Brexit and rural fears give Donohoe pause for thought on carbon levy
A question mark hangs over the long-signalled hike to diesel and petrol prices as Finance Minister Paschal Donohoe prepares to sign-off on Budget 2019.
The initial plan was to raise carbon tax by €10 to €30 per tonne, which would have seen the price of a litre of petrol and diesel increase by around 3c, when VAT is included.
A bale of briquettes would be 26c dearer and a 40kg bag of coal would rise by almost €1.20.
Brexit, housing, health and childcare will be the key themes of the Government's spending plans for next year.
But Mr Donohoe is struggling to finalise a taxation package that satisfies the entire Cabinet, with carbon tax proving a particular sticking point.
Sources say initial plans to raise the tax by 50pc have proven "problematic" with several ministers and backbench Fine Gael TDs privately warning it will be massively unpopular in rural areas.
Hauliers have also complained that extra diesel costs will adversely affect their ability to deal with the eventual impact of Brexit.
One source close to the Budget talks said the carbon tax hike could be half of what was previously expected or even postponed.
"At the start, the focus on carbon tax was a policy issue but the longer the talks have gone on the political reality seems to have kicked in," one source said.
If carbon tax hikes are more limited, Mr Donohoe will have little choice but to raise the 9pc VAT rate for the hospitality sector back to 13.5pc in one swoop.
Tourism Minister Shane Ross has already voiced staunch opposition to hiking the VAT rate.
In advance of the Budget, Mr Varadkar promised it would be "very much Brexit proofed".
"There's going to be a Rainy Day Fund that we can dip into to help our farmers and businesses if we need to in the event of a chaotic Brexit," he said.