Michael Fitzmaurice (Roscommon-Galway, Independent)
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I move:

That Dáil Éireann:

notes that: — inflationary pressures over the past number of years have significantly exacerbated financial pressures on both consumers and businesses, particularly within the food service sector, which has been severely impacted by the spiralling costs of energy, food produce, insurance, labour and supply chain disruptions;

— food-serving hospitality businesses, and hospitality businesses more generally, were among the hardest hit by the economic consequences of the COVID-19 pandemic, with many food-led businesses experiencing a sharp decline in revenue due to lockdowns, public health restrictions, and subsequent changes in consumer behaviour;

— energy, labour and supply chain costs have sharply increased over the past two years, with food service businesses, including restaurants, cafés and pubs, finding themselves disproportionately affected due to their high operational dependency on energy and fresh supplies, alongside growing difficulties in hiring and retaining staff in a competitive labour market;

— the temporary reduction in the VAT rate for the hospitality sector during the COVID-19 pandemic, which applied to food sales, provided critical and timely relief to many struggling food service businesses, enabling them to remain viable, maintain jobs, and serve their local communities during a period of profound economic disruption;

— however, this temporary VAT reduction ended in September 2023, resulting in a 50 per cent increase in the hospitality sector's VAT rate from 9 per cent to 13.5 per cent, which has further exacerbated financial pressures on food-led businesses and threatened their viability;

— the Restaurants Association of Ireland (RAI), in its pre-Budget submission, has formally requested the reinstatement of a lower VAT rate specifically for food sales, not the accommodation element of the hospitality sector, highlighting the necessity of such a measure to ensure the survival of the food sector in the face of the cost of doing business challenges facing the hospitality sector;

— food-led businesses play an essential role in Ireland's economy, providing employment for tens of thousands of individuals, particularly in rural and regional areas, where restaurants and cafés are often integral to the local economy and serve as key drivers of tourism and community life;

— food businesses also contribute significantly to Ireland's cultural identity, promoting local cuisine and food heritage, while being instrumental in attracting international tourists to the country, a sector that is critically important to the broader Irish economy;

— the reversion to a higher VAT rate for food sales has exacerbated financial pressures on small- and medium-sized food service businesses, with many facing the prospect of closure due to the unsustainable nature of current operating conditions, as demonstrated by the closure of over 600 food-led businesses in the past twelve months alone; and

— the food service sector is still reeling from the long-term effects of the COVID-19 pandemic, including the warehousing of revenue debts which are now coming due for repayment, further compounding the financial burden on businesses that are already struggling to cope with rising costs; recognises that: — many restaurants, cafés and other food-serving hospitality businesses continue to grapple with the financial fallout from COVID-19 restrictions, with inflationary pressures and labour shortages now posing additional, severe challenges to their operational viability;

— a competitive VAT rate, as opposed to the current rate which ranks amongst the highest in the European Union (EU), is not only critical to the viability of the food service sector, but is also essential to the broader economy, given the sector’s role in providing employment, supporting tourism and fostering community resilience, particularly in rural and regional areas;

— reinstating a 9 per cent VAT rate specifically for food sales would enable businesses to manage rising operational costs more effectively, reduce the need to pass on price increases to consumers and provide a safeguard against the potential closure of many more food-led enterprises, which would otherwise risk the loss of jobs and vital community services;

— food-led businesses face a unique set of challenges that differ from other parts of the hospitality sector, including hotels in larger cities that can rely on high-margin accommodation services and practices such as dynamic pricing to maintain profitability in the face of rising costs meaning, as such, that hotel rooms and all-inclusive or bed and board deals should not attract the lower VAT rate intended to assist food-led businesses;

— the reinstatement of a lower VAT rate for food sales would directly benefit consumers, by ensuring that food service businesses can absorb some of the rising costs of raw materials, energy, and labour without passing on unsustainable price increases to customers, many of whom are already struggling with the rising cost of living;

— the successful implementation of similar VAT reductions on food sales in other EU member states, in accordance with EU VAT law, demonstrates that such measures are both feasible and effective, providing essential relief to struggling food service sectors in times of economic difficulty, and promoting long-term stability and job retention within the sector;

— successive increases to the National Minimum Wage, while aimed at improving living standards, have contributed to wider wage inflation across the food service sector, further increasing the financial strain on businesses that already operate on narrow margins;

— the introduction of, and subsequent increases in, statutory paid sick days, though beneficial for workers, have added additional costs to employers in the food service industry, many of whom are struggling to absorb these new financial and regulatory obligations in the face of rising operational costs; and

— the impending introduction of pension auto-enrolment will further increase the cost burden on employers, particularly small- and medium-sized businesses in the food-led sector, who must now account for these additional mandatory contributions, compounding the financial pressures caused by inflation and other regulatory changes; acknowledges that: — the previous temporary VAT reduction for the hospitality sector demonstrated the positive and wide-reaching effects of such a measure, helping to sustain jobs, protect businesses, and secure Ireland's reputation as a leading food tourism destination;

— EU VAT directives allow member states to apply lower VAT rates to specific sectors, including food sales, thereby offering the Government a legally sound and flexible framework for implementing the permanent reinstatement of a lower VAT rate for food-led businesses, without breaching European law or undermining public finances;

— the distinct operational and financial needs of food-led businesses, which often operate on narrower margins and face higher fixed costs than other parts of the hospitality sector, necessitate targeted VAT relief measures that are specifically designed to protect and support these businesses; and

— food service businesses, particularly those operating in smaller towns and rural areas, serve as economic and social hubs within their communities, offering essential services and contributing to the social fabric of Irish society; and calls on the Government to: — permanently reinstate a lower 9 per cent rate of VAT on food sales in Ireland, in line with the pre-Budget submissions of the Restaurants Association of Ireland, ensuring that this rate applies specifically to food-led businesses and not to other parts of the hospitality sector such as the provision of accommodation by hotels;

— ensure that this targeted VAT relief measure is implemented in a way that reflects the specific needs of food-led businesses, including restaurants, cafés and other food service establishments, which are uniquely vulnerable to rising operational costs and inflationary pressures;

— recognise the critical contribution of the food service sector to the Irish economy and prioritise the protection and sustainability of this sector as a vital component of the country's broader economic and social infrastructure;

— take into account the long-term benefits of reinstating a lower VAT rate for food sales, including increased job retention, enhanced economic resilience, the continued growth of Ireland's food tourism industry and the preservation of Ireland's unique cultural and culinary heritage; and

— engage in meaningful and sustained dialogue with representatives of the food service sector, including the Restaurants Association of Ireland, to ensure that future VAT policy decisions are informed by the real-world experiences and challenges facing businesses and consumers and that any future changes to VAT rates are designed to foster long-term stability and competitiveness within the sector.

I welcome the opportunity to speak on this motion on the VAT rate for the hospitality sector. I am not a person who goes around blindfolded; I acknowledge the €4,000 scheme. The Minister of State and I both see the unfortunate reality in the hospitality sector. I saw it this morning in Dublin but I do not know the business. There are businesses announcing their closure day by day in the sector, unfortunately. Looking at the local papers, be it in Galway, Mayo or wherever, in the small rural villages and the larger towns, unfortunately we are seeing the closure of those small businesses. They are finding it hard to survive. Some might say there were only one two people working in the business. However, one or two in a small village in a rural area might be as important as 21 or 25 in a bigger town. We are seeing this on a constant basis, week in, week out, unfortunately.

Talking to the sector, first, there is deflation there. I commend them for yesterday. Bear in mind one thing: people do not jump in a car from Donegal, Kerry or any part of the country and drive to Dublin just for the sake of protesting, because business people are busy enough at home. Yesterday, those people, because of their frustration and the situation they find themselves in, came from all over the country to show their frustration at being left behind.

I wish to be clear on one thing. I am not talking about hotel beds or that sector whatsoever. I am talking about the hospitality sector. We can broaden that out to small SMEs, be it hairdressers and all of that. However, I refer especially to the food sector. The restaurant sector is in real trouble.

There are enough different problems. The sector always tries to hire staff, and it is tough to get staff. They have that to overcome. In fairness, during the Covid period, the Government tried to give help to the hospitality and other sectors. However, there are a few things causing problems. Everybody knows about the tax warehousing. It is grand parking something down the byroad, but someday again it has to come up onto the main road. Unfortunately, some of them were not in a position to be able to come back from that, which is a loss.

I refer to the cost of energy. Have a look at Ireland. We can say we give this, that and the other. The cost of energy in Ireland is one of the highest in Europe, if not the highest. When you try to produce or cook food in the restaurant sector, it costs more.

In fairness to everybody in the hospitality sector who I have spoken to, no one begrudges someone getting a proper wage. The minimum wage is going up in the budget and no one begrudges that. However, every other step of the way costs will be going up as well. I spoke to a person with a small SME that has 50 employees. The night of the budget, the person texted me. They do not begrudge people getting more wages. Obviously, costs are going up for ordinary working people as well. However, the problem for this person who has 50 employees – they gave me the figures – is, with the increase and the pension auto-enrolment, which I think is put down the road until next September, with a rates revision that was done, they have to find €150,000 somewhere else. That person does not know where that will come from.

If we listened to anything from Europe over the past number of weeks, we saw Mario Draghi being very clear that we are basically getting anti-competitive. If he says that about Europe, if he threw his eye to Ireland, I do not know what he would say about us for the simple reason that compared with the rest of the Europe, 70% of the countries in Europe have a lower VAT rate for that sector than what we have. In the rest of Europe, one will see very clearly that the cost of production, be it electricity, rents or leases, and the overall cost of producing something, be it in a restaurant or having a meal, is way less. We are going up and up and we are losing a huge number of those premises right around the country.

A few different headwinds are hitting the sector. Looking at Board Fáilte or Tourism Ireland’s report, the figures show that bed space is not as available. We are well aware that the Government, for other reasons that I will not get into, decided to take hotel space where it was under pressure with regard to immigration. The problem was then that some of the businesses in those towns would not have the spend that would be coming from, let us say, the yank coming from America or people from other parts of Europe. There would not be the same spend. The other thing we need to do as a country is watch that we stay attractive for bringing in different tourists.

We seem to hear our Government clearly stating that it will give them this and this, and that will sort it. I acknowledge that, however, we are losing small businesses, especially in the restaurant sector, coffee shops and all those types of businesses, day in, day out.

Some might say the budget has gone now. However, there is an election coming. These people live in areas right around this country.

These people have gone to the bother of setting up a business, employing people. Some of them may be doing it on their own. The current turnover and rate of closures are frightening. The Government has become tone-deaf to what is going on in parts of the country. There may be some restaurants flourishing but on the whole, an awful lot of them are struggling. I spoke to the owner of one restaurant. On the face of it, a lot of people are going there and you would think it was doing well. The owner is contemplating closure. It would come as a bolt out of the blue.

