Coalition on collision course over budget hike in carbon tax on fuel

Fine Gael wants the planned tax hikes delayed or offset before they come into effect next month.

However, the Green Party is adamant the climate change measures should go ahead as planned.

While Fianna Fáil would also like to see the tax hikes delayed, the party believes that putting off the increases will lessen the amount of financial resources available for other budget measures.

It has also emerged that excise duty cuts on petrol and diesel will be extended in the Budget and consideration is also being given to reducing fees for people who pay motor tax in instalments.

Carbon tax increases are legally set to rise on October 12 and will see the price of a 60-litre tank of diesel increase by €1.48 and a similar tank of petrol by €1.28.

Legislation agreed by the coalition parties will see carbon taxes increased to €48.50 per tonne on motor fuel and home-heating oil.

However, increases on home-heating oil have been delayed until May so homes are not negatively affected by the measures during the colder winter months.

Fine Gael now wants to see increases on fuel and diesel also delayed until May due to the rising cost for motorists at the pumps since the Russian invasion of Ukraine.

“It will have to be deferred or offset given the high price of petrol and diesel at the moment,” a senior Fine Gael source said.

There is even some discussion within Government about delaying the hike entirely next year, and instead adding the planned percentage increase for 2023 over following years.

However, the Green Party will insist the carbon tax increase on motor fuel costs should go ahead next month despite the impact it will have on prices as the climate crisis has not gone away.

The party will argue that the tax results in minimal increases in petrol and diesel prices and insists the real impact on fuel costs is due to the war in Ukraine.

The Green Party will also insist that money raised by the tax will be used to pay for cost-of-living measures aimed at off-setting price hikes resulting from the introduction of road taxes.

Fianna Fáil is relatively agnostic about increasing the tax again this year, with senior party figures noting that the tax is already set out in law.

Party sources also pointed out that money raised from the tax is significant and further budget adjustments would need to be made if the increase on petrol and diesel is delayed for another seven months.

However, there seems to be agreement among the coalition parties that cuts in excise duty on motor fuel will remain in place after the Budget, which will be announced on Tuesday, September 27.

The Government reduced excise on petrol by 15c and diesel by 10c earlier this year due to record rates of inflation and a global energy crisis.

All three coalition parties agree the cuts should remain in place over the coming months but there is still a debate over when they should come to an end.

Sources have also said there is discussion taking place about reducing the fees for people who pay motor tax in instalments.

At present, people who pay their motor tax over a number of months rather than in one payment are asked to pay around 11pc extra.

There is consideration being given to reducing this penalty to allow motorists who are struggling with their household finances to pay off their motor tax later in the year.

Talks on the issue are expected to continue next week.