Oireachtas Joint and Select Committees
Tuesday, 17 September 2013
Joint Oireachtas Committee on Jobs, Enterprise and Innovation
Retention of 9% VAT Rate: Discussion with Restaurants Association of Ireland
Our second discussion concerns the importance of the retention of the 9% VAT rate in creating and maintaining jobs, including in the restaurant sector. I welcome Mr. Adrian Cummins, chief executive officer of the Restaurants Association of Ireland; Mr. Pádraig Óg Gallagher, president of the Restaurants Association of Ireland and owner-chef of Gallaghers Boxty House, Temple Bar; Ms Angela Ruttledge of Woodstock, Phibsboro and Moloughney's of Clontarf; and Mr. Brian Fallon of Fallon's, Kilcullen, County Kildare and Fallon and Byrne, Dublin 2. They are all in attendance to discuss the importance of the retention of the 9% VAT rate in creating and maintaining jobs in the tourism and restaurant sector. They have been involved in a campaign over the summer. Most members have been contacted at some stage. We decided it was important to have a discussion on this subject in advance of the budget, even though at short notice.
I apologise for the small attendance of members due to many of the parties holding meetings prior to the return of the Dáil. We will share the information provided today with those members.
I advise the witnesses that, by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to this committee. If they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given. They are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing ruling of the Chair to the effect that they should not comment on, criticise or make charges against a person outside the Houses or any official by name or in such a way as to make him or her identifiable.
Mr. Adrian Cummins:
I thank the Chairman and the members of the Joint Committee on Jobs, Enterprise and Innovation, for the invitation to attend today's meeting. I am pleased to have the opportunity to discuss with the committee the importance of the retention of the 9% VAT rate in creating and maintaining jobs in the tourism and restaurant sectors. Following the presentation, which I will keep brief, we are happy to take questions. We made a formal pre-budget submission to the Department of Finance last week. We have a greater sense of clarity on the emerging issues and priorities for business in advance of budget 2014.
To provide some context, it will be useful for me to set out what the Restaurants Association of Ireland is picking up from the business community and our 1,000 members on the performance of the economy over the first half of the year and the issues arising as a result. Restaurants have to deal with, on average, 25 bodies and agencies in the day-to-day running of their businesses. It is an industry that has not been given a helping hand by local authorities and our SMEs contribute a massive 28% to the total income of local authorities. Restaurants can be seen as engine rooms of local economies in small towns and villages around Ireland.
Irish tourism suffered a major setback with the onset of the global recession in 2008. In the case of Ireland, the severity of the decline in demand for what we have to offer was all the more marked due to an already significant loss of competitiveness during the Celtic tiger boom years. Between 2008 and 2010, overseas tourism to Ireland slumped by over 20% in volume and value, equating to a loss of 1.8 million visitors and over €1 billion in revenue each year. As a consequence, 50,000 jobs were lost in the tourism sector. We have been fighting to regain those jobs lost in the hospitality sector in the past three years.
A reduction in the VAT rate from 13.5% to 9% was a key measure introduced to accelerate recovery in tourism through the Government's jobs initiative of May 2011. The Minister for Finance recognised that, "much economic activity within the tourism industry is highly intensive in its use of labour, particularly true of hotels and restaurants, recreation and entertainment". The Minister further stated that, "tourism can make a very substantial contribution to our economic recovery and to the creation of employment in all parts of our country". We are asking the Minister to recall these facts when considering budget 2014.
The reduction in the VAT rate provided a much-needed boost to help restore competitiveness and a return to growth in demand, as predicted by the Minister. The sharp decline was arrested in 2011, with an increase in overseas visitors for the first time in four years. This modest recovery was maintained in 2012 and figures are already showing signs of improvement, thanks to The Gathering. More encouragingly, results for the early part of this year suggest that revenue growth is outpacing volume growth - a major turnaround, given the economic and trading conditions in Ireland's main source tourism markets.