The Government needs to revisit this. The restaurants federation has spoken to it. There seemed to be a big build-up before the budget that this would be sorted. There was a lot of speculation. The Minister responsible had agreed that it needed help. Unfortunately, it did not come through. The Government has enough money to make sure we keep this going. The more jobs we lose in places that do not have the same levels of industry as other parts of the country, the more social welfare will end up being paid out. The statistics will tell us that. If we do not help the sector with one hand, we will end up giving it with the other hand. Restaurant owners, any of them you talk to, have no problem with the likes of the minimum wage. They are firm believers that reducing VAT will not make them wealthy but will keep the door open rather than another light going out in rural Ireland. That opportunity is there for the Government. It would be different if we were stuck for money or whatever. At the moment, thankfully, things are pretty good that way. The attitude at the moment is nearly that we can do without them now. We cannot do without them if we are to build communities around Ireland. We must give them the opportunity of survival.

I call on the Government not to oppose the motion. People around the country agree fully that this needs sorting out. These people need help. I call on the Government not to propose an amendment or vote against the motion. There is a lot of frustration out there that is not being listened to. The sector feels left behind and neglected. I ask the Minister of State to talk to those people and to work on the VAT issue. We need a long-term plan on the viability of those places going forward. The Government cannot keep lobbing different costs on top of them. As for electricity costs, to go back to Mr. Draghi's statement, we are not tackling the sides of it that should be tackled in the line of costs and all of that for the sector. I will leave it at that and Deputy Pringle is to speak next.

Thomas Pringle (Donegal, Independent)
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I am pleased to speak on this motion regarding the VAT rate for the hospitality sector. I thank Deputy Fitzmaurice and the team for bringing forward such an important motion. I fully support and have cosigned the motion. I particularly highlight the motion's call on the Government to permanently reinstate a lower 9% VAT rate on food sales in Ireland, to recognise the critical contribution of the food sector and prioritise the protection and sustainability of the sector. I fail to see the reason behind not doing so. It seems to be difficulties around administration and how Revenue would manage it. I do not think that is a good enough reason not to do something that could make a massive difference to the viability of many businesses across Ireland, rural and urban.

There is no doubt that the food sector has faced countless pressures over the last five years, such as adapting during the Covid-19 pandemic and all the requirements that came with it, as well as dealing with the current cost-of-living crisis that we are facing. Restaurants and cafes are feeling the pressure. They are struggling to continue trading with the rising cost of electricity, gas, food and supplies. They are forced to face the full impact of rising prices alone. Many are facing potential closure and some have already been forced to close. My constituency of Donegal has seen many closures over the last few years and it is truly devastating to see. I raised this same issue two years ago when a local business in Killybegs was forced to close due to rising costs at that time, including a 50% rise in the cost of cooking oil, a 70% rise in beef, a 78% rise in dairy produce and a 90% rise in chicken costs. It is rising costs like these that the food sector is finding it difficult to recover from. This is before adding energy bills on top of everything. Two years later, south-west Donegal has seen many more closures, most recently the closure of a well loved family run restaurant in Ardara three days ago. The restaurant stated: "Unfortunately, with the difficulties facing the hospitality industry at the moment and spiralling costs, it has simply become unsustainable for us to continue." This was another devastating blow for Ardara and south-west Donegal. It seems that soon there will be nowhere left to eat if things keep going the way they are going. The industry is drowning. The Government needs to recognise this and do something about it before it is too late.

Really it is already too late for so many businesses. I am particularly concerned about rural towns that rely on seasonal work, such as the likes of Killybegs, where most employment in the area is seasonal. Killybegs relies on the food sector for seasonal employment outside the fishing business. The fishing sector only provides seasonal employment as well. Between the two of them, there is some employment about. The fishing season is getting shorter each year due to a continuous decrease in fishing quotas. Towns in south-west Donegal are barely getting by as it is, with such limited employment in the area. More closures will decimate the area completely and will force more people to leave, putting more pressure on the cities, which are already experiencing immense pressure. The small business and small food sector is growing and has the potential to grow if there is a bit of support there. That is vitally important. They are not looking for massive handouts or anything. Many places can and will develop with a bit of support. That is key.

The food sector is really struggling in cities, too. I have talked to business owners in Letterkenny who are also struggling to make ends meet and dread the ever-increasing bills. This is not the way it should be. People should not be living their lives under this much stress, especially when they play such a vital part in our towns and cities. They should be appreciated and supported, not bled dry. The food sector plays an essential role in our economy but it also plays a very important cultural role. Tourism is important and contributes massively to our economy but I do not believe in catering our economy, culture and way of life solely towards visitors. The everyday life of Irish people deserves to be valued just as much as this Government values tourism. Our citizens deserve to live a good life in Ireland, a country that is wealthy and has the resources necessary to ensure that every single person who lives here has a happy and fulfilling life. Is that not what we should all be striving for? Our food and restaurant culture is an important part of that. Supporting people to be innovative and entrepreneurial in their communities is part of it as well. Restaurateurs know the risk of setting up and doing business in the economy, yet they do it anyway. They do it to provide a service to the community, to bring life and culture to the towns and cities, even when it is not the easy thing to do, the hours long and the work stressful. We could all take inspiration in many ways from the small businesses that try it anyway. The Government could definitely take inspiration in striving to support communities, better lives and opportunities for the people of this country. Many will survive and grow with a little support, and that is what is needed: a small bit of support, endorsement and belief in what they are doing.

In many ways, the Government has offered supports through the councils. Ratepayers have to be up to date with their rates and so on. Very often, when businesses get into bother, the first thing they stop is the rates because they feel it is not an urgent cost.

There is no point keeping up to date with your rates if your lights are not on and that is the reality. A lot of businesses cannot actually qualify for those supports that are there and available at the minute. That is a problem. We need to get to the stage where we are supporting businesses' ability to pay their rates at a later stage and grow their businesses so they will be in a position to do that rather than making sure fully up-to-date ratepayers are the ones who are benefiting from it. That is important but the Minister of State should note it is a small change that might make a huge difference to how businesses can survive. While I know it is necessary that businesses meet their costs and stuff like that, they prioritise the costs they can afford and the costs that are necessary to keep open. If we keep them open, then we can get those other fees from them as well. That is vitally important and I support this motion.

Emer Higgins (Dublin Mid West, Fine Gael)
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I move amendment No. 1:

To delete all the words after "Dáil Éireann" and substitute the following:

"notes that:

— the Government is very conscious of the needs of the tourist and hospitality sector and wants to maintain a healthy and profitable environment for these sectors going forward;

— in this regard, it reduced on a temporary basis the Value Added Tax (VAT) rate from 13.5 per cent to 9 per cent on 1st November, 2020, in recognition of the fact that the sector was amongst the most impacted by the public health restrictions put in place throughout the pandemic;

— the cost of this VAT measure for the period from 1st November, 2020, to 31st August, 2023, was over €1.3 billion, and this represented a very substantial support by the Government to the hospitality and tourism related sectors;

— the cost of a further temporary VAT reduction to 9 per cent for a full year is estimated to be €868 million, and even where the measure is restricted to food and catering services, the estimated full year cost is €675 million; and

— Ireland is not significantly out of line with other countries in relation to the application of VAT in this sector, for instance, it is noteworthy that 14 European Union (EU) countries have a VAT rate of 12 per cent or higher on food services, and our nearest neighbour, Great Britain and Northern Ireland, has a VAT rate of 20 per cent on food services;

recalls that:

— the hospitality sector benefits when consumers have greater disposable income, so Government measures to address cost-of-living issues benefit business through increased household income;

— the Government has made substantial fiscal support available to assist with the cost-of-living challenges that arose after the global increase in energy prices;

— changes were made to the tax Debt Warehousing Scheme earlier this year, including a reduction in the interest rate on warehoused debt to zero per cent, which provided critical support to businesses in the hospitality sector (amongst other sectors) at a very difficult time;

— during the summer, the Government agreed a range of measures to assist businesses in adjusting to increased costs and to improve the cost competitiveness of firms more generally, and these measures included: — increasing the employer Pay Related Social Insurance (PRSI) threshold from €441 to €496 with effect from 1st October, 2024, and this ensured that employers with employees earning the weekly equivalent of the National Minimum Wage will pay the lower employer PRSI rate of 8.8 per cent;

— launching a second phase of the Increased Cost of Business (ICOB) scheme, targeted at businesses in the retail and hospitality sectors, and this scheme has now paid out over €243 million to almost 75,000 small- and medium-sized enterprises (SMEs) right across the country over the past six months;

— doubling the Circular Economy Innovation Grant Scheme 2024 (CEIGS) from €5,000 to €10,000; and

— increasing the maximum amount available under the Energy Efficiency Grant scheme to €10,000, and reducing the business contribution rate from 50 per cent to 25 per cent; — the personal income tax package in Budget 2025 was designed to support low and middle income earners, building on the progress already made during this Government's term, specifically in relation to increases to tax credits and Universal Social Charge (USC) reductions;

— the personal income tax package of €1.6 billion included: — increasing the main tax credits, the Personal, Employee and Earned Income Credits, by €125; and

— increasing the Standard Rate Cut Off Point by €2,000 to €44,000, with proportionate increases for married couples and civil partners; — reducing the 4 per cent rate of USC to 3 per cent; and

— the Government, in Budget 2025, agreed a range of measures to assist businesses in adjusting to increased costs and to improve the cost competitiveness of firms more generally, and these measures include: — the Power Up Grant, which provides businesses that received the second ICOB payment and that now meet the eligibility criteria for a grant in 2024, an energy grant of €4,000; and

— Budget 2025 will also increase VAT registration thresholds from 1st January, to €42,500 for services and €85,000 for goods, and this will help small businesses recently drawn into the VAT net by current levels of inflation; and recognises that:

— this approach to the cost-of-living challenge balances the need to provide the necessary fiscal support to households and firms while, at the same time, maintaining our public finances on a sustainable trajectory over the medium-term and avoiding a situation whereby the Government's fiscal response becomes part of the inflation problem;

— the policy response has been focused on measures that are temporary, timely and targeted at those most in need;

— the Government's measures to date are having the desired impact since: — inflationary pressures have eased considerably over the last year and the domestic economy has grown at a robust pace, and the easing in inflationary pressure will boost real disposable income and enable the pace of consumer spending growth to pick up as the year progresses; and

— Ireland continues to experience record high levels of employment with almost three quarters of our working-age population now in employment and with participation amongst female workers at its highest level ever; and — the cumulative impact of personal income tax changes over the lifetime of this Government has seen: — the main tax credits increased by 21 per cent or €350 each from €1,650 to €2,000;

— the Standard Rate Cut Off Point for single person increased by 25 per cent or €8,700, going from €35,300 to €44,000, with commensurate increases for persons who are married or in a civil partnership;

— the USC middle rate reduced by 1.5 percentage points from 4.5 per cent to 3 per cent; and

— the 2 per cent USC ceiling band increased by 34 per cent or €6,898, going from €20,484 to €27,382.".

