LEO: USE FUEL TAX TO TOP UP CHILD BENEFIT

Taoiseach’s proposal to limit impact of new carbon taxes on families

FUTURE hikes in carbon tax could be used to fund a rise in child benefit, the Taoiseach has suggested.

Electricity, home fuels and petrol and diesel costs will all begin increasing from 2020 when Ireland introduces steps to meet its climate change targets.

But the Government is nervous about a French-style backlash, where Yellow Vest protesters crippled the country after President Emmanuel Macron hiked levies on diesel.

While Fine Gael has committed to raising carbon taxes, Leo Varadkar said he is keen to offset the impact of the tax on struggling families and has suggested the fees will be returned to them.

A cross-party Oireachtas committee will meet between now and the end of February to discuss the best way

forward. The Taoiseach met with Finance Minister Paschal Donohoe and Climate Action Minister Richard Bruton before the Christmas break, where they discussed two potential models of rewarding those who cut down on their carbon footprint.

This could be in the form of child benefit increases, tax credits, welfare rises or through a direct cheque in the post, with those using the least carbon benefiting the most.

‘I am of the view that carbon tax is there for a reason,’ the Taoiseach said. ‘It’s an environmental tax designed to change behaviour. It’s not designed to take money out of your pocket.

‘That’s why I’m very much of the view that the money raised from carbon tax from households should be given back to households.

‘There are two ways in which you can do that. You can either give everyone a carbon cheque in the

‘You can give a carbon cheque’

post; you can do that by individual or by household, and you get that up-front.

‘The cheque would help offset the money people have paid in carbon taxes during the year – with those who have used the least carbon and paid the least tax ending up benefiting financially.

‘That’s designed to compensate you for the cost of the carbon. Those who use a lot of carbon don’t benefit as much, those who have low-carbon lifestyles benefit more.’

An alternative to issuing a cheque would be to either reduce people’s income tax or boost welfare payments, such as child benefit.

‘You can do it that way or you can do it through the tax and welfare system such as an increase in child benefit funded by the carbon tax or an increase in tax credits and welfare,’ Mr Varadkar added.

‘We haven’t decided which to go for. I would like to get an all-party consensus around it, so what I propose to do is develop a proposal in the first two months of the new year and put that out to the other parties to see if they are willing to be supportive of it.’

A Department of Finance report last summer recommended that a welfare increase could be delivered through a rise in the winter fuel allowance to protect more vulnerable, low-income households.

The same report recommended using some of the revenue raised by the carbon tax to offset fines of up to €600million Ireland is set to incur when it misses its EU 2020 climate targets, which Government accepts will happen.

However, the Taoiseach did indicate that the first hike in the tax would be introduced in next autumn’s Budget and come into effect the following year. He said: ‘The decision we make on carbon tax would not apply until 2020 – unless you are doing it on the night of the Budget – but that would be a decision we would make nearer the time.’

The Taoiseach has also indicated that the revenues could help fund his proposal to raise the entry point for the higher rate of income tax to €50,000.

The carbon tax has proved a thorny issue for the Government, which is struggling to balance climate concerns with appeasing a tax-weary public.

The Taoiseach came in for heavy criticism for failing to implement the measure in Budget 2019, despite having previously indicated he was ready to ‘grasp the nettle.’

Mr Varadkar later defended his decision by pointing to the unrest that quickly spread through France as part of the ‘gilets jaunes’, or ‘yellow vest’, protests against fuel tax hikes.

He will also be mindful of the mass public outcry that accompanied the botched attempt to introduce water charges during the last Government.

It has recently emerged that Finance Minister Paschal Donohoe was considering introducing a €10 per tonne of CO2 increase last year, which would have netted €212million for the Exchequer – only to decide against it just before last October’s Budget Day.

Such an increase would not have been high enough to encourage behavioural change, according to research by the OECD.

However, it would have resulted in price hikes across petrol, diesel, home-heating fuels and coal, ranging from 2% for a litre of petrol to 6.6% on a 40kg bag of coal.

While the Government didn’t raise the tax in the last Budget, Mr Donohoe did commit it to meeting the Climate Change Advisory Council’s recommendation that the tax should be quadrupled by 2030 from its current rate of €20 to €80 (per tonne of CO2). Comment – Page 12 james.ward@dailymail.ie

‘I’d like all-party consensus’