Michael Collins (Cork South West, Independent)
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I move:

That Dáil Éireann: notes that:

— from 2011-2018 and 2020-2023, the hospitality and tourism sector enjoyed a reduced 9 per cent Value Added Tax (VAT) rate;

— the Government restored this rate to 13.5 per cent in September 2023;

— the Government’s decision to hike the VAT rate on the sector last year was ill-judged and ill-advised;

— the 9 per cent VAT rate should be restored without delay, particularly to support food-related businesses which have seen insolvencies more than double in the first three months of the year;

— the hospitality sector, in this instance, includes businesses like hotels, bars, pubs, canteens, hairdressers, barbers, catering operators, hostels, bed and breakfasts, caravan parks, self-catering accommodations, and guest houses;

— the aim of reducing VAT is to lower consumer prices, stimulate demand, and boost employment in the sector;

— VAT, being a regressive form of taxation, can impact lower-income households, especially when it comes to discretionary goods like hospitality and tourism;

— pre the Covid-19 pandemic in 2019, hospitality and tourism, one of Ireland’s largest indigenous sectors, generated over €9 billion for the economy and employed an estimated 284,800 workers across 46,000 tourism-related businesses;

— the Covid-19 pandemic and enforced lockdowns have severely impacted the entire sector;

— as of Q3 2022, the latest Central Statistics Office and Irish Tourism Industry Confederation data show a total of 246,000 people employed in the tourism sector and 170,000 in the hospitality and food services sector;

— most hospitality and tourism employment is based in Dublin, with over 125,000 workers, followed by the South-West (63,000), Mid-East (48,000), and South-East (42,000);

— the hospitality and tourism sector significantly contributes to the State’s finances, both directly through employment and indirectly through income tax and VAT;

— Dublin has the largest number of workers in the accommodation and food service sector, followed by the South-West, Mid-East, and Border regions;

— between 2019 and 2023, the Border (18 per cent), Midlands (17 per cent), and Dublin (14 per cent) saw the largest reductions in workers employed;

— excluding Denmark, Ireland’s VAT rate of 13.5 per cent for the tourism and hospitality sector is the highest in Europe; and

— in 2019, the hospitality and tourism sector was worth €9 billion, employed 250,000 workers, and comprised around 20,000 businesses;

further notes that:

— the Government’s reliance on the accommodation sector to provide temporary accommodation for Ukrainian refugees and asylum seekers has significantly reduced the availability of tourist accommodation and increased prices;

— this accommodation shortage, particularly outside Dublin, directly affects other tourism-related activity providers and resulted in an expected €1 billion loss in revenue last year;

— the shortage in tourism accommodation from housing Ukrainian refugees and asylum seekers is also reducing job vacancies in rural areas heavily dependent on tourism and hospitality;

— Government-imposed labour measures that have come into effect from January are estimated to be adding a massive €466 million to the payroll of tourism and hospitality enterprises this year alone;

— for this labour-intensive sector with thin margins this is hugely challenging, and poses a pressing question for many businesses as to whether they should pass the extra cost on to the consumer, thereby damaging demand, or absorb it to the bottom line, thereby threatening business viability;

— with 75 per cent of the Irish tourism economy made up of international visitation, the Government-imposed cap on passengers at Dublin Airport is hugely problematic and impacting the sector;

— tourism is Ireland’s largest indigenous industry and biggest rural and regional employer, but a lack of Government support is leaving the sector at a vulnerable juncture; and

— the tourism and hospitality sector is grappling with a multifaceted demand scenario, marked by capacity constraints, substantial cost pressures, an exceptionally high cost of doing business, financial strains on consumers, skills shortages, and an uncertain future for key tourism markets, all of which pose immediate challenges and significant risks to the sector’s long-term sustainability; and

calls on the Government to:

— promptly reduce the VAT rate for the entire tourism and hospitality sector to 9 per cent, considering the imminent summer tourism season and the sector’s financial strains;

— in the context of Budget 2025, permanently establish the VAT rate at 9 per cent from Budget night;

— in the context of Budget 2025, consider varying VAT rates across the country in the hospitality and tourism sector to promote regional balance, including the introduction of a reduced 5 per cent VAT rate for areas outside Dublin, thereby creating a distinction between the VAT applied in rural areas and the capital, ensuring that rural areas are subject to a VAT rate no greater than 5 per cent (akin to Italy, Hungary, Latvia, Lithuania, Malta, Romania and Portugal as per the European Union Reduced VAT Rates Directive), taking into account the potential for higher prices charged by Dublin’s hospitality and tourism providers due to their proximity to external events such as festivals, international concerts, and sporting events, which rural businesses cannot leverage;

— as part of a broader review, investigate whether the VAT rates applied to the sector can be differentiated, with distinct rates for hospitality and accommodation compared to pubs and restaurants over the medium-term; and

— publish the long-overdue national policy on tourism, which must address the numerous growth challenges, ranging from the State’s use of hotels to the VAT rate to the airport passenger cap, and align with the industry’s ambition for the sector.

The tourism sector is vibrant and dynamic and plays a pivotal role in Ireland’s economy. It is the lifeblood of many rural communities, providing employment and economic activity where other industries may be absent. However, recent changes in Government policy and global events have put this vital industry under unprecedented strain.

From 2011 to 2018, and again from 2020 to 2023, the hospitality and tourism sector enjoyed a reduced VAT rate of 9%. The aim of this reduction was to lower consumer prices, stimulate demand and boost employment in the sector. However, in September 2023 the Government restored the rate to 13.5%. This decision, widely regarded as ill-judged and ill-advised, has had a significant impact on the sector, particularly food-related businesses, which have seen closures more than double in the first three months of the year. According to the Restaurants Association of Ireland, whose representatives we met yesterday afternoon in Leinster House, there was a total of 212 closures in the first three months of this year. This has far-reaching consequences. Every restaurant closure results in the loss of 22 direct employees, on average, and approximately 13 indirect jobs. As a result of direct job losses, the Exchequer loses out on €115,310 in payroll taxes. There is a loss of annual VAT receipts to the State of €105,000 and a loss of commercial rates receipts to local authorities of €11,874. Water charges receipts worth €4,583, on average, are lost. If the workers laid off have to go on social welfare payments, the annual cost works out at around €440,000. Also, considerable financial losses are suffered by numerous businesses across the economy that provide services to restaurants. The closure of one restaurant could cost the State up to €1.36 million in total in one full year, according to the recent report of the Restaurants Association of Ireland produced by Jim Power Economics.

In a survey by the Restaurants Association of Ireland, 212 of its members said that if the VAT rate is not returned immediately to 9%, they do not expect to be open this time next year. A businessman in Bandon, west Cork, told me that with respect to three hospitality businesses, whose data he combined for ease of calculation, the year-on-year VAT increase from 2023 to 2024 will cost him €220,000 and that the year-on-year increase in the cost of running the three businesses is €500,000. This includes the VAT increase, increased wages, cost-of-living increases, sick pay, the continuing high cost of energy and insurance costs. We should remember that the insurance reform promised has not been delivered. The man said he could go on but that I have heard it all before. He is but one businessman in the Bandon area.

The Minister for Finance, Deputy Michael McGrath, met the VAT 9 group, which was initially set up in west Cork. It involves a collective of small food-led business owners that started in west Cork and that has since expanded to become a national movement because all its members face similar challenges. The group was formed out of sheer frustration and because of the stark reality that its industry is collapsing right before its eyes. The support offered by the Government demonstrates a profound misunderstanding of what would truly make a difference. The group’s members are passionate about what they do and the impact of their small food-led businesses on Irish life. They have all chosen the food-led hospitality industry not because of its potential for wealth but because they are genuinely passionate about it. They cherish the sense of community and take pride in using and showcasing the abundant, wonderful ingredients their country offers. They appreciate the significant contribution they make to Ireland’s tourism sector and they want overseas tourists to love this country as much as they do. They take great pride in it. They want to convey to the Minister that operating a small food-led hospitality business in Ireland has become unsustainable and is no longer profitable. Despite being busier than ever, it has become impossible for them to turn a profit.

All those who met the Minister owned a successful business when the VAT rate was 9%. By “successful business”, they mean a sustainable business that has been able to stay afloat for many years while providing jobs, especially for young people. In the current climate, operating a small-scale food-led hospitality business is an uphill battle and a completely unviable business prospect. Most of those concerned are hanging on week by week, barely making ends meet.

The cost of doing business has skyrocketed over the past year due to factors such as food costs, inflation, crippling energy rates and insurance bill hikes, the increase in the rate of VAT to 13.5%, employer PRSI, statutory sick pay, the minimum wage increase and automatic pension enrolment. While businesses acknowledge the importance of some of these, such as the minimum wage, there must be balance and support. The businesses cannot keep increasing their prices indefinitely or absorb the cost increases. These factors render small-margin businesses, which are already just about getting by, unviable. Many have already closed and more will follow. They risk being replaced with soulless chain shops, with not a cent staying in local communities and with no one to take on students or support local clubs and teams.

The VAT 9 group has asked the Government to lower the VAT rate to 9% immediately. It is the only viable support that would give the small businesses a fighting chance. They have examined all the options available and believe lowering the VAT rate is the only viable support to give them a fighting chance. It will cost the Exchequer a little but nothing by comparison with the cost of the closure of hundreds of cafés and restaurants, resulting in lost tax revenue, PRSI, VAT and rates.

A restaurant closure costs the State and economy up to €1.36 million, on average, and results in the loss of 22 direct jobs. The hospitality sector is broad, encompassing businesses like hotels, bars, pubs, canteens, hairdressers, barbers, catering operators, hostels, bed and breakfasts, caravan parks, self-catering accommodation and guesthouses. In 2019, before the Covid-19 pandemic, the hospitality and tourism sector, one of Ireland’s largest indigenous sectors, generated over €9 billion for the economy and employed an estimated 284,800 workers in 46,000 tourism-related businesses. However, the Covid-19 pandemic and enforced lockdowns severely impacted the entire sector in quarter 3 of 2022. The latest data show a total of 246,000 people employed in the tourism sector and 17,000 in the hospitality and food services sector. Most hospitality and tourism employment is based in Dublin, which has over 125,000 workers, followed by the south west, which has 63,000, the mid-east, which has 48,000, and the south east, which has 42,000.

The hospitality and tourism sector significantly contributes to the State’s finances both directly through employment and indirectly through income tax and VAT. Excluding Denmark, Ireland’s VAT rate of 13.5% for tourism and hospitality is the highest in Europe. The Government’s reliance on the accommodation sector to provide temporary accommodation to Ukrainian refugees and asylum seekers has significantly reduced the amount of tourist accommodation available and has increased prices. This accommodation shortage, particularly outside Dublin, directly affects other tourism-related activity providers and it resulted in an estimated €1 billion loss of revenue last year. With 75% of the Irish tourism economy attributable to international visitors, the Government-imposed cap on passengers at Dublin airport is very problematic. The DAA’s control over Cork Airport has an impact on the sector. The tourism industry is Ireland’s largest indigenous industry and biggest rural and regional employer, but a lack of government support is leaving it vulnerable.

