Budget concrete levy concerns raised at Fine Gael parliamentary party meeting

A budget move to impose an €80 million levy on the sale of concrete products caused concerns at Fine Gael’s parliamentary party meeting, as well as stirring discontent on Government backbenches. The revenue-raising measure was announced to part-fund the €2.57 billion mica redress scheme.

Sources said concerns about the levy were raised at Fine Gael’s Wednesday evening meeting.

Dublin Fingal TD, Alan Farrell - who has spoken publicly of his concerns about the plans - called the proposal “a crude means of clawing back funding” towards the cost of a “hugely expensive remediation scheme.”

It is understood that Kerry TD Brendan Griffin suggested the levy would be “punitive” at a time when taxes on home building should eliminated, not added to.

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Tánaiste Leo Varadkar outlined how funds have to be found for defective apartments as well as the Mica Scheme and he suggested there is time to work on the details saying: “It has to be legislated for and it’s important we get it right.

However, he gave no indication that the levy would be postponed or scrapped.

Speaking on Tuesday, backbenchers criticised the move, saying it risked generating further headwinds to housing amid fears that the sector may already be facing into a slowdown.

Fine Gael TD for Dublin Fingal Alan Farrell told The Irish Times that he wanted to wait to see the detail of the levy but “I have my concerns regarding the proposal”.

“It has the potential to increase costs at a time when national and international pressures are driving up the cost of building materials.”

TDs who spoke on Wednesday complained that the inclusion of the measure in the budget was not flagged sufficiently.

Former minister of state and Fine Gael TD for Carlow-Kilkenny John Paul Phelan rounded on the Department of Finance - where his party colleague Paschal Donohoe is Minister. “Only in Ireland would we introduce a levy on concrete in a housing shortage crisis and think it’s ok,” he said. “Classic Department of Finance ‘cutting off their noses to spite their face’.”

Fine Gael TD for Mayo Alan Dillon said he was “very surprised to see it included”.

“Rising inflation on building materials is already an issue and this won’t help matters,” he said. “Ultimately it will be passed onto the customer who are already on hard times.”

[ New legislation needed for defective buildings repair scheme, Minister says ]

“Concrete blocks is the most vulnerable [element of the budget] I think,” another backbencher said. “Costs could be significant on home building - not what you want right now.”

An economic outlook produced by the Department of Finance for budget day suggests there is already a weakening of output detected in the homebuilding sector. Following a stop-start period of activity during the Covid crisis, economists at the Department said that activity “picked up strongly over the last year” with commencements of nearly 30,000 homes during the second quarter of this year. However, they warned that “with mounting headwinds - in the form of higher input costs and shortages of labour - momentum in the house building market appears to be slowing”.

Regional Independent TD Sean Canney, speaking in the Dáil, criticised the levy as ill-timed and ill-judged and said it would penalise young people trying to build or buy their first home as well as local authorities trying to build social housing.

But Taoiseach Micheál Martin told Mr Canney that sustainable future revenue stream will be needed to meet the up to €6 billion cost of dealing with existing building defects.

Defending the 10 per cent levy on concrete products, Mr Martin told Mr Canney that the construction sector has to realise that because of what happened the levies were being put in place “to deal with rogue behaviour”, that led to mica, pyrite, and apartment defects.

The levy is expected to raise €80 million annually when it is introduced from April next year. But Mr Canney said there was a “thriving inflation” in the construction sector which was creating havoc for those trying to build homes and local authorities trying to build social houses.

“This levy is not penalising people who committed wrong. It is putting an additional cost on people who are trying to build their own homes.”

Mr Canney said however the only way to avoid rogue behaviour in the construction industry was to implement effective building control and without this billions would continue to be needed for effective building control.

Mr Martin said that remediating houses affected by mica in blocks would cost €2.8 billion and pyrite interventions would cost some €1.5 billion. He added that up to 100,000 apartments would potentially be affected with a cost of up to €6 billion.

Speaking on RTÉ News at One on Wednesday, Minister for Housing Darragh O’Brien said the levy was a sustainable funding scheme to deal with the mica and pyrite redress schemes.

The Department of Finance estimated that the levy will mean a 0.4 percent increase in the cost of concrete products being used to build homes, the Minister told RTÉ News at One. The levy had been “flagged” last November by the Minister for Finance as a sustainable aspect of the remedial schemes, said Mr O’Brien. It will raise €80 million of the €2.7 billion remedial scheme which includes apartments with defects. The Minister acknowledged that he did not know how the cost of the levy would be borne or paid for and if house purchasers would bear the cost ultimately. The “workings” of the levy would be given by the Minister for Finance in the Finance Bill, he added. “It’s about trying to create a sustainable funding scheme.”

Budget documents show that the levy will be set at a rate of 10 per cent of the cost of the concrete product, ex VAT, to come into force from April 3rd next year. “This levy will be self-assessed and administered by the Revenue Commissioners. The measure aims to go some way to offset the cost to the State of the Defective Concrete Blocks (Mica) Redress Scheme”.

The mica redress is set to top €3 billion, depending on inflation. Some €65 million was made available for the remediation of homes impacted by pyrite and defective concrete blocks for the Department of Housing in capital funding in the budget.

Praise

The Fine Gael parliamentary party meeting meeting was otherwise dominated by praise of the Budget and accounts of positive feedback in constituency offices with Mr Varadkar and Minister for Finance Paschal Donohoe outlining how it will help people with the cost of living.

It was noted that Irish Fiscal Advisory Council have responded positively to the Budget.

Mr Varadkar confirmed he has spoken to Minister for Education Norma Foley in relation to school transport and the situation that has seen thousands of pupils left without seats amid a surge in demand due to the waiving of fares.

He said there is additional funding aimed at resolving the issue and consultations with Bus Éireann are ongoing.

Members raised the issue of section 39 bodies in the healthcare sector and asked they be given sufficient funding to pay their staff the equivalent of the public pay deal if it is ratified by unions in the coming weeks.