The Restaurants Association of Ireland welcomed the Government's jobs initiative in 2011 with open arms. It is evident that the changes to the VAT and PRSI rate regimes complemented each other in having a favourable impact on both prices and employment. In the hospitality sector in the past 18 months we have created 9,000 jobs at a time when job losses are dominant in other industries. Tourism has seen the largest growth in employment in the last number of years, coming second only to agriculture. However, it is also clear that the recovery is fragile and sustainable growth is not yet assured. The restaurant industry is starting to see a three-tier recovery across the country. There is now a three-speed economy. In Dublin city centre in the vicinity of Dáil Éireann, restaurants are doing well, paying their bills and we are even beginning to see growth and new openings. Unfortunately a different picture is painted around the country. Urban areas around Ireland are also busy, but only on Thursday, Friday and Saturday nights. Further into the country we see restaurants and cafes on life support. The reduction in the VAT rate to 9% has been a lifeline for them with rising costs facing SMEs such as the price of food, excise duty increases, rates, regulatory burdens. If the VAT rate is increased it will tip these businesses over the edge in every corner of the country. For these reasons it is imperative that the VAT and PRSI sections of the jobs initiative are retained.
Even before allowing for the stimulus effects of the 9% VAT rate on tourist spending and employment, it looks like the budgetary cost of the measure as it applies to tourism-related products and services has been approximately €90 million. I have provided a copy of the Deloitte report to members. The Irish tourism industry confederation and Fáilte Ireland reports in August of this year are based on CSO figures which confirm the figure of €90 million. This contrasts sharply with the €350 million estimate published at the time the jobs initiative package was first announced in 2011. When the resultant boost to employment is accounted for, the cost to the Exchequer is further reduced and may in fact become a net gain.
Common sense, international experience and anecdotal evidence, including a recently published Department of Finance paper, strongly support the argument that the VAT cut has been passed on to consumers. Our sector has fully complied with the measure and passed on the savings to the consumer. This has happened at the same time as visitors' perceptions of value-for-money in Ireland have improved substantially and despite the fact that key input costs have been steadily rising.
We are a labour-intensive industry with the ability to employ people quickly. We are encouraged by sentiments expressed by politicians the length and breadth of the country who want to continue to see jobs being created in their local towns and cities. Local authorities in 12 counties have passed motions and a further 14 are due to ratify motions in the next two weeks supporting the retention of the VAT rate at 9%. We have received great support from restaurateurs who realise that the increase of the VAT rate would mean job losses, price increases and closure for many. We are asking the Minister to retain the 9% VAT rate so we can all work as a collective to create even more jobs and employment opportunities than those that have already been created since July 2011.
If the current rate is retained post-2014, we will create another 5,000 jobs in the next 18 months.
Following on from the increase in excise duty of 41% on wine in budget 2013, the association is arguing that any increase in excise duty should be levied towards below-cost selling of alcohol in off-licences and supermarkets. This would have a positive impact on excessive unregulated home drinking, as well as encouraging sensible drinking in regulated environments. We must be able to compete with our European counterparts where there are no such extreme rates of excise duty.
While the 9% VAT rate helped to create 9,000 jobs in the tourism and restaurant industry, there remains an issue for the Government to address in terms of the serious shortage of chefs throughout the country. This has reached a crisis point such that it is threatening the recovery of the tourism industry. Serious efforts in the area of job creation must be made. The Restaurants Association of Ireland is calling for investment in training to be offset against employer's PRSI. We are further proposing that 1,000 workplace apprenticeships be provided in the restaurant sector, with participants accessing a training allowance equal to that given to FÁS apprentices. The scheme should be weighted towards professional cookery, craft and culinary arts, providing participants with a skills set which guarantees them employment on completion.
While we were granted funding to set up a professional cookery course that will take 100 long-term unemployed persons off the live register and train them in an intensive work placement programme, greater investment is needed. Job positions are available, but the necessary skilled workers are not. There is a lack of college places to serve the industry and, moreover, the cost of training a chef is substantially higher in an institute of technology than is the case under a private programme such as we are operating. A number of Fáilte Ireland courses were cut four years ago when the recession took hold. As it takes four years to train a chef, it is now that we are facing a huge crisis and bearing the brunt of the cuts. Unfortunately, there are fully fitted State-owned training centres lying idle and decommissioned throughout the country. The association needs assistance to get these training centres up and running in order that people can be trained for the employment market.
The Restaurants Association of Ireland is proposing that in order to capitalise on The Gathering, 2014 should be identified as the year of food tourism. This would involve including tourism and hospitality studies as part of the second level curriculum, thus reinforcing their importance to the economy and involving civil society in the economic recovery. After all, tourism is the second largest indigenous contributor to the economy. This is not the time to cut the allocation of funds to overseas marketing.
