Dáil debates
Tuesday, 23 March 2010
Tourism Industry: Motion
7:00 pm
Olivia Mitchell (Dublin South, Fine Gael)
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I move:
That Dáil Éireann:
recognising:
— tourism revenue dropped by €1.1 billion in 2009 to €5.2 billion, its lowest level since 2004;
— overseas visitor numbers fell by close to 1 million in 2009 compared with 2008;
— Ireland's largest tourism market, the United Kingdom, declined by 16% in 2009;
— access to Ireland has become worryingly restricted with the ongoing removal of routes and a reduction in airline capacity at both Shannon and Dublin airports; and
— the serious credit flow crisis and level of debt facing the sector as a result of the economic downturn;
considering:
— the introduction of an air travel tax was short-sighted, counterproductive and a deterrent to the survival of the tourism industry;
— the fragmented nature of this indigenous industry and the lack of economic priority afforded to it by the Government;
— the significant burden of local authority rates, Government charges and energy costs on small businesses;
— the archaic nature of the joint labour committee wage-setting system;
— the administration cost and complexity of Irish visitor visas;
— the failure of the Office of Public Works to exploit the full tourism potential of visitor attraction sites;
— the Government-generated shortage in the supply of cars for the rental market; and
— the emergence of "zombie hotels" and the financial pressure this is placing on the hotel sector;
calls on the Government to immediately abolish the air travel tax.
I propose to share time with Deputies O'Dowd, Breen, Clune, Feighan, O'Donnell and Deenihan.
Olivia Mitchell (Dublin South, Fine Gael)
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It is estimated that some 31,000 jobs were lost in the tourism industry last year and 21,000 the year before that. It is certain that more jobs will be lost this year. The tragedy is that this could be avoided and that it is possible for the tourism industry to have a bright future. A thriving tourism sector is essential because the economy will only recover through growth in export services industries such as tourism. However, that will happen only if the Government stops putting barriers in the way of the success of the tourist industry. Those barriers are causing significant problems for the sector, with the result that jobs and revenues are being lost and damage done to our international reputation.
How long more does the Government intend to ignore these barriers to business? At what point in the scale of job losses will it realise it is dealing not with an industry that is crying wolf but with an industry in extremis? I have spoken at great length and on many occasions about the enormous damage the travel tax is doing, as airlines take their aircraft and their business elsewhere. The Government can no longer pretend that the drop in capacity and routes into Ireland is down to a worldwide recession. If that were the case, seat capacity into Ireland this summer would not be down 13% when that for Europe as a whole has increased by 5%. We are not all in the same boat, as the Government would have us believe.
In January, Dublin Airport Authority traffic was down by 300,000 passengers, but Ryanair grew its passengers by 400,000. As far as seat capacity is concerned, we are the worst performing European country. As an island country, we should strive to be the best. We are worse even than the Ukraine, which is hardly a renowned tourist destination. If further proof were needed that this is a home-grown problem, it is that last year, our main airlines - Ryanair and Aer Lingus - both carried more tourists but did not carry them to Ireland.
It is beyond me how this tax was conceived and then imposed. It is the same, and as damaging, as taxing exports. It could only have been allowed to slip through the net of good sense by a Government totally devoid of an aviation policy or any grasp or interest in what an island must do to remain competitive in the tourism market. I am aghast at the Government's countermotion which offers absolute and final proof that the Government - and, worryingly, the Minister for Finance - has simply not grasped the problem at all. According to the countermotion, the impact of the travel tax "has been considerably overstated in the context of overall purchasing decisions by visitors". That argument is a nonsense because it is not visitors who make those purchasing decisions. It is the airlines that pay this tax and they, unlike the Government, know that if they pass it on, they will lose even more customers. The direct impact is on airline pockets, not on visitors' pockets. The impact on them is indirect in that they are losing flights into Ireland. The reality is that consumers at home and abroad have lost all connectivity. There are now 24 fewer destinations to which one can fly from Ireland than was the case 18 months ago.
The advice from everybody with knowledge of the industry is that this tax is damaging Ireland. The Government's own adviser on tourism, the tourism renewal group advised against it, as have the Commission on Taxation, IBEC, ITEC, Fáilte Ireland and the National Competitiveness Council. It is time for the Government to take its head out of the sand, swallow its pride and axe this tax before any more jobs are lost. It is particularly worrying that the Minister for Finance has not grasped the nature of the problem, particularly as he has taken in between €30 million and €40 million from Aer Lingus, which is losing money hand over fist. This tax is endangering the viability of that airline.
The Government has also sat on its hands on the issue of the zombie hotels. Tut tutting and shaking of heads in disapproval is not action. Insolvent hotels should not be kept artificially alive by banks which themselves are being kept artificially alive by taxpayers. We have blatant examples of predatory pricing, reckless trading, below-cost selling, unfair trading and grossly anti-competitive practices from both the banks and the hotels they are propping up. Why does the Government remain silent when the laws of the land are being flouted, good businesses deprived of credit and all the normal laws of the market turned on their head? The reality is that for good hotels to survive, insolvent ones must fail. There is no good outcome to this situation of oversupply of hotel beds. We all know how that came about and I will not go into it. There is only a least worst scenario. Postponing the normal market correction is destroying businesses that might survive and propping up those that are clearly not viable.
