 July will still be taxed under the old system. Effectively, we will penalise those who cared for the environment before the Government decided to reward people for it, a point adequately made.
In contrast, I received information from the Society of the Irish Motor Industry, SIMI, that someone who imports a used car from England and registers it after 1 July will be taxed under the new system. This means that the same make, model and year of car will be taxed at two separate rates depending on whether it was originally bought in Ireland or imported from England and registered in Ireland after 1 July 2008. For example, an individual who purchased a new Volkswagen Golf diesel car in Ireland in 2006 will pay annual road tax of €560. However, someone who imports the same car from England after 1 July will pay only €150 per annum.
Unfortunately, the people who will be penalised under this anomaly will be those Irish motorists who cared enough for the environment to buy a lower emissions car before the introduction of this new standard. Regarding the measurements of emissions, with which I am not very familiar, are we dependent on information given to us by motor manufacturers or do we have a way of measuring emissions ourselves? The understanding from the industry is that not all the measurements are accurate as there are different ways of testing emission levels. This is an area that could be examined.
While I recognise the intentions behind the Minister’s proposals and commend him on taking this initiative, I hope he will consider the impact this anomaly will have on both environmentally responsible motorists and on the motor industry. The most efficient way to overcome this anomaly would be to allow cars to be taxed at the new environmental rates on renewal provided these rates are lower than the current rates and that the CO2 data were recorded by the State at the time of registration. A recent study undertaken on behalf of the SIMI has shown the cost of making this change would come to €26.8 million. However, the study also showed that a decline of 1.5% in new car sales this year as a result of this anomaly could cost the Exchequer €27.8 million in lost VRT and VAT. These figures show the cost of implementing this proposal. We must rectify the loophole.
The Minister has proposed a 9.5% increase for cars below 2.3 litre engine size and 11% for cars with an average size above this threshold. When communities see the benefit of the revenue generated by the local government fund, most reasonable people will understand it is worth paying the extra money. Recently, the Minister for Transport announced the regional and local roads programme for 2008, setting out an overall expenditure of €618 million. Funding for this will come from the local government fund. Motor tax proceeds in 2008 are anticipated to be €1.08 billion, a significant figure which will directly finance improvements to local government services and investment in roads.
There has been some criticism of the Minister’s decision to apply the new motor taxation system to new and pre-owned imported cars registered on 1 July 2008 linking VRT to CO2 emissions from that date and the potential impact on motor vehicle sales in 2008. We may well see a reduction in sales in the first half of the year compared with last year, but it is to be hoped that the second half of the year will compensate for this. There is a fear that some people will hold off on buying a new car until 2009, but when a fundamental change such as this is introduced, some anomalies will always be created which will be washed out through the system over a period.
The important thing is that we subscribe to the principle of what the Minister, Deputy Gormley, is seeking to achieve, namely, that as a country we play a leading role in tackling climate change, especially by linking motor taxation and VRT to carbon emissions rather than engine size. From 1 July motor tax for the most efficient new cars registered will start at €100, while under the current system the lowest motor tax rate is €165. There is a direct incentive for people who want to act responsibly and play their parts in tackling climate change. By buying a vehicle that is carbon efficient, people will earn a direct financial benefit.
I also welcome the new labelling system being introduced from 1 July. It is particularly important that consumer-friendly information is available and is presented in a uniform and consistent manner to enable people to make conscious and informed decisions on the implications of this Bill for their buying patterns.
I refer to a number of side issues that have come to my notice. I have come across many used cars lying dormant from two years to ten years. I see them in driveways. People ask the owners about them and the owners pay approximately €150 to have the cars taken away. These cars are sold again and there seems to be no proper tracking system. An example I raised previously is that of the Malahide Road on which I live and where it is advertised blatantly on exclusive signage that one can buy a used car for €49.95. This is from where the used cars come. We must examine this matter closely.
