Budget 2023: Grants for electric cars maintained, VAT reduction on newspapers, but no incentives for bicycles

— Despite climate emergency, cost-of-living and energy crises, Government fails to act.
— No change in VAT after EU rules relaxed, when Government previously blamed EU rules.
— Programme for Govt promises wider incentives, Ibec and opposition supported action.

Budget 2023 today has brought news of continued grants for electric cars and 0% VAT on newspapers, but no good news for incentives relating to bicycle sales, rental or services.

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There has been a range of options on the table including a VAT reduction from 23% to 13.5% or 9%, grants, or a scrappage scheme. But none have materialised today.

Sources told IrishCycle.com this is because the Green Party had to use its ‘political capital’ regarding transport to maintain the 20% cuts for public transport and continuation of the funding increases for extra bus services relating to the BusConnects network rollout.

IrishCycle.com understands that there was opposition to the incentives — which are seen as “Green” measures — from the Department of Public Expenditure and Reform and some within the Budget teams of the Green’s coalition parties.

The Programme for Government promises to “Widen the eligibility of the Bike to Work scheme”. But an expansion of the Cycle to Work scheme is not possible due to such a tax scheme only being available to PAYE workers.

So, widening the eligibility would instead require some kind of different incentives such as grants which are available in other countries or zero-interest loans available in Scotland and some US states.

The view that the Cycle to Work Scheme is too limited as it is not open to a large range of people or businesses is shared by independent experts on active transport and climate action, Department of Transport officials, and cycling campaigners.

The Cycle to Work Scheme is also seen as not as generous as the grants for electric cars which range from €2,000 to €5,000 for consumers, €600 for home chargers, and between €2,000 to €3,800 per vehicle for businesses.

As the website reported after last year’s Budget, there’s a wide range of incentives for bicycles around the world, especially costly electric and cargo bicycles which are seen to have a large potential as car replacements for many trips.

One source hinted that there’s still an outside chance that some measures within spending windows might still be announced or worked out after the Budget. However, tax changes are generally only announced on Budget day, so, without a “mini-budget” at some point in the next year, the VAT rates are likely to stay the same until Autumn 2023.

Last Thursday, a parliamentary answer from transport Minister Eamon Ryan said: “There are currently no plans to extend eligibility for [the Cycle to Work] scheme further. We are, however, examining a number of active travel initiatives as part of the budgetary discussions which will be finalised this week, which, if implemented, could result in the removal of some barriers to cycling and could see increased numbers of people of all ages engaging in active travel going forward.”

A number of attempts were made today to seek on-the-record comment from the Department of Transport.

The Green Party press office was also contacted, and tonight a spokesperson said: “The Green Party are continually examining ways in which we can incentivise the take-up of cycling.”

They added: “In this Budget we have continued the unprecedented investment of €1m a day in active travel infrastructure such as bike lanes, greenways and footpaths. We will continue to press local authorities across the country to use these allocations in order to accelerate the take-up of cycling in Ireland.”

In the Budget debate in Dail today, Duncan Smith, a Labour Party TD for Dublin Fingal, said: “Working parents should not have to rely on cars to get their kids to school. It is senseless that the Government has not introduced an expansion of the cycle to work scheme to allow parents to purchase a bike for their children under such a scheme. The recent school transport scheme fiasco and the Government’s handling of it only drives this point home further.”

He said: “We also need to get innovative in our approach to transport in Ireland. France plans to introduce a car scrappage scheme that will provide grants for trading in an old car in exchange for an e-bike or a cargo bike. What is stopping this Government from introducing a similar scheme here? Again, it is a simple measure that has been introduced elsewhere that will encourage people to get out of their cars, reduce their costs and give us a better chance of meeting our climate targets.”

Wide support for incentives for bicycles

At the Oireachtas Committee on Budgetary Oversight earlier this month, Hazel Ahern-Flynn, an economist for business group Ibec, that that it supported the VAT reduction and named-checked bicycles twice.

She said: “Under EU rules there is provision to provide a more favourable rate of VAT to energy-efficient technologies and that ranges through everything from bikes to solar panels to heating pumps. Very simply, what we are calling for in our budget submission is to make full use of the greening of the VAT rules to make sure they are a preferable option.”

Later in the committee meeting, Ahern-Flynn said: “We have the room to additionally cut VAT rates per the EU’s framework on it. It would be sensible that we take full advantage of that, given the current climate.”

The issue was also not only a Green Party one. According to a search on KildareStreet.com, the following TDs asked parliamentary questions the Government taking advantage of the new EU-level VAT rule: Jim O’Callaghan of Fianna Fail, and Sinn Fein TDs Darren O’Rourke, Pat Buckley, and, before the last election, former TD Jonathan O’Brien.

While Green Party TDs Brian Leddin, Neasa Hourigan, and Marc Ó Cathasaigh also asked about the changes.

A large number of TDs over recent years have also asked questions about an expansion of the Cycle to Work Scheme — recently including Fine Gael, Labour, and Sinn Fein TDs.

In his most recent written parliamentary responses on VAT in May, Minister for Finance and Fine Gael TD Paschal Donohoe said: “Following a new agreement on VAT rates coming into force in April, officials in my Department are currently reviewing the options now available to Ireland in setting VAT rates.”

He ruled out zero percent, and said it if there were no behavioural change by consumers, the cost of a reduction in VAT on bicycles from 23% to 13.5% could be in the region of €6m annually.

In June, Sinn Fein Senator Lynn Boylan, at the Joint Oireachtas Committee on Climate Action, said that the Cycle to Work Scheme has been great but said that it is “designed regressively so that the higher your income, the more benefit you get from it. It also excludes children, students and anybody who is on social welfare payments.”

She asked: “Is there scope to amend that scheme so that it is more inclusive of people who might want to take up cycling but, for whatever reason, are not in paid employment?”

John Martin, principal officer at the Department of Transport, responded: “There is a PAYE element to [the Cycle to Work scheme]. As a result, it excludes those who do not work, including children and students, etc. It is something we are looking at. We are also looking at other things in respect of e-bikes or e-cargo bikes, where the bike-to-work scheme does not cut it in terms of the amount of relief it offers.”

He said the issue would be included in budget negotiations, and added; “I reiterate that it is on our radar. We are aware of it and we are looking at it.”

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