PROCEEDS FROM A windfall tax on energy companies and a cap on energy firm revenues will give the Government “extra firepower” in this year’s budget, according to Public Expenditure Minister Michael McGrath has said.
Speaking to reporters on the last day Fianna Fáil’s party think-in in Mullingar, McGrath said the Government will cap the revenues of energy companies and tax their windfall profits, pumping the proceeds into households and businesses.
“We will provide direct support to our citizens and to our businesses and we will take money off those energy companies who are making unjustified gains,” McGrath said.
The EU Commission is expected to have its updated proposals ready in the next couple of days, with a final decision being taken by energy ministers later this month.
Windfall gains
McGrath said the EU proposals would “place a cap on the revenues that non-gas electricity generators are currently earning”.
“If you think for example of our wind power, which is providing so much of the electricity in this country, they haven’t seen their costs increase in anything commensurate with the kind of increases that we’re seeing in terms of of gas internationally, and yet they are earning windfall gains,” he said.
McGrath said primary producers of fossil fuels will be hit with a solidarity contribution, something Energy Minister Eamon Ryan had also indicated would be on the cards last week.
The Government is committed to giving all of the money received in respect of that cap on revenues and the solidarity contribution directly back to helping households and helping businesses, said McGrath.
Direct supports to households and business
McGrath said there is recognition of the scale of the challenge that people are facing in terms of the rising costs of energy.
He hit out at Sinn Fein’s proposals, stating that it would appears to be giving a blank cheque to energy companies.
“We will provide direct support to our citizens and to our businesses,” he said.
McGrath would not go into the details of the estimate of what the Government thinks Ireland will receive by way of revenues, stating that across government work is ongoing to evaluate what type of revenues could flow from the energy companies.
“Of course, that would feed into the budget process, because we are making it clear that the revenues we receive that are of a windfall nature, will be given back to people and giving back to businesses. It’s not a tax generating exercise by government here or by the European Union.
“But it is better that this is done on an annual basis. And we are working through the energy ministers through the European Commission on all of that at the moment,” said the minister.
When asked when he would expect to see those revenues, he said “we certainly hope to have a clearer picture of Ireland’s likely revenues from that by budget, so that we can factor that into our final decision making”.
“But we’re clear that as a government, we have to intervene anyway. But receiving additional revenues from those sources, it does give us extra firepower,” he added.
There will be some benefit in the budget for every household, said the minister.
Protecting employment
He reiterated the importance of protecting jobs, stating that “if you lose jobs, then the economic consequences and the fallout from that spiral. You end up with more people on social welfare, which has a direct impact on the Exchequer as well”.
“So it is in all of our interest to protect employment, and make sure that otherwise viable businesses are supported… The situation has deteriorated… and we do need to go further now in two weeks time, and that’s what we intend do,” said McGrath.
“It’s a very serious situation facing businesses, there is no question about that. We heard even this morning, within our parliamentary party meeting, many examples of three and four fold increases in energy bills, and nobody knows how far it will go in the months ahead.
“Those kinds of increases are not sustainable for many businesses, some can withstand it, some have the resources to absorb that scale of increase in costs, but not all of them can. And our primary aim in supporting businesses is to protect jobs,” he added.
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