Parents buy small motorcycles for young children who drive them up and down footpaths. It is only a matter of time before someone is killed, as the motorcycles can do up to 30 mph. The situation with quad-bikes or quads is the same. When I was travelling through the country yesterday, I saw quads being driven on roads where there were no crash barriers or safety barriers and where there was a serious crash recently. It is only a matter of time before the situation gets out of hand because parents are buying quads as presents for children. The quads do not need tax or insurance. When I inquired of the Garda, it was unsure as to whether anything was required. Children of ten or 12 years of age can get up on the quads and do 40 mph.
Senator Dominic Hannigan: I welcome the Minister for the Environment, Heritage and Local Government to the House. This Bill has been on quite a journey since it first saw the light of day several months ago. The core issue is that vehicles should be taxed based on their emissions, a measure we all welcome. All sides of the House would agree that tackling emissions is vital if we are interested in tackling climate change.
I heard of the proposal while doing some work in my mother-in-law’s back garden when I got a telephone call from a journalist who asked for my comments. After listening to the details, I believe the Labour Party is in favour of the idea. I commend the Minster on his actions in this regard and I welcome his recent changes in respect of the legislation’s D-Day, meaning it will come into effect in January rather than July.
I should declare a conflict of interest because I was one of those who went out in the past month and bought a more environmentally friendly car. I am looking forward to paying less tax the next time I renew it, assuming the Bill is passed.
Senator Dominic Hannigan: Some points raised by my colleagues in the Lower House during its discussion of the Bill must be addressed. For example and as mentioned by Senators Coffey and Brady, why will energy efficient cars bought one year or two years ago not be included in the legislation? We could address this matter. Why will gas guzzling vehicles bought prior to the change not be subject to increases in tax? I would like the Minister’s advice on the status of cars bought outside our jurisdiction. Under current proposals, people on lower incomes — generally speaking, they buy second-hand vehicles — seem to be discriminated against by the Bill because only new cars are to be included. The House deserves an answer to all of these questions. In the Lower House, the Minister stated he would consider tabling a number of amendments in that regard on Committee Stage. Perhaps he will do so.
We welcome the legislation in general. As car emissions have a significant impact on global warming, anything that can reduce the level of emissions must be good news. As emissions continue to rise, so will their consequences, such as the frequency of storms. Last week saw one of the biggest storms of the year. I had the opportunity to view some of its damage when I went to the Laytown pitch and putt club, some of which had been washed away. When the tide came in, it left flotsam and jetsam on the course and took away some of the undersoil. This is just one example of the impact of climate change and I am sure there are others around the country.
Measures such as the Bill can contribute to lessening the impact of global warming, but concerns remain. Transport accounts for 21% of our emissions. As car ownership is holding at the European average, it and car usage can be expected to rise. The combination of both will mean more road journeys. The 21% of emissions from transport will continue to rise despite legislation such as this Bill. We need other measures to ensure people have the opportunity to leave their cars at home and we must put in place alternatives.
One area in which we could make a difference is school transport. Later tonight, the House will debate sustainable residential development. I had the opportunity to read the Minister’s excellent document, which stated clearly that 55% of children go to school by car compared to 28% 15 years ago. An additional 100,000 children travel by car to and from school every morning and afternoon, respectively. We must try to reverse this trend by introducing measures such as walking buses and safer routes to school. The document handed out at the beginning of the Minister’s contribution states that the impact of the Bill is expected to be revenue neutral. While there may not be additional funds to play with, I ask the Minister to use his office to promote expenditure by local authorities on such areas as walking buses and additional footpaths in the vicinity of schools to tackle the percentage of children who are driven to school every day. Apart from the Bill, we can expect other measures to be put in place to deal with global warming. Walking buses, for example, could help to mitigate the effect of transport emissions.
Senator Dan Boyle: I welcome the presentation of the Bill to the House and my colleague, the Minister for the Environment, Heritage and Local Government. The Bill is an important policy initiative that clearly shows the presence of the Green Party in government. Consequently, the welcome given by other Senators is to be acknowledged.