I welcome the opportunity to discuss this Private Members’ motion to apply a 9% VAT rate to the hospitality food sector. At the outset, I wish to say that the Government is acutely conscious of the pressures facing small and medium enterprises, particularly in the hospitality and tourism sectors. My own Department, the Department of Enterprise, Trade and Employment, in collaboration with the Department of Social Protection, carried out a study on the increase in the cost of doing business and the hospitality and tourism sectors were absolutely to the fore on that. We drew up a heat map and they were the ones that were red. The reason for those pressures has been in part due to the energy price inflation and the broader cost-of-living crisis since the end of the pandemic which has led to a challenging environment for these sectors across the country. Indeed, Government policy decisions have also increased the cost of doing business. Those decisions were taken in light of the need to increase workers' rights.

The challenges have been reinforced in meetings with the hospitality food sector where it has been really clear that businesses are doing well from a turnover perspective but that costs remain stubbornly high. I have met with so many businesses who say my turnover is up, my covers are up but my margins are down and that is because of the increase in the cost of doing businesses.

In this context, the Minister for Finance, Deputy Chambers, believes that while undoubtedly a lower rate of VAT may assist hospitality businesses from a cash flow perspective in the short term, it is his view that it will be of little assistance in the longer term as it would not address the fundamental issues of business costs. While this decision around VAT is a matter for the Minister for Finance, in my capacity as a Minister of State in the Department of Enterprise, Trade and Employment, I want to ensure that Government is working to create a better economic environment for businesses and in particular, for the hospitality sector.

The Government and I recognise the importance of the tourism and hospitality sector not just for the economy or the tens of thousands of people they employ, but also for the role that many of these businesses play in our communities. For many people, myself included, the sector provided them with their first job and their first start in work when they were starting out by providing them with a job that gave them the ability to work flexibly or part time and for so many people, it offers a full career filled with opportunities. The personal nature of the business and the way it impacts on all of our lives means that all of us in government are aware of the challenges the tourism and hospitality sectors have faced over the last number of years.

Small and medium-sized enterprises have experienced a number of economic shocks in recent years, which have resulted in cost increases. The pandemic and the quicker-than-expected bounce back in global economic activity strained global supply chains. The Russian war in Ukraine significantly impacted energy costs, which have escalated for both businesses and consumers. While wholesale energy prices are improving, prices remain elevated compared with historical averages. It is important to remember these shocks have been global in nature.

As I alluded to earlier, it is acknowledged that there have also been increased costs associated with domestic measures, which includes the increase in minimum wage, changes to statutory sick pay and the introduction of the additional bank holiday, all of which were brought forward from a workers' rights perspective. The various changes were signalled in advance and were typically subject to consultation. Ultimately, however, it is clear there is a cost of this, which is being borne by businesses and the sector. That is why it is so important that we have the SME test now at the heart of Government and the heart of Cabinet to make sure every policy decision, every item of legislation and every statutory instrument from every single Department is stress-tested from an SME perspective and any changes are well flagged in advance with those who will be impacted. The implementation of the living wage is assessed to have the most significant impact on costs, with those operating in the hospitality and retail sectors expected to experience a comparatively sharper increase in costs compared with others. Those two sectors account for almost two out of every three workers on the national minimum wage.

When the Government introduced the 9% VAT rate for tourism and hospitality, a measure we brought in back in November 2020, it was a time when public health measures routinely closed hotels and restaurants or significantly limited their capacity and put their business at risk. The temporary change to the VAT rate was only one part of the Government’s response and other business supports, such as the wage subsidy schemes, were critical for many businesses to survive that uncertain time. Reflecting the large-scale Government support for households and firms, the economy has weathered this price shock relatively well. Economic activity is now back above its pre-pandemic levels and is broadly consistent with levels that would have existed had there been no pandemic.

The most recent analysis carried out by the Department of Finance noted that despite facing numerous successive headwinds over recent years, the domestic economy has proven to be remarkably resilient. Looking ahead, as inflation eases and with the tax reductions that were announced in the budget coming into play in January, the real disposable income of households will continue to recover and support consumer spending. Putting households on a stronger financial footing will support demand for services, cafes, restaurants and hotels right across the tourism and hospitality sectors. The Minister, Deputy Chambers, informs me the most recent estimated cost of the 9% VAT rate for tourism and hospitality, from 1 November 2020 to 31 August 2023, was over €1.3 billion. This represented a very substantial support by the Government to the hospitality and tourism related sectors. The cost of a further temporary VAT reduction to 9% for a full year is estimated to be €868 million. Even if the measure is restricted to food and catering services, that cost would be €675 million.

The reality is, and we have heard this from the hospitality sector that were there to be a VAT reduction, it may not be passed on to consumers. If that was the case, it would constitute an enormous fiscal transfer of taxpayers' money, which is the Minister for Finance's position on this issue. The Minister, Deputy Chambers, also wishes to put on record that the VAT rate for the hospitality sector in Ireland compares favourably to the rate in Britain and Northern Ireland, where there is a 20% rate.

One of the suggestions that has been made by many people is to apply different VAT rates for the hospitality and food sectors when compared to the VAT rate for accommodation. While this is possible, the same VAT rate must be applied within the same sector. If the VAT rate was changed and reduced for hospitality but the accommodation rate continued at 13.5%, this change would have to apply to all accommodation, including bed and breakfast accommodation and small hotels, because of the principle of fiscal neutrality which requires universal application. Revenue has advised that there would be significant practical operational concerns associated with that and it believes it would give rise to administrative and operational complexity.

In addition, a significant concern with this proposal is the cost from an Exchequer perspective would still be very significant. Food makes up a far greater proportion of the overall tourism and hospitality VAT revenue than accommodation, with an estimated annual cost of €675 million from applying a reduced VAT rate to food alone. The Government has provided significant supports to businesses over the last number of years and I welcome that both Deputies have alluded to some of the supports that were there. The increased cost of business, ICOB, grant, which has provided financial support to small and medium businesses that operate from a rateable premises, has been really welcomed by SMEs across the countries. A total of €243.5 million has been paid out under the scheme to almost 75,000 SMEs, including over 39,000 SMEs in the retail and hospitality sector. Businesses in the retail and hospitality sectors were entitled to a second payment for approved businesses or a double payment for new registrations. Deputy Pringle spoke about businesses that were behind on rates and excluded from this scheme. If there is a business in the Deputy's community in that situation, once they have a payment plan in place at all with their local authority, they will qualify for that support.

Under the new power up grant, announced in budget 2025, those businesses that received the second ICOB payment, and those that now meet the eligibility criteria for a grant in 2024 - new businesses to the scheme that were not rateable last year but are this year - are in line to receive an energy grant of €4,000 straight to them between now and Christmas. There was €170 million announced in the budget for this grant and details on the application process will be announced shortly. Broader supports for SMEs were announced in the budget, including the extension of the 9% VAT on gas and electricity from the end of October to the end of April next year. In addition, the VAT registration thresholds have been increased from €40,000 for services and €80,000 for goods. This will help small businesses recently drawn into the VAT net by current levels of inflation.

The tax debt warehousing scheme, which I know the Deputy spoke about, has also offered valuable and practical liquidity support to businesses since the Covid-19 pandemic and supported their cash flow during difficult trading periods.

The small benefit exemption limit has been increased from €1,000 to €1,500. This is to allow employers to reward their staff in a much easier and less cumbersome way by allowing them to draw down up to five non-cash benefits in a single year. In addition, the self-employed earned income credit will allow business owners to keep more of their hard-earned money. Having listened to the sector, we have made changes to the capital gains tax, CGT, retirement relief to facilitate family business owners to pass on their operations to the next generation without any financial penalty. The national training fund will be utilised to help to upskill staff, with €8 million targeted at smaller businesses. Automatic enrolment, as noted, has been deferred until October to give businesses time to better prepare for it.

Furthermore, the Government recently announced a €2.2 billion cost-of-living package, which is targeted to provide additional income to households as economic conditions improve. This will benefit consumer confidence and increase disposable income. It is expected that this package, along with continuing falling inflation, will see an increase in consumer confidence going into the busy Christmas period and will, in turn, lead to greater spending.

Michael Ring (Mayo, Fine Gael)
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The Minister of State's time is up.

Emer Higgins (Dublin Mid West, Fine Gael)
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May I just reiterate that the Government is conscious of the need to support the food and hospitality sector?

Michael Ring (Mayo, Fine Gael)
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There are other speakers waiting. I call Deputy Connolly.

Emer Higgins (Dublin Mid West, Fine Gael)
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I have outlined some of what we are doing in that regard.

Catherine Connolly (Galway West, Independent)
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I welcome the opportunity to contribute to this debate. I thank Deputy Fitzmaurice and his office staff not just for their work on the motion but for giving us the opportunity to put a spotlight on this area. I appreciate and acknowledge all the help that is being given to the different sectors. However, since I was elected, I have looked for long-term, sustainable solutions. The lack of such solutions is the cause of my difficulty with the budget every year. This budget certainly exceeded all our expectations in terms of giving out money without a long-term, sustainable plan in many areas.

Outside of housing, health and the war in Palestine, we receive the most representations from people regarding the issue we are discussing. Deputy Fitzmaurice has set out a very detailed motion. The Government has put forward an amendment, as has the Labour Party. There has been flip-flopping on this issue for a very long time. The approach has been up and down. In July 2011, which is a long time ago, a 9% VAT rate was introduced to support and boost employment in a range of areas. It worked, with employment figures increasing. In budget 2019, the VAT rate was increased to 13.5% for tourism activities, with effect from 2019. That was a flip-flop. Moving forward to budget 2021, VAT was reduced again to 9% to help businesses during the Covid period. Again, the Government was able to change the rate when it decided it was right to do so. That reduced rate ended in September 2023, with a 50% increase in the rate for the hospitality sector.

