FIANNA FÁIL has struck back at comments from finance minister Michael Noonan, saying the minister is “out of touch” with ordinary people on the impact of rising fuel prices.

Noonan had said earlier today that FF’s emergency legislation bring brought before the Dáil this week – which proposes to cut excise duties on a litre of petrol and diesel by 4c, a move which will see prices drop by 5c after VAT – had come from “economic dreamland”.

The minister had said the legislation would take €150 million out of the economy and require the 2012 Budget to be reassembled – but this afternoon FF’s Timmy Dooley hit back and said the idea for the legislation had come from Noonan himself.

“Minister Michael Noonan seems to forget that only last week he confirmed to the Dáil that people adjust their spending patterns in other sectors of the economy depending on the price of fuel,” Dooley said.

“We agree with what he said last week and believe a modest reduction in the cost of fuel would result in a €145 million stimulus to other, more productive sectors of the domestic economy.”

Last week, when a similar proposal was mooted in the Dáil, Noonan had said the current increase in petrol prices would not cause any unexpected surge in VAT takings.

He said:

It should also be noted that there is no windfall for the Exchequer as a result of these increases. What happens is that people who have to use their car to get to work will make savings elsewhere.

In other words, they are spending more on fuel and less on something else. While the Exchequer takes an additional amount on VAT from fuel, it loses VAT on other parts of the spending profile.

Dooley said that by this logic, it was possible to cut the levies on fuel, as the government would then recoup the savings by the resurgence of activity in other sectors.

“The Minister should be careful of accusing others of losing touch with reality at a time when his Government is heaping new charges upon families and is apparently clueless about the effect this is having on people.”

Dooley also pointed out that Enda Kenny, when leading the opposition, had called on Brian Cowen’s fledgling government to initiate moves which would reduce petrol prices.

In the Dáil in June 2008, Kenny had said:

I am disappointed that the Taoiseach does not have an initiative with regard to the mix of excise duties and VAT to ensure they are not used as a further battering ram against the hard pressed consumer.

Noonan: FF is in ‘economic dreamland’ with plan to cut fuel prices