In this context, the Minister's intended review of tourism policy is welcome. It should acknowledge, as policy does, that the contribution of the industry extends well beyond its direct effects on employment and economic activity. Increasing the 9% VAT rate, one of the most tourism-friendly initiatives taken by the Government in recent years, would send a mixed signal to the hospitality industry. We must build confidence in the sector in order that businesses employ more staff and consumers spend more money. There must be confidence that we are all working towards the same goal of a brighter future. Maintaining the VAT rate at 9% will ensure we can achieve this. Budget 2014 which is exactly one month away must be pro-jobs, pro-business, pro-economy and pro-Ireland.
I thank Mr. Cummins for his comprehensive presentation. In regard to the apprenticeship scheme he mentioned, has he been in touch with the Department of Social Protection in the context of its labour activation remit?
Mr. Adrian Cummins:
Yes, we applied in May last year for funding from the labour market activation fund. However, we failed at the first hurdle, purely because the criteria relate to food processing, as opposed to restaurant and hospitality skills. Perhaps the committee might examine that issue with a view to placing hospitality to the forefront of activation efforts. Part of the difficulty is that FÁS which has responsibility for training is being subsumed into SOLAS, the latter having no major remit in the area of hospitality. Fáilte Ireland, on the other hand, which has the remit for hospitality, is pulling out of the training side in certain areas and reducing its budgets accordingly. That shortfall must be addressed. As I said, there are positions available in the sector. Today, in fact, there are some 300 chef training positions advertised on irishjobs.ie and other websites. As it takes four years to train a chef, there is an urgency attached to all of this.
I welcome the delegates. Their proposal that the VAT rate of 9% be retained is really a no-brainer. Employment in the sector is up 10,000, which is not an achievement many sectors can claim in the past two years. Likewise, tourism numbers are up. There is definite and recorded feedback that the proposition we are offering as a tourism destination is better value than it was in 2010. We should bear in mind that this proposal does not require additional moneys to be found. The levy on private pensions introduced in the special budget in 2011 is specifically to pay for the VAT reduction. Given the success of the initiative in creating and sustaining employment, there should not be any doubt about its retention. In that context, the committee should send a strong message of support for the retention of the 9% rate to the Minister for Finance.
Mr. Cummins makes a very strong point on the shortfall in training provision for the hospitality sector. CERT had a strong role in this regard in the 1980s, but since it was subsumed into Fáilte Ireland the training element seems to have gone skew-ways. There must be a revival of the strong role previously played by CERT, which might well be by way of the Restaurants Association of Ireland getting into the training business. Whatever the format, support must be given. We cannot set out our stall and declare tourism as a job creation focus, which it certainly can be, without putting the appropriate training programmes in place to ensure the necessary quality. The figures show that the 9% rate has worked and we should support its retention. The delegates should note, however, that the proximity of this institution to the restaurants of Dublin 2 has had no bearing on their resurgence in recent years.
Cuirim fáilte roimh na finnéithe. One of the difficulties for the hospitality sector is that its offering is often considered a luxury product which may be more sensitive to price increases. An increase in VAT, therefore, is likely to have an even greater impact than would be the case in other sectors. I have a dislike for VAT in general because it is a regressive tax which does not involve a strong linkage between the charge levied and ability to pay. We have seen VAT rates increase steadily since 2001. In the restaurant industry, a particularly labour intensive industry, it is effectively a tax on labour.
I strongly agree with Mr. Cummins's point on the great disparity between urban and rural in the context of the overall performance of the sector. In County Meath, for example, restaurants served as a weather vane of the crash, being some of the first businesses to topple when the economy declined. They continue throughout the country to struggle. Another factor hitting restaurants hard is the payment of rates. My view is that rates should also be tied to income or ability to pay. It seems very unfair that businesses which are not even making a profit are being hit to the same extent as their profitable counterparts.
I was impressed by Mr. Cummins's proposal of a linkage with food tourism. There is ongoing expansion of the level of trade and employment in the agrifood sector. Food tourism fits very closely with the idea of Ireland as a food island, both in an export sense and in terms of tourism. There is certainly an opportunity in that regard.
Mr. Cummins apportions a specific figure to jobs created as a consequence of the reduction in VAT. Are all of these jobs directly related to the VAT decrease or have other initiatives taken by the Government to support tourism come into play?
