Fuel prices hit record highs as VAT bites
Published 16/01/2012 | 05:00
THE Government has been accused of sucking money out of the pockets of families after its latest VAT hike forced petrol and diesel prices to record levels.
The cost of petrol has risen to an average of 154.9c per litre -- a 7c increase in the space of just one month.
The price of diesel is also at a record high, costing motorists an average of 153.1c per litre -- an increase of 6.2c since December.
And 2.4c of the 7c petrol increase is attributable to the Government increasing VAT from 21pc to 23pc at the start of the year. The rest is due to the value of the euro weakening against the dollar and to increases in wholesale prices.
These additions come on top of a 1.4c per litre rise in the price of petrol and a 1.6c per litre hike in the price of diesel after December's Budget.
AA Ireland, which compiled the data, has accused the Government of making a bad situation worse.
"It was a policy of the last Government (increasing prices), it was wrong then and it's still wrong now," AA Ireland's Conor Faughnan told the Irish Independent.
"In terms of its practical effect, it sucks money out of the pockets of ordinary families and the more it does that, the more damage it does to the economy. Ultimately, it ends up costing the exchequer money rather than making it."
Mr Faughnan claimed the Government had scored an 'own-goal', citing falling petrol consumption as evidence.
"In 2011, the total amount of fuel sold in the country was down by about 6 or 7pc in response to rising prices. That means the exchequer take is also down.
"When you look at the net effect of that policy it is to reduce trade, to reduce VAT receipts, to reduce sales and ultimately the Government is collecting less money, not more," he said.
A senior government spokesman has conceded that the increase is having a negative effect on consumers.
A spokesman for Transport Minster Leo Varadkar said the minister accepted that the cost of living would be affected.
The comments are in contrast with those made by Mr Varadkar little more than a month ago, when he indicated that the 2012 Budget would be mild enough to allow people to afford a holiday this year.
"Incomes will remain untouched," he said at the time.
"You'll have to pay €100 for your house and 2pc on a new TV or fridge but that's it. That means people will be able to take a holiday, which they might not have been able to afford this year," he said.
But last night a spokesperson for the minister said that Mr Varadkar had "explicitly acknowledged that VAT would increase in the New Year, and that a household charge would come into force, both of which would inevitably increase the cost of living to differing degrees.
"However, incomes are not the same as outgoings. Neither income tax nor pay was touched in the Budget, and take-home pay in January for most people will remain the same," he added.