The motion calls for a 9% VAT rate on food sales. I am no expert in the area of finance. However, we all have experience in our local areas of businesses going bust on a daily basis. There is a constant mantra from the Government that small and medium-sized businesses are the backbone of our society. I agree with that but the mantra has become a bit rhetorical. Small and medium-sized businesses are indeed the backbone of our society but they are not getting the practical help they need for the transformative action that is necessary because of climate change and the public health requirements arising from the next pandemic we will face. All the actions from the Government, with the help of Members on this side of the House, should be to bring forward transformative action. That has not happened. It has not happened in regard to public health and an analysis of how businesses will cope with another pandemic while ensuring public safety. All of that has to be taken into account. Another consideration is how businesses are coping with increased costs, including the increases in wages. Those wage increases are absolutely essential, as the Minister of State acknowledged.

We all use restaurants. On a Friday, I go out with my staff to a small restaurant. Tremendous work is being done by such businesses but they are all struggling with rates and rents. In addition to the other measures, we need an analysis of how we can make small businesses viable in the long term. The rates system absolutely mitigates against that viability. We receive representations from business owners regarding the enormous rates bills they are charged every year. This comes back to the bigger issue that local authorities are utterly reliant on property taxes. They are going up in Galway city, where people are struggling. Rates are a problem because the local authorities are not being funded properly. Both officials and councillors in Galway County Council have had a lot of meetings with us TDs, including Deputy Fitzmaurice, to discuss the underfunding of the county council. Recently, the city council members said the message from management was that the council could not provide the services it should be providing without an increase in property taxes and so on.

I fully support this motion. I reiterate the importance to an area of a small local restaurant. I think in particular of one in Connemara. I am not singling out anyone except an ceann sin i gcroílár na Gaeltachta, atá luaite cheana agam, is í sin, POTA in Indreabhán. Scríobh an bhialann sin litir chugainn ag cur in iúl na ndeacrachtaí ar an dtalamh. Is gnó é seo a bhfuil an cuma air go bhfuil sé ag déanamh dul chun cinn an t-am uilig. Tá an bhialann bheag sin ag tabhairt cuid mhaith buntáistí don cheantar. Faigheann sí an bia amh cosúil leis an gcáisc, na huibheacha agus na hábhair amha uilig ó dhaoine sa cheantar. Tá an bhialann bheag seo ag coinneáil na ndaoine sin ar an dtalamh. Tá sí ag éascú dóibh maireachtáil sa Ghaeltacht. Tá réimse leathan buntáistí ag gabháil le bialann nó gnó beag mar sin i gcroílár na Gaeltachta. Ní féidir glacadh go bhfuil an bhialann sin i gcónaí ag cur in iúl dúinn cé chomh deacair is atá sé maireachtáil leis an VAT agus leis na táillí eile. Cé gur ag dul timpeall i gciorcal atá mé, tá mé ag rá go bhfuil an gá le VAT a laghdú ar cheann de na rudaí atá tábhachtach, ach tá rud eile ag teastáil freisin, is é sin, fís, plean agus straitéis do na ceantair thuaite agus na ceantair Ghaeltachta ionas go gcuireann muid in iúl go bhfuil muid i ndáiríre faoi rud a dhéanamh de réir ár mbriathair.

This motion calling for a reduction in the VAT rate is just one element that is needed in an overall plan, strategy and vision for genuine regional development, balanced regional development and balanced city and rural development. I specifically mentioned one restaurant in Indreabhán, which I invite everyone to visit. This debate puts the spotlight on the importance of small businesses like that for an area in terms of entirely sourcing their suppliers locally, thereby enabling people to live a sustainable life in the Gaeltacht as well as giving employment. It is a pity that this is not the start of a proper conversation as to what we need to do to make sustainable work for people. Without that, we are paying lip service to the issues.

After this debate, I hope to catch the tail end of the presentation from representatives of the regional authorities, who are constantly highlighting the imbalance between the regions, particularly the north west. My colleague tells me County Galway is doing better but that is not quite right; parts of Galway are doing better. There is an imbalance in the region and it has been downgraded by Europe in recent years. I would love to support the Government's amendment but I absolutely cannot do so. We need a different vision and emphasis. This is just one of the steps that is needed.

Martin Browne (Tipperary, Sinn Fein)
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I welcome the opportunity to discuss this matter. A number of catering businesses in my constituency have fallen victim to the high cost of doing business that has been prevalent in recent years. Each loss is a blow to the business owners, employees, their families and other businesses that trade with the business that closes. The loss of these businesses impacts on the local economy and the sense of vibrancy of the area in which they are located.

Measures must be examined and, where appropriate, taken, to assist businesses in need of supports. For these reasons, Sinn Féin proposed the €250 million PRSI rebate scheme. What is that scheme and why did we propose it? Its purpose is to support businesses in coping with rising costs while at the same time ensuring workers can receive the pay increases and sick pay they need and deserve. These are added costs that benefit workers and businesses alike.

When the pandemic hit, Sinn Féin supported the reduction of the VAT rate for the hospitality and tourism sectors to support them in enduring such challenging times from November 2020 to the end of August 2023. This was the correct response. This motion calls for food and catering services to be specifically targeted for the reduction of VAT to 9%. It is a useful element to this motion, to distinguish between the hotel sector for whom this motion does not provide, but for food-led businesses that have suffered from the high cost of business. We must bear in mind various factors when making this distinction. First, there are hotels that use dynamic pricing, which can, by its very nature, harm the rest of the hospitality industry. As I understand it, this may be a factor in the distinction being made here. We must also remember that specifying food and catering services would not eliminate hotels from benefiting from this motion due to the fact that alcoholic drinks currently have a VAT rate of 23% as well as excise duty. These would not be reduced by this measure. For this reason and because of the various ways in which a reduction in the VAT rate could be tailored, it is prudent that a review be undertaken to establish the appropriate level of VAT for the hospitality sector. That is what Sinn Féin would do if it were in government. I say this because when the reduced VAT rate was withdrawn by the Government it was withdrawn from the entire sector. While the hotel subsector did not require this support, it was badly needed by other businesses such as cafés, restaurants and hairdressers. That is why it is important the Government's amendment be opposed because any measure to shut down any further examination of VAT rates must be resisted.

Ruairi Ó Murchú (Louth, Sinn Fein)
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I appreciate the fact this motion has been brought and the opportunity people had in the industry, whether in pubs, cafés, restaurants or hairdressers. Many are from our own constituencies and many of us have been contacted by them over a considerable period in that regard. As my colleague said, Sinn Féin had a budget proposal for a €250 million PRSI rebate scheme on the basis of what we saw as the issue.

Getting to the crux of the matter, first and foremost we are seeking to commission a short review to establish the appropriate VAT rate for the hospitality sector. There will be an awful lot of toing and froing with regard to the hospitality sector and we know the subsectors that are being absolutely hammered at this point. We could all list multiple business owners who have contacted us regarding the severe pressure they are under because of the high cost of business. We have pushed at many stages to make sure there are adequate supports. We have seen some supports but talking to anybody on the street yesterday, they would have said all of it is insufficient.

At the same time they speak about the fact their businesses are thriving from the point of view of demand; that is not a problem. People want to eat in their restaurants and drink in their bars. Beyond that, people need to get their hair cut. Hairdressing is not something that will go out of business any time soon. Maybe I will not have such a need into the future but that is another kettle of fish.

I was contacted by the owners of the Camelot Bar and the Market Bar in Drogheda. Yesterday, I met the owners of Kennedys and the Seatown, and Byrne's of No. 10 also made contact with me. I attended a number of GAA events and alongside being contacted by Jacinta Kierans of Hodgins Hair Design in Drogheda, the owner of Eclips did not waste the opportunity of dealing with me when he had me there, and assumed I would be attending the event, which I was. It is very difficult to make sure I had made contact with all of those business owners, there was just such a throng of people, so that tells us the issues that exist at this point.

I have had huge interactions over the past while where the owner of Ma Brady's went through the ins and outs of the particular costs he is going through. Recently The Food House closed down in Dundalk. That was a huge business on Clanbrassil Street in Dundalk. The owner of Ma Brady's has reopened it as The Brassil and we wish him well into the future but it is fair to say he would say there needs to be moves and changes or we will be talking about greater numbers of closures. The last thing we need to see is a greater level of businesses closing and derelictions in our towns that are under severe pressure.

We know this Government is coming towards the end of its days. I would like that to happen sooner rather than later. We have to do whatever can be done to address these issues and whether that happens now or with the next government, we need to make sure these businesses are given those necessary supports. I also had some disappointing news relating to Cooley Distillery and the possibility of jobs being lost next year. I would like to think the Minister of State's Department will have engagement with the owners because we are talking about a long-term employer. I also brought up the issue with the Taoiseach that we have had the closure of Wassdell, which was a pharma packaging company, and we hope we will have good news relating to PCI Pharma Services, but we have seen the reports about WuXi and the possible closure of its European facilities. We have a major pharma facility in Dundalk. Not only does there need to be engagement but we need to see some sort of clarity around that. I do not want to frighten anyone but we need to make sure the engagement is at its best from the point of view that we ensure we can maintain these facilities and as much of this business as possible.

I commend those who brought the motion forward. We really need to address the issues facing SMEs, particularly small businesses, across the length and breadth of Ireland.

Mairead Farrell (Galway West, Sinn Fein)
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A business owner told me today: "Without a business like mine, there would be no Atlantic Way." This is a business owner who has felt the impact of the lack of Government support or interest across the west and that is what I hear back from businesses across the west. When we talk about SMEs, as we all know in this Chamber, we are talking about so much more than one business. We are talking about so much more than several businesses. We are talking about the whole community impact a business has. For a community in rural Ireland and in the west these businesses are not just businesses. They are vital community hubs where people gather. They might gather after a funeral or during a difficult time. When one of those businesses, be it a pub or different type of business, closes it has a serious community impact. It also has a serious impact in terms of jobs, and people's ability to be able to stay and work in the place they come from and where they may want to raise their children. In a place like the Gaeltacht in Connemara it has a serious impact on the language as well.

Over the past decade, hundreds of pubs have closed. It is very clear from pub owners who have spoken to me over the past number of days that they feel that if the Government does not act now. there will be even more closures, especially in rural areas. Pubs can seriously be the heart of any community. The owners have told me clearly that there is very little profit in pints at the moment and that despite appearances, many publicans feel they are barely breaking even and do not know how they will continue.

We also have a situation where there are other types of business in rural Ireland, and these are businesses that really provide services that the State does not provide. I think about the likes of the podiatry and chiropody types of businesses whose owners have contacted me in the past. They provide services in rural areas that are far more difficult for older people to travel to larger urban areas to access. They create and deliver services the Government is simply not providing.