Mr. Adrian Cummins:
The figures from which we are taking our soundings come from the CSO and from two reports that were compiled on the basis of the latter's figures. Both reports analysed the increase in employment in the tourism sector in the context of accommodation and food. One cannot separate the PRSI element from the VAT rate and both are linked within the entire job stimulus package. To answer the question, therefore, it is very difficult to provide exact figures regarding how many jobs were created as a result of either the VAT change or the PRSI reduction. However, both are of equal importance to our sector.
It is important to point out that when a tourist enters the country - the measure under discussion relates to tourism - and stays here for seven days, there is one thing which he or she must do, namely, eat. He or she will eat on approximately 21 occasions - that is, breakfast, lunch and dinner - during that week. Our industry is labour intensive and my colleagues will inform the committee as to the number of employees they have on their books. We are a fast-track employment sector so we can create 15 to 20 jobs in a small business fairly rapidly. It is a labour-intensive sector.
I met Mr. Cummins last year - I am sure he also met many other Deputies - to discuss the barriers and bottlenecks that exist for those involved in the profession of chef. In light of the current level of unemployment, it is crazy that there has been absolutely no movement in respect of this issue. The industry will suffer greatly in three to four years from now as a result of a lack of suitably-qualified people. We often discuss the skills-jobs mismatch, particularly in the context of the high-tech industries. If and, hopefully, when the restaurant industry gets going again, we may be obliged to bring in chefs from other countries to fill vacancies because people here will not possess the necessary skills.
There are three Departments with responsibility in this area and we need to bring representatives from each before the committee to discuss this problem. We will invite such representatives to come before us in the next couple of weeks because it is crazy that a potential 1,000 work and training placements are not being filled. That is just not on and we cannot accept it. I presume that any action taken in respect of this matter would be cost-neutral in nature because most of the people who would be taken on would come off the live register.
I welcome our guests. I know something about the tourism business because my father ran Red Island holiday camp in Skerries. In those days there was, certainly at a higher level, a degree of snobbery in respect of the profession. Those to whom I refer did not really want people to come here to stay in a holiday camp. Rather, they wanted them to come here to hunt, shoot and play golf. Does that type of snobbery still exist? Are there still barriers in the context of attracting certain types of tourists? Are there any bureaucratic barriers which our guests would like to see removed?
Deputy Calleary stated that the move in respect of VAT was a no-brainer. In the past I argued that a reduction in the percentage of VAT would give rise to a corresponding increase in the moneys accruing to the Government. The move to reduce the rate of VAT was a real win-win situation. I cannot believe that the Government is considering increasing the VAT on restaurants. It should be considering introducing a second reduction in order to provide the industry with another boost. The previous reduction had a tremendous impact.
I was jolted by what was said with regard to the lack of chefs, etc. What action can we take to solve this problem? Mr. Cummins explained the position but I would have thought that it would be very easy for people to gain entry to the profession. I was chairman of the leaving certificate applied programme for five years. That programme identifies talents, skills, abilities and levels of intelligence among students which are not necessarily measured by the mainstream leaving certificate. We tried to encourage those who pursued the leaving certificate applied to develop the talents, skills and abilities to which I refer. In that context, people who had sat at the back of the classroom up to junior certificate and who were not considered to be great academically turned out to be brilliant chefs, orators and so on. At the end of each year we visited the various schools which run the leaving certificate applied and were entertained by and treated to the cooking of the students. One could see that some of the students - all of whom were 17 or 18 years of age - had suddenly discovered that they possessed abilities which had not previously been identified. Is there some way we can encourage more people to enter the profession? As stated, I am shocked by the fact that there are vacancies in this area. There are vacancies in the information and communications technology sector which we cannot fill other than by taking on people from abroad. As Deputy Tóibín noted and as a result of the fact that we have not encouraged people here to develop the necessary skills, we may also be obliged to fill vacancies in the tourism and restaurant sector by importing individuals from abroad. What should we do? Is there a need to increase investment in education, particularly at third level, to deal with this problem?
I welcome Mr. Cummins and his colleagues. I represent Galway West, which includes Galway city, Connemara, the Aran Islands, Inishbofin and other offshore islands. The latter are all very much reliant on and have benefited from the tourism industry. They also benefited from the reduction in VAT. There is no doubt that the latter has worked, particularly as the numbers coming here from abroad have increased. I support the retention of the reduction and the Minister for Transport, Tourism and Sport, Deputy Varadkar, is on record as indicating his support for it. Heretofore, we would have been given a figure of €360 million in respect of this matter whereas the report with which we have been presented refers to a sum of €90 million. I do not know for how long the report has been available but I only saw it today. There is a pretty big difference between €90 million and €360 million. I will be obliged to examine this matter closely in order to identify the origin of that difference.