The tourism and hospital sector is grappling with a multifaceted demand scenario marked by capacity constants, substantial cost pressures, the exceptionally high cost of doing business, financial strains on consumers, skills shortages and an uncertain future for key tourism markets. All of those factors pose immediate challenges and significant risk to the sector's long-term sustainability. The Government must promptly reduce the VAT rate to 9% for the entire tourism and hospitality sector considering the imminent summer tourism season and the sector's financial strains in the context of budget 2025. The VAT rate should be permanently established at 9% from tonight.

Furthermore, the Government should consider varying VAT rates in the hospitality and tourism sector across the country to promote regional balance, including the introduction of a new radically reduced 5% VAT rate for areas outside Dublin. This would create a distinction between the VAT applied in rural areas and in the capital, ensuring that rural areas are subject to a VAT rate of no greater than 5%. As part of a broader review, the Government should investigate whether the VAT rates applied to the sector can be differentiated with distinct rates for hospitality and accommodation compared with pubs and restaurants over the medium term.

The Government should publish the long overdue national policy on tourism, which must address the numerous growth challenges, ranging from the State's use of hotels to VAT rates and to the airport passenger cap, and align with the industry's ambition for the sector.

The importance of tourism to Ireland, especially rural Ireland, cannot be overstated. It is a lifeline for many communities, providing employment and economic activity. It is crucial that the Government recognises this and takes the necessary steps to support and sustain this vital industry. No doubt the Government will argue that retaining the reduced 9% VAT rate for the tourism and hospitality sector will cost the Exchequer €789 million per year. It can be equally argued that not reducing the VAT rate could lead to the closure of hundreds of SMEs, job losses and reduced Exchequer returns and could have a significant impact on the rural and regional economy.

I thank all those in the Rural Independent Group who put together this motion. It is an excellent motion. The Government cannot be sending out soundbites as it did before the election. It must reduce the VAT rate from 13.5% to 9%.

Carol Nolan (Laois-Offaly, Independent)
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It is unclear just how many times a sector has to sound the alarm before it is taken seriously and listened to by the Government. Time and again, those working in hospitality, tourism and retail have emphatically made the point that they are facing imminent and widespread closures caused in part by the reintroduction of the 13.5% VAT rate. We know from a survey conducted last week with 180 members of the Restaurants Association of Ireland that a staggering 86.7% consider the 13.5% VAT the greatest threat to their viability. Some 73.9% said their businesses will be closed by this time next year if the 9% VAT rate does not return. Some 67.2% of the members said they would already have closed their business if it were not for the ongoing VAT 9 lobbying campaign.

This is a real crisis that is being made immeasurably worse by the stubborn and, frankly, incomprehensible unwillingness of the Government to address this key issue. I do not understand the rationale behind the refusal and would like some clarity so I can understand the point of view of the Government side. The fact is these businesses create much employment in urban and rural areas. They need to be protected. If we are to protect jobs, we need to ensure our restaurants are protected and allowed to operate with a fair VAT rate of 9%.

We know the Government has initiated several measures to support businesses, which is welcome, but unfortunately it is not enough. It is a bit like giving a patient something for his or her headache while leaving his or her broken legs untreated. I know from the responses to parliamentary questions I have submitted to the Minister for Enterprise, Trade and Employment that there have been 957 submissions from small and medium-sized business owners in Offaly for the Government's increased costs of businesses, ICOB, portal. The total number of properties involved is 1,068, while there has been an almost equivalent number for County Laois. This highlights the ongoing economic shocks being felt by retailers and small business owners. The failure of Government to reduce the 13.5% VAT rate to 9% is a move considered of critical importance by many within the retail and hospitality sectors. While I am sure that almost 2,000 small businesses in counties Laois and Offaly appreciate the support from the ICOB scheme, what we need is an immediate change to the VAT rate and escalated efforts to reduce the cost of energy. Both those factors are major drains on small enterprises operating on razor-thin margins.

I talk to small and medium-sized business owners on a daily basis and they tell me the same thing. Tinkering around the edges with schemes and supports may assist them in the short term but the avalanche of costs will keep coming long after the support schemes have been closed. Businesses need to be able to plan, going forward. They need to know that input costs, such as those for energy, and outgoing costs, such as those required by increased VAT rates, will not wipe them out. I have spoken to many employers who feel utterly demoralised by the cost burden of trying to operate and to keep their doors open.

It is time this Government got real about the nature of the very serious threat these sectors are facing. We know from the Restaurants Association of Ireland research, conducted by the economist Mr. Jim Power, that the economy will lose up to €288 million annually as a result of the closure of more than 200 restaurants, cafés and other food-led businesses so far this year. We also know from this particular analysis that every time one firm closes its doors for good, it could result in the State losing out on a total of €1.36 million in value each year and in 22 people, on average, losing their jobs. In this sense, we can truly say without fear of exaggeration that the increased VAT rate is acting like a slow-release poison in the body of Irish SMEs and tourism. Government policy is killing the patient. Worse still is the fact that the Government has the antidote to this poison but will not use it.

What is profoundly distressing to many of these businesses is the fact that the warnings were so clearly laid out. This is not some unforeseeable crisis we are dealing with. In fact, immediately following budget 2024, the Restaurants Association of Ireland and others within the various sectors made the consequences of the Government's policy approach crystal clear. In October 2023, the association stated that budget 2024 failed to deliver enough significant measures to support small and medium-sized food-led and hospitality businesses across the country, adding that business closures will occur as a result of the Government's lack of meaningful action. What did the Government do in response? Did it offer certainty by implementing a semi-permanent 9% VAT rate that would have enabled critical future planning and certainty within sectors already beset by globally high levels of energy prices? No, it did not. In a sense, it cut off its nose to spite its face. It devised and implemented supports and various schemes while leaving the key issue unaddressed.

There are approximately 18,670 active businesses within the midland counties of Offaly, Laois, Longford and Westmeath. They employ approximately 72,467 people across the region. The Minister is well aware of the challenges entirely unrelated to the crippling level of VAT that many of those businesses are facing. In the broader context, we have known for years now that despite Ireland's reputation as one of the world's most globalised economies, the majority of private sector workers are employed by indigenous, non-exporting firms and SMEs. The Government was at one point capable of recognising how these numbers highlight the importance of domestic demand for sustaining and generating employment within the SME sector.

This is not rocket science. No sector can survive the endless onslaught of high VAT rates and energy costs. Cash reserves and savings are being poured away just trying to stay afloat, pay wages and keep doors open. The solution is here before us. It merely requires political will. It is way past time to signal the end of the 13.5% VAT rate. If the Government fails to do this, I have a request to the Minister of State. Will he come with me to speak face-to-face to the many business owners across Laois and Offaly who are about to call it a day for their businesses and dreams? Will he explain to them why those dreams are being sacrificed for a policy that makes no sense socially or economically?

Neale Richmond (Dublin Rathdown, Fine Gael)
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I thank the Deputies opposite for tabling this motion. I welcome the opportunity to discuss it and lay out a few issues. In the few minutes I have available to me, I would like to go through the motion itself, the challenges that have been cited, some of the responses that have been issued, some of the engagement we have had and to take the debate in the round. I would like to state for the record that the Government does not intend to oppose this motion, but I remind Deputies that any decision on all tax matters, including VAT, is considered as part of the budgetary process. Therefore, the decision to not oppose this motion today does not mean that the Government has made any decision in respect of budget 2025. We do not announce the budget in June.

Mattie McGrath (Tipperary, Independent)
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They cannot wait until the budget.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I have not even got 45 seconds into my speech.

Mattie McGrath (Tipperary, Independent)
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No response.

Neale Richmond (Dublin Rathdown, Fine Gael)
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If the Deputy listens to the entirety, he will be given a full response.

Mattie McGrath (Tipperary, Independent)
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No response.

Neale Richmond (Dublin Rathdown, Fine Gael)
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The Deputy will have a full response when I get a chance to respond. All things are taken into full and frank consideration because the Government recognises the importance not just of tourism but also the hospitality sector for the economy and the tens of thousands of people it employs directly across the country. The Deputies opposite have cited the Restaurants Association of Ireland. I have met its representatives three times in this brief and half a dozen times in my previous brief to discuss this issue and a number of others, including the progress of their members in getting their insurance costs down. In response to Deputy Collins, I have met the VAT 9 group a number of times. I met its representatives with newly elected councillor Noel O'Donovan at Eastertime. I was in The Fish Basket in Owenahincha, which the Deputy knows well. I had a good discussion with Peter Shanahan about this very issue. I was in contact with them again last night. I look forward to having a deputation meeting with them in this role as I had previously in my role in the Department of enterprise. I fully understand their concerns.

I have also been fortunate to meet the Vintners' Federation of Ireland, the Licensed Vintners Association, the Irish Hotels Federation, the self-catering accommodation groups and other groups independent of the representative bodies to discuss this very issue and the wider issues impacting the sector, knowing full well the importance of these businesses to the very fabric of society. They welcome guests to the country and we go to them with our own families. I had a number of very enjoyable days in west Cork just last Easter and I look forward to returning there in four weeks. Perhaps Deputy Collins might show me a bit of his hospitality. I am happy to visit any of the local hospitality businesses.

Michael Collins (Cork South West, Independent)
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I would be delighted to.

Neale Richmond (Dublin Rathdown, Fine Gael)
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In response to Deputy Nolan, I will be in Laois on 8 July and am happy to meet any business owners. I am also travelling to Kinnitty. I am sure the Deputy can understand why. I will meet a particular hospitality business there this month to discuss the impact of this. If the Deputy is available, I am happy to meet her.

The last time I was in Clonmel, Deputy McGrath and I shared breakfast.

Mattie McGrath (Tipperary, Independent)
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We did.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I am happy to meet him. It is always a pleasure. I will not be in Kerry until 22 July, but if I have both Deputies Healy-Rae meet me in Killorglin, I will be happy to see them then. I will be in Fexco and meeting the local credit unions. I will make time to meet any local hospitality businesses to discuss this issue. That offer goes to the Deputies opposite, whether in Louth or Donegal. I was in Donegal two weeks ago.

Mattie McGrath (Tipperary, Independent)
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Good job they are not here or the Minister of State would be in real trouble.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I will not leave out Waterford either. We all know that this has a significant impact on many communities, both rural and indeed urban, in Dublin and outside Dublin. We know the many challenges that so many SMEs have experienced in recent years with economic shocks from the Covid-19 pandemic. Many business representatives I have met in recent months cite the supports. People talk about shutting down hospitality. No one ever wanted to do it but unfortunately it is what we had to do. They will talk about the real supports from Government.