It is clear the previous system of motor tax was grossly inequitable and did not take into account environmental factors. The Bill is a method to address the imbalance and to overcome many of the anomalies that will occur, as of necessity, when a new system replaces an old one. The concept of retrospection is notoriously difficult in any legislation, particularly so in respect of taxation. A cut-off point must be applied at some time. The Minister responded to the debate in the Lower House by adjusting the cut-off point for cars bought from 1 January onwards, an important concession. If Senators are speaking of people who bought environmentally friendly vehicles before then in the full knowledge that no incentive existed and that, in doing so, they were assisting the environmental health of the country, then the concept of retrospection could be also applied to people who bought environmentally unfriendly vehicles knowingly in that they could be asked to pay more tax for the damage they caused. This might be an especially difficult suggestion for Fine Gael, which seems to have in its possession——
Senator Dan Boyle: We have come a long way since the time when many public representatives thought a carbon footprint was a piece of copying paper stuck to a shoe. There is now a real debate on the nature of the environmental damage caused by the previous failed policies of all parties that have been in government and on the need to address those policies.
It is undoubtedly true that car ownership and usage in Ireland is high by international standards. By necessity, this is due to the poor state of public transport, a challenge for everyone in public life to address. It is also true that the cultural use of motor vehicles has crept up here in that we have adopted the modes of behaviour of the United States. This must be addressed in respect of what our taxation system measures and encourages people to do, or otherwise, in the area of transport.
Senator Hannigan has just mentioned a highly important statistic regarding the increase in the number of children who are brought to, and collected from, school every day by car. Those who are involved in door-to-door campaigning and who address the concerns of parents who feel obliged to take their children to school in this fashion come up with the ultimate conundrum. Although people want their children to walk or cycle to school, they are unable to so do because the roads are filled with those who take their children to school by car. While such contradictions exist in our society, the question of the proper and necessary use of the motor car should constitute an important national debate.
As for the proposed system that will be imposed, it has been mentioned that its cut-off points mean there are anomalies because of the manner in which cars will be identified by the motor manufacturers on their petrol use and because it will be done both on a revenue-neutral basis and on a fuel-neutral basis. Some cars can be and have been converted. In future, Members will be obliged to consider how to address such anomalies. However, other measures have been in place such as the 50% VRT exemption for hybrid cars and the excise duty exemption for particular fuels. Those incentives have encouraged people to use such vehicles and many of the incentives in question will continue.
The issue of where we stand in respect of overall transport policy constitutes a major challenge for the Government and the political system. The national development plan is running ahead of schedule and ahead of budget in respect of its roads element but is running behind schedule in respect of its public transport elements. This discrepancy cannot be allowed to continue. We must bridge that gap and address the pre-existing imbalance between public transport and road-based alternatives. I hope the programme for Government has identified particular benchmarks as to when and how this could happen.
Another element of the Bill pertains to funding for local government. This Bill is revenue neutral in its structure. Although it will not allow additional resources to accrue to local authorities, it is structured in such a way that it will not lead to fewer resources being available. Whether it continues to be a significant part of local government funding is a matter for another debate that will follow after the impending publication of the Green Paper on local government. Members may be presented with another item of legislation that will address this anomaly.
I have heard the arguments regarding the claimed excessive taxation on motor vehicles and the money actually spent, for instance, on roads. This is a simple equation. Senator Coffey noted that €5.5 billion is collected in various taxes related to motor vehicles and one can establish how much is spent on the national roads and local roads programmes. However, one should factor everything into the cost of motoring for a society. I refer to the 360 road deaths per year and the associated costs to the health and emergency services, as well as the cultural cost of motoring. I revert to the statistics already noted by Senator Hannigan. As we are transporting our children around in this fashion and spending more time in cars, we have other problems regarding obesity and fewer opportunities in respect of exercise. When one makes an economic argument about the cost of a car to a society, one should take into account all these factors because they are not being judged at present.