As Deputy Calleary indicated, the original jobs initiative involved a levy on private pensions. In order to retain that source of funding, said levy would also have to be retained. The issue of private pensions is one which gives rise to its own concerns. Obviously, this debate will be ongoing for some time but I firmly believe that the VAT reduction has had a very positive impact and I support its retention. We have expressed that sentiment to the Minister. We look forward to pursuing the issue relating to chefs with officials from the Department at one of our forthcoming meetings.
Mr. Adrian Cummins:
I will deal with the cost element. The jobs stimulus package was for tourism. However, newspapers, hairdressers, cinemas and entertainment venues also benefited from the reduction to 9%. The tourism element of the overall amount of €350 million is €90 million. In media bulletins earlier today the Minister for Social Protection indicated that 7,000 jobs equates to savings of between €90 million and €93 million. We rounded up that figure. The 9,000 new jobs we created in the tourism industry are worth €123 million in cost-----
Mr. Adrian Cummins:
So the 9,000 jobs created in our industry equates to a saving to her Department of over €90 million. That is a something to which consideration should be given in the context of retaining the reduction. There is no doubt that the reduction to 9% has benefited every part of the tourism economy. I visited Inishbofin two or three weeks ago and I discovered that from a tourism point of view, it has had one of its best summers ever. The island seems to be doing well in the context of tourism promotion and the reduction to 9% has been greatly applauded by every business out there.
On creating more jobs for chefs, 2004 was the last year in which there was a national HR policy in respect of tourism. There is a need for a new policy. When we set down a HR policy, we also establish benchmarks such as the number of jobs to be created, the nature of the training to be given and the level of investment and resources required. Under such policies, we can also identify where skills shortages exist. There is an urgent need for such a policy to be developed by Fáilte Ireland or some other body with responsibility in this area.
Senator Quinn inquired about tourism growth, fishing and hunting. Tourism can be increased in every county in Ireland, not just the specific high-tourism destination areas such as the Ring of Kerry, Connemara and Dublin city centre. If one is a visitor from Britain, for instance, it does not matter whether one goes horse racing in Kildare, game fishing in Ballina or cruising on the River Shannon. Tourism is part of every town and area in Ireland. We need to get agencies and local authorities to understand that. As long as local authorities have a grasp of tourism then we will at least be going in the right direction. We need to make sure that the creation of jobs comes first. I read in today’s newspaper about a small café in Gort in County Galway that has to close its doors because of the outdoor seating charge. It is a bit of nonsense. We call it a sunshine tax, making people pay for having tables and chairs outside their premises. This year we had a good summer but we did not have a good summer in the previous ten to 14 years. That business only has 30 seats inside in the restaurant but it was able to put a couple of tables and chairs outside and now it is being penalised. It would have been brought to court and had a €5,000 fine imposed. What happened is that ten people have lost their jobs and the café has closed down. Local authorities must have more flexibility and look at what is fit for purpose.
Mr. Adrian Cummins:
When we applied for funding from the labour market activation fund, we had to find employers that were willing to take on staff. We were told to put in a project with about 200 training places. We had between 150 and 160 businesses that had guaranteed to take on one or two people and give them jobs. When one replicates the estimate for an industry that has nearly 4,000 restaurant businesses - that does not include hotels or pubs that do food – there are vacancies. We are inundated at the moment with requests for chefs. There are 300 jobs today on irishjobs.ie and other job websites. We are looking for skilled staff. There is a need out there but we need to get the bodies in place. One cannot just take a person off the live register and put them into a kitchen. One must train them. It takes four years to train a fully qualified chef. One has to start somewhere.
Apart from seeking help with training, does Mr. Cummins have any idea of the number of people who apply for jobs who do not have qualifications? I am aware of a couple of places that have advertised jobs but have received no applications.
Mr. Adrian Cummins:
The Department of Social Protection, the association and our colleagues in the Irish Hotels Federation were asked to participate in jobs fairs. We participated in three jobs fairs this year. A total of 800 people turned up at a jobs fair in Dublin looking for a job. A total of 23% of them got a job afterwards in the hospitality sector in some shape or form. The hospitality sector can be contract catering, hotels and restaurants and the tourism industry in general. It is not just mainstream cafés and restaurants. People are working in the contract catering area and working in factories. We have a diverse industry.
