Scrappage welcome but Carbon Tax hit on Petrol and Diesel will send drivers North – AA Budget reaction
Image courtesy of RTE
The AA has welcomed the announcement of a car scrappage scheme in the recent budget but is disappointed at the rise in the cost of fuel.
"A scrappage scheme will provide a much needed incentive for the car industry, but just as significantly it will promote the replacement of older cars with cleaner, greener and safer vehicles." Says Director of Policy Conor Faughnan. "The previous scrappage scheme of the late 1990's was very successful in its time, and the AA had been in favour of introducing a similar environmentally motivated scheme at this time."
No such environmental dividend will emerge from the wrongly-named Carbon Tax, however. Minister Lenehan's budget announcement of a Carbon Tax at €15 per tonne will add 4 cent per litre to petrol, 5 cent per litre to diesel. This is highly disappointing and will give an added incentive for motorists to cross the border.
The AA argues that price increases applied in the guise of a Carbon Levy are no different from the current excise duty tax. They will simply make fuel dearer, and drive customers across the border, but they will not be of the remotest help when it comes to Carbon use."Whether it is called Carbon Tax or not, it is in effect just a price rise. We know from experience that price rises will not reduce the amount of fuel used – the Carbon dividend will be zero. It will however mean that more of our fuel will be bought in the North, greatly diminishing its effectiveness as a revenue raising measure."
In the course of 2008 petrol prices went from a low of 94 cent in January to a high of 144 cent in July. This did not make the slightest difference to usage and there is no reason to expect that a State-applied price increase will be any different.
The AA points out that the recent increases completely eroded the price gap between Northern Ireland and the Republic. "Where Northern drivers used to cross the border to refuel, to the benefit of the Dublin exchequer, that trade has been shut off like a tap and both trade and tax money are now flowing in the other direction." Says Faughnan. "This is entirely self-defeating, and remember that in all of this the environmental or carbon gain is zero."
"When it comes to raising money then fuel taxes are tempting, although they have reached the limit of their effectiveness given how much trade is currently being lost to Northern Ireland. What we do know is that in terms of changing carbon-use patterns fuel taxes are literally useless."
"Giving a tax increase a politically correct name does not change that reality." Says Director of Policy Conor Faughnan. "70% of the retail price of fuel is already tax. In October of 2008 there was 8 cent per litre added to petrol excise duty; 5 cent per litre was added to Diesel last April. Why not call those increases a Carbon Tax?" He asks.
The AA calculates that a 4 cent per litre fuel price increase will cost the motorist an additional €72 per year or €6 per month. [a car averaging 30 miles per gallon and doing 12,000 miles or 19,200 kms per year will use 1800 litres of fuel annually].
The cost of petrol and diesel rose significantly in the last month, according to the latest fuel price survey from the AA. A litre of petrol now costs an average of 118.7 cents, up by 3.1 cents since last month. Diesel also rose sharply, up by 3.6 cent in the last month to a current average of 108.9.