Marian Harkin (Sligo-Leitrim, Independent) | Oireachtas source

Yesterday, I raised the issue of the chronic and worsening imbalance between the northern and western region and the rest of the country. I have been banging on about this for a long time. The statistics and figures show it. Europe has downgraded the region vis-à-visother European regions for the second time in three years. It has now gone from a region in transition to a lagging region. The statistics are there. I will not bore the Minister of State by quoting them to him. I have done that many times. I had hoped there would have been something in yesterday's budget or some statement from either of the Ministers to give me a bit of hope this Government would do something to reverse the ever-widening gap, which is a fact.

There is something that can still be done. I am not sure whether the decision has been taken but, if we could maintain the 9% rate of VAT for the tourism and hospitality sector, it would have a national impact, which would be a good thing, but, crucially, it would have a much greater impact in the northern and western region and in the Border regions. It would be very significant. There are many reasons for this. Tourism and hospitality are very important sectors in that region. We do not have the same number of high-value jobs as other parts of the country. Our indigenous tourism and hospitality sector is very valuable not just for our larger towns like Sligo and Carrick-on-Shannon but for many smaller towns like Drumshanbo, Boyle, Tubbercurry, Enniscrone, Manorhamilton and Ballyshannon and for many small villages. I will not name them because there are so many villages where the local hotel, guesthouse, restaurant or café plays a pivotal role in supporting local jobs and in ensuring local produce is served while also being a social space for both locals and tourists. Given that tourism and hospitality play such a pivotal role in the economic and social fabric of the northern and western region, any increase in the VAT rate will have an especially detrimental impact on the indigenous economy and will, in fact, accelerate the growing regional disparities. This is something the Government can do within this budget. As I have said, it would have a national impact but it will have a greater impact in the Border regions.

The Ministers of State will be aware, as we are, that there is a more immediate issue, that of the drop in the value of sterling compared with the euro. This will impact nationally but will hit even harder in the Border regions. How can hotels, restaurants, cafés and guesthouses remain competitive when their counterparts across the Border benefit from sterling being weaker? The strength of the euro is already a great challenge but, on top of that, if the VAT rate is increased at the end of February, many businesses will be unable to compete. The truth is Irish people will vote with their feet and travel north. Tourists will be coming in but, with a strong euro and a strong dollar, where will they travel? They will travel to where they get the best value in hospitality. Those businesses will be north of the Border. No matter how the businesses south of the Border try to remain competitive, they will not be able to. Even in that, I am not factoring in the significant jump in energy prices.

What we could unfortunately see, although I hope we do not, is a domino effect taking hold. Tourism businesses in the northern and western region have to absorb significantly higher costs, as do all other businesses, but they also have to compete with a sector in Northern Ireland that is much more competitive because of sterling being weak. If we pile on a 50% increase in the VAT rate on top of that, some businesses will just not be able to take the escalating costs. I am a making strong case for the Government maintaining a 9% VAT rate for hospitality and tourism now and for at least the next 12 to 18 months. It is perhaps not the most popular thing to say but I have to look at the area and region I represent and that would make a significant difference. It will matter nationally and that is good but it would be a crucial intervention in the Border counties.

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