Much of the Bill’s contents were introduced owing to prior consultation with bodies such as the Society of the Irish Motor Industry. A consultation process that takes into account all the actors and the legislative process in both Houses of the Oireachtas will come up with the best possible Bill. However, the principle is important and I am glad it has been accepted because having moved on the idea of cars being taxed on the basis of their carbon content, one then can move on many other areas that will help to address the totality of climate change issues and greenhouse gases within society.
One must be aware, while depending on taxation of motor vehicles for local government funding, that the use of the motor car is not necessarily good for Ireland’s overall economic health. All our cars are imported as none is manufactured here. The value added to Ireland’s economy arising from the purchase of a car is limited. An ongoing and more wide-ranging debate is required on the value of motoring, how it is properly costed and how its tax returns measure to our society. This Bill constitutes an important beginning and I am thankful for the Minister’s initiative and the Green Party’s participation in Government for bringing it about.
Senator John Paul Phelan: I welcome the Minister’s presence in the Chamber for this debate. I wish to make a few points and will be as brief as possible. I refer to Senator Boyle’s comments in respect of the current motor taxation system and its grossly inequitable nature. However, on foot of the Minister’s proposals, there will be two motor taxation systems. While an argument could be made that the new system must be phased in over time, we are not getting rid of our grossly inequitable system but are making an attempt to phase it out. However, it will remain with us for a number of years to come. Senator Boyle also stated that Ireland has a high ownership rate of cars. However, compared with our international neighbours, we do not have a particularly high rate. Irish car ownership levels are approximately average when compared with our European counterparts.
I wish to make some points that have not been made earlier. Previous speakers have noted that the transport sector contributes 21% to our CO2 emissions. This is a highly significant amount, which has been growing rapidly in the past 15 years. A total of 97% of such transport emissions emanate from road transport and serious measures must be taken to tackle this issue. While I do not believe the introduction of the proposed new motor tax system will be the be all and end all in this regard, it is a step in the right direction. I agree that taxing cars based on their CO2 emissions constitutes a progressive step and I support it.
However, I refer to the point made by previous speakers regarding the widespread lack of alternatives to car use. In rural Ireland, such as the part of County Kilkenny in which I live, those who wish to work or go to school, college or a hurling match depend on cars. During the Celtic tiger years, the Government placed insufficient emphasis on trying to provide realistic alternatives to car use nationwide. I read the programme for Government and did not find a reference in it to rail freight. Perhaps the Minister can enlighten me otherwise.
As someone who, by the nature of my job, spends much time in cars, as do all politicians, a particular bugbear of mine concerns the juggernauts one encounters on the roads. They do untold damage to the road structure and block up and clog the country’s arteries. However, this new Government, which has been in office for nearly a year, does not appear to have placed an emphasis on the importance of the significant role that rail freight could play in reducing the volume of freight transport on our road network. There has been an explosion in this regard in the past ten years and it has become uneconomic for many businesses to use the rail transport option. Were the Government serious about identifying an area in which some progress could be made, the issue of rail freight would appear obvious to me.
I urge the Minister, during his term of office, to make a serious attempt in this regard despite its apparent absence from the programme of Government. Approximately €60 million will be spent on carbon credits next year and the realisation has dawned on everyone that we must reduce our carbon emissions, regardless of their source.
I agree with previous speakers that the 9.5% increase in motor tax on engines smaller than 2.5 litres is not the most progressive of steps. People who make a genuine effort to purchase cars with smaller engines should be looked after in terms of the motor tax they pay. By all means increase the tax on people who drive gas guzzlers. I have no problem with retrospection in respect of those who drive 3 litre vehicles.
The Minister should have agreed to the request made by Opposition Members in the other House to backdate these measures to 2004, especially given the availability of records from that time. I understand an amendment was proposed which sought to backdate the measures to an earlier date.
Previous speakers have spoken about the anomaly with regard to the purchase in Britain and elsewhere of second-hand vehicles. Under the new regime, a car bought five years ago in Ireland will fall under a different motor tax system to one of a similar age bought second-hand in Northern Ireland. That is neither fair nor equitable.