Business owners are also saying that they feel very much that this budget gives them very little if any support but that this has been on a continuous basis from the Government. An awful lot of businesses in the west in particular found it very difficult during Covid. Obviously, everybody did, but I am referring to supports. Some of the supports just were not tailored for the types they needed in the west. A number of business owners have also told me about the admin difficulties they experienced. They say that the larger companies may have had somebody who could do admin, but small companies, which we really need because they are keeping their jobs but also have the community aspect, were not getting that support.

Níl ach 50 soicind agam, ach dúirt gnólacht in iarthar na Gaillimhe liom, "Gan gnólachtaí cosúil le mo cheann féin, ní bheadh Slí an Atlantaigh Fhiáin ann." Teastaíonn cabhair ón Rialtas; tá sé sin ráite go soléir. Ní hamháin go bhfuil gnólachtaí i gceist anseo ach, ar ndóigh, tá a fhios againn gur jabanna atá i gceist, go gciallaíonn sé gur féidir le daoine fanacht sa cheantar, i gConamara, más rud é go bhfuil fostaíocht ann, ionas gur féidir leo fanacht ann, a dteaghlaigh a thógáil, agus iad a thógáil trí mheán na Gaeilge, ar ndóigh, chomh maith. Tá sé fíorthábhachtach go n-éisteodh an Rialtas leis na gnólachtaí seo ach go gcabhródh sé leo ionas nach ndúnfaidh siad.

Louise O'Reilly (Dublin Fingal, Sinn Fein)
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There is no doubt that our small companies are struggling. Small and medium-sized enterprises are, as everyone has said, and as I know the Minister of State will acknowledge, the backbone of our economy. I thank Teachtaí Dála for engaging with the food and catering sector, listening to its concerns and bringing forward this constructive motion.

This issue resonates far beyond the employers and business owners and beyond the many people who work in the sector. When well-known restaurants and pubs close down, it is felt right across society. These businesses make up an important part of our culture and are part of the social fabric of every city, town and village. We cannot have vibrant communities without a viable hospitality sector.

Covid had a profound impact on the sector. That fact cannot be overstated. Since then, SMEs up and down the State, like households, have endured an unprecedented energy shock. There is no doubt that some of that was caused by international events and some of it was caused by Government inaction, even opposing attempts to address the runaway energy bills at EU level. This was further compounded by rapid increases in import costs. This has placed a real strain on many sectors.

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 excluded far too many businesses. Many rural businesses rely on LPG and many restaurants rely on forms of non-metered gas for cooking, and they were also excluded. That is why the CEO of the Restaurants Association said, in response to budget 2025, "We fully expect this new grant to be as ineffective as the failed Temporary Business Energy Support Scheme". I therefore ask the Minister of State not to take my word for it but to listen to the people representing the sector. It is no surprise that only a small fraction of the money allocated made its way into the accounts of small businesses. Many businesses are struggling because of the impact of Covid, energy shocks and the increased cost of doing business, including increases in labour costs.

I absolutely reject the Government narrative of constantly pitting business against workers and workers against business. It is absolutely shameful. All sectors of the wider economy need to move away from low pay. Sinn Féin is committed to making work pay in every sector, but we know that we need to protect employment. We need to help businesses adjust. We are keenly aware of the challenges the food and catering sector faces. That is why in our alternative budget Sinn Féin proposed a €250 million PRSI rebate scheme to help business with rising wages without incentivising or rewarding low pay. We are also looking very seriously at how we target supports specifically to the hospitality sector and how we protect low-margin, high-employment businesses, particularly small independent operators. We are listening to the sector. Sinn Féin recognises the need to make a clear distinction between the wider hospitality sector and hotels that use aggressive dynamic pricing, a practice that actually harms the rest of the hospitality sector, which is made up of businesses providing a lot of employment.

The motion calls for food and catering services to be specifically targeted for a reduction in VAT. It should be noted that alcoholic drinks currently have a VAT rate of 23% as well as excise duty and will not be reduced by this measure. Many pubs in Ireland have been forced to close their doors. Rural towns have been left without a local pub. Many large areas in Dublin no longer have a local pub, and more than 2,000 pubs have closed in the past 20 years. What is really concerning is the rate of closures we have seen over the past five years. Pubs are part of our culture and should always be given equal consideration to restaurants. Pubs under this measure will benefit only insofar as they serve food and non-alcoholic drinks. It is a positive side of this proposal that they will benefit in any way, but not all pubs should have to become restaurants just to survive.

It should also be noted that by specifically reducing the VAT rate on food service, hotels will benefit as the vast majority also incorporate a restaurant on site. Hotels that engage in aggressive dynamic pricing will benefit, although not directly, because, as we know, accommodation is not included, but I am not comfortable with tens of millions of euro being given over to hotels that have priced ordinary people out of a trip to the capital city just to see a concert, watch a match, do a bit of shopping or whatever. They are simply way out of the reach of ordinary people. My colleague Deputy Pearse Doherty raised previously a situation where it was €200 cheaper to fly to Rome for a concert than to travel up the road to Dublin and stay a night in a hotel here after the concert. That is a scandal. That is not, and should never be accepted as, normal, and that should absolutely not be rewarded.

The cost of a VAT reduction to 9% for a full year is estimated to be €764 million. Even where the measure is restricted to food and catering, the estimated full-year cost is €545 million. The reduction of the VAT rate must be considered in terms of the policy aim of such a reduction. It is clear that in the context of this motion the policy aim is to provide a fiscal support specific to the food and catering services rather than as an incentive to reduce prices. That is a legitimate aim and should be considered. The approach being taken in this motion is to limit the 9% VAT rate to food and catering. This would mean that other important sectors of hospitality such as entertainment and hairdressing would not benefit. The cost of including those two subsectors, which, along with accommodation, make up the tourism and hospitality sectors, would be €24 million and €36 million, respectively. Those subsectors should be included in any form of support. Pubs, restaurants, cafés and entertainment venues, and hairdressers that are classed as hospitality for VAT purposes, are vital parts of our economy. It is estimated that 170,000 people are employed in the food and hospitality sector alone. There has been a decline in the total number employed in the sector since 2019. Analysis reveals that insolvencies reached the highest level in five years after a 25% rise in 2023. Of the 663 insolvencies last year, hospitality and construction experienced a 62% increase, showing that inflation is having a particularly potent impact on these sectors. This trend has continued. Insolvencies in the food and hospitality sector more than doubled in the first three months of this year. The issue at stake here is jobs and livelihoods and no measure should be off the table.

In the time I have left, I want to raise with the Minister of State the issue of sick pay because I am confused, as are many workers. As she knows, as regards the sick pay scheme the Government eventually brought in having come under serious pressure not just from us in the Opposition but also from the trade union movement and wider lobby groups, there were already huge difficulties with low-income workers accessing it, but it was due to expand in January. I have seen the Fine Gael leaflet that promises that it will not expanded. I also asked the Minister of State, Deputy Calleary, in a Topical Issue debate last week if the planned increase would go ahead. He told me that it is under review. The Government should not mess with people's sick leave entitlements. They are an important public health instrument and not something it should play with. Low-income workers absolutely need it, and to say on the one hand that it will be increased but, on the other, that it will not and then, on the third hand, if that is possible, that it is under review is deeply unfair.

Michael Ring (Mayo, Fine Gael)
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I call Deputy Connolly to correct the record.

Catherine Connolly (Galway West, Independent)
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It was the Western Development Commission that was in the audiovisual room. I inadvertently said "the regional authorities" and I just wanted to correct that.

Michael Ring (Mayo, Fine Gael)
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Thank you, Deputy. I call Deputy Nash.

Gerald Nash (Louth, Labour)
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I move amendment No. 1 to amendment No. 1:

To insert the following after "the 2 per cent USC ceiling band increased by 34 per cent or €6,898, going from €20,484 to €27,382": "further notes that:

— individual hospitality sector businesses are facing a number challenges;

— employment in the accommodation and food services sector is close to an all-time high of 190,000, and focus must be on addressing the structural issues required to sustain businesses in the sector to improve innovation, skills development, productivity and sustainability;

— average hourly earnings in the accommodation and food sector continues to be one of the lowest of any economic sector;

— the National Minimum Wage (NMW) remains below the level needed for a living income, and supports calls for it to be linked to 66 per cent of average hourly wages, above the Government target of 60 per cent from 2026;

— there is an 'inability to pay' clause in law for employers who are unable to pay NMW rates to enable them to seek an exemption from increases; and

— Ireland lags behind other European countries on the provision of worker's rights and benefits, and that auto-enrolment and statutory sick pay are long overdue;

calls for:

— the establishment of a State agency to support the hospitality sector, modelled on Teagasc, to boost sustainability and productivity, and provide research, advisory and training services;

— a strategy to drive down costs for small businesses focused on energy and insurance prices;

— increased discretionary powers for local authorities to levy a hotel bed tax if they wish, as is the norm in other European countries, to fund investment in the public realm of our cities and towns;

— reform of the outdated commercial rates system; and

— reform of outdated licensing laws to support the night-time economy".

This is perhaps the third motion this year alone that either specifically refers to or is related to this issue. That shows the level of concern Members of the House have about the current status of the hospitality sector and what is happening in the undergrowth in every town, village and city in the country. It is an important and well-intentioned motion. I have significant sympathy with hospitality owners who are going through a perfect storm at the moment.

I was a member of the Government that brought in the original reduced 9% VAT rate in 2011. The Labour Party sought to retain it right through that term of Government, often against some opposition, but it was the right thing to do at the time. I remember that much of the criticism at the time centred on the evidence, of which there was some, that after employment started to grow, the cut was not being passed on to customers and the pay and terms and conditions of workers in the sector were not improving. The economic circumstances of 2024 are a world away from 2011. We recall 2011 very well. We had a deep recession and liquidations, and the public finances were destroyed. We were reliant on the lender of last resort to pay pensions and public servants and keep show on the road. Unemployment was at 16%. I could go on.

The VAT reduction introduced in spring 2011 was a crucial innovation targeted at stimulating job growth in the hospitality sector, and it worked. At a time of high unemployment, low demand and economic recession, it was absolutely the right policy to pursue at the right time. Today, conversely, the country is at full employment. There are record savings in bank accounts and economic activity is hot. There is, therefore, a paradox of sorts here. On one hand, the economy and fiscal position have rarely, if ever, been stronger, yet there are valid concerns in the hospitality industry about hospitality businesses closing down. This reality on the ground takes some explaining and interrogation. On one hand, there always has been churn in the hospitality sector in good economic times and in bad, but there is something happening in the undergrowth to which we need to pay attention. We know the hospitality sector, along with retail, has been hit with a dynamic cost structure change to the traditional business model. I do not think we can discuss some of the challenges facing the businesses we are all concerned about without reflecting on the last few years and the experiences businesses have had.