I welcome the delegation, particularly Mr. Cummins, who comes from the same part of the country as me. I come from the eastern part of the county, where the situation is different from the picture painted by Deputy Kyne in the city of Galway and the west of the county. It is a much more challenging business in the east of the county. Mr. Cummins described some of the restaurants as being on life support. It is certainly pretty challenging in some of the rural towns around County Galway. On a positive note, we have our own international gathering this weekend in Galway, with the international hurling gathering.
I hope we will be able to prolong their stay and keep them for the October fair in Ballinasloe. I very much welcome the fact that the Chairman has indicated that he will bring the relevant Departments together to see how skills shortages and the shortage of chefs can be addressed. It seems ludicrous that so many people are emigrating when there are obvious career opportunities for young people and that we cannot sort out the problem once and for all. We must focus and see how we can get more people into the supply chain.
I strongly support the notion of keeping the VAT rate at 9%. There is no doubt it has been a great success. Mr. Cummins correctly said that agriculture and tourism have been the two areas in which we have seen significant job growth in the past two years. I hope we can build on the successes of 2013 with The Gathering and that many people who have had a good experience in this country in the past year will return or will spread the word and their contacts and relatives will make their way here next year. What is significant is that it would appear that the majority of restaurants have passed on the VAT reduction. There is no doubt there is much better value to be had in restaurants around the country. If customers get good value and service, that is what will bring them back. There is a strong emphasis in most establishments on looking after the customer. Senator Quinn is someone who always talks about care of the customer and ensuring that their experience is good whether they go into a store or a restaurant. There is no doubt that if one has a good experience one will tell a few but if one has a bad experience one will tell many. I compliment the work of the Restaurants Association of Ireland in recent years in instilling in their members the importance of looking after the customer. I will do everything possible to ensure we keep the VAT rate at 9%.
Following on from Deputy Kyne’s question about the €90 million cost, I can see the difficulty the Minister might have with the figure of €360 million in some of the areas that were included as part of the overall VAT reduction package. I would not be surprised if there were a change but I hope the 9% VAT rate is retained for the hospitality industry and the tourism sector.
I welcome the witnesses. I have two points to make. One relates to the figures under discussion. When the issue of maintaining the 9% VAT rate has been brought to the Minister’s attention he has always raised the figure of €360 million. It is important that the witnesses get the message to him that it is not costing that amount according to the report of Bord Fáilte. The point should be made more loudly than we have heard it so that everyone realises that is the case.
It is important for the sector to become involved in devising new ways of increasing tourism. I am promoting the development of the canals as cycleways. There is potential for new restaurants and cafés along the canals. It is necessary to find new ways of bringing people into the country rather than sticking with the Cliffs of Moher or fishing.
New ideas are important to drive forward from the success of The Gathering this year. We need to drive the industry forward rather than sit back on our laurels because we have had a great year. We can drive forward with new ideas from people such as the witnesses.
Mr. Adrian Cummins:
The report before the members was commissioned by the Minister for Transport, Tourism and Sport, Deputy Leo Varadkar. We hope that the Department of Finance and the Department of Transport, Tourism and Sport will come together and get the figures right. That report says it is costing the tourism industry €90 million, and we stand over that. It is a great deal of money in today's budget, but it is not a great deal when 9,000 jobs are created and many people are taken off the live register. There are huge savings for the Department of Social Protection in that regard. We will ramp up our efforts over the next month to get that message across clearly and distinctly.
With regard to the new types of tourism, I fully support the Deputy. We must look at all areas and, as I said earlier, every county must benefit from it. Senator Mullins and I are from the River Shannon area but there is no policy regarding the growth of waterways in Ireland as a tourism product. That could be done. Cruise hire on the River Shannon and on many inland waterways has declined rapidly. Angling tourism is being decimated by a number of issues that can be discussed at a later date. We must examine green ways and cycle routes, linking with the canals across the midlands as a cycle route. The Greenway in Mayo has worked and it is a huge benefit to that area. We must use our natural physical environment, our forestry through Coillte and walkways. Consider small towns and villages where there might be a small pub, shop and grocery. If tourists are brought to such areas, it brings life to the village. That is what we must consider so we can give them hope, to use President Obama's phrase. Unfortunately, in the tourism industry at present certain counties and regions are getting much more hope than other counties. Tourism is a 26-county industry for development; it is not just for specific centres. In respect of international promotion, it is a 32-county promotion through Tourism Ireland.