This legislation seems to encourage people to purchase new cars. I do not know the carbon footprint of building a car but it seems to me that car production requires considerable amounts of energy. Rather than encouraging people to purchase new cars, perhaps we should ask them to re-use existing vehicles. That idea seems to have got lost in the debate but I may be wrong in terms of the carbon dioxide emissions from building cars. The Minister might enlighten me in that regard.
I welcome in principle that motor taxation will be based on the emissions made by a car. While that is a progressive step, it is a step in the wrong direction, however, to penalise those who drive cars with smaller engines rather than reward them for making a special effort to purchase vehicles which are friendlier towards the environment.
Senator Paul Bradford: I welcome the opportunity to speak on this legislation. I concur with other speakers in welcoming the legislation in so far as it attempts to be environmentally progressive. Like all legislation, however, it is not perfect.
I listened with interest to Senator Phelan’s concluding remarks on the real impact of the Bill in terms of encouraging people to purchase new cars, which will be cheaper in the long term from a tax perspective. The Senator raised the interesting question of whether the concept of re-use, recycle and repair is being abandoned.
I presume the Minister will return to the House for the debate on planning and housing guidelines. It is interesting that his party is playing a role in Government on these key matters for the environment. He knows me well enough to be aware that I do not participate in political play acting. One of the stronger arguments made by Senator Boyle before the general election is that Green parties have been in government in almost every country in Europe and that the Irish Green Party could make a real impact if given a chance to govern here. He has been granted his wish of entering Government and I wish him well in that regard. However, the difference in environmental lifestyles has not been huge in other countries where Green parties have played a genuine and progressive role in government over the past 15 years and the progress on emissions has not been significant. Talk is one thing but real progress is another. Progress has been very slow on what the Minister wants to do in the areas of emissions from the motor industry and housing planning and construction.
If we want to console ourselves in regard to environmental damage, we should realise that we are a tiny blip on the scale of the world’s problems and only a minor part of the solution. The big industrialised countries will have to produce the real results, so we should be realistic by calling our efforts “tokenism”. Even if everyone in Ireland bought the newest, cleanest and greenest car or lived the most sustainable life possible, our global impact would be minimal. It would be the right thing for us to do but we must be realistic about the progress we can make.
There is consensus in the House that making the legislation retrospective would be welcome. I note Senator Boyle’s comment that retrospective measures can work in both directions but the people who in previous years bought what they thought were the most environmentally friendly cars are now being penalised on the double because they will continue to pay a high rate of car tax and the value of their cars will be reduced when they sell them. The Minister might reconsider that issue.
The Bill makes no provision for cars fuelled by liquid petroleum gas, LPG, which is very low in emissions. In the 1970s, a significant minority of cars ran on LPG. I believe it is still possible to convert cars to LPG and several centres continue to sell this fuel. Is there any incentive on LPG? I was in Britain last week, where I noted the high price of diesel and petrol and the exceptionally low price of LPG in garages. Possibly as an environmental incentive, LPG seems to be less than half the price of other fuels. The Minister might indicate whether we are doing anything through VRT, motor tax or fuel taxes to establish LPG as a viable fuel.
I wish the Minister well with this legislation, although I hope he pays heed to the suggestions made by the Opposition on making it fairer. It is a progressive Bill and I am not being a spoilsport when I say it will not change the world’s carbon footprint to a significant degree. Our greatest role will be in setting an example and leading the campaign at the UN and elsewhere to persuade the real players to make the necessary changes to their industrial emissions, which is where the problem begins and ends. I thank the Minister for listening. He might try to respond to my inquiry about LPG fuel.
Minister for the Environment, Heritage and Local Government (Deputy John Gormley): I thank all the Senators who contributed to this debate. As in the other House, the contributions were wide-ranging and this is appropriate having regard to the far-reaching functions of all local authorities and the fact the Bill introduces fundamental change to the basis on which motor tax will be charged in the future.