We had the pandemic and the outbreak of the war being waged on Ukraine, which had a significant impact on the economy, and all the supports the State correctly provided to viable businesses to get them through a very difficult time. There have been casualties across the economy as those supports wind down. The number of liquidations and insolvencies in the hospitality and retail sectors were put on the record earlier, and this should concern us. Low margin, energy and labour intensive businesses, such as cafés and restaurants, have seen enormous jumps in food costs. As we know, the price of energy in Ireland is the third highest in the EU. Transport costs are through the roof and there has been no respite on insurance despite the much-trumpeted reforms. At the same time and amid those rising costs, these low margin, locally trading sectors have managed between them, to their credit, to add one third of all new jobs in our economy in 2023.

That does not tell the whole story, as we know. Hardly a day passes that I am not contacted by a constituent, many of them friends who have been running very good hospitality businesses for years. They are often owner-managers who would describe themselves sometimes as busy fools, working exceptionally hard in low margin businesses and taking an ever lower margin even though they are working extremely hard. When the businesses these people are running are gone, they are gone and it is only then that we will really miss them and their social importance. One person described to me this week how they are now working in the business and not on the business. They are on the floor all the time, taking on responsibility for every single aspect of the business and working on the front line when they should actually be managing their business. Every business closure is a tragedy. People see it as a personal failure. It is a tragedy for the owner-manager, the families involved and loyal staff too.

I am sceptical that a cut to VAT alone can somehow save every struggling hospitality business in the country. To claim that it would does the great people in this critically important sector for our economy a real disservice. For some, it is definitely the case that a cut to the VAT rate would stave off trouble in the short term and give some temporary respite. In truth, it would not go anywhere near addressing the real structural problems for the sector. I want to put on record the real problem I have with the lowest paid people in the country, those on the national minimum wage, being asked by some almost to take the blame for the difficulties encountered by some employers in an entire economic sector. This is not a good narrative and it is something that needs to be looked at. Overall, it is irresponsible and it is not winning any friends.

I say all this because I am serious about sustainable jobs and decent work. I say it because we need to have a similar seriousness from Government, those of us who want to be in government and the representative bodies about the serious structural reforms we need to make to support, sustain and change a sector that is crucial to communities and workers across the country. In doing so, the Labour Party has proposed an amendment to the Government amendment. Our amendment deals with the real problems and provides for proposals that could, if adopted, be a game-changer for an industry we need to do well and to survive and thrive. It is one of the most significant private sector employers and it needs to be supported. We need to be serious about how those employments are supported. We would do so, for example, by establishing a State agency, modelled on Teagasc, to support the hospitality sector, boost sustainability and productivity and provide research advisory and training services to build a real functioning and robust sector. We have developed a strategy to drive down costs for small businesses that is focused on energy and insurance prices and increased discretionary powers for local authorities to raise tourist levies to pay for investment in the public realm. Finally, we would reform the outdated commercial rates system, which is highly problematic, and the outdated licensing laws to support the hospitality business and our night-time economy.

Michael Ring (Mayo, Fine Gael)
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We will now hear from the Social Democrats.

Róisín Shortall (Dublin North West, Social Democrats)
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I welcome this Private Members’ motion and debate on a sector in this economy and country that is critically important. It is essential that there is a complete examination of what is actually going on here. The Independent Group proposed this Private Members' motion, which is welcome as it enables us to have full debate on the issue in the Chamber. However, it will not solve the problems impacting a significant number of players within the hospitality sector. We need a much closer examination of what is currently going on because we know the sector is not homogeneous. There is wide variation in it, extending from the very big hotel chains in our main cities to the small coffee shops in villages around the country. It also includes many other elements related to hospitality. It is not a case that one size fits all or that one solution would deal with all the issues in the sector.

We know the performance of businesses in the hospitality sector varies enormously. There are individual circumstances relating to location, size, quality of service provided, cost base, the competitive environment in the local area and many other factors which impact the viability or otherwise of businesses.

One of the difficulties relating to the sector is that it is not possible to distinguish subcategories within VAT categories. That is what we are told by the Government. That needs to be tested. We need to see if it is possible to have more targeted measures in respect of VAT. That has not been clarified and the claim is being made that other European countries have been able to separate out elements within EU VAT categories. We need clarification on that. We need to be clear about what the rules are, what is possible and not possible and whether we can vary the rates within a particular category. That needs to be verified.

We need claims being made on both sides of the issue to be verified. We need to have evidence and definitive information on what is going on in the sector. The return to 13.5% VAT in August has undoubtedly impacted all businesses in the hospitality sector but the impact varies widely. For some, it may be the final straw; for others, it will result in a reduced profit margin, which is not in itself a bad thing. Policy changes based on evidence are critical, rather than the broad brushstrokes we have heard about from the industry and its representatives. It is not the case that the entire industry is in difficulty, not by a long shot. Those of us living in Dublin, and the same applies in other parts of the country, see evidence of the hospitality sector booming. I was around town on Friday of last week and could not believe the level of activity. Everywhere was packed: pubs, restaurants and coffee shops. There were queues outside restaurants and pubs. It struck me at the time it is hard to argue anything other than that the hospitality sector is booming in that area and in that element of it. I am not suggesting that applies across the board - it does not - but the idea that reducing VAT back to the 9% temporary rate would solve problems for people across the board is not logical. That is why a more detailed examination of what is going on is needed. The fact some elements of the industry are booming distracts from the fact other elements are struggling and need supports. We need a way of responding to those businesses that provides financial support, improves their sustainability and enables them to survive.

The Government claims a number of the schemes it announced have not been drawn down fully. Is that the case? If so, will the Minister of State tell us the reason they have not been drawn down fully? Were there problems with the accessibility of the schemes? Was there too much paperwork involved? What kinds of businesses within hospitality were not able to draw them down? We need a closer examination of what is going on. We need details of the number of businesses closing. It is claimed two hospitality businesses are closing every day. Is that a high or low number relative to what happened previously? What kind of number is it relative to new businesses opening? We need that kind of basic data. The point is often made, and I heard a business owner on the radio this morning making it, that the reason for the closure of businesses is difficulty getting staff. This is the sector with the lowest paid workers in the country. That is not an argument for delaying an increase in the minimum wage. We need a root-and-branch examination of the issue to ensure we know exactly what the problem is and how we can target supports to businesses that need them most. Business representative bodies consistently refer to the high cost of living as being a major problem in ensuring competitiveness and that gets back to the Government in terms of cost of housing, in particular, and cost of living.

In relation to this blunt instrument approach, it should be unthinkable the Government would give tax breaks to the fast food industry, which is also part of this sector. At a time when we have serious problems with the commercial determinants of health and a major problem with obesity, the idea of giving a tax break to the fast food industry is not on. We need an independent examination of the issues and to respond accordingly.

Seán Canney (Galway East, Independent)
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I welcome the motion from the Independent Group. It is important we look at the hospitality and pub sector in a different light. The pub is part of our tradition and culture and is a tourist attraction for people coming into the country. What I am finding happening on the ground is that pubs are downsizing. Where they had a big space, they have cut it down to a small bar size. They are relying on a few customers coming in and a party every so often - a 21st, 40th, 50th, 60th, or, in my case, maybe a 70th or 80th. That is what the pub trade in rural Ireland relies on.

There is a complete disconnect from what is happening on the ground. The rates these businesses pay have been changed and in many cases have gone up for people in the hospitality sector. That is not sustainable because rates are not a tax on profit but on doing business. Rates are paid based on turnover and the size of the floor area of a building. It is incredible to think people who are not making any money still have to pay rates. Successive Governments have left local authorities reliant on this money to keep services going in our counties. If we have fewer businesses operational we will have less rates and poorer local authorities. It is important we take a common sense approach to that.

Another issue I sometimes get annoyed about is when the Government makes an announcement it is increasing the minimum wage by a certain amount in the next budget or next year or whatever. The announcement is made as if the Government is paying for it but it is not. It is being paid for by the blood, sweat and tears of the coffee shops, bakeries, small shops and pubs around the country. It is not just the person on the minimum wage who will get an increase; everybody else employed in that business will also have to get an increase.

I met a businessman last week who said that the small increase in the minimum wage announced in the budget will cost him an extra €266 per week in wages. If we multiply that by 52 weeks, we are talking about €12,500 or €13,000 extra that must be paid by that businessman because of the Government's great announcement that it is increasing the minimum wage. Part of that cost arises because he has to pay more PRSI. It is important to remember when we make these grandiose announcements about the minimum wage that while it is great and may be considered popular, the increase is crucifying businesses. Unless we can offer proper, long-term support for businesses, we are giving the two fingers to small businesses.

It is not often that the publicans and restaurateurs come together to try to alert people to problems. The march in Dublin yesterday suggests we are at that point. Publicans and restaurateurs are in trouble and we need to do something for them in the long term.

Matt Shanahan (Waterford, Independent)
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I thank Deputy Fitzmaurice and his colleagues for bringing forward this motion, which speaks to support for all of the SME sector. Across the sector, there are significant challenges for SMEs, retailers, hairdressers, beauty salons and all service providers, as we heard on the streets yesterday. There are specific challenges for the food and hospitality sectors. This motion is calling for a reduction or some easement of the VAT rate, which is now critical.

The one thing that these business have in common and the one challenge they all face is the rise in costs, many of which are attributable to Government actions. Minimum wage increases, sick pay, parental leave and auto-enrolment in pension schemes are laudable and we want them, but we must also give support to businesses and recognise that they cannot carry all of the costs that are being put onto their trading accounts. The only way they can cover those costs is by increasing the prices. As soon as they do that, they see an impact to consumption and to their turnover. There have been increases in the costs of utilities. We heard yesterday that food costs for the hospitality sector have increased by more than 200% in the past two years. The cost of utilities has increased by 100%. All energy costs have increased by 100%. Bureaucracy is another significant problem that businesses are facing, all thanks to Government Departments.

There is an ironic element to the budget. When the Regional Group put forward its pre-budget submission, we asked for the VAT issue to be addressed for the food sector. We put forward the novel suggestion of a stepped VAT change based on the turnover of a business. The position of the Government was that it did not have the money and could not do it. Yesterday, it magically found €1 billion to fund the investment shortfalls in the Department. The point is not lost on people in the small business sector.

The Minister of State will have heard that over 600 restaurants closed in 2023 due to the reinstatement of the 13.5% VAT rate. More than 1,000 businesses have been identified. A key message that went out yesterday was that for a restaurant with a turnover of €1 million, the increases in the most recent budget have resulted in an extra €96,000 in costs. For a business with a turnover of €500,000, we can extrapolate an additional cost of approximately €42,00 or €43,000. I guarantee that none of those businesses are making and retaining €40,000 in their businesses.

