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Dáil
‹ Ceisteanna ó Cheannairí - Leaders' Questions

Inflation and rural cost pressures

Summary

Richard O'Donoghue raises inflation, energy costs and the tax burden on PAYE workers, especially in rural areas with poor infrastructure. The Taoiseach argues taxation funds public services, highlights rural transport support and says energy VAT reductions are constrained by EU rules.

I also pass on my best wishes to the Ceann Comhairle for a speedy recovery.

Inflation is at a 14-year high thanks to the rise in energy costs, supply shortages and increased demand following the post-Covid reopening. The Central Statistics Office has confirmed that the rise in prices in October was the largest seen since April 2007. The squeeze on the household budget is due to the Government over-exhausting and crippling the PAYE sector, particularly those living in rural areas. I am going to make it very simple. I have a payslip here from week 33 of the current tax year. If someone earns €500 net into their hand per week, it will cost the employer and the employee €680.65. The employer pays €67.73 PRSI for the employee, who is a single person. PAYE deducts €74.22 per week while the USC deducted is €14.18 and the PRSI €24.52. That is €180.65, which allows the employee to take home €500 per week. Now we must adjust this for the cost of living. An average person commuting to work and with family commitments, in County Limerick, will spend €100 a week on fuel. The Government takes €57 out of that €100. Food for a single moderate person is €20 per day, which equals €140 per week. The Government gets €26 out of that. The ESB bill costs per week €30 and the Government gets €6.40 out of that. Heating costs, which include coal, timber or oil to heat the family home, are roughly €40 per week and the Government takes €7.48 out of that. Clothes and footwear cost about €1,560 a year, which equals €30 a week, and the Government takes €6.40 out of that €30. If this person is lucky enough to rent a room at €100 per week, the Government takes a further €10 out of that. They are then left with €60 for miscellaneous things. God forbid they want to get a pint, go for a meal or go to the cinema with that €60 because the Government will take €12 of that.

Comment on this

The Deputy used the phrase, "the Government takes". Who is the Government?

Comment on this

At the moment it is your party.

Comment on this

This is a very simplistic kind of presentation, which goes on all the time. It is the social contract, to varying degrees. We might disagree as to where the balance of the social contract is but the social contract is society raising revenue through the elected government of the day and rebalancing that revenue out in education services, childcare services, health services, mental health services and infrastructure.

These are the very issues that Deputies will consistently come into the House and raise with Ministers, asking why we do not have extra money to spend on this or on that. We have a very strong social welfare code in Ireland which requires a lot of revenue and that revenue has to be raised. Substantial revenues have to be raised. People may argue that it is not enough and others will argue differently but we cannot get away from the fact that huge sums of money are involved in social protection, education and health in particular which reflects the majority view in terms of how we want to organise society. The Government must raise revenue on behalf of society to be able to do the things it wants to do and that involves PRSI as well. One of the big challenges in higher and further education is the need to dramatically increase the number of skills programmes to upskill the economy for retrofitting, offshore wind and apprenticeships generally across all of the trades. That is working and the funding we have provided is definitely yielding results in terms of increased applications for apprenticeships.

A balance must be struck but I accept that there is a big pressure on energy prices at the moment. I have no doubt about that and agree with the Deputy. We brought in a modest taxation package in the budget which was designed to make a contribution towards helping people. We also increased the fuel allowance and provided other welfare increases to try to cushion the blow from higher energy prices. The Government is keeping under review the issue of the impact of global energy price increases on households. I fully accept that energy prices are putting pressure on many families and households but this is very much a global phenomenon. The European Central Bank is saying that it will be a short-term issue and that after the first quarter of next year, prices will begin to recede but we will have to monitor and review that very closely to see what further help we can give.

Comment on this

The Taoiseach's answer to the people was to put a 2% increase on fuel. Who pays the most? The Government is taking 45% of a wage. I have asked the Taoiseach today about the rural person because there is no infrastructure. The Taoiseach mentioned infrastructure two or three times in his deliberations. If I was living in the city I could choose the Luas, the train, the DART, the bus or I could cycle or walk. There is none of that outside the city boundaries and the Government's failure to introduce infrastructure outside the city areas is what I am talking about. I am talking about the rural person outside the famous Red Cow roundabout. Everything outside that is rural and everyone outside of that has no infrastructure so they pay the most. If you live in the city, you have a choice but there is no choice in rural areas. That is why I am asking the Taoiseach to consider something like reducing the VAT or we will not have food on our tables this winter.

Comment on this

First, in terms of rural Ireland, a major and unprecedented initiative was taken to increase the allocation of resources for a rural transport scheme. The only city that has Luas and DART services is Dublin. The other cities do not have those services although we are trying to develop a more expanded bus network. That is acknowledged. We are one of only a few EU countries that by way of a special derogation from the general EU rules already apply a reduced rate of VAT of 13.5% to energy prices. Under EU rules, this rate cannot be reduced below 12% so if we were to attempt to reduce the rate to 9% for a few months, for example, I am informed that the VAT rate would afterwards revert to the standard rate of 23% and our special derogation would be lost. The VAT reduction option is not as simple as it has been presented in the House and could have serious repercussions down the line. What is important is that we look at ways to cushion families against the impact of increases in energy prices and we are keeping that under review.

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