Increasing any tax is not a popular thing to do and the decision to increase motor tax rates for the existing fleet is not one that was taken lightly. The sole reason for increasing rates was to fund local government. The 9.5% increase for the majority of the fleet is well below the rate of inflation since the last increase in rates in 2004. The increases for 95% of the fleet range between 27 cent and 98 cent per week. Senators are aware of the significant role which the local government fund plays in financing local government and of the need to maintain this funding. Motor tax receipts represent some 60% of the local government fund, which is ring-fenced exclusively for local government.
The increase in motor tax rates is about local government. It is about providing sufficient resources to local authorities to enable them to provide quality public services to all of their customers. Failure to raise funding through increased motor tax rates would have resulted in significantly reduced allocations to local authorities in 2008 for both general purpose funding and for regional and local roads. Total funding for the local government fund for 2008 is estimated at €1.6 billion, which represents approximately 30% of local authority current funding requirements.
The motor tax increases have enabled me to provide for substantial increases in general purpose funding and in regional and local road grants to local authorities for 2008. This year I have allocated some €999 million in general purpose grants while €565 million is being provided from the fund towards the development and maintenance of the regional and local road network.
Senators have referred to the importance of addressing climate change, which is profound in its implications. I have elaborated on this in some detail. To be fair to the Senators, I should address some of the other issues they raised. I want to clarify the position with regard to the scope of the new CO2 system, which was raised by Senator Brady. The new CO2-based motor tax system will take effect from 1 July 2008. In the first instance, it will apply to new cars registered on or after that date. It will not apply to second-hand imports which were registered abroad prior to 2008, contrary to what has been said in the House today. In addition, anyone who registered a low CO2-emitting car in the first six months of 2008 will be switched onto the lower CO2-based motor tax rate on first renewal of motor tax after 1 July 2008.
Cars which are first registered abroad from 2008 and subsequently imported here will come within the CO2-based motor tax system. This will ensure equity as between cars which are registered here as new from 2008 and future imports of equivalent second-hand cars. I should make it clear that cars registered before 2008 will continue to be taxed in future years under the existing motor tax system related to engine size. This will ensure equity as between cars in the existing fleet and equivalent imports. Some erroneous statements were made and the position needed to be clarified.
There have been some criticisms of the new CO2-based system. A number of Senators said they would like to see it applied retrospectively to the existing car fleet. Having examined the issue, I have concluded that it would not be appropriate to do so. I made the position clear in the other House and perhaps should repeat the reasons here.
From the outset, the public consultation process on motor tax made it clear that the new CO2-based system would apply from a specified date and that cars registered before that date would continue to be taxed in future years under the existing motor tax system related to engine size. Retrospection would not be practicable as there is no authenticated CO2 data for the majority of the existing fleet. The CO2 values on the Revenue and NVDF systems, in respect of new cars only, have not heretofore been used for any business purpose, have not been collected as the basis for a fiscal charge and, accordingly, have not been authenticated to any degree. It would be unsound to apply charges on the basis of such data.
If the new system were to be applied retrospectively, it would be unfair to penalise people for a purchasing decision made in the past. If there was an optional “opt in” to the new system, it would undermine the revenue base of local government, resulting in serious financial problems for local authorities throughout the country. As I said earlier, I want to ensure that local government continues to deliver for communities and business throughout the country. To this end, the local government fund must have the resources necessary to meet those demands.
The clear objective of this new motor tax system is to influence the purchasing decisions of consumers. Purchasers of cars with low CO2 emissions will be rewarded while a premium will be charged on vehicles with high CO2 emissions.
Senator Coffey referred to the national climate change strategy and the quantified effects of a range of measures in various sectors. A combined annual saving of 50,000 tonnes is attributed to the re-balancing of motor tax and vehicle registration tax and the introduction of an enhanced vehicle label. This saving is based on indicative calculations contained in a study prepared by Sustainable Energy Ireland and referenced in a report on greenhouse emission projections prepared for my Department in 2006. As it would not have been possible for the study to assess the impacts of the actual motor tax and VRT changes announced in budget 2008, it is necessary to update the estimate of the saving from these changes.
