Oil prices surged overnight as the unforeseen and continued costs of Donald Trump’s war on Iran continued to spiral. About that – the war itself – there is not much Irish politicians can do. Search the international newspapers today, if you do not believe me, and see how many non-Irish publications covered President Connolly’s blistering lecture on international law yesterday: The figure is zero.
But there are things the Irish Government can do to mitigate the damage here, and it continues to refuse to do them.
Sometimes, dear reader, I just have to take a step back and marvel at the lack of self-awareness in both Ireland’s politicians, and it’s fourth estate. I mean, what is there to be said about this line, which appeared in an Irish Times article by Jack Horgan-Jones over the weekend, concerning the Government’s apparent inch towards a U-turn on war-related energy supports. The “he” here is Minister Thomas Byrne, pictured above:
“He said the Coalition would “look at this over the next week or so [and] see how things develop,” adding it was “open to examining supports we could give”.
However, he downplayed the prospect of a measure like a VAT cut, which he suggested would not benefit people directly – rather allowing retailers and wholesalers to “pocket” the difference in prices themselves.”
This line was published, I repeat, in the Irish Times, which was the beneficiary two budgets ago of a Government policy to reduce the VAT on newspapers to 0%. The Newspapers promptly “pocketed” the difference in prices themselves, without so much as a word of reproach from the Government, as that was the wholly intended effect of the policy.
Now of course, it was well understood before the Government eliminated newspaper VAT that this is precisely what would happen. The VAT cut for newspapers was, in fairness to all involved, never really presented as anything more than a bailout to the people who are supposed to hold the Government to account in print. Presumably one part of their repayment for that little favour was that everyone would simply agree to forget it had happened, and never mention it again in the context of VAT on anyone else.
But to pretend that newspapers and fuel-retailers on forecourts up and down the country are the same is so ludicrous that really only a newspaper could publish it with a straight face. The differences are legion.
First, the newspapers do not really compete on price. There are very few of them to begin with, but to take the three largest broadsheets: The Irish Times sells for €2.70 daily, the Independent for €2.80, and the Examiner (owned by the Irish Times) for €2.60. Buying the cheapest one rather than the most expensive would save you €1 a week.
By contrast, fuel retailers do compete on price. This factor alone would mean that the vast majority of any VAT cut would immediately be passed on to the customer, as a 23% price differential between suppliers would deliver an average motorist somewhere between €20 and €40 per week.
In addition, the Government would like us all to pretend that VAT is a static thing, when in fact it is dynamic. This tweet from Robert Burke over the weekend sets out just how false this is:
In fact, as Robert points out, Government VAT is the cause of more than 50% of the recent price increases. On diesel alone, the price at the pumps has risen by 26cent a litre at some pumps, of which 15cent goes directly to the Government. The state is taking the single biggest chunk of the price increases, just as it takes the single biggest chunk of the price. That was never true of the Newspapers.
In fact, just by handing back this tax windfall, the Government could save a family running a diesel vehicle nearly €8 on a weekly fill. That is without the Government taking any financial hit at all compared to what it was taking in before the war. This might require emergency legislation, to be sure, but it’s hardly beyond the realm of the possible. Doing so would immediately ameliorate the recent price increases at no cost to the state.
But the Government does not wish to do this. Instead, I suspect, we are going to see something they find much more politically palatable: Targeted handouts to low-income families in a form of explicit vote buying – and almost certainly in a way that, with the recent fuel increases, still leaves the Government a net financial winner out of the whole deal. In other words, I would bet my house that whatever money they hand out to low-income families will be dwarved by the windfall they take in on additional taxes.
Where does that leave the middle class motorist? Absolutely nowhere, as ever. Instead, you are expected to believe nonsense like “cutting VAT would hand profits to the retailers”, despite that being absolute nonsense, while the state continues to line its pockets at your expense and blame your local petrol station for its own crimes against your wallet.
And the media? Well – they were already bought off with the 0% VAT, so don’t expect too much support from that quarter. Shameful.