Simon Coveney (Cork South Central, Fine Gael) | Oireachtas source

The business sector has mixed views on this. Clearly, the hospitality sector wanted to keep the lower VAT rate. A number of us made the case for retaining the lower VAT rate for a longer period. A decision was taken to extend the lower VAT rate for an extra six months, which brought the tourist season last year into play. That was very welcome from the hospitality sector's perspective. I supported the budget last year, which made a decision to bring an end to the temporary decision to lower the VAT rate. The cost of a lower VAT rate for the hospitality sector as a whole, through a 12-month period if we were to retain it this year, would be approximately €788 million. Many people made the case that if we are going to spend €788 million, we should be spending it to support other sectors as well rather than just the hospitality sector. These are choices that the Government had to make.

A tax reduction is calculated, from a financial perspective, in the same way as a grant is. It is income foregone versus grant aid. It the same thing as regards the financial calculation for the Department of Finance. That being said, I made a case to look at splitting the VAT rate where it would not apply to hotel rooms but would apply to food hospitality. I felt there was a case to be made for that. It was looked at and it was decided that it was too complicated to split that in terms of enforcement and so on. Of course, there would not have been significant savings either because it still would have been a significant cost. The Government looked at that proposal but, on balance, decided not to go with it.

My team has spent the last number of months putting together a report on the impact on the economy of the increased costs that come from a whole series of Government policy changes. I would argue in favour of all of them, including workers' rights, sick leave, minimum wage increases, parental leave, planning for future pension provision and so on but, undoubtedly, those choices have increased the cost of doing business for certain sectors of the economy in a significant way, while hardly impacting other sectors at all. We are now looking at how we can support those sectors that have been impacted in a disproportionate way. Cafés and restaurants are very much in that space. It is about what we can do now from a policy and support perspective to help their viability and competitiveness going forward. We are currently in a process of looking at that and speaking to the Department of Finance about it. The Minister, Deputy Michael McGrath, has been very helpful in signalling that he is speaking to Revenue about showing more flexibility on the warehousing of historical debt, most of which is linked to Covid, so we are not putting small businesses under inappropriate pressure to make repayments when they are trying to survive on a week-to-week or month-to-month basis.

I will say a number of things on this. Looking at the economy as a whole, many more businesses were being set up than were lost both last year and into this year. One is a multiple of the other. We are in a very healthy space regarding new businesses being set up. Having said that, there are particular pressures on food hospitality at present, including cafés and restaurants. We have seen a number of high-profile restaurants that were well-run businesses closing in the first month of this year. Even recognising that January is a very difficult month for the hospitality sector for obvious reasons, there is an issue here that we need look seriously at and talk to the industry about. That is what we are doing. There are a lot of issues but it is hoped we will be able to share the piece of work we have done with the committee when it is finalised in the next few weeks because-----