Budget sweeteners

ALCOHOL prices will be reduced and a new car scrappage scheme will be announced as two minor sweeteners in today’s draconian Budget 2010.

But the Government will still face a wave of public fury over swingeing cutbacks, including those to child benefit and social welfare payments.

The Coalition is planning to rush through the cuts to social welfare payments to prevent Fianna Fail backbenchers from being forced into a climbdown.

Petrol and diesel will go up by 4c a litre by midnight tonight, but motorists will also get the chance to buy a new car slightly cheaper, with the introduction of a scrappage scheme for bangers. The price of a pint is also set to fall, possibly by about 10c, as Finance Minister Brian Lenihan cuts the excise duty on alcohol by up to 20pc.

Mr Lenihan strangely claimed last night his speech this afternoon was “going to be the last of the very difficult Budgets”. The minister said his Budget needed to “give hope to this economy”.

The Government is going to rush the passing of cuts in social welfare through a Dail vote tomorrow to prevent any Fianna Fail backbenchers being lobbied to vote against the cuts when they go home to their constituencies this weekend.

Taoiseach Brian Cowen yesterday said the legislation bringing in the social welfare changes, including a 10pc cut to child benefit, would be put in place tonight or early tomorrow to allow it to be debated the day after the Budget.

Mr Cowen said the Social Welfare Bill would be passed by Friday and a vote on carbon tax would also be taken that day.

The Taoiseach said the legislation to bring in the €1.3bn in cuts to the public sector pay bill would be passed next week.

The Cabinet yesterday agreed the €4bn in cuts and savings to be announced by Mr Lenihan this afternoon. The Budget document has now gone to the printers and ministers will formally sign off on its contents at a special Cabinet meeting at 8am this morning.

The new carbon tax will cause an immediate impact on car fuel, with a rise in the price of petrol and diesel.

But motorists who want to upgrade their cars will benefit from a car scrappage scheme — provided they are buying an environmentally friendly motor.

Where somebody trades in a car over 10 years old for scrappage, the Government will offer around €1,500 off the Vehicle Registration Tax on their new car. But this new car will have to have low emissions, putting it in tax bands A or B. These cars already attract the lowest road tax and VRT levels and are highly fuel efficient.

Cars that emit up to 120gms of CO2 every kilometre fall into Band A and attract a VRT rate of 14pc and owners pay €104 a year road tax.

Those in Band B with emissions between 121gms and 140gms have a VRT rate of 16pc — and road tax of €156.

Many smaller cars, especially those with diesel engines, fall into these categories and will be prime targets for buyers under the new scheme.

Excise duty on alcohol will also be cut substantially as the minister aims to stem the flow of shoppers across the border.

A number of measures will be introduced with immediate effect through votes in the Dail tonight.

The carbon tax will mean a litre of petrol will go up by 4c and diesel by a similar amount.

But the increases in home heating fuels will be staved off until next spring to avoid an adverse hit on homeowners.

The Government believes it would not be possible for householders to stock up on fuel before the price hike comes in.

Under the plan, 1,000 litres of home heating oil will go up by about €40, a bale of briquettes by 35c, and a tonne of coal by €42. Timber blocks won’t be affected by the new tax.

Tax

The €500m raised from the carbon tax will be partly ring-fenced to be pumped back into providing extra fuel allowances for the poor and the elderly.

There will also be funding for councils to improve the insulation in local authority houses and schemes for private houseowners to cut down on their fuel usage.

The drinks sector has repeatedly called on the Government to reduce excise rates on spirits to stem the tide of shoppers heading to the North.

Excise receipts from spirit sales have slumped by over 26pc in the past year, with bottles of spirits sometimes up to €10 cheaper over the border.

Vintners Federation of Ireland representative Con Dennehy said the price cut would “most definitely” be passed on to the customer. He said it would be a positive move for sales in pubs and keeping off-sales from going up North.

Mr Cowen said the Government had to proceed with the legislation as there wasn’t much time at the back end of the Budget as would have been the case in previous times.

Twelve other European countries have already introduced car scrappage schemes with positive results. The scrappage scheme in Britain has turned a 30.5pc decline in sales in March into a 6pc increase in August; while Germany’s scheme saw an increase of 18pc in sales for the first quarter of 2009.

- Fionnan Sheahan, Aine Kerr and Patricia McDonagh

Irish Independent