Cian O'Callaghan (Dublin Bay North, Social Democrats)

There are some points that the Minister made with which I agree. Hospitality businesses in rural towns and villages where there is not much economic activity and not many business open, and equally those in urban areas that may be economically deprived and have very few local business, have a function that goes well beyond their economic activity. They have a social function. They can be the equivalent of the rural post office in that they might be places where an older person living alone has their only daily contact with others. They are important.

The difficulty I have with this measure is that it is a blunt one. It is not targeted. In general, I have an issue with blunt, non-targeted measures, not just in this sector. What we should have been contemplating was a targeted reduction. As Deputy Nash said earlier, the measure under discussion was introduced at a time of economic crisis when there was a need to retain some jobs and ensure stimulation. A blunt blanket measure when we are in a very different situation does not make sense. We should have been considering targeted measures. In our alternative budget, we proposed targeted measures that would support small rural cafés or businesses with a social or community function rather than a very large, expensive, non-targeted blunt measure that is not needed across the board. I would certainly support a targeted measure.

The lobbying on this made much of the number of closed businesses. However, this is a growing sector, with growing employment and a growing number of businesses. Not just in Ireland but also in other countries, businesses in the sector, including cafés and restaurants, do not remain open for ten to 50 years; there is a lot of turnover. It can be very difficult for individuals who have put their hearts and souls into a business if it does not work out. Are we now getting into a situation where State policy is about subsidising all small businesses to stay open, regardless of whether they are viable? I am all for State intervention, but it must be strategic and in areas where it is really needed. It cannot simply be to maintain small businesses that are not viable.

After many of the closures, especially of many of the high-profile businesses on which the lobbying was done, we see a new hospitality business open in the premises a month to eight weeks later. That is very different from the rural areas we have talked about, where if one of one or two businesses closes, it may not be replaced. That is why I favour targeted supports to keep those businesses with a social function open. However, a blunt VAT rate of the kind under discussion does not achieve that.

Let me quote what Nevin Economic Research Institute submitted to us this week:

... the decision to cut taxes for the hospitality sector at a time of full employment – the lowest paying and least productive sector in the economy no less – is a particularly bizarre one. Wasting €700 million annually on a policy that will generate little to no new jobs is a breathtaking waste of resources. The opportunity cost is enormous. We could have hired over 11,000 nurses, made public transport free, or taken 50,000 children out of poverty with that money, or alternatively, we could have just saved the money in order to reduce the need for tax increases in the future.

Unfortunately, the evidence free tax breaks for the loudest business lobby follow a well-worn pattern of responding to complex policy issues with a blunt, ineffective and regressive tool. This measure will do precisely nothing to promote the economy’s productivity – indeed it will have the opposite effect.

That is an independent commentary on the measure.