LAST UPDATE | 10 Nov
MICHEÁL MARTIN HAS raised concerns about Fine Gael’s plan to reduce the VAT rate for the food and hospitality sector to 11% stating that “the problem with going to 11% is gas and electricity prices would have to be brought to 11% as well”.
Fianna Fáil manifesto pledges to keep the 9% VAT on gas and electricity bills for the next 5 years in a bid to keep costs low for customers.
The government originally cut VAT on domestic gas and electricity from 13.5% to 9% in 2022, but it has been extended for the last two years.
If it were returned to the higher rate of 13.5% it would add around another €65 a year to the average electricity bill.
His comments come as one of the first election campaign disagreement among party policies has emerged over the VAT issue.
Fianna Fáil leader Micheál Martin told The Journal this week that the cost-of-living is coming up on the doors as he canvasses around the country.
Tackling the cost-of-living and high energy costs is understood to be a core pillar in the party’s election strategy.
However, Taoiseach Simon Harris moved to allay any fears today, promising today that “there is more to come” on his party’s cost-of-living measures.
Harris said: “We can’t say to business people ‘we can’t help you, because we also have to help householders’.
“Governments have to be able to do more than one thing at a time, and let me assure you, and most importantly, assure people getting electricity and energy bills: you haven’t heard from Fine Gael yet on our policy proposals in relation to that.”
He added: “There is more to come though in our cost-of-living measures, because we’re absolutely, absolutely committed to helping people with the electricity and energy bills.”
Responding to Martin’s criticism, he said gym memberships would not increase as Fine Gael was introducing a separate tax credit.
Harris said: “We have also said we’re introducing a tax credit for gym membership worth €50.
“So let’s say your gym membership is €500 euro, you go up to €509 if the VAT changes, but it’ll come down by the €50 tax credit, so gym membership costs will fall under the Fine Gael plan.
I know Micheál is into the fitness, although I think he’s more a walker than a gym man.
The manifesto, which is due to be published next week, will also outline that the party intends to reduce the Public Service Obligation (PSO) levy on households’ electricity bills by up to €100.
The Commission for the Regulation of Utilities (CRU) announced earlier this year that network charges would kick in for customers from last month, adding an average of €100 to customers’ bills,
The charge, which equates to around €8.40 a month, is required to fund investment in the electricity grid.
However, the party is proposing a switch to direct funding by the Exchequer of the Renewable Electricity Support Scheme, which would in turn, reduce the PSO levy on households.
Speaking in Cork yesterday, Martin said his party is committed to keeping the the 9% VAT rate for electricity gas prices.
The Fine Gael proposal of 11% would, in turn, increase energy costs for businesses and households, said Martin.
“That’s something I think that we have to reflect on. We don’t want to be increasing gas and electricity prices for homes and for businesses. Incidentally, it also increases membership fees for gyms across the country. They’d have to come from 9% to 11%,” he said.
Minister for Finance Jack Chambers said Fine Gael’s plan would directly lead to a 2% increase in the energy bills of every business and every household in the country.
“On the one hand, they are proposing to reduce the VAT rate for hospitality, while on the other hand they are increasing the VAT rate for all business, including hospitality.This move is regressive,” he said.
“Fianna Fáil will deliver a permanent 9% VAT rate on gas and electricity for 5 years, lowering costs for every business and household.
“Our proposals fully fund retaining a lower rate of tax on energy bills for everyone, and also provide separate direct aid for businesses and the hospitality sector in particular.
“Fine Gael’s proposal for an 11% rate will lead to an increased tax on gym memberships, which is very unfair to tens of thousands of people who value being a member of their local gym.”
Fianna Fáil, if in government next time around, also plan to benchmark energy network costs against other OECD countries.
The move comes after Eurostat revealed in recent weeks that households in Ireland are paying for the second most expensive electricity in the European Union.
A household using both electricity and gas is paying around €500 more a year for their energy compared with the average in other European countries.
There is also a pledge contained in the manifesto to publish an independent investigation into the speed and extent of passthrough from wholesale prices to retail prices, so as to provide transparency to consumers.
A number of ministers have raised concerns in recent months about the slow pace in which energy operators are passing on cost reductions to consumers.
Party sources state the overall aim is to ensure that consumers see a reduction in their bills when companies wholesale prices fall.
In this year’s budget, it was announced that two €125 energy credits would be paid to all households.
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