I am sure my colleagues will wish to give their own opinions on why the 9% rate should be retained, but I will first make a final point. When we conducted our roadshow around the country and talked to the businesses, one guy equated the 9% VAT rate to the corporation tax. The corporation tax is sacrosanct. For us, a change in the 9% will have international ramifications. It is not that it will increase by 1% or up to 13%, it is that Ireland will have become more expensive. Tour operators and the international travel media will be writing about this for two or three months and it will have a negative effect next year on tourism throughout the country.
Mr. Brian Fallon:
I thank the Chairman and the committee for such a positive response. We thought we would have to work really hard to convince the committee but the members already appear to be convinced that the VAT reduction has been a great success.
Adrian Cummins represents almost 1,000 restaurants in the country. I can outline the reality of what he has said. I have a restaurant in Dublin and one in Kildare. Undoubtedly, there are two tiers at work. In central Dublin, in Fallon & Byrne, we have approximately 160 staff. We have increased the number by approximately 10% in the last two years. There is no doubt that the VAT reduction has been a massive boost to us. It might sound a bit alarmist but it is simple mathematics that if the VAT increases, the number of our staff will decrease. It is that simple. Kildare is something of a struggle. As Deputy Lawlor knows, things are a little different outside the Pale. While we are seeing double digit growth in town, we are seeing double digit decline in Kildare, which is a little worrying. Only God knows where that will end.
With regard to chefs, this is something I have been shouting about for a long time. Driving through town today I passed two restaurants that had "Chefs wanted" signs in the windows. It is incredible. Many of our European counterparts cannot understand it. I have a friend who runs a catering school on the Costa del Sol and he just cannot believe we are in such dire straits for chefs. We are now looking outside the country for them, which is a cardinal sin with so many unemployed.
Again, I thank the committee for such a positive reception today.
Mr. Pádraig Óg Gallagher:
I thank the committee for listening to us today. The 9% VAT rate is vitally important to us. It is a matter of survival. It is a mixed bag when discussing restaurants and how they are doing. I am also located in Dublin, in Temple Bar. I have been there for 25 years but this year is the most challenging year I have had to date. It has been extremely challenging. The weather affects it a little, but the British tourist still has not returned to Ireland. We reduced our prices and we are very competitive. There is a great deal of competition among restaurants and this winter will be quite tough for many restaurants throughout the country. If VAT is increased from 9% it means that for every €10,000 worth of food I sell per week, it will cost an extra €450 in VAT. That is one job. It is either one or the other; it cannot be both.
Our industry is a front-line industry and is very labour intensive. As has correctly been said, it is all about services. Deputy Tóibín referred earlier to Navan in County Meath where the restaurants were the first to fall. Yes, we are on the front line. We must react. We cannot sit back. We have nobody to back us. We do not have banking behind us. We have nothing behind us, just the people who come in the door and making sure they come back.
Ms Angela Ruttledge:
I thank the committee for inviting me to the meeting. I wish to reiterate what my colleagues have said and especially to emphasise the point about the rise in food costs and in excise duty that has occurred over the last year or 18 months. The cost of beef and potatoes, which are basic staples in our industry, has increased by 15% to 20%. That should be seen in the context of how central the food and restaurant industry is to consumer confidence, not just in terms of tourist numbers but also for people living here wishing to enjoy themselves, and how obsessed we are as a country with food. The issue of the shortage of chefs has not been emphasised enough and actually makes us uncompetitive. When I started in this business it was difficult but we tried to cut wage and food costs wherever we could. However, it is impossible to do that with the chef shortages because obviously chefs can command much higher salaries. In view of all that, we ask the Government to retain the VAT rate at 9%.
The process is that we will have a follow-up in private session next week to decide what we will do. It is clear that members are very much behind the campaign. The association has run a very good campaign in the past couple of months which is reflected in the views expressed here. We will send a copy of today's presentation to the relevant Ministers in order that they can see the questions and answers on the presentation. We will probably decide next week to do something formally ourselves but we will keep the witnesses posted on what we are doing. It is clear they have got cross-party support on the issue. The Minister spoke about this yesterday and nothing is definite. The campaign will have to continue. He made it clear that the Department of Finance had factored in this figure. There is a battle on. The message is getting out but we must keep the pressure on. I again thank the witnesses. We will be in touch with them in the next couple of weeks.