Michael McGrath (Cork South Central, Fianna Fail)
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I examined a range of factors when considering the Department's advice. I accept its advice that this should end. The question is one of timing. In that regard, my colleagues and I had to consider the fact that there are significant regional variations. Much is often said about the price of hotels in Dublin and much criticism is levelled in that direction. It is not a uniform issue around the country by any means. Smaller operators are in quite a different situation. Many are dealing with high costs at the moment. While some may absorb an increase in VAT, others would simply not be able to. It would definitely push up prices at a time when many households, as the Deputy has acknowledged, are really struggling with the issue. That was a factor for me too. I made a decision that provides certainty. We gave six months' notice.

I accept the Department's advice that the VAT rate should go back up. It will go back up, but it will go back up at the end of August as opposed to the end of February. That is the right decision. It provides adequate notice to the whole sector. At that point in our economic cycle, all the indications are that inflation will be at a considerably lower level. Allowing the VAT rate to go up at the end of February would have pushed up some prices. While the impact of inflation would perhaps not have been material in the overall context, it would have had a negative impact on some household budgets and would have affected the viability of many businesses at a time when they were struggling with high energy costs in particular. Those were some of the factors that I considered in making the recommendation to Government, which was ultimately accepted.