Every autumn, when the Finance Minister of the day gets up to deliver the annual budget, this writer gets a text message from his mother: “Make sure and fill the car today, the diesel is going up at midnight”.
That’s how quickly our politicians can act, on fuel duty: They can adjust it in hours, on the fly, with no real advance warning to retailers, and the price change at the pumps can be felt before dawn the next day after they make their decision.
Readers observing the torturous process over the last few weeks to move fuel duty in the other direction, and get me the text message I got yesterday – “be sure not to put diesel in the car now for a few days till they cut the tax” – might have thought that the whole process was more complicated than bringing peace to Russia and Ukraine. Indeed, our politicians have been practically tearing their hair out in horror at the prospect that they might have to cut the taxes.
The Minister for Finance has adopted a sternness in his public commentary on the issue that could only bring to mind a particularly hard-line camp guard in some repressive regime: Youse are getting a small cut, but it will only be for a month, and it will be under constant review. The minute prices start coming down again, that tax of ours is going right back on the diesel. One might nearly think that if the public was unmannerly or ungrateful, they might have to be punished.
The Taoiseach who, for all his flaws, remains the Government’s best communicator (sorry, Mr. Harris) has at least come up with a new line to justify the Government’s recalcitrance: That this current crisis underlines the volatility of fossil fuels, and perhaps we might all learn a lesson from it about the wisdom of the Government’s policy of making everything electrified and wind-powered. Once the country is covered from end-to-end in the buzzard-murdering turbines, the argument goes, we shall no longer have to give a fiddlers about the Iranians and their Hormuz strait. For now, we are all just learning the hard way how unfortunate we were not to have Eamon Ryan around in the 1940s, designing the state’s energy strategy from the ground up.
The upshot of all this? About the smallest possible set of measures that the Government could possibly have enacted. Relative relief for motorists? Sure. But relative: You’ll still be paying more at the pumps today than you were a month ago. And the Government, despite cutting the taxes on fuel, will still be taking just about the exact same amount of money in as they were before because the reduction in excise duty will be offset by increases in VAT on the base price.
Let’s be clear about what is happening here: The Government is not foregoing a single cent in taxation. What they are giving up is the revenue windfall that was due to accrue to them from higher prices and higher VAT. This is not a “giveaway” – it is a “we have graciously decided not to takeaway”.
So what, then, is the Government talking about, when it says it has “limited scope” for action? It is, to be clear, talking nonsense: The fuel duty bonanza it was due to get from increased fuel taxes will not have been included in this year’s budget or estimates. This was always extra money that the politicians would not otherwise be getting: Giving it up by not collecting it does not, in any way, alter the budget for this year.
In fact, the state was projecting a budgetary surplus of five billion euros this year. Abolishing fuel duty altogether would have cost the state two point five billion of that, meaning that the state actually had far more scope for action than what it has taken. And it is not as if the country had no cost of living issues before the war: Energy prices have been a consistent political concern now for years, in addition to all of the other upward pressures on household expenditure.
So what’s happening here? Alas, this writer is no mind-reader, but I do know a little of how Government works, and I can tell you that the politicians will have been coming under enormous pressure from the civil service not to give an inch on fuel duty, which is seen as critical to the permanent government’s long-term climate action policy which is something that the service guards from interference by any transient political office holder. I have no doubt that our Ministers did come under enormous pressure to do as little as possible.
The problem is that once you cut the fuel duty, you establish the principle that fuel duties can be cut – when the entirety of political thought in Ireland has been devoted for years to the idea that excise duties on fuel, cigarettes and alcohol are a one-way ratchet that can never be reversed. If you alter that in the public mind, you might suddenly find a powerful constituency in favour of cutting such taxes, and the Government does not want to risk it.
Hence, these emergency measures, being presented as something they are not.
There will be a tendency in some quarters today to welcome them, and call them a good start. That is the wrong position: What they are is political gaslighting, being presented as the most that can be done, while the Government does not give back to the public even a single cent of what it otherwise would have taken in.
Be relieved, if you must, as you still pay an exorbitant price for your fuel tomorrow. But please, don’t be fooled.