Monday 14 October 2019

Rise in carbon tax 'very likely' despite Brexit, says Taoiseach

Taoiseach Leo Varadkar. Picture: PA
Taoiseach Leo Varadkar. Picture: PA

Kevin Doyle and David Chance

Increases to the carbon tax are "very likely" in the next Budget, despite the uncertainty of Brexit, according to Taoiseach Leo Varadkar.

The Taoiseach went off-script at the National Economic Dialogue yesterday and indicated a hike is all but inevitable.

Government ministers have repeatedly refused to say that the tax will be raised next year despite launching a new Climate Action Plan.

While defending other tax increases in recent years, Mr Varadkar said: "These aren't easy decisions to make and they're certainly not popular. But in a growing economy they were the right ones to do.

"Reversing the cut in VAT, increasing stamp duty for the commercial property sector, introducing a sugar tax. And very likely increases in the carbon tax in the forthcoming Budget," he said.

Finance Minister Paschal Donohoe was on the verge of raising the €20-per-tonne tax in last year's Budget but baulked at the last minute, blaming Brexit uncertainty.

However, it is known a number of ministers were lobbying to stop the increase amid fears about a backlash in rural Ireland.

A €10 increase would mean an increase in purchase price of around 4c for a litre of petrol or diesel. There are worries that would hit poorer people disproportionately hard.

"The climate change issue needs to be addressed, we do need carbon taxes, as part of that," said Seán Healy of Social Justice Ireland.

"However, carbon tax should not be progressing without a simultaneous mitigation programme that addresses the vulnerable and issues like fuel poverty and rural transport," he said.

Mr Healy's call was echoed by others, and prompted a response from Mr Donohoe who noted that if these measures were implemented, there would be no money left from the tax for environmental measures.

"In relation to the debate on carbon taxation, the support that I have heard so far is at best contingent, and what it is contingent on is reinvesting that money back into standard of living mitigating factors, which I think is a very legitimate choice to consider," Mr Donohoe said.

"It does however then mean that it is not generating new resources for investing in change within in our economy."

At the same time, Brexit risks are on the rise and Mr Varadkar warned that a disorderly Brexit has become "much more likely in the past few months".

Setting out his pitch for the next Budget today, Mr Varadkar said the country needs to wary of internal and external threats.

The Government will publish an updated no-deal Brexit contingency action plan next month, setting out the state of readiness and further actions to be taken before the end of October.

Mr Varadkar said the planning would help the country deal with the impact but the situation "would be deeply challenging with many risks which can't be mitigated away".

Irish Independent

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