Should the Government cut fuel taxes for hauliers? Jimmy Quinnis in favour and Óisín Coughlanopposes.
Ireland has the most truck-dependent economy in Europe. If the hauliers can't make a living, we'll all suffer the consequences, writes Jimmy Quinn.
THERE CAN be no doubt that the dynamics surrounding the supply and usage of energy in this century have changed beyond all recognition. The energy taxes that apply today were conceived over 50 years ago when energy was cheap and plentiful. In this century all that has changed.
Today, the Minister for Finance takes €367 per 1,000 litres of diesel fuel purchased. This is the amount required to fill the tank in a modern truck. The cost of this has risen from €600 to €1,240 in a space of three years. It represents an export tax of €367 on that vehicle, while delivering a truckload of Irish beef, fish, computers, or pharmaceuticals to customers in Bologna or Madrid.
The problem is not just an Irish one. On a pan-European basis, road hauliers are in despair. The economics of running a road transport operation have been turned upside down in a short time. All these factors are outside the control of hauliers. From Monday to Saturday, the entire inside lane of any European motorway is a conveyor belt of trucked goods heading to consumers.
The vision that Schumann, Adenaur and company shared in post-war Europe has been a resounding success. It is now obvious that nations who are trading extensively are less likely to go to war with each other. The abolition of border controls in 1992 triggered an explosion in trade which resulted in the most astonishing performance of the logistics sector in catering for the growth of this trade.
Trade is the key to economic prosperity. The road haulage sector is the facilitator of this trade. Politicians have never tired of reminding us in Ireland of our peripherality, but hauliers have just gotten on with it. We did this without State aid, or a grand plan: we were just entrepreneurs hungry for success who spotted an opportunity and had a go.
Foreign direct investment has driveemployment in Ireland, especially since 1992. We export 90 per cent of everything we make. We depend on trucks to deliver 95 per cent of the goods we export. We are the most truck-dependent economy in Europe. We don't have the options of rail, barge, pipeline or coastal shipping that they do in Europe.
Peripheral regions have the most to lose if manufacturing start to drift back to central Europe. Newly joined nations are busy copying the template used in Ireland to attract foreign investment. Our competitiveness is, as our Government rightly reminds us, very precious. It's time they did something positive about it, rather than pay lip service to it.
One reason put forward for not helping the road haulage sector is that it will damage the rail sector. This is bunkum. Rail has an important place in European logistics. It has a limited role here. Rail could just about cope with a 3 per cent per annum swing from the roads, but everywhere you have a railway you need a fleet of trucks at each end of it.
Lazy thinking in Brussels and the greed of finance ministers on a pan-European basis have left alternative fuel options light years behind where we could be. The first petrol shortage happened in the 1960s - the Suez crisis. The 1970s saw the fall of the Shah of Iran and the tumult which followed. There were the adventures of Bush Senior and Junior. The Brazilians got their ethanol programme going in the 1970s as a direct result of the shortages in that decade. But we in Europe have squandered opportunities in this regard, and while alternative energy sources will stretch oil reserves, they are a long way off being a total replacement.
The other myth which should be nailed is the idea of carbon tax, insofar as it applies to freight vehicles. We have paid a multiple of the proposed carbon taxes since Christmas! It has achieved nothing but to drive the whole European transport sector onto the streets, and create mayhem in fishing and farming enterprises. There are in excess of two million cars in the Republic, but just 16,000 licensed haulage vehicles. Add in a further 4,000 from the North of Ireland and that is how the 32 counties function. A rebate to essential users, who are licensed and tax-compliant, would cost €367 million per annum. The amount of money lost to diesel launderers is estimated at €500 million per annum.
Each of us gets through 750kg of goods a year, all delivered on trucks. If fishermen cannot afford to fish, farmers cannot afford to sow and hauliers cannot deliver goods because of the price of fuel, it is society that has a real problem - not just the hauliers.
Jimmy Quinn is president of the Irish Road Haulage Association
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The real problem is our over-dependence on diminishing oil. Cutting fuel taxes is as futile as building sandcastles to stop the tide, writes Oisín Coghlan.
THERE IS no doubt that hauliers face real problems with rising fuel prices. But demanding that the Government reduce taxes is not the answer. We are up against geological reality. Oil is a finite resource and we have used almost half the accessible, conventional sources. Meanwhile, global demand is rising relentlessly. According to BP, average demand in 2007 rose to 85.2 million barrels a day while average production fell to 81.5 million. With a gap like that, it is no wonder prices are at record levels. Speculation and political uncertainty may cause short-term spikes and dips but in the long term the oil price is going only one way. Asking the Government to address this with tax cuts is absurd. As George Monbiot puts it, you might as well demand that they ensure it only rains at night.
Government taxes are not contributing to rising fuel prices for hauliers. VAT can be reclaimed and excise duty is set at 44c a litre on petrol and 38c a litre on diesel. As market prices rise, excise becomes a smaller proportion of the price. The impact of any tax reduction would be minimal. There is no guarantee the price at the pump would even fall. It could just as easily be appropriated by fuel companies under the cover of rising world prices. Any actual savings to the haulier would soon be eaten up by further rises in world prices. Moreover, the Government would be starved of the revenue needed to invest in a smart, 21st century transport and energy infrastructure.
The problem is simple and stark: our over-dependence on oil. And cutting fuel taxes to tackle that is as futile as building sandcastles to stop the tide. We have to wean ourselves off such polluting fossil fuels and the painful truth is that high prices have an important role to play in that shift.
Already EU and US oil consumption has fallen by 1 per cent as companies and individuals embrace efficiency and rethink lifestyles. Driving in the US has actually fallen by 4 per cent. Ford and General Motors have announced plans to switch production away from gas-guzzlers towards new fuel efficient models. Having resisted tooth and nail any federal plans for gradual improvements in fuel-efficiency standards through regulation, the automotive industry is now transforming itself overnight in response to changing demand brought about by high oil prices.
Jimmy Quinn has argued that our existing energy tax system was designed in an earlier era when oil was cheap and plentiful. In a way he's right. The current system does nowhere near enough to incentivise us to husband what we now know is a precious and scarce resource, albeit a highly polluting one.
While rising market prices do reflect that increasing scarcity, they do not reflect the cost of the pollution that arises from burning oil. Only government measures can address what the market ignores. The obvious step is tax reform which shifts tax away from jobs and income and onto bad things like pollution. The Government is committed to implementing a revenue-neutral carbon levy, something the ESRI has been seeking for 17 years. If we had implemented it 10 years ago when we agreed our Kyoto target, we would now be much less oil dependent.
An emerging alternative is a "Cap and Share" scheme which gives all citizens an equal share of pollution permits from a national quota. Only importers of primary energy, like oil, need to buy permits. Citizens simply sell their share into the market through banks and post offices. The more they then reduce their demand for energy the more of the proceeds they get to keep. A new study commissioned by Comhar, the national sustainable development council, favours Cap and Share over either a carbon tax or personal carbon trading and concludes that the transport sector is the ideal area to introduce the scheme.
What both of these options do is ensure that prices fully reflect underlying costs. This is the solution for hauliers too. They must pass on their rising costs to those they transport goods for, such as supermarkets and other retailers. As consumers we need to see the price signal from higher oil prices feed through into the goods and services we buy. That will help trigger the shift to more environmentally sustainable consumption patterns, thereby containing climate change and protecting ourselves from worse oil price shocks down the line.
Oisín Coghlan is director of Friends of the Earth"