Most politicians stood at the plate to offer support but the impact of Covid-19, the Russian war in Ukraine, the subsequent energy crisis, and rising inflation rates, which are thankfully going down rapidly this year, have all had a major impact. It would be remiss of me not to acknowledge the impact that Government measures have had. The Department of Enterprise, Trade and Employment did a report on this just before Christmas, which was published. It examined the impact of rising costs on all sectors and the economy as a whole and referred to pension auto-enrolment, the move towards a living wage, statutory sick pay, parent's leave and benefit, the additional public holiday in February and indeed the right to request remote working. It showed that, in the round, the economy can meet these challenges. I am fairly sure every Deputy in this Chamber supported and still supports those continuing moves, but they acknowledge that they have an acute impact, particularly on lower margin, lower salary sectors such as retail and hospitality. We acknowledge those challenges.

When the then Minister for Finance, Deputy Donohoe, introduced the 9% VAT rate for tourism and hospitality measure in November 2020, it was a time when public health measures routinely closed hotels and restaurants or significantly limited their capacity. The temporary change to the VAT rate was only one part of the Government's response, with other business supports as I have laid out. Analysis conducted by the Department of Finance at the time the VAT rate previously reverted to 13.5% concluded there was no economic case for a continuation of the preferential 9% VAT rate at that time, and further analysis last year reached the same conclusion. As I mentioned, it will always be looked at in the context of the budget. The recent analysis has of course looked at recent impacts.

On employment, between the end of 2020 when the 9% VAT rate was reintroduced, and the final quarter of 2023, total economy-wide employment expanded from 2.3 million to reach a record of 2.71 million. As Deputies know, the estimated cost of the 9% VAT rate for tourism and hospitality, from 1 November 2020 to 31 August 2023, was €1.2 billion. This represented a substantial but justified support from the Government to the hospitality and tourism-related sectors. The cost of a further VAT reduction to 9% for a full year is estimated to be €764 million. Even where the measure is restricted to food and catering services, the estimated full year cost is €545 million and would therefore constitute a significant fiscal transfer of taxpayers' money. For context, the VAT rate for the hospitality sector in Ireland compares favourably to that of Britain and Northern Ireland, which has a 20% VAT rate. Across the whole of the EU, Ireland is one of 14 countries with a rate at 12% or higher for hospitality.

One of the issues that regularly comes up in this debate is whether it is possible to change the VAT rate for hospitality or accommodation without reference to the other. It is possible. However, it is not possible to apply two different VAT rates within the same sector, so the VAT rate that applies to food and catering services provided by a restaurant must be the same rate that is applied to that service as provided by cafés or pubs. Revenue has advised that there would be significant practical operational concerns in having different VAT rates applying.

I am rapidly running out of time. There are one or two areas that I want to address that Deputies raised. More will be addressed as the debate goes on. Deputy Collins talked about a Government-imposed passenger cap in Dublin Airport. That is nothing to do with the Government. The passenger cap is, of course, looked after by Fingal County Council in consultation with the Dublin Airport Authority. We as a Government monitor that closely but we are not responsible for that cap. That is important for the context of the debate and how much we continue to promote or invest in encouraging tourism in the State.

Regarding announced supports, the increased cost of business scheme must be referenced. That is a €257 million fund, which is a large fund, that was provided for in the latest budget. It was part of wider measures for SMEs that were announced within the budget, including changing the VAT thresholds. One thing that many people discuss is the tax debt warehousing scheme, which has offered a valuable, practical liquidity support to businesses since the pandemic and supported cash flow. We are keen to make sure that flexibility is shown to businesses to ensure they can pay in a manner that will allow them to stay viable.

This year alone, the Government has provided funding of €216 million to the hospitality and tourism sector, which represents an increase of 33% on the 2020 level. Today, more than €27 million has been announced in tourism funding from the just transition fund. In counties Offaly and Laois, Deputy Nolan, more than €12 million was announced today for tourism projects, with in excess of €7 million for Clonmacnoise alone. These are real, serious investments.

When considering the increased cost of business scheme, we have to also consider that 80,577 properties have registered for it, which represents 66% of estimated eligible businesses and includes the 5,245 registrations that happened in the reopening period. As I said, these were part of a suite of measures that were carried out.

I will talk about one final matter. The motion calls on the Government to consider varying VAT rates throughout the country and suggests the creation of a 5% VAT rate outside of Dublin. I note for Deputies that the VAT directive does not permit the varying of VAT rates across individual member states. The VAT rates in Kimmage and Dún Laoghaire must be the same as the VAT rates in counties Kerry and Donegal. I understand that Article 104 of the VAT directive allows certain member states to maintain a historical derogation that allows for very limited variation in their VAT rates. This means that Austria can maintain a lower standard rate in two specific communes, Greece may maintain a lower VAT rate on specified islands, and Portugal can maintain a lower rate of VAT for the Azores and Madeira. These provisions cannot be extended by these member states nor adapted by other member states for their own use.

I look forward to the rest of the debate. I could say a lot more. I am more than happy to meet with Deputies in a separate deputation meeting. As I said, the Government will not oppose the motion. However, we will consider it in its full context as part of budgetary discussions and examinations. I thank the Deputies for submitting the motion and look forward to the debate.

Michael Healy-Rae (Kerry, Independent)
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I thank the Minister of State. I come from what is widely recognised as the tourism capital of the western world, which includes Killarney town and the beautiful Ring of Kerry that encompasses places such as Killorglin, Glenbeigh, Cahersiveen, Waterville, down to Portmagee, the beautiful Valentia Island, Ballinskelligs, Kells Bay, back up to Caherdaniel, Castlecove, Sneem and on up to Kenmare. It is the most beautiful place in the western world. I am very proud and glad to have represented businesspeople in those places, and those towns and communities, first on Kerry County Council and then in Dáil Éireann.

I have been asked to give the Minister of State this message - these businesses are struggling. People in the hospitality sector are struggling. The Government's decision to hike the VAT rate on the sector last year was ill-judged and ill-advised. The 9% VAT rate should be restored without delay, especially to support food-related businesses that have seen insolvencies more than double in the past three months of the year. That is a fact. The hospitality sectors in this instance include businesses such as hotels, bars, pubs, canteens, hairdressers, barbers, catering operators, hostels, bed and breakfasts, caravan parks, self-catering accommodation and guesthouses. We have those in abundance in Kerry in the south, mid, north, east and west of the county, but particularly in south Kerry.

The aim of reducing the VAT rate is to lower consumer prices, stimulate demand and boost employment in the sector. At this stage, I thank, in a very special way, Mr. Adrian Cummins from the Restaurants Association of Ireland who met with our group under Deputy Mattie McGrath yesterday. Mr. Cummins gave us comprehensive evidence to bring before the House. He is running what I call a sterling campaign on this issue. I take this opportunity, as I did yesterday, to personally thank him on behalf of businesses in County Kerry, which he diligently worked to represent during the Covid crisis. He did so in a very hard-working fashion. He was to the forefront in insisting that the Government help that sector.

The Minister of State knows that I am not a negative person but am a fair person. I have said in the House over and over again that I thank the Government for its reaction to Covid. I thank it for the speed with which it operated. I thank it for the assistance it gave to businesses, which I outlined. I acknowledge that. Only for the Government's proactive way at that time, many of those businesses would be gone. While the Government helped very well in keeping those businesses open, I plead with it to please acknowledge that what is happening is wrong, that the VAT rate is wrong, and that the Government has helped businesses before and will help them now. I cannot understand how the Minister of State can tell me that the Government is willing to not disagree with our motion while at the same time tell us that it will not reduce the rate. That sends out a mixed message to the sector. We want to hear from the Government today that it is willing to put its shoulder to the wheel and say, "Yes. The sector is calling out for help and we will help it." This is the lifeline we so desperately need.

The tourism and hospitality sector is grappling with a multifaceted-demand scenario marked by capacity constraints, substantial cost pressures and the exceptionally high cost of doing business. I ask the Government to please acknowledge this, to please understand the sector needs its help and to listen to the cases that have been made. Instances, scenarios and case studies have been shown to it, where businesses have opened up their books, that show if the VAT rate does not change, businesses will not survive. Why does the Government now want to stand by and close down businesses that it helped keep open? That is stopping midstream in its work.

The Minister of State is an exceptionally good operator and politician. I ask him to use his influence within the Government to fight for this case.

Danny Healy-Rae (Kerry, Independent)
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I am glad to get the opportunity to talk about this very important matter. I thank all those who put the motion together. It is very important that we bring this matter to the Government's attention. Tourism and the hospitality sector are of vital importance to County Kerry. So much depends on it. In recent times, or since January in any case, many restaurants and small cafés have closed. There are different reasons for this but the VAT rate is the dominant one. The increase in the VAT rate from 9% to 13.5% for the hospitality sector is having a devastating effect.

There has also been an increase in rates since the review, which is militating against many businesses. Rates have increased by a factor of three or four. That matter should have been included in the motion. In any case, in many of our towns, such as Killorglin and Kenmare, where businesses are also closing, there is less footfall. This is because 37% of our hotel beds and bed nights are taken up by asylum seekers and refugees. That is having a devastating effect on the footfall in restaurants and cafés. The Government must recognise this.

Energy costs, including electricity and gas, have gone through the roof. There is an increase in the cost of food and a scarcity in certain types of food, such as potatoes. This is already having serious repercussions for businesses and employees. Many of the places young people hoping to get work for the summer traditionally went to are not taking on staff because they simply cannot. I appeal to the Government to reduce the VAT rate from 13.5% to 9%, especially for food-led and drinks businesses. There is a suggestion of splitting the VAT rate in respect of accommodation. Some hotels in Dublin charge exorbitant prices for bed nights. If they want to persist with that, maybe the VAT rate should be left as it is for them, but not for businesses on a tight margin, such as restaurants, cafés and even pubs.

Places such as Killarney, Kenmare, Killorglin and many places around the Ring of Kerry were mentioned. We are now being told that bus traffic has reduced because of the reduction in footfall into our county.

We do not want this to continue because a place like Killarney has built up its tourism product since Queen Victoria's time in the 1860s. The town has been continuously building and adding and all the businesses in it worked tremendously well together to make Killarney the great town that it is. What they are pleading and begging for now is that the VAT rate be reduced. We do not oppose the motion but I ask that this be considered in the budget. I appeal to the Minister of State to ensure that happens. It is a long time for people to carry on, even until the budget in October. Several places in Killarney have already closed. If someone gets a cough in one place, it can lead to flu somewhere else. Such closures have a ripple effect on the entire county of Kerry. It is having a devastating effect around the Ring of Kerry and into north Kerry, in Ballybunion and other such places. We cannot emphasise enough the importance of this. I again ask the Minister of State to keep Killarney and our tourism product around the Ring of Kerry at the top of the agenda.

Marc Ó Cathasaigh (Waterford, Green Party)
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Tá an t-am istigh. Your time has elapsed.