More than 270,000 people are employed in the hospitality sector. These are the ones who are primarily being hit. Amazingly, those in the regions are being hit most especially. This is about our future tourism offering and our community cohesiveness. It is about what makes the Irish tourism experience unique. What will people come to Ireland for in the future if we close these indigenous businesses? As someone said yesterday, the Irish pub will be an attraction that people will go to the Continent to see in the future. That is the way we are going. I ask the Minister of State to consider doing something with the VAT rate.

I remind the Minister of State of the lack of participation of the SME sector at the Labour Employer Economic Forum, LEEF. That is an issue I have raised for the past four years. There is still no tacit recognition that the small business sector is not being brought into discussions and that decisions are being made without the input of those businesses, as happened the last time. Will the Minister of State make the decision to bring Irish Small and Medium Employers, ISME, onto the LEEF so we will have some representation in that area?

I will make one other key point. What direct experience of running a business have the people in the Departments? I do not think they have any experience on the basis of the decisions they are making. As I said before, I ask the Minister of State to consider a specific agency to look after the SME sector. We have Enterprise Ireland for indigenous exporters. We have IDA Ireland for foreign direct investment, FDI. It is no good saying that the local authorities and local enterprise offices, LEOs, are providing. They are doing what they can at ground level but we need a national agency as soon as possible to cover off the SME sector.

Michael Healy-Rae (Kerry, Independent)
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I thank the Independent Group for bringing this important motion before the House. I thank the businesspeople, workers from around the country, who left their businesses yesterday to come to Dublin to outline their concerns. I thank the deputation from Kerry, which was led by Mr. Christie Walsh from Listowel, the chairman of the Vintners' Federation of Ireland. Also part of that deputation were Councillor Liam "Speedy" Nolan, Councillor Niall "Botty" O'Callaghan from the Fáilte Bar in Killarney, Mr. Seán Murphy from Murphy's bar in High Street, Mr. JC O'Shea from O'Shea's bar in High Street, Mr. Jerry Behan from the great Horseshoe Bar and Restaurant in Listowel and all of the others who came up. All of those people are very busy. When they left Kerry yesterday, they came here for a purpose, which was to highlight their disappointment with the Government in respect of the VAT reduction that was not given but should have been. The VAT reduction was going to cost between €700 million and €800 million. I believe we would have got that money back into the State's coffers through the increased business in those places. Rather than people staying at home, they might have gone out. It might have made our businesses more attractive. We need more footfall. One of the speakers yesterday said that a business, whether in hospitality or not, with €1 million in turnover - which is not much of a turnover in any business - is facing €96,000 in extra costs because of the additional charges that have been put on them. We are not doing enough. We should be working harder and doing more for the people in all of these sectors to help local businesses to keep their doors open.

Danny Healy-Rae (Kerry, Independent)
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I am glad of the opportunity to contribute. I too compliment all the traders from Kerry and from all around the country who were outside the gates of Leinster House yesterday to highlight their concerns about what has been happening. The fact that VAT has not been reduced to 9% is ensuring that more places will close, following those that have already closed. That is what the Government of Fianna Fáil, Fine Gael and the Green Party is trying to do. By not reducing the VAT rate, the Government is ensuring that more businesses will close - full stop. That is it. People around the country have Fianna Fáil, Fine Gael and the Green Party to thank for that.

Hotels and guesthouses have been filled with refugees, including Ukrainians, and that is causing a reduction in footfall. I ask the Minister of State not to shake his head. The cost of electricity is increasing. Every day since Bord na Móna was closed, the cost of electricity has gone up. Rates have doubled, tripled or quadrupled under this regime. The Government is ensuring that labour costs are going up. Fuel and food are costing more and the Government is not recognising that. It is still insisting it will not reduce the VAT rate. I will tell the Minister of State one thing - the people of Kerry will remind the Government of that on the doorsteps.

Richard O'Donoghue (Limerick County, Independent)
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The Government has proved that it, and the Minister of State's Department, know nothing about business. Deputy Micheál Martin has said that the issues in respect of the hospitality sector need to be revisited. That is what he is saying now. Why is that the case? The Government did not cost it properly. The increase in VAT and the two increases to the minimum wage have affected businesses. With the increases in social welfare and the minimum wage that the Government is giving out, it has taken all of that back again and more. It is closing down businesses. The Minister, Deputy Peter Burke, said that more businesses have opened than have closed. He is correct, but what he did not say was that every business that has opened was funded by the Government for the first two years through Enterprise Ireland and all these different grants.

Now those businesses are closing after two years and the businesses which were there for decades cannot stay open. That is why with everything the Government puts its hands to, it wastes the money. It started with the bike shed, the children's hospital and a security hut. If the Government had to run a business like other people have to run their businesses, it would not be in business but it is wasting every bit of taxpayers' money. It is waste with no accountability for the funds which the hard-working people of this country work for. That is what is wrong as the Government does not know what it is doing.

Mattie McGrath (Tipperary, Independent)
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Gabhaim buíochas and I compliment the Independent Group for bringing forward this motion. I was delighted to meet Richard Gleeson, the vintners' representative, and Michael Foley, of Foley's Bar in Cashel. They run two fabulous establishments, one in Clonmel and one in Cashel as do the other publicans and the other people who were there yesterday.

Some 600 such establishments have closed. What more does the Government want? It caps it all then for those people going home last night, who were saddened that they had to come here the first place, that the Government found €1 billion to block holes again that its Departments had wasted with overruns by bringing in a Supplementary Estimate. It is a shocking disgrace. If those people go in and vote for the Government again in the next election, I will give up because if the people can be fooled like that and if it can rob the taxpayers' money with such wasteful carry on, it is unbelievable. They came up here yesterday in their hundreds, workers and company owners. Some 600 have closed in the past 15 months. Can the Government not see the writing on the wall? Deputy Micheál Martin comes out now to say that it must be reviewed. If that was not an election gimmick from a bribe government, I will never know. That is the best thing that he has been at all of his life, which is the setting up of reviews and committees to investigate stuff and doing nothing. He will go down in history as the do-nothing Tánaiste or Taoiseach and Minister. He sets up this report and that report and he will give Deloitte and Touche another €1 million to have an investigation into RTÉ and then he gives them €750 million to sell propaganda for the Government. It is a shocking and the Government should be charged and arraigned for fraud in what it is doing in wasting taxpayers' money.

Neale Richmond (Dublin Rathdown, Fine Gael)
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There is no basis for that comment, Deputy.

Michael Collins (Cork South West, Independent)
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I thank the Acting Chair. First, I think Deputy Fitzmaurice and the Independent Group of Deputies for putting forward this very worthy motion at this time. The Minister of State should remember one thing which is that all of these restaurants, cafés, pubs and hairdressers are small businesses. That is why the Government has them crushed. It is trying to crush them out of business. Why did the Minister of State not attend the protest yesterday? If he did not, he should have been there to listen to what is going on on the ground. The Government is out of touch with what is going on on the ground. These businesses are paying rent, rates, electricity, staff, oil, pensions and property tax. It is one tax on top of another. What does the cup of tea and cup of coffee cost and how many of them do they have to make before they have to turn a profit? How many cups of tea and coffee do they have to sell? The Government is totally and utterly out of touch and the problem is the two boys at the top; the Minister, Deputy Donohoe, and the Minister, Deputy Chambers. They are Dublin 4 Ministers and have no idea what is going on in the real world. I ask the Minister of State present to come down to my constituency and I will take him around to the communities. They are not nasty people down in west Cork.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I was down there two weeks ago.

Michael Collins (Cork South West, Independent)
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They came up yesterday. In one minute I will give the Minister of State time to talk and I will not interrupt his talking. They came up here yesterday out of their goodwill and took another few pounds out of their pockets. They were brought up here a couple of days before the budget, the VAT 9 group, and were codded to their eyeball by Fine Gael and Fianna Fáil. The Minister of State's Minister was down in west Cork promising, promising, promising. He left a legacy of closures after him and that is what is happening to the cafés, restaurants and the pubs, and to the businesses in west Cork. The Minister, Deputy Martin, now knows that there is a general election and he better revisit it. It is too late for the Government and it is time for them to go. That is the order from the people of west Cork.

Violet-Anne Wynne (Clare, Independent)
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The hospitality sector in Clare has been speaking and highlighting its struggles for the past number of months now. I pay tribute to Maurice Walsh and Michael Vaughan for doing exactly that. They have said that they are facing an Armageddon this winter if the Government does not respond to their loud pleas. We know that Shannon Airport has been doing fantastic and its passenger numbers are up but although still in June and July we had an extra 1.3 million visitors to the region according to the Fáilte Ireland tourism barometer, some 33% of businesses had fewer customers.

This summer, it is also interesting to note, was the coldest summer we have had since 2015 and one in five tourism beds in Clare are being used for housing accommodation. Some four in ten businesses have referred to this severely impacting their turnover.

Some 600 businesses have gone in the past year and I also pay tribute to the youth who would be the most dependent on this kind of employment, especially in the hospitality sector in Clare also. They have felt the brunt of the closures and it has really impacted them in going back to university this September. I pay tribute to those students.

We also want to highlight this call for the reduction of the VAT rate. I have been very much on this issue and have raised it a number of times. It has been costed and massive amounts of money have been discussed in response to parliamentary questions as to how much it would cost the State. In respect of those who are working in the industry who feel no hope, it is definitely worth doing and there is a need to reduce the VAT rate. Gabhaim buíochas.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I welcome the opportunity to respond to the issues raised. I acknowledge the protests which came to Dublin yesterday and I believe I met all of the representative bodies many times in dealing with this, including the local businesses in my own community.

I would like to acknowledge the role of the Cathaoirleach Gníomhach, Deputy Ring, in introducing the 9% VAT rate originally at a very difficult time for the sector, which he, as the then Minister of State, represented in government and the impact it had on the entire country as well as businesses in D4, even though neither of the Ministers are from D4, despite some of the colourful comments from others.

The Deputies across the Chamber have expressed the view that the 9% VAT rate should be brought back for the food hospitality sector and indeed made permanent. The Government is fully committed to supporting the food hospitality sector. The decision was taken, however, in budget 2025 not to reduce the VAT rate to 9%.

From the outset, let me be clear, I and indeed the entire Government are well aware of the pressures faced by the food hospitality sector. In my time in the Department of enterprise, I met with these businesses on a weekly if not daily basis and I still do. Indeed, most recently, I was in Cork city last Friday meeting businesses and all the representative bodies. The previous Friday and Thursday, I was in Tipperary and there is not a day of the week when I do not go into businesses in my own constituency, like any dutiful TD does.

