There is renewed pressure on the Government to impose a windfall tax on energy companies to help fund measures to ease the cost-of-living crisis.
Opposition politicians highlighted revenues at semi-State energy group ESB and the operator of the Corrib Gas Field, Vermillion Energy, as they argued that Ireland should follow the UK in bringing in a windfall tax.
Officials in the Department of Finance are looking at the issue but the Government has so far played down the prospect of introducing a windfall tax.
Asked about the UK measures on Friday, Tánaiste Leo Varadkar said the Government had “done a lot more” than its British counterpart to tackle the cost-of-living. “For example, in the United Kingdom they’ve put up income and national insurance, we reduced it. They’ve frozen welfare and pensions, we increased them and we have already given an increase in fuel allowances to low income households and also taken €200 off people’s electricity bills so if you compare like for like, we are actually ahead of what has been done in the United Kingdom, here in the Republic of Ireland.
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“We are, of course, examining more way of helping people out with the cost-of-living,” Mr Varadkar added. “What we really want to focus on the next package of measures is on areas where we can reduce costs sustainably, areas like child care, for example, which is very expensive in Ireland, the cost of putting a child through college, medicines, the cost of health care, the cost of public transport – they’re the kind of things that we are examining in great detail as we head into the budget.”
Minister for Finance Paschal Donohoe this week highlighted the differences between the energy sectors in Ireland and the UK as he spoke of the difficulties of bringing in a windfall tax. He said much of Ireland’s energy supply is provided by semi-State companies and placing a levy on them would impact on the dividends they pay to the exchequer. Mr Donohoe mentioned ESB and said its profits were needed to fund renewable energy. He said the issue of a windfall tax was “under review” and decisions would not happen until October’s budget.
Labour’s finance spokesman Ged Nash told The Irish Times that he will be raising the need for a windfall tax on energy companies in the Dáil next week. He said “hyper-profits” are being made at a time when people “are having to spend a bigger proportion of their income than ever on paying the electricity bill and on keeping the house warm”. His party wants to see resources generated by a windfall tax used to expand the fuel allowance scheme.
Mr Nash said the ESB made a “massive” operating profit of €679 million last year and that profits posted by Vermilion Energy which operates Corrib and part-owns the gasfield are “eye-watering”.
The Canada-headquartered company recorded pretax profits of CAN$1.38 billion (€1.01bn) in 2021 after losses of CAN$1.87 billion in 2020. Rising gas prices ensured that its revenues from the Corrib Gas field last year increased almost fourfold to CAN$214.4 million (€152.86m).
Mr Nash said: “The likes of Vermillion should be in the Government’s sights if they have the political will to provide more support to the hard-pressed households that need more help to make ends meet.”
Asked about the debate on a windfall tax, a Vermilion spokeswoman said the company “does not provide comment on speculation”.
People Before Profit TD Richard Boyd Barrett said electricity providers have benefited enormously from the surge in prices. He said ESB made an additional €63 million in 2021 “yet in March it announced that bills will go up by nearly 25 per cent”. He said “excess profits” should be taxed at 50 per cent and this could raise at least €300 million “to support hard-pressed households”.
ESB said taxation and dividend policy “are a matter for the Government” and that the company must earn “an appropriate level of profits” so it can invest in energy infrastructure and repay its borrowings along with interest. “In 2021 ESB delivered a profit after tax of €191 million and dividends of €126 million to the Irish exchequer,” it added.
New research by Permanent TSB found that 81 per cent of consumers cited increases in the cost of living as a key concern, up from 62 per cent just three months ago. The same research found that 62 per cent of people surveyed feel they will have to cut back on food spending over the coming year in response to sharp price rises, while 53 per cent of people fear they will be unable to pay higher energy bills.