Danny Healy-Rae (Kerry, Independent)
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Thank you very much, Acting Chair. I appeal to the Minister of State on behalf of those who are depending on us to do this.

Marc Ó Cathasaigh (Waterford, Green Party)
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I thank the Deputy. Deputy Doherty is sharing time with a number of other speakers. Is that agreed? Agreed.

Pearse Doherty (Donegal, Sinn Fein)
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Go raibh maith agat, a Chathaoirligh, agus cuirim fáilte roimh an rún seo. Níl dabht ar bith ach go bhfuil ár gcomhlachtaí beaga ag streachailt agus go bhfuil siad mar chnámh droime eacnamaíochta, go háirithe in earnáil na turasóireachta. D'fhulaing siad go mór le cúpla bliain anuas.

Our hospitality and tourism sector, which is the backbone of our economy has suffered from a very difficult three years. As a result of the pandemic, so many were forced to close their doors and they endured a dramatic drop in footfall, unlike anything we have ever experienced. That is the reason I and my party wrote at the time to the Minister of Finance calling for the introduction of a scheme to support the wage bill of businesses. It was an unprecedented step that was taken here and right across Europe and elsewhere. It is also the reason my party supported the reduction in the VAT rate for the hospitality and tourism sector in November 2020, which was in place for almost three years. That was the right response in extraordinary circumstances.

Since then, our SMEs have endured an unprecedented energy shock and increases in input costs that put a strain on the viability of many small businesses. As we know, the temporary business energy support scheme, TBESS, rolled out by the Government to support small businesses with their increased costs, was an abject failure. It was too complicated and convoluted. It is no surprise that only a small fraction of the money allocated to it made its way into the accounts of small businesses. More recently, we have seen the cost of doing business rising for many small- and medium-sized businesses across the State, including in the hospitality and tourism sector. As many speakers stated, this sector is a critical source of employment in every region and county, including my own county of Donegal.

The motion before us has a particular focus on VAT. It calls for an immediate cut in VAT for restaurants, hotels and the wider hospitality and tourism sector. I have a number of important points to make. As we know, VAT reductions are a blunt policy instrument, which can have one of two aims, either to reduce prices for consumers or to increase the cash margin of firms that enjoy them. We know that the review undertaken by the Department in 2018 found little evidence that the reduced rate that was in place from 2011 to 2019 was passed on to consumers. This leads me to the prices we have seen in the accommodation sector in some parts of the State. I have raised this issue before in this House and it is worth restating. In this, our capital city, utterly extortionate prices are charged by hotels far too often. People have been in touch with me about their experiences. It is ridiculous that some people have been in contact saying it was cheaper for them to book a flight to Lisbon to go to a Taylor Swift concert than to jump on a bus and go up the road and see that concert in Dublin, while staying in a hotel in this city. That is absurd, but it is what is happening with hotels in this city. The question we must ask ourselves is whether hotels in this city would reduce their prices if VAT were reduced or if they would pocket the money and continue to charge rip-off prices.

Things are not the same throughout the State, however. The situation is very different in the regions. In Donegal and many other counties, small businesses in the hospitality and tourism sector are struggling. They are a critical part of the tourism offering and an important source of employment. Before the pandemic, the tourism sector supported 260,000 jobs in 20,000 businesses, most of them SMEs supporting rural and regional economies. They have faced rising business costs, which will continue in the years ahead. That is the reason the Government should explore options to introduce a targeted financial package to support them. This can best be done in the form of a PRSI rebate to support them with, among other things, rising labour costs. That would support those most impacted and the most vulnerable.

As I have said before on the issue of VAT, we need a comprehensive review of the rate of VAT applied to the hospitality and tourism sector. We have the third highest rate of VAT on accommodation across Europe and the eighth highest for restaurants and catering. What impact does this have on our tourism offering and our competitiveness? We need an informed analysis of whether the current regime is appropriate. The motion also calls on the Government to consider operating different VAT rates in regions across the State. I welcome the clarification from the Minister that this is not permissible under EU law.

I welcome the opportunity to speak. I also want to state that I have an interest in this matter as I am a director of a music festival, which would benefit from a reduction in the VAT rate. It has benefited in the past. It is a not-for-profit event that is run by the community. I want to put on record that I am a founder member and a director. The hospitality and tourism sector is an important source of employment in many counties, including my own, and we need to foster the success of the tourism offering. I welcome the Minister's commitment to a comprehensive review in advance of the budget and for it to be published so we can more clearly examine whether we have the appropriate rate. There is no doubt that we need more supports for the tourism and hospitality sector.

Louise O'Reilly (Dublin Fingal, Sinn Fein)
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I thank the Deputies who introduced the motion for debate. Businesses are struggling with the cost-of-doing-business crisis and workers are struggling with the cost-of-living crisis. Both need to be supported. Unfortunately, instead of helping both, the Government has sought to pit business against business and business against workers. It has been clear for some time that supports for business must be forthcoming. For nearly a year now, Sinn Féin has called on the Government to engage with industry to design a bespoke but time-limited support for the sectors most impacted by public policy interventions. However, businesses have been let down time and again. Supports are untargeted and ineffectual. That is evidenced by the litany of failed business support schemes launched by the Government.

Analysis from Deloitte Ireland reveals that corporate insolvencies reached the highest level in five years, after a 25% rise in 2023. Of the 663 insolvencies last year, hospitality and construction saw a 62% increase, showing that inflation is having a particularly potent impact on these sectors. This trend has continued, and insolvencies in the food and hospitality sector have more than doubled in the first three months of this year.

Sinn Féin is aware of the cost-of-business storm that has been brewing for SMEs. In addition, we are also cognisant that phased payment arrangements on warehoused tax liabilities have created an additional dynamic for businesses to navigate. All the while, the Government has consistently failed to appreciate the importance of the domestic, demand-driven service economy, which includes the food, beverage and hospitality sectors. This sector of the economy encompasses small businesses that cater to the needs of our communities, employing a significant proportion of the workforce in its process. I again call on the Government to engage with industry to design a bespoke but time-limited support for those sectors most impacted by public policy interventions.

It would be remiss of me not to call for a quid pro quo for workers. For years now, there has not been a joint labour committee, JLC, for the hospitality sector. There is a clear urgency to rectify the legislation governing the JLC system, which has enabled employers to veto the functioning of these committees, thereby preventing engagement, negotiation and progress. Experience of the JLC system proves that it works for employees, the reputation of employers and outcomes for the sector.

We must also point to the need for the tourism and hospitality sector to adhere to the employment laws of the State. This sector is the worst abuser of workers' rights in the economy. Beverage services have a 54% breach rate of employment law. Hotels had a 57% breach rate of employment law in 2023.

Food services had a 58% breach rate of employment law in 2023. On the one hand, this sector is looking for State support while, on the other, it opposes improving the conditions of workers and the abuse of workers’ rights. Any moves to provide State support for businesses must be made in tandem with an equivalent level of support and protection for workers and this must include the delivery of a right to organise and a right to collective bargaining. I understand there is a directive but there has been no sense of urgency coming from the Government in relation to collective bargaining, and all the while vulnerable workers are being left to wait. They do not have the protection of a trade union and they have to wait to get to the Workplace Relations Commission. The Minister knows these are the facts. The figures from the WRC do not lie.

We absolutely recognise the need to support the tourism and hospitality sector. We absolutely recognise the value of tourism and hospitality in every town, village and city in this State. We also have to recognise, however, that there is a need for workers to be facilitated with the right to collectively bargain. This has to be done. I do not sense any urgency coming from the Government and I would like to see that.

In the few moments remaining to me, I will refer to Dublin Airport, which is referenced in the motion. Some 38% of tourists who land in Dublin travel to the west. It is past time that a strategy was developed. The Government must develop a strategy to harness the potential of regional airports and use those to drive the economy right across Ireland and balanced regional development, which is needed. We need to see greater utilisation of all the transport infrastructure in the State. That must include Shannon Airport and all our regional airports. The overreliance on Dublin is not good for Dublin, tourism or the regions. We need to see a proper plan to harness balanced regional development.

Martin Kenny (Sligo-Leitrim, Sinn Fein)
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I thank the proposers of the motion for tabling it. The tourism and hospitality sectors are vital industries in many parts of the country where there is little else to employ people or provide them with opportunities. For a long time now, particularly during the Covid pandemic, the sector has faced a huge difficulty in trying to survive. Many of its members were very grateful for the assistance that came from Government, which was spread out over a number of years. It kept them in a space in which they were able to manage to survive. Many who closed down during the pandemic would not have been able to reopen but for the unfortunate fact that the war in Ukraine started. Many people came from Ukraine and took up space in hotels, guesthouses, etc. However, that has also put pressure on many of the small towns. I am thinking of Bundoran, one such town in my own constituency, where many such people are accommodated. This means that other businesses in the town that depend on tourism do not have numbers of tourists coming because accommodation is not available for them. I know the position is changing, and it needs to change. Hopefully, we can find a way out of that.

Many tourism businesses face difficult circumstances during the lean times of year. They are fine in the summertime when things are going well but, during the rest of the year, they face huge difficulty in managing to survive. The Government needs to assist them in every way possible. I support the possibility of putting in place some kind of review of the VAT rate. A rebate of PRSI can and should be targeted at many of these businesses that have to try to survive.

I also recognise that there is a huge problem with transport infrastructure in many areas. Many people arrive here - my colleague mentioned Dublin Airport as an example - and the only way they can travel around Ireland, by and large, is to hire a car because they have to drive. We need to change that. We need to put adequate public transport systems in place across the entire country. Opening up the western rail corridor is an example of that and would make a huge difference. There is also the use of our regional airports for more tourism traffic. All these things need to happen. We need to see a sense of ambition from the Government, not just to provide for this industry, but to develop and sustain it into the future.

Imelda Munster (Louth, Sinn Fein)
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There have been very serious challenges to the tourism industry in recent years, in particular during Covid-19 and with the use of tourist accommodation to house asylum seekers. Businesses are grappling with the cost of doing business, energy prices, food prices and the cost of rent. It is a very difficult time for many.

While I take the point made in the motion that our VAT rate may be high when compared with other European countries, I am not sure an immediate blanket reduction in VAT is the answer. We need to treat hotels and other large accommodation providers separately from other tourism businesses. They cannot be compared to small restaurants and tourist attractions. Domestic and international tourists did not see value for money or reduced room rates in the period when a 9% VAT rate applied. It is fair to say that in most cases the savings were never passed on to the customer. The Department of Finance made a similar finding when it studied the recession-era reduction in VAT for the sector.

In recent years, the exorbitant hotel accommodation costs in some of our cities have damaged our reputation internationally. We all know that it is often cheaper to fly to another country to attend a concert and stay in a hotel than it is to spend a night in Dublin. The use of tourism accommodation for asylum seekers suits the hotels that have signed up to it. Why would it not? There are huge bucks in it for them. It does not work for other tourism businesses, however, or for tourists who will undoubtedly be charged higher prices due to the reduction in the number of beds.