I hear their concerns and I absolutely take them on board. The hospitality sector is vital, not just to our tourism sector and to our economy, but it is absolutely vital to our communities. It is the centrepiece for so many community endeavours and is the heartbeat of suburban, urban and rural Ireland in so many regards.

There is simply no denying that the cost of doing business has risen significantly over the past few years, driven primarily by energy costs and inflation. However, I do acknowledge the other costs arising from domestic measures such as changes to statutory sick pay and the transition to a living wage, which will have a particular impact on labour-intensive businesses such as restaurants. These measures have been roundly supported from nearly all sides of these Houses. Indeed many of the people criticising them actually welcomed their introduction at one stage.

There is, however, a very significant amount of work underway to mitigate the impact of these costs. In this regard, the supports the Government have offered, from tax debt warehousing, the increased cost of business grant, the recently announced power up grant and the changes to the VAT registration threshold are all having a significant impact. The increased cost of business grant saw €154 million issued in the first payments with nearly €90 million issued in the second payments tailored specifically to retail and hospitality businesses which we know are bearing the brunt of the increased costs. The first payment issued to just under 75,000 businesses and a further 38,000 benefited from the second round.

Deputy Shortall raised concerns as to whether there was a large undertake of this grant. There simply was not. By the end of the year we saw over 90% take-up of the grant. Businesses which had not taken it up had gone out of business or were not in fact eligible for it.

Earlier this month in budget 2025, a power up grant was announced which will be an additional grant for businesses. Some €170 million has been made available for the scheme in the budget. Under this scheme those retail and hospitality businesses that received a second increased cost of business grant will receive €4,000 into their bank accounts this side of Christmas. While we are fully aware that these grants do not solve many if any of the issues which businesses are facing, they may in some small part go towards paying a bill or an element of the wage bill those businesses face.

However, beyond grants and tax changes, one of the main ways the Government has worked not just for both the hospitality and tourism sector and the wider retail sector, but for the economy as a whole, is by trying to put more money into customers' pockets. That has been a focus of the Government's last two budgets. That is why the Government's budget announcement of €2.2 billion of cost-of-living measures targeted to provide additional income for households, is also support for the wider hospitality sector. As these measures take effect in the final quarter of 2024, the Government expects an increase in consumer confidence going into the busy Christmas weeks with a knock-on increase in spending within the hospitality sector.

We have also seen a consistent approach to changing the tax rates in the State, with another increase this year in the threshold before someone pays the higher level of taxation by €2,000 and a cut to the USC of 1%. These measures all put money directly into the pockets of Irish people and with greater spending power there is greater spending power within the hospitality sector.

The proposal made by the Deputies is that this will be a permanent VAT rate for the sector. The cost would reach the billions very quickly. The 9% VAT rate cost an estimated €1.3 billion between its introduction on 1 November 2020 and when the rate reverted to 13.5% on 31 August 2023. Do not get me wrong. This was money well spent and it was extremely important to do it but we do have to ask whether this is a viable, long-term solution for the sector and if it addresses the myriad concerns raised by vendors, restaurateurs and café owners, and the representatives in this House, in terms of the sector.

When making budget decisions about VAT or any other tax matter, the Government must balance the costs of the measures in question against their impact on the overall budgetary framework. The Government is committed to supporting businesses in these sectors but we have to ensure that the support we offer is targeted, sustainable and legal. A number of Deputies have asked previously, including in this debate, about the possibility of altering VAT rates for different parts of the country or to have a different rate for the same service in a different area. This is just not possible. It is forbidden by EU law and it is against the VAT code. We need to put some clarity and clear blue water between this and what is actually possible. The Government will, however, absolutely continue to support the hospitality sector and all of the businesses operating in it. We will also continue to ensure that taxpayers can spend their own money to support these businesses rather than relying on the Government to subsidise them on an ongoing basis. We will absolutely commit to constantly reviewing all measures and to constantly engaging with the sector through the representative bodies, through the individual business owners in our constituencies, and through the workers who work in the sector.

I want to put on record distinctly and clearly the value and importance of the hospitality sector to our economy and our society. I completely hear it. It was put to me quite bluntly on Friday by a number of people who work in this sector when I had that engagement with Senator Jerry Buttimer in Cork city centre. They said that they do not feel appreciated and not necessarily just about policy direction but also with the language used by Government Ministers and the language used by political parties of all sides, particularly when it comes to writing election manifestos in the coming weeks, or months, depending on what happens. I put it on the record of this Dáil that they are valued, they are appreciated and they are vital for ongoing success, not just for the economy but for the sheer functioning of communities around this country north, south, east and west.

I will conclude by genuinely thanking the Deputy for placing this motion. I fully understand the importance of this matter, not just to their constituencies in the north west but to every constituency across this country and to every business operating in this sector regardless of size or the offering they have. The Government is absolutely committed to supporting the sector and over the next weeks, months or whatever happens in the future, we are more than committed to working with Deputies Harkin and Fitzmaurice as individuals and as part of their wider political group to address the concerns they have to see where we can provide meaningful and viable solutions on an ongoing and multi-annual basis.

Marian Harkin (Sligo-Leitrim, Independent)
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I thank Deputy Fitzmaurice for drafting this motion, which I fully support. The motion proposes maintaining the 9% VAT rate for the hospitality sector. This is in the wider context of the huge increases in the past 12 to 18 months in the cost of doing business but specifically this morning, we are looking at the 9% VAT rate. In that context, let us look at our VAT rate on hospitality in comparison with our EU colleagues, that is, the people we compete with when it comes to tourism business and leisure business. Increased VAT rates have a huge impact on our competitiveness. Ireland's VAT rate of 13.5% on this sector is one of the highest in Europe. The Minister of State will know this. More than 70% of EU countries, including Italy, Spain, France and Portugal, have lower VAT rates on hospitality. Some of these are significantly lower. I put it to the Minister of State that Ireland is way out of line when it comes to VAT rates on the hospitality sector. If we reduced it to 9%, that would bring us right into the middle group where our tourism sector could compete. The Minister of State and I both know that. This is the reality of the situation. EU law allows us to implement lower VAT rates in certain sectors. I agree with what the Minister of State said earlier about certain parts of the country and so on. That would become a minefield and nobody wants that but the Government does have the power to reduce it in certain sectors, for example if there was economic difficulty or issues around businesses surviving. That is the situation we are looking at the moment so there is no issue from that perspective.

It is not just VAT rates. Consider our excise rates on wine and beer. Wine and beer are often sold in our restaurants. Ireland has the highest excise rate on wine in all of the EU and we have the second highest rate on beer. Therefore, the Government already has a huge tax take on wine and beer sales in our restaurants. On top of that, the Government slaps one of the highest VAT rates in the EU. This means that as a State our tax take from this sector is one of the highest in EU, if not the highest when food and drink are combined. It is, therefore, perfectly reasonable that we should ask the Government to reduce the VAT rate on the food sector to give these businesses a chance to survive. What we are asking is reasonable. It is not off the wall. It benefits urban and rural alike. I was horribly disappointed that it did not happen in the budget but a billion euro was found yesterday or the day before so maybe money could be found to reduce the VAT rate before we finalise the Finance Bill.

The second issue here is Government interference in the market. The Government has done this by: raising the minimum wage, which I fully support; by pension auto-enrolment; and the five days' sick pay, which will increase further. I fully support all of that but Ministers are claiming credit for it by saying "I reduced the minimum wage" when the credit should go to the employers who pay the increased salary. Ministers make a decision, which is the easy part, but when the State intervenes in the market it has a responsibility to prevent market failure because of its actions. That is what is happening here. Restaurants, cafés and small businesses are under serious pressure from increased costs mandated by the State. The State, therefore, has to act. I read through the Minister of State's contribution where he speaks of some of the supports that are there, and they are of small assistance, but yesterday at the protest I spoke to a restaurant owner from Sligo who has two restaurants with 45 staff. His increased costs for one year are in excess of €90,000. I spoke to a restaurant owner from Leitrim. He was not at the protest on his own but was there with five or six members of his staff and when they come to a protest outside Leinster House, this tells us that they recognise their very viability, the future of their restaurant and of many restaurants in the region, is seriously under threat.

I went through all the figures with the restaurant owner from Sligo. It is perfectly legitimate. The Government's €4,000 grant will be a help, and yes the Government has put in some measures, but just five minutes ago the Minister of State said it "may in some small part go towards paying a bill". It will but that is all it will do. It will not be enough to keep the doors of some of those restaurants open.

Deputy Fitzmaurice has given me some time to finish.

One of my main concerns is that many of the restaurants that are closing are Irish owned. They are indigenous, use local produce and are unique to their own areas. That is one of the reasons why we all go out to eat, for something different. It is one of the reasons why tourists enjoy going to Irish restaurants. Restaurants open and restaurants close - we know this, but the real risk is that the restaurants which are closing will be replaced by the chains. That is fine but if that is all we have then we are losing the uniqueness in our food offering. I can honestly say that I have never seen such anxiety and worry from small businesses as at the moment. They tell me they are on their knees and many are on the verge of giving up. There is still time to reverse this decision and I ask the Minister of State to seriously consider it. I thank Deputy Fitzmaurice for drafting this excellent motion where we get an opportunity to raise issues that are crucial nationally and regionally.

Michael Fitzmaurice (Roscommon-Galway, Independent)
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I thank Deputy Harkin. I thank the Minister of State and everyone else who spoke on the motion. I thank the Minister of State for his engagement on this. Everybody is entitled to their opinion and I acknowledge that Deputy Nash of the Labour Party has an amendment in. For people who go into business in their local areas, there seems to be a disconnect from what I would call the people in Departments who never took a risk in their lives, never had to see the letter from the bank manager, never had to make sure that Revenue was being paid and never had to make sure they had to meet deadlines. There seemed to be a disconnect, talking to the people yesterday. A person who owns a business does not come to Dublin to protest, that is sure, unless there is something very wrong, because they do not have the time and they are small outfits. It is the last thing these people would do and, as Deputy Harkin said, to bring their staff with them as support. This is not just something that we are rocking up with to try to bring up again. We know because we see it on the ground. Every local paper is showing it every day. Businesses are closing, one here and one there. People do not just close businesses for the fun of it. Through blood, sweat and tears, they try to build a business. They will work whatever hours they can. I ask the Minister of State to re-consider this. I hear the Tánaiste has now said this may have to be revisited. I ask the Government to make sure that this sector is protected. We have put proposals forward and obviously the Government is putting an amendment forward.

At the end of the day, I thank everyone who spoke on the motion.

Michael Ring (Mayo, Fine Gael)
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In accordance with Standing Order 80(2), the division is postponed until the weekly division time this evening.