Factors which will be taken into account include the significant increase in car ownership in recent years, the average mileage of vehicles in Ireland, the rate of fleet renewal and the projected impact of the tax changes on purchasing patterns. I have already indicated that I will present updated figures where appropriate for relevant measures in the context of my annual report to the Oireachtas on the implementation of the national climate change strategy. I envisage that this report will be ready by the end of April.
I would also like to address some of the points made by Senator Bradford. I will have to come back to him on the question of LPG. On the question of Ireland’s contribution, while its contribution of approximately 70,000 tonnes annually would seem to be small in the context of overall emissions globally, this argument is used by all countries. I attended a climate change conference in London last Friday. At 44 million tonnes, London’s emissions are relatively small for a city of 12 million people but the United Kingdom’s emissions are greater again. Nonetheless, the UK argues that its emissions amount to just 2% of global emissions. Every country can argue this point.
I recall the point made by Ghandi when asked by a mother what she could do about a child who kept eating sweets. He replied that the first thing he had to do was to give up sweets himself. Then he could talk to the child. That is an appropriate lesson in regard to climate change. We must all play our part — each state and each individual. This is why I am introducing the new awareness campaign. I have seen the advertisements and am very impressed with them. They will induce a sense of responsibility and make people understand that they can do something. It is so easy to go from denial to despair in one small leap. There is that area in between, where we can make people understand that they can do something.
Senator Bradford made a valid point. I have no doubt that even as we increase the environmental friendliness and energy efficiency of products consumption will go in only one direction. We have seen this with regard to the transport figures. We can now produce a so-called environmentally friendly car with lower emissions but households may have three of them instead of one. When we construct houses we have things in them that were unheard of previously. This point was made on Friday. Heated towel racks have become almost standard in homes. This is a product of affluence. We have all of these things which are add-ons and may enhance our quality of life to some degree but one can ask whether they are really necessary. We must examine how we can combat climate change and reduce emissions if we continue to purchase all these products.
After transport the big increase in terms of global emissions comes from the IT sector, namely computers and gadgets in our houses. These are issues we now have to confront and examine how we will deal with them. I have two gadgets in my pocket. I am a gadget person, as are we all. We consume huge amounts of energy. We usually think of the IT sector as being energy efficient and environmentally friendly but we need to look more closely at it. I could go through it in detail. There is no easy solution. Every time we come up with a so-called solution we are knocked back a little. That is why climate change is the biggest challenge facing us because it seems there is not a quick fix. We are all looking for that silver bullet but at the end of the day it will require a lot of thinking. We need to question our consumerist values. That is difficult when we, and especially our children, have been hard wired to be consumers from an early age.
|Boyle, Dan.||Brady, Martin.|
|Butler, Larry.||Callanan, Peter.|
|Callely, Ivor.||Carty, John.|
|Cassidy, Donie.||Corrigan, Maria.|
|de Búrca, Déirdre.||Ellis, John.|
|Hanafin, John.||Hannigan, Dominic.|
|Keaveney, Cecilia.||Leyden, Terry.|
|MacSharry, Marc.||Ó Domhnaill, Brian.|
|Ó Murchú, Labhrás.||O’Brien, Francis.|
|O’Donovan, Denis.||O’Malley, Fiona.|
|O’Sullivan, Ned.||Ormonde, Ann.|
|Phelan, Kieran.||Ross, Shane.|
|Walsh, Jim.||White, Alex.|
|White, Mary M.||Wilson, Diarmuid.|
|Bradford, Paul.||Buttimer, Jerry.|
|Coffey, Paudie.||Coghlan, Paul.|
|Cummins, Maurice.||Donohoe, Paschal.|
|Fitzgerald, Frances.||McFadden, Nicky.|
|O’Reilly, Joe.||Phelan, John Paul.|
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