The Government acts as though we cannot differentiate between hotels and other parts of the tourism and hospitality sectors in terms of VAT rates. Of course we can. The EU VAT directive already provides for hotel and holiday accommodation to be treated separately from other areas of the hospitality sector. In response to Covid-19, there were VAT reductions in countries across Europe, for example, in Belgium, where hotel accommodation was omitted entirely. There is nothing whatsoever stopping us from doing something similar. We should also explore the introduction of a targeted PRSI rebate scheme to support struggling SMEs. We should examine the VAT situation with a view to exploring more targeted reductions for the sector in the future.

Mairead Farrell (Galway West, Sinn Fein)
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Nuair atáimid ag caint ar chúrsaí turasóireachta, ar ndóigh caithfimid caint ar na hoileáin amach ón gcósta freisin. I mí Iúil, téann thart ar 3,000 turasóir in aghaidh an lae chuig Inis Oírr mar is breá leo é. Tuigim é sin. Is breá liomsa Inis Oírr chomh maith. Ach caithfimid breathnú ar an infreastruchtúr atá ann do na daoine atá ina gcónaí ann agus do na turasóirí atá ag teacht chuile lá. Chuile shamhradh, ó mhí Aibreáin nó mí na Bealtaine go dtí Meán Fómhair, bíonn srianta uisce ann ó 11 p.m. go dtí 7 a.m. Is léir go dteastaíonn infheistíocht chuí i gcúrsaí uisce thall ansin agus sa chóras séarachais chomh maith. Nuair a ardaítear an cheist seo le hUisce Éireann, deireann sé linn nach féidir leis insint dúinn cén costas atá ar an uisce a fháil ón mórthír don oileán chuile shamhradh. Ní deireann sé é sin linn. In 2017, nuair a cuireadh ceist air faoi seo, dúirt Uisce Éireann nár cheap sé gur réiteach fadtéarmach é an t-uisce a fháil ón mórthír don oileán. Is léir go dteastaíonn infheistíocht chuí sa chóras uisce agus sa chóras séarachais láithreach. Impím ar an Aire Stáit agus ar an Rialtas é sin a dhéanamh.

Martin Browne (Tipperary, Sinn Fein)
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The challenges that continue to be faced by many small- and medium-sized businesses are considerable. Locally, in my part of Tipperary, we have seen a number of closures in the area of hospitality. Tipperary town has seen more than its fair share of closures and there are also instances in other parts of the county. Every loss has its impact on the locality and other businesses operating nearby. We must do what we can to offset the challenges these businesses are facing and keep their survival at the forefront of our minds. That is our duty in this House.

I fully support reviewing the VAT rate for the hospitality and tourism sector because Ireland has the third highest VAT rate for accommodation in the EU. We have the eighth highest rate for restaurants and catering. We must assess the implications for the sector of the closures we have seen locally in Tipperary and then respond accordingly. We must assess the role VAT has played in the closures we have recently witnessed and how adjusting the rate could assist the sector. We will take stock of the demands being made of these businesses. Key among those considerations must be those businesses that are struggling and those that have closed because they are unable to maintain viability.

In addition, we call for consideration to be given to targeted policy supports, such as a PRSI rebate scheme for SMEs that are facing higher business costs. The motion also refers to the VAT measures employed by other countries, where varying rates are applied based on economic activity, demand and need. Nothing should be dismissed and, equally, nothing should be considered irrevocable, just because it represents the current status quo. That includes our VAT rates. Another possibility is a PRSI rebate scheme, for which we have called for some time.

Our SMEs are the lifeblood of our communities. We need a root-and-branch examination of the demands placed on them.

Ruairi Ó Murchú (Louth, Sinn Fein)
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In the last while, we have engaged on solving the huge issue with public liability insurance that has impacted on hospitality and, in particular, tourism and what we would call adventure tourism. It goes without saying that issue is impacting the cost of business.

I agree with what my colleagues have said. We need a review of the VAT rate to assess the implications for our entire tourism offering. We know the huge issues that SMEs are facing across the board, so we need to look at the introduction of a targeted PRSI rebate support scheme to support those SMEs.

Deputy Munster referred to the chaotic way in which the Government has dealt with IP applications and how it has relied on the private sector. A large number of the sites in question are not suitable and have created issues. The loss of beds in the D Hotel and other hotels has had an impact, and will impact where we go into the future. That needs to be rectified alongside the streamlining of the system.

I could not mention tourism in County Louth without referring to the Narrow Water bridge. The sooner it is delivered, the better. We just need to make sure it comes in on price and on time. Antóin Watters and Fiona Mhic Conchoille would not forgive me if I did not mention that project. I also mention Pádraig Cumiskey and people involved in historic tours around Dundalk. There needs to be an engagement with Louth County Council. We are doing a bit of work around that. That is everything from the time of Cú Chulainn, back when Louth could field really good hurlers, up to the modern age. I also mention the Poc Fada. Louth County Council is engaging with Poc Fada and also with residents to ensure we have something that is brilliant and sustainable, and that we can improve in the future.

Gerald Nash (Louth, Labour)
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I am pleased to speak on the motion and we will not oppose it. Any day we debate a sincerely tabled motion in this Chamber to protect and support enterprise is a good one.

I recall only too well debates on jobs and business in this Chamber, which were held in very different circumstances when I first entered this House 13 years ago. The fiscal crash meant we had an unemployment rate of 16% and businesses were closing at unprecedented rates. We had one job and that job, as far as I was concerned, was to get people back to work and fix the economy. Crucial innovation in 2011 was the targeted VAT rate cut to stimulate the hospitality sector. At a time of high unemployment, low demand and economic recession and stagnation, it was the right policy at the right time, and objectively it worked. At a time when the labour market is tight, the economy is putting in a stellar performance and demand is high, the Government appears to have concluded that a VAT rate cut for the sector is not something it is prepared to reintroduce now. If it is the case that at any point in the future a VAT rate cut is reintroduced, a condition should be applied to it with regard to employment conditions. We should return to the idea of a joint labour committee and an employment regulation order for the industry. No cash should be provided by the State without conditions.

I note also that the low-margin, locally traded sectors of retail and hospitality added one third, or 90,000, of all new jobs created last year. That is a superb performance in these sectors that are so important to every town, village and city and they are owed a great credit.

There is no doubt that this is not the full picture. These sectors were in the top three as regards reliance on the tax debt warehousing scheme, for example. We are familiar with the relatively high rates of attrition in the industry and the rates of churn. There is an issue with insolvencies in certain businesses. Nobody can deny that. There are individual hospitality businesses across the country that are in real trouble. The reasons are many and can be complex. There has not been a normal trading year for several years. We had Brexit, the pandemic, war in Europe and high energy costs. We are in the era of the polycrisis.

The challenges facing the SME sector, and hospitality in particular, could be best addressed in the longer term and sustainably by taking a series of comprehensive actions that could change the picture structurally for the SME sector in this country. In Ireland in 2024, we have, for example, businesses paying among the highest rates for energy in all of the EU. Where is the Government plan to tackle the high cost of electricity? Where is it? We have a Victorian commercial rates system that hammers main street hospitality businesses – bricks and mortar firms – that have no choice but to pay their annual rates bill to the council and which, by their nature, have high labour costs to deal with as they are labour-intensive sectors. Where is the reform that is so badly needed to a system that is objectively unfair and inequitable? The commercial rates system we currently have bears no relationship to the reality of business in the 21st century. Therefore, we need to reform how local government is funded and we cannot continue to over-rely on commercial rates and the kind of Victorian system we continue to have.

We have the continuation of training levy into an important fund that is more than €1 billion in surplus. Where is the plan to use this to keep the businesses we are all concerned about competitive, to help them innovate, to help workers upskill and to help those firms become much more productive and innovative than they currently are and sustain them? There is a case for the suspension of that levy for a period of time. However, I have heard very little from this Government, the relevant Minister or the finance or enterprise Ministers about this proposition. Why not keep the employment permit system under more frequent review and make it more flexible and responsive to evolving needs in the hospitality sector, for example?

While the plan seems to be to process asylum applications quicker, might we also look at allowing those in the system to work earlier than is currently the case and make the contribution they want to make? Let us also carry out skills assessments of those who are here and establish if we can match them with skills needs in our tight labour market. We could also look at extending, for example, the hours that those who are on stamp 2 permissions are allowed to work. It is 20 hours a week. People who are working 20 hours a week may wish to work longer. In my experience, those who I represent who are on stamp 2 permissions would like to do that, as would their employers. There are experienced workers who are very valuable to the hospitality industry but they would be in breach of the law if they were to work any longer than 20 hours per week.

The best outfit in the country at displacing jobs in the hospitality sector is the Department of integration – a Government Department. That Department’s failures have deprived my town, as the Minister of State knows, of its largest hotel. Just a few weeks ago, a newly opened pub and restaurant, €2 million worth of refurbishment work later and less than six months in operation, decided it wanted to try to become a centre accommodating international protection applicants and beneficiaries of temporary protection. That tells us all we need to know about the situation facing hospitality businesses at the moment. Because of generous support, if I can describe it as such, it is more profitable for them to try their luck, as they say, as accommodation centres hosting international protection applicants and refugees from Ukraine. That too is reflective of this Government’s abject failure to build the human rights-informed accommodation centres that we require to accommodate international protection applicants, with all of the services they need and require. I hope this House in its entirety agrees that a small hotel room is no place for a family or a young child fleeing trauma and seeking international protection here, in the same way as it is no place to host a child from a homeless Irish family.

Here is an idea for a subsidy for the hospitality sector that might work and is practical by nature. It was a proposal made to me by a local pub manager in my home town. Why does the Government not grant-aid hospitality businesses to add rooms and improve their product and offering in areas where there are high displacement rates of hotel beds because of this country’s excessive reliance on the hospitality business to do that? We could add a condition that the businesses that are grant-aided to improve their product and add rooms will only operate as hospitality businesses for, say, a minimum period of five years.

That is something the Government could practically do to help towns like mine where there has been significant displacement of hotel beds we rely on to support local jobs. Next week, I will meet representatives of the local business community to discuss the economic analysis the local BID group did on the displacement of hotel beds at the D Hotel. That is a proposal the Minister of State should take back to the Government. It is worth consideration as it would have a practical impact on the hospitality sector.

Catherine Murphy (Kildare North, Social Democrats)
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The Social Democrats recognise that some indigenous businesses are struggling and we support a targeted approach for providing support to them. In addition to the hospitality sector, some smaller retail outlets are under pressure. We are losing vibrancy in our cities, towns and villages, seeing buildings becoming redundant and that leads to dereliction. In turn, that puts other businesses that are trying to exist in that kind of environment under pressure.

