Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

There is a misunderstanding about what the position is. The reduction was introduced as a temporary measure to pump-prime the industry. If Deputies ask me to leave the rate as it is, that means 13.5% from 1 January next year. Leaving it as it is means it reverts automatically to the higher rate because it was reduced for a temporary period. That is the reason it is so difficult to do it. It is not a question of leaving it as it is, but of making an independent decision now to cut the 13.5% to 9% for next year. That costs a great deal of money. I introduced it without being requested to do so by the industry. I was not lobbied to do it but I considered it a classic pump-priming exercise to create jobs and activity. It has done that.

It requires a new decision to keep the rate at 9%, and that costs a lot of money. Members will appreciate that the budget situation is quite tight and that getting that money from another sector or from another set of people to continue to provide the low VAT rate in this sector is a problem. However, no decision has been taken yet. The law provides that it automatically reverts to the higher rate with effect from 1 January next, and to change that requires a decision. Of course we will consider the Deputies' submissions and comments. The three of them represent constituencies that have very strong tourism industries.

The idea of pump-priming is that where something is weak, one gives it a break to make it stronger. However, when it is strong it should fend for itself. I do not agree with the argument that if the rate returns, jobs will be lost again. The point of pump-priming is that sectors should be strong enough to walk alone.

On Deputy Griffin's last point about other sectors of the economy, in parallel with the bailout programme we have another programme which deals with the economy on a sector-by-sector basis.

If the Deputies examine the two most recent Finance Acts, they will encounter a series of measures geared towards repairing the damaged sectors of the economy and reinforcing the stronger ones. We will continue to use that approach. I will consider what the Deputies said in the context of the budget preparations, which have just commenced and which will conclude in the House on 15 October.

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