Sunday 20 October 2019

Budget 2020: Ministers now fear carbon tax backlash as fuel costs set to rise

  • FG worried about how rural areas will react to 'unnecessary' financial burden
  • Home heating oil could rise by €16
  • Cost of bale of briquettes may increase too
Finance Minister Paschal Donohoe. Photo: Gareth Chaney, Collins
Finance Minister Paschal Donohoe. Photo: Gareth Chaney, Collins
Philip Ryan

Philip Ryan

Government ministers fear an angry backlash from rural voters when they significantly increase carbon taxes which will push up the cost of petrol, diesel, heating oil and other fuels.

Fine Gael Cabinet ministers believe that the plan to hike carbon taxes by €6 to €7 per tonne could add an "unnecessary" financial burden on rural voters ahead of a fast-approaching general election.

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Ministers are also concerned that Fianna Fail will backtrack on its decision to support the controversial climate action measure if the increases ­- which will add an extra €1.20 to the cost of an average tank of diesel or petrol - spark public anger.

The hike means 900 litres of home heating oil may increase in price by between €15 and €16, a 12.5kg bale of briquettes could cost around 15c more and a 40kg bag of coal may go up by more than 70c.

READ MORE: Philip Ryan: 'Fianna Fail go through the motions to agree a budget that might never happen'

Finance Minister Paschal Donohoe is expected to delay the carbon tax hike on home heating oil and other fuels until May because of the increasing fears in Government over the political impact of the extra burden on rural families.

"It's fine for people in Dublin, but people in rural Ireland are already angry enough about the cost of fuel which has gone up in recent weeks already," a Fine Gael Cabinet minister said.

"If we are serious about climate change why are we not putting taxes on the aviation industry?"

Another Fine Gael Cabinet minister said Fianna Fail is "only just about" supporting the Government's plans to increase carbon taxes. "I think Fianna Fail are watery on it and will probably turn around and tear into our Budget a few days after it is announced," the minister said.

A senior Fianna Fail source said the party has been consistent in its support of climate action measures.

Taoiseach Leo Varadkar. Photo by Steve Humphreys
Taoiseach Leo Varadkar. Photo by Steve Humphreys

Another Fine Gael minister said they hoped the increases of about 2c per litre of petrol or diesel will be low enough not to enrage rural voters ahead of next year's election. All money raised from the carbon tax increase is to be ring-fenced for climate action measures which will encourage voters to be more environmentally conscious.

READ MORE: Dan O'Brien: 'Budget preparations bedevilled by unprecedented uncertainty'

The fears over the political cost of climate action come after Taoiseach Leo Varadkar last night suggested he would increase carbon taxes every year that he is in government.

Speaking at a Fine Gael presidential dinner in Dublin, Mr Varadkar said: "We will use the Budget to step up climate action," before adding: "We must do that in every Budget from now on."

The Taoiseach also used his speech to attack the Green Party over its suggestion that wolves should be reintroduced into rural Ireland to rejuvenate the countryside.

"I would have thought the Greens' experience of being in government with Fianna Fail would have warned them off dangerous predators," he said.

Mr Varadkar also took aim at Fianna Fail, saying Micheal Martin does not have a team of TDs capable of taking on responsibility for the Brexit negotiations.

READ MORE: Conor Skehan: 'When it comes to Budget 2020 - it's the silence that's golden'

"If we had a Fianna Fail-led government now and they were involved in Brexit negotiations now, who could they send who could match Simon Coveney or Helen McEntee?" the Taoiseach said. "When it comes to managing the economy and the public finances, dealing with really difficult industrial relations, issues with politeness, competence and firmness - who do they have as good as Paschal Donohoe?" he added.

Meanwhile, it has emerged that Mr Donohoe is preparing to introduce some welfare increases in the Budget which will help older vulnerable people and children trapped in poverty. This could see the widow's pension and the Living Alone allowance increased on Tuesday. However, other payments will not change including the State pension and Jobseeker's Allowance.

Mr Donohoe is also under pressure form the Independent Alliance to find funding for its demands before the Budget is announced.

Transport Minister Shane Ross is continuing to push for an increase in the threshold for a family home to be exempt from inheritance taxes.

Mr Ross secured a €10,000 increase in the threshold to €320,000 last year and is expected to make a similar change on Tuesday.

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Minister Shane Ross. Photo: INPHO/Bryan Keane

Meanwhile, Disability Minister Finian McGrath is understood to believe that not enough progress has been made on securing funding for disability services.

Mr McGrath is also insisting on €350,000 for the design of the new cystic fibrosis unit in Beaumont Hospital in Dublin.

READ MORE: Richard Curran: 'Betting tax delivers cash but squeeze on small bookies is coming'

Speaking last night, the Taoiseach said: "This Budget is different. It's a no-deal Budget so it has to be more conservative than previous budgets and what that means is no across-the-board income tax cuts and no across-the-board welfare increases. But there will be room for a package of modest ones targeted on the poorest and those most in need and there will be a tax package, albeit a minimal one, correcting some anomalies and unfairnesses that need to be corrected."

Mr Varadkar said the exact amount that the Government will provide for Brexit contingency measures was not yet settled. But that it will involve a "financial package to save jobs and businesses that are viable in the long term but may be vulnerable as a consequence of Brexit".

A major focus of the Government's action on tourism will be luring new visitors from China and Japan to replace the significant drop in holidaymakers from Britain.

The Help to Buy scheme is set to be extended and no changes will be made to grants for first-time buyers.Fine Gael and Fianna Fail are also at odds over the cap for fast-tracking local authority spending on social housing construction. Fianna Fail wants to extend the cap from €2m to €6m, which it says would allow councils to construct more social housing more quickly.

However, Fine Gael is concerned that the move would mean the Department of Housing would have no oversight over how almost €2bn is being spent by local authorities.

Fine Gael ministers have also claimed there has been little or no interaction between Fianna Fail spokespeople during Budget negotiations because the party is focused on election preparations.

READ MORE: Budget 2020 black hole: Missing millions forces Minister to dramatically scale back plans

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