The motion is not targeted and that is of concern to us. It states that food-related businesses have seen insolvencies more than double in the first three months of the year and we must be concerned about that, but those insolvencies do not differentiate between those in Dublin and those in the rest of the country, as the motion seeks to do. It acknowledges that 135,000 workers are employed in that sector in Dublin and we must be seriously concerned about those jobs, as we should be about jobs in the rest of the country. The cost-of-living crisis is probably most acute in Dublin, especially with the cost of accommodation. Business rents are also likely to be a lot higher. With an increasing number of people opting to work from home, there is less footfall in the city centre, especially if we look at lunchtime activity, and we are seeing a loss of businesses and vibrancy in the city centre as a consequence.

I am also thinking of the contradictions that would happen if this differential in VAT were to be applied. There are locations such as Leixlip where part of the town is in County Dublin and most of it is in County Kildare. It has two hotels, one of which on the Dublin side unfortunately closed, as did a pub on the Dublin side. Should a 5 % VAT rate be applied in one area and just across the bridge a 9% VAT rate? The same is the case with part of Bray being in County Dublin and part in County Wicklow. The motion has not been well thought out. The urban versus rural or the rest of the country versus Dublin should not be what we are talking about in a national policy on tourism. It should not differentiate. It should look at the totality of what is needed. The Covid-19 pandemic was particularly difficult for Dublin, which did not benefit from staycation business. Some businesses are still recovering with some debt warehoused. Let us therefore get away from that when we are thinking about the sector. It should be seen in its totality.

In respect of the hotel sector, I looked online yesterday in preparation for this debate and saw that there are hotels that charge €700 and €800 per night, but they are few and far between, except when a big event is on. I certainly am not supportive of price-gouging when events are happening as it damages our reputation. However, for the vast majority, there was not a huge differential across the country and they are fairly expensive at this time of year.

The motion correctly acknowledges that 246,000 people work in the hospitality sector. A sizeable number of them are foreign nationals without whom the sector would not survive. A document was published by the Joint Committee on Tourism, Culture, Arts, Sport and Media in 2022 - Deputy Mattie McGrath was member of that committee - which referred to the clear evidence presented to the committee of widespread poor pay and working conditions in many parts of the hospitality sector and went on to talk about people who are particularly vulnerable and identified migrant workers in that group. We have to look at the working conditions in the tourism sector as well and the shortage of skills in the sector needs to be properly addressed by any tourism plan.

Criticism of the Government's reliance on the accommodation sector to provide temporary accommodation for Ukrainian refugees and those seeking international protection is valid. I have no doubt but that in some locations, it reduces the tourism spend and puts secondary tourism providers in difficulty. That needs to be rectified with alternative, not tourism-related, accommodation. There is a plan for that but it is painfully slow in being seen. We do not even have the locations of where the six centres that will be publicly run will be located. That urgently needs to happen in its own right.

The element of the restaurant sector that is growing the fastest is fast-food, such as McDonald's and Burger King and other outlets. If this motion were to pass, the reduction in the VAT rate would benefit such companies. Public policy is working towards healthy food and it would seem strange to give an advantage on one side and then try to rectify it on the other. We have to think about the consequences of a blanket approach rather than a targeted one.

There is no doubt that there are high input costs for insurance and despite the changes made in this House relating to the insurance industry, it does not appear the benefits are being passed on. Insurance is a big issue for businesses, small, medium and large, as is the cost of energy. People can get away with things in this country if they make them complicated. How the cost of energy is arrived at is so complicated that it makes it difficult to untangle, but it needs to be untangled as it is making this country uncompetitive.

I agree with the point Deputy Nash made about commercial rates, which are structured in such a way that businesses almost benefit from being an out-of-town, large entity. We are undermining our main streets by not reforming the commercial rates sector and how rates are levied. The focus should not be on the rate charged by local authorities each year because they do not have any choice if they are to survive. The structure of the commercial rates is the issue that needs to be addressed and we should be looking at a system that gives an advantage to keeping the vibrancy of our indigenous industries in our towns and cities. It works to their disadvantage.

However, my main point is that we need a targeted approach. The one-size-fits-all approach brings all kinds of problems with it.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I thank the Rural Independent Group for bringing forward this motion on the hospitality and tourism sector. We are all aware of the employment contribution this sector generates and its importance to our wider economy and to many local areas. In Dún Laoghaire, we have many small businesses such as coffee shops, restaurants, independent food retail outlets and so on, many of which periodically find themselves struggling to stay afloat.

It is welcome that we will have a discussion on this issue and look at how we can ensure we maintain this employment and these small businesses that contribute to the vitality of our cities, towns and villages. It is an important discussion to have. I am certainly open to looking at the question of the VAT rate to see if it can make the difference. I must be honest, however, and say I am not sure it is going to make the difference those advocating for this change are suggesting it will.

The motion claims that by reducing the rate of VAT we will boost demand. Presumably, the implication is that prices will be lowered and, therefore, boost demand. Whether this was or was not the case, I am not entirely sure this is what happened when we reduced the VAT rate previously. I am not sure there was a significant reduction in prices. In fact, anecdotally, I would certainly say there is no particular evidence of prices having gone down. If businesses are genuinely struggling to survive, I could understand that the benefit they might get from a VAT rate reduction might not be passed on to consumers in terms of lower prices precisely because these businesses are struggling. I am not sure, therefore, that reducing the VAT rate will achieve the aims the proposers of the motion are suggesting it will.

I was struck by the figure the Minister of State mentioned in terms of what it would cost to reduce the VAT rate, some €750 million. That is a lot of money. If this is the sort of money we are talking about, one question the proposers of the motion and anybody serious about this issue should ask is whether there might be better ways to spend €750 million that would actually help small businesses and guarantee their viability. I ask this because the downside to what the proposers are suggesting is precisely that some of the very big and profitable multinational chains and other business chains are not struggling. In fact, in many cases, these are the ones putting great pressure on the small independent businesses. These large business chains are crushing them but they are highly profitable. These large businesses, however, will significantly benefit because this proposed measure is a universal one.

I empathise with where the proposers of this motion are coming from, but they need to think this proposed measure through. Is it actually going to achieve what they and I would like to see it achieve? Will it specifically help the small independent businesses that are often being crushed by very big businesses making huge profits that can cut prices and so on? Our view for a very long time, for as long as I have been in this House, and I note others are now saying this too, has seen us advocating for a change in the rates system. We have been advocating that we should have differential rates. I refer to the idea that a small business, whether it is a butcher, a baker, a candlestick-maker, a small coffee shop or whatever kind of small business it might be, is charged the same level of rates per square metre as huge multinational corporations or even banks. When I think about it, a bank might often have a relatively small premises whereas a restaurant has a big premises. The bank, however, will be making enormous profits while the small little restaurant or coffee shop will be struggling to survive. Yet these businesses are paying the same rates per metre squared even though one is hugely profitable and the other is struggling to survive. This makes no sense to me.

While I do not claim to know the details, my understanding is that in France, for example, there is a systematic policy of favouring the small independent businesses in towns and villages over the big chains and corporations making profits. Our view, therefore, is that we should have a differential rates scheme based on turnover or profitability so that we would help the small independent businesses as opposed to the big businesses that could afford to pay bigger contributions in rates.

The other area involved here concerns energy costs. Again, we have been arguing this point for years, especially in the context of the huge hikes we have seen in energy costs and the massive profits being raked in by the energy companies. These companies have been making enormous profits while businesses and households have been absolutely hammered with energy price hikes. This situation should be dealt with. We have argued that we should control the prices of energy and put caps on them. By the way, this is allowed for in the consumer legislation. It allows for caps to be put in place in particular areas where there is a crisis or an urgent need to do so. This is something that could be done. Similarly, regarding insurance, while there have been some improvements, this is also a huge source of costs and a burden.

The other thing I would ask those advocating for small businesses to consider is to not go down the road - and I know many do not - of thinking that perhaps slowing down on the moves towards implementing the living wage or increasing the minimum wage will somehow be good for them. The truth is that if what is being talked about here is increasing footfall and demand, the biggest source of that demand is the workers themselves. If the workers are on low pay, they will not then have the money to go into the restaurants, the coffee shops and other businesses. These workers are the biggest customer base for many of the small businesses in towns and villages. We should, therefore, embrace improving the wages and conditions of the tens of thousands of workers who work in this sector, which is characterised by low pay, poor conditions and so on. This is cutting off your nose to spite your face. Providing better wages and conditions for the workers would mean they would have more money in their pockets and would spend it in the small independent businesses in their cities, towns and villages.

Marc Ó Cathasaigh (Waterford, Green Party)
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Deputies Canney and Tóibín of the Regional Group are sharing time.

Seán Canney (Galway East, Independent)
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I welcome the opportunity to speak on this important subject for many people right across the country, including in my constituency of Galway East. We have many self-employed people who are the backbone of our economy. The problem is that people who are self-employed, who might have one, two or three people working for them in construction, hospitality or in whatever sector, and who are working in and managing all this, do not get illness benefit if they fall ill. They should be allowed to pay the higher level of PRSI for themselves, so they can get illness benefit. If their employees fall sick, they will get illness benefit. Yet the employer does not get anything. I have seen cases where families have been in disarray because somebody gets ill, is out of work for five or six weeks and no income is coming in. We should look at this issue in the budget.

The Regional Group tabled a Private Members' motion some weeks ago on SMEs and how best to deal with this sector. I will refer to one point, namely, the national minimum wage. I agree this rate should be increased. What happens for small businesses, though, is that the threshold beyond which they must pay the higher rate of PRSI does not go up in line with the minimum wage rate. I refer to the move from 8.8% to 13%. I think the threshold at the moment is something like €441. This should be brought up to €449 before the additional PRSI starts to be paid. This, in itself, would be a saving for small businesspeople because when the national minimum wage goes up, there is also an increased cost in terms of employees in respect of paying the additional PRSI due in this regard. It is small, but, again, it is another cost there we do not speak about.

The other major aspect concerns people working remotely. The hospitality sector was mentioned. People are not in our towns and villages as often as they were before remote working became part of our way of living. It is important, therefore, that we recognise this point.

Turning to the level of rates paid, small businesses and the way all this is sorted out, as has been said by Deputy Boyd Barrett, the same rate per square foot applies in all cases.

We need to have a differential rate but we also need to say that we would exempt businesses from rates up to a certain modest turnover. While we are giving supports for rates, the rates still have to be paid and then it can be claimed back at 50%. Basically, what are rates but a tax on doing business on top of all the other taxes. For those people in fledgling self-employment and those people trying to make a living on it there are a lot of things we could be getting ourselves involved in.

Peadar Tóibín (Meath West, Aontú)
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Before I was elected as a Deputy I worked as a management consultant. I worked with about 2,000 small businesses either training them or consulting them on how to operate their businesses. I also worked as a sole trader so I know what it is like to be self-employed. At the heart of being self-employed is actually the fact that one is living hand to mouth. The contracts that a person wins this month will pay the mortgage and electricity in three months' time, and the contracts that are delivered this month will put the food on the table in the immediate months afterwards. If those contracts are not won or not delivered on, then one simply will not be able to pay the mortgage or feed the family. It is a very precarious type of work. We often talk here about precarious work, and rightly so in terms of workers' rights, but it is important to realise that the self-employed people with smaller enterprises often live in a very precarious situations.

Small to medium-sized businesses are the backbone of this country. Some 70% of the people employed in this country are employed by SMEs, which is 1.2 million people. It is an incredible chunk of people. Incredibly, 99% of businesses are actually small businesses, micro businesses, and businesses with fewer than ten people.

Foreign direct investment is good. Foreign direct investment is important for the State but I believe the Government is solely focused on foreign direct investment at the cost of focusing on small to medium sized businesses. When foreign direct investment says, "Jump", the Government says, "How high?". Mostly, however, small to medium sized businesses are ignored in the Government's economic policy. They are the poor relation of the Government's economic policy. For sure the Government will say that it provides a fund for this and a grant for that, and while this is good to help struggling businesses, in reality it amounts to social welfare for businesses in trouble. Businesses would much rather have the ability to work in an environment that is beneficial and in which it is easy to make a living rather than having all the difficulties the Government puts in their way and then having the funds to help them.

I will give the Minister of State a number of examples of this. Hospitality especially was hammered by the Government in the lengthy lockdowns the Government imposed in the State. Indeed, that changed the behaviour of many people when it came to hospitality and the music industry. Many hospitality businesses are crucified by the cost-of-living crisis. It is incredible the Government made €3.5 billion on fuel taxes last year, which was the highest in ten years. In the jaws of a cost-of-living crisis, the Government was giving tea and sympathy to small businesses with one hand while at the same time was pilfering their pockets with higher fuel taxes with the other hand. The small businesses were especially fleeced as a result of these cost-of-living crises.

The migration crisis has also hit the hospitality sector in a large way. Incredibly, almost one third of registered tourism stock outside of Dublin is now contracted to the State. This is a stunning figure. A response to a parliamentary question I submitted shows that 85% of accommodation the Government is using is in the hospitality sector. As a result of the Government's abject uselessness when it comes to delivering infrastructure projects, it is leaning heavily on the hospitality sector to provide that accommodation. This is hammering the downstream tourism businesses in many towns. Fáilte Ireland has said that non-accommodation providers in sector will lose €1.1 billion in revenues as a result of the Government's leaning on the hospitality sector to provide that accommodation.

The Government VAT rate for small businesses is also hammering those small businesses. There is a madness around this. I refer to Deputy Boyd Barrett's comments on this. He said that while there are big hotel chains in the sector making massive profits, there were also small cafes, pubs and restaurants that are struggling. The logic is that one would separate those two sectors within the hospitality area. They have different market structures and different profitability and turnover levels, and they have very few similarities in terms of how their businesses operate. Aontú was the first party to come up with the idea to separate out those two elements of the hospitality sector. We would leave the high level of VAT on the massively profitable businesses and we would lower the VAT rate on the smaller businesses so they could operate, and especially in a small towns. Aontú was also the first to come up with a new business rate idea whereby the business rate reflects the profitability, at least in part, of the businesses on which they are being levied. This is really important because the Amazons of this world cannot be treated the same as the independent book retailers that operate in small towns. If we continue to levy the business rate in the same fashion, we will give the advantages to the Amazons of this world, which will gut the inner sections of our towns and villages across the country.

Marian Harkin (Sligo-Leitrim, Independent)
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I welcome the motion by the Rural Independents because it seeks to address in a practical way some of the challenges faced by tourism and hospitality businesses across the country. I especially welcome the key proposal on reducing VAT rates for the sector to 9%. This is an immediate and practical step that can be taken that would lead to an immediate impact on the viability of so many businesses.

We are accustomed to the Government and Government Ministers bemoaning what they cannot do. They often tell us that they would love to take on board proposals and suggestions put forward by the Opposition and even by their own backbench Deputies. They shake their heads and point to budgetary constraints and fiscal rules. When they really want to smother a proposal they point the finger at EU legislation.

This motion, however, contains a very practical proposal that would allow the Government to apply different VAT rates in areas outside of Dublin, in rural areas, where it could apply a VAT rate a 5%. Tourism is really suffering in regions outside Dublin. This proposal would also would deal with the issues raised by many of our colleagues because it would separate the very profitable businesses from those that are struggling.

The EU is no barrier. We have an EU reduced VAT rate directive that allows for this very situation. We see it applied in Italy, Hungary, Latvia, Lithuania, Malta and Romania. We see it applied in Portugal, a country where tourism is an integral part of its economy. This helps to support tourism in more peripheral areas. Our capital city, Dublin, has much greater opportunity to host national and international major events whether concerts, sporting events and so on. Half of Sligo will be in Croke Park next Sunday to support the black and white. It is because Dublin has those venues and those opportunities to host all these national and international events.

We can see how the further reduced VAT rate is working in other EU countries. At the very least, we need to look at a pilot programme, perhaps for one to two years, where we would have a lower VAT rate on hospitality business. The north west would be an ideal location to see how it works out. First, it is, by definition, rural and peripheral and crucially it is beside the Border with Northern Ireland. A lowering of the VAT rate would be hugely significant in equalising the cost between running a business North and South of the Border and giving those businesses a real chance of survival.

One of the crucial issues for many towns in the areas I represent is that hotels have been taken over to provide accommodation for Ukrainians. Local tourism businesses, whether a local restaurant, an activity centre, a souvenir shop or a local teashop, have all suffered greatly because there is no footfall in the context of national or international tourism. The Government took over these hotels and the very least it can do now is reduce the VAT rate on those tourism businesses that rely partly or largely on the tourists who would otherwise have stayed in the host hotels.

I am thinking of places like Rosses Point, County Sligo, Bundoran, County Donegal, all of north Leitrim, Ballinamore in south Leitrim and many other towns where some or all of the tourism accommodation is no longer available for tourists. To be fair, in Drumshanbo, County Leitrim, the State is concluding the contract to accommodate Ukrainian refugees. However, the way the Department approached the matter, with very short notice for the local hotel and causing disruption to families, is an example of worst practice. Best practice would see people being given an opportunity to find new accommodation, transfer to new schools and, if necessary, find new employment. That did not happen. The way things were done is not acceptable. It has created severe difficulties for many Ukrainian refugees and the local community. With support from the community, many of those living in the local hotel have found some kind of alternative accommodation. However, that is no way to manage the transition. I am not setting out a blanket way of proceeding as we move forward. I am just saying the process must be managed properly.

Given the hotel in Drumshanbo is no longer accommodating Ukrainians, it will, I hope, soon be available for tourists. I ask for engagement on this matter. I have written to the Minister but received no reply. Given the hotel will be available, a reduction in the VAT rate would be very important to kick-start the tourism business in the area. It would be a real incentive. The State would lose money in the short term but, in the long term, a policy change like this would be a real investment in Drumshanbo and other towns. It would help to restart and revitalise many tourism enterprises that have stalled or closed because of Government intervention.

I recently received a letter from a restaurant owner in my constituency. I will not name the business or its location. The letter gives a really good overview of recent Government decisions. It states:

Dear TD,

I am writing to you as the business owner of [a particular business] in [a particular town] and on behalf of ourselves and our colleagues in the industry nationwide. We, along with many businesses in our area, are at risk of closure if VAT is not returned to 9%. We are a husband-and-wife-run business, opened in the last four years. The hotel in our town housed Ukrainian refugees from 2023 onwards and this has resulted in a 20% drop in our business outside of the summer season. We have again seen an increase in our energy costs, no Government supports, along with supplier costs just going through the roof.

This is just one example of the many letters and emails I have received from small business owners. Reducing the VAT rate to 9%, and further lowering it to 5% in peripheral regions, would pay dividends to those businesses, their communities and, in the final analysis, to Revenue.

Marc Ó Cathasaigh (Waterford, Green Party)
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I welcome to the Visitors Gallery the retired gardaí from Clonmel who are visiting Leinster House today. They are very welcome.

I call the Minister of State, Deputy Byrne, to reply to the debate, after which there will be a response from the Rural Independent Group. As we are up against the clock, I ask speakers to be economical with their time.

Thomas Byrne (Meath East, Fianna Fail)
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I welcome the opportunity to respond to some of the issues raised in the debate on the motion put forward by the Rural Independent Group. Deputies expressed the view that the 9% VAT rate should be brought back and made permanent for the tourism and hospitality sector. The Deputies proposing the motion also asked that VAT rates be varied across the country such that areas outside Dublin would have a lower rate.

As my colleague, the Minister of State, Deputy Richmond, outlined, it is not possible to have different VAT rates, depending on geography, under the rules set out in the European VAT directive. Moreover, I am not sure whether such differentiation would be desirable. In this country, we have never allocated expenditure based on where it arises. We should not offer differential tax rates, in the form of VAT, in different areas across the country. I do not say that out of any opposition to rural hospitality, which we all want to support. The Government is strongly committed to balanced regional development but I am not sure whether differential VAT rates are necessary and desirable. The example of Celbridge was given and there are lots of other examples.

My colleague, the Minister, Deputy Catherine Martin, is due to publish the tourism policy framework shortly. Our Department has completed the necessary analysis of the submissions made via the public consultation. The new framework will complement Ireland's regional growth strategies and objectives, particularly the four new development strategies for Ireland's Ancient East, which covers a lot of rural Ireland, the Wild Atlantic Way, an internationally successful initiative for the heart of our rural economy, Ireland's Hidden Heartlands and, of course, Dublin.

With regard to the primary focus of this debate, it is important to state that decisions on tax matters, including VAT, are considered as part of the budget. While the Government is not opposing the motion, this does not and cannot mean we have made any decisions in respect of budget 2025. The issues raised in good faith by the Deputies will be considered in the context of the broader budgetary package. The Minister for Finance recently met representatives of the hospitality sector to talk about their trading conditions and their call to reduce the VAT rate for their businesses to 9%.

The Government is very much aware of the cost pressures faced by businesses, despite many of those businesses having a consistently high number of customers. In some cases, the costs they face have been external, particularly on the energy side. Other costs arise from domestic measures such as changes to statutory sick pay, an additional bank holiday and the transition to a living wage. The Government is aware of these challenges and is working to mitigate their impact. The supports we have offered, including tax debt warehousing, the new increased-cost-of-business grant and our significantly increased spending on tourism since 2020, have underpinned employment across the tourism and hospitality sector. The latest Labour Force Survey indicated that economy-wide employment in Ireland reached a record high of 2.71 million by the end of last year, with employment in the accommodation and food service sector standing at 183,000.

One of the best ways the Government has to support not just the hospitality and tourism sector but the wider retail sector is by seeking to ensure their customers - our citizens and taxpayers - have more money in their pocket. Last year, we introduced a range of cost-of-living measures and an income tax package worth €1.5 billion. Further income tax measures can be expected as part of budget 2025. When making budget decisions on VAT or any other tax matter, the Government must balance the costs of the measures in question against their impact and the overall budgetary framework. We are committed to supporting business in these sectors but we must ensure the support we offer is targeted and sustainable. As the Minister of State, Deputy Richmond, stated earlier, a permanent reduction in the VAT rate for the tourism and hospitality sector would impact on all other budget decisions.

While the Government is not opposing this motion, I repeat that no presumption should be made that we have made any decision in respect of the budget. No such decision has been made. However, I reiterate that we fully recognise that tourism and hospitality businesses are integral to the fabric of our economy and society. It is our shared wish across this Chamber that those businesses be supported to thrive in the years ahead. The Government is committed to supporting them right across the country. We have demonstrated that commitment by our actions to date. We will continue to support them.

Mattie McGrath (Tipperary, Independent)
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I thank colleagues for their contributions. Ar céad dul síos, gabhaim buíochas leis an iar-Seanadóir Brian Ó Domhnaill agus Triona O'Flynn in our office for putting together this motion. Tourism is a vibrant, dynamic sector that plays a vital role in Ireland's economy, as has been stated. It is the lifeblood of rural communities, providing employment and economic activity, including in locations where other industries may be absent. I also thank Adrian Cummins and his team for providing us with an up-to-date, as of yesterday, briefing on the perilous situation faced by many restaurants and food outlets.

Recent changes in Government policy and global events have put this vital industry under unprecedented strain. From 2011 to 2018 and again from 2020 to 2023, the hospitality and tourism sector enjoyed a reduced VAT rate of 9%. However, in September 2023, the Government restored the rate to 13.5%. The decision has had a significant impact on the sector and particularly on food-related businesses, which have seen insolvencies more than double in the first three months of the year. How much more clear evidence does the Minister of State want? He should talk to the Revenue. It will tell him. On principle, it is not being very lenient with people either.

The hospitality sector is broad and encompasses businesses such as hotels, bars, pubs, canteens, hairdressers, barbers, catering operators, hostels, bed and breakfast providers, caravan parks, self-catering accommodation and guesthouses. Many of us enjoy the scenic views between counties Tipperary and Waterford. People now come along with their mobile café units. These are of a very high standard and serve people in those remote areas. They have also sprung up in many towns.

Before the Covid-19 pandemic, in 2019, hospitality and tourism were among Ireland's indigenous sectors, generating more than €9 billion for the economy and employing an estimated 284,000 workers across 46,000 tourism-related businesses. That is not chicken feed. However, the Covid-19 pandemic and enforced lockdowns severely impacted the entire sector. As of the third quarter of 2022, the latest data shows a total of 246,000 people employed in the tourism sector and 170,000 in the hospitality and food services sector. The hospitality and tourism sector contributes significantly to the State's finances both directly through employment and indirectly through income tax and VAT. I fail to see that in the figures pointed out by the Ministers of State as to the cost of the request we are making here today. It is a timely request. As Deputy Michael Healy-Rae and others said, we are begging because these people are clinging on by their fingertips.

Excluding Denmark, Ireland's VAT rate of 13.5% for the tourism and hospitality sector is the highest in Europe. Why is that? Why do we have to be the highest or almost the highest in everything, whether fuel charges, transport costs or whatever else? One of the party leaders in the Minister of State's Government has announced he is to retire. I wish him well on behalf of our group but he piled a carbon tax on people as well.

The Government's reliance on the accommodation sector to provide temporary accommodation for Ukrainian refugees and asylum seekers has significantly reduced the availability of tourist accommodation and has increased prices. That is evident. Over the past two years, the Government has blindly taken over the accommodation sector. Some of my colleagues and I stay in the wonderful Martello Hotel in Bray. The Minister of State visited it with me once. I have to declare an interest. Cousins of mine own it. It is now the only hotel left in Bray. All of the others are being used as asylum and refugee centres. A person in junior infants would know that would have a massive impact on footfall and spend and it has. We were there last night. I could not believe it. The place was like some place out in the middle of the countryside of a wet Tuesday night. Last night was not wet. I could not believe the lack of footfall. The damage being done there is obvious and the Government continues to do it. At this point, a hotel in Clonmel is being taken over for an asylum centre. Hearn's Hotel is a famous hotel. Charles Bianconi set up his transport network there 100 years ago. We cannot learn from the past or from our mistakes. We are going down culs-de-sac.

The accommodation shortage, particularly outside Dublin, directly affects other tourism-related activity providers, resulting in an expected loss of €1 billion in revenue last year. The Minister of State has said our proposal might cost €600 million or €700 million but it would save these businesses. A closed business, gnó dúnta, is of no use to anybody. A place that is closed just becomes derelict and lowers activity in the whole of the town or village. The Government must promptly reduce the VAT rate for the entire tourism and hospitality sector to 9% considering the imminent summer tourism season and the sector's financial strains. These are evident. We cannot wait for the budget, whether that is in October or whether it is brought forward for electoral purposes, which is all the Government seems to worry about. These businesses cannot wait. Week by week, dozens of businesses are closing. The Minister of State knows that small businesses are the backbone of the economy.

Furthermore, the Government should consider varying VAT rates in the hospitality and tourism sector across the country to promote regional balance. This should include the introduction of a new radically reduced VAT rate of 5% for areas outside of Dublin. This would create a distinction between the VAT applied in rural areas and in the capital, ensuring that rural areas are subject to a VAT rate no greater than 5%. I have heard the Government's excuses as to why it cannot do it. I have heard some parties here who are supporting the motion, mainly on the left, tear it asunder for looking for this. Why can seven other EU countries do it if we cannot? What the hell is wrong with the Irish Government? We are told all of the time that we cannot do things because Europe will not allow it. Seven other European countries have different rates so why can we not? The Government is not codding the people any more. They know well that this can be changed if the Government wants to change it. As I have said, seven countries have varying rates.

The data we got yesterday from the Restaurants Association of Ireland and Adrian Cummins was excellent but stark. It is a case study on increased costs in 2024. It is very up to date. These people employed 22 staff and had a turnover of €1 million. This is what the Minister of State's Government has done to them. The 13.5% VAT rate increased costs for this business, which has a turnover of €1 million and employs 22 staff, by €37,000. Inflation in the wages of those 22 staff has totalled €36,000. Supply cost increases have cost the business €13,500. That is mostly thanks to the Government's increases in VAT and excise duties and taking off the rebates it had put on. Auto-enrolment is another nice thing the NGOs brought to the Government. It is penalising. Most of us in the Rural Independent Group are self-employed. We declare that. We have good relations with our workers. Auto-enrolment is going to add €5,000 to the costs of this business with a turnover of €1 million employing 22 people. I hope the Minister of State sees where I am going with this. Overhead costs have risen by €3,500 thanks to the Government and sick pay adds on another €2,000.

These are all lovely and dandy. They are rolled out with fanfare by the Government but they have a severe impact on self-employed people, the workers, movers and shakers who drive this country's economy and give employment from Carrick-on-Suir to Kilsheelan to Clonmel, out to Cahir and Clerihan, where the wonderful pub, the Final Furlong, is located, and on up to Cashel, home of the famed Rock of Cashel, and into west Tipperary and the famed Glen of Aherlow. Across Tipperary, small businesses are begging for help. This is the stark reality of what the Government has done to these people. This is the respect it shows them. The Minister of State offered to go to every community to meet people. He will be busy. If he does not go soon, he will not meet many because they will be imithe. Their businesses will be dúnta,finito, gone.

People employed in a business may dream of being self-employed and setting up a business to look after themselves, their family and their neighbourhood. They may dream of employing people and expanding to employ more people, providing jobs. The vast majority of small businesses do not have press like the workers in Aer Lingus are getting today about their big strike. They work collaboratively and help each other. These stark figures say that the Government has little respect for them. Revenue is not giving much latitude to the many businesses that are struggling at the moment. I heard a Government Senator on my radio this morning clamouring for this. It was all for show because he knows it will not be done until the budget. They cannot wait until the budget. It will be too late for many of these businesses. They cannot and will not wait. They would love to wait but they cannot. Their savings are exhausted and their mental and physical health are suffering trying to manage with limited staff. They are getting great co-operation from their staff, who support them and understand their struggles. Ní neart go cur le chéile is the old Irish proverb. I ask the Minister of State to think about that and to look after the businesses because they, in turn, will pour €1 billion into the Government's coffers.

It is short-sighted to say this would cost too much. It has worked in the past. As I have said, it worked from 2011 to 2018 and it worked again after the pandemic. The lower rate of VAT has worked and paid dividends. Some rogue people and big businesses did not pass it on but they can be weeded out. We know who they are. The ordinary people and the spirit of the Gael, of CJ Kickham and of the village must prevail. The Government is going to extinguish that spirit. It is going to extinguish those small businesses and then we will be in a far poorer place because the digitals, the Googles and the big data centres are not interested in small rural communities. They are not interested in the fabric of rural Ireland or in our culture, our heritage or our dúchas. I beg the Minister of State to do something about this VAT rate.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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Is the motion agreed?

Mattie McGrath (Tipperary, Independent)
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The Government has been doing this for 18 months. It is political. The Government parties are not accepting the motion, yet-----

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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The motion is agreed.

Mattie McGrath (Tipperary, Independent)
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It is not agreed. They are accepting the motion mar dhea and then talking against it . We will have to force a vote.

Michael Healy-Rae (Kerry, Independent)
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On a point of clarification, to be very clear what the Government parties have said is that they are accepting our motion. At the same time, they are not saying they will reduce the VAT rate. We cannot agree to that because we would be buying a pig in a poke. We do not know what we are agreeing to because all they have said is that they are not calling a vote on the motion or opposing us, but at the same time they are not telling us that it will give------

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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Presumably you are not going to oppose yourselves.

Mattie McGrath (Tipperary, Independent)
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We have to.

Michael Healy-Rae (Kerry, Independent)
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We cannot agree to what the Government is doing.

Mattie McGrath (Tipperary, Independent)
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It is a slipshod way of getting-----

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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The choice is either to agree or not agree the motion.

Mattie McGrath (Tipperary, Independent)
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We would love to agree the motion, but it is a slipshod effort by the Government to allow its backbenchers to go around to all the hotels and tell them they support them.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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I am sorry now, but we cannot go into the-----

Mattie McGrath (Tipperary, Independent)
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That is the reason we are not supporting it.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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Na Teachtaí atá ar thaobh na cheiste, abraidís "Tá".

Deputies:

Tá.

Mattie McGrath (Tipperary, Independent)
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We are not accepting it. We have to vote against our own motion, which is ridiculous. It is exposing the Government.

Seán Ó Fearghaíl (Kildare South, Ceann Comhairle)
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Na Teachtaí atá ina coinne, abraidís "Níl". Nobody said "Níl". The motion is carried.

Mattie McGrath (Tipperary, Independent)
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More baloney and trickery by the Government.