The least worst option is to allow the creditors in and to have the hotels sold off for change of use or as going concerns. Inevitably jobs will be lost and hotels will close, but the sooner the correction takes place, the sooner normal trading can return to the sector. It is vital that NAMA does not prolong the agony by nursing failed businesses along. Rescuing the banks should not be at the expense of destroying good businesses. The oversupply in the hotel sector is a salutary lesson on the folly of maintaining tax reliefs when they are no longer appropriate and of allowing vested interests to dictate tax policy against the advice of experts.
An issue of extraordinary urgency as the season begins is car hire. Some 30% of visitors to Ireland hire a car, and 40% of visitors from the United States do so. If such visitors cannot hire a car, they will not come. Already this year there are reports of Americans cancelling holiday bookings because they cannot hire a car with automatic transmission. If they have not booked by early summer, any further inquiries will have to be turned away. This is absolute madness and, once again, a self-inflicted difficulty on the part of the Government. In 2006 the car rental fleet was 31,000 cars. This year it will be between 10,000 and 12,500, as a direct result of Government budgetary measures. In part, this was due to the scrappage scheme and, as such, was an unintended consequence. However, it is also the result of two calculated decisions. The first of these was the imposition of a penal tax on automatic cars, apparently for environmental reasons. The reality is that, in general, drivers of automatic cars in this State are either disabled or are visitors from the United States. Second, the vehicle registration tax advantage that was in place for years - including, perversely, during the Celtic tiger years when it was not needed - is being withdrawn at the worst possible time and with the worst possible consequences for the industry.
The Minister ignores this issue at his peril. The damage it will do this year is incalculable, but it will also do long-term reputational damage and will send out a clear message that Ireland is simply not geared up for tourists. The notion that a potential visitors from the United States would find in March or April that there are no cars to hire is absurd. That is the last message we should be sending. The Minister for Finance knows about this problem but has chosen to ignore it. He will effectively write off an entire season and cause long-term damage if he does not take immediate measures to address the situation.
Another issue that has received considerable publicity in recent months is that of visas. The cost and complexity of getting a visa is a deterrent to those areas where we expect the travel market to grow in the coming years. A tour company bringing people from China or India to Europe must get a Schengen visa, a British visa and an Irish visa if it wants to come here. The €60 cost is a deterrent, but if one had to answer all the questions required for entry to Ireland, one would lose the will to live, much less travel. I understand that the Department of Justice, Equality and Law Reform needs to protect the integrity of our borders, but it also has a responsibility to pursue the wider national interest to protect jobs, to promote Ireland and at the very least, not to frustrate the efforts of other Departments and agencies. We spend millions every year marketing the country, yet there seems to be almost a concerted plan on the part of other Departments to thwart and frustrate tourism efforts. There is a visa issue with the Department of Justice, Equality and Law Reform, a car hire issue with the Department of Finance, a travel tax issue with the Department of Transport, while the OPW's attitude to the broader tourism drive is another issue.
The OPW has control over many of our national monuments, gardens, buildings and historic sites. It is second to none for conservation and restoration, but if it denies access or make access to visitors difficult, it is a sterile undertaking. What is the point of conserving things if nobody can see them or use them? It seems as if the OPW does not see it as its function to facilitate visitors. The OPW alone was the only facilities provider in Ireland to increase prices last year. It is slow to publish opening schedules, provide guides when required or even to open sites to visitors at reasonable hours. The OPW just does not see itself as part of the national tourism effort or the national recovery drive, and neither do many of the other Departments. I do not altogether blame the OPW for this, because there is no commercial incentive to open longer or sell itself better. When its budgets are cut, the inevitable response is to cut staff and opening hours. There is a real case to be made for outsourcing the management of OPW sites and to leave the OPW with the upkeep. There should be no conflict between conservation and tourism, and national treasures should be marshalled to operate in the national interest.
The Government-imposed barriers to business, the lack of co-operation between Departments and agencies, the examples of Departments actually working at cross purposes to one another, can only happen if an industry is not taken seriously at the top. It seems to me that this is the case and that the Government just does not rate tourism or recognise its huge potential to be not just a direct provider of jobs, but to be a real driver of the national economic recovery. An opportunity was lost today by not putting tourism in an economic Department.
The industry itself, despite all its difficulties, is trying to respond to the very changed climate. It is becoming more competitive. Restaurants and hotels are offering reduced prices and deals, but we still have a long way to go if we are to compete with the many other attractive and cheaper holiday destinations available worldwide. We have to remember we are competing for tourists in a global market. They can only bring their prices down further if, in turn, the price of their inputs come down. I do not have time tonight to deal with prices but my colleagues will speak about industry costs, and I hope to return to the issue tomorrow night. Wages and rates are big issues for the tourism industry, which is very labour intensive. I have said many times before that tourism is a fragmented and geographically dispersed industry. It consists of many small and disparate businesses, but they all have one thing in common. They need tourists. That means Ireland, as an island, needs better air access than any other competing country. However, as a direct result of the air travel tax we are becoming increasingly inaccessible, and that spells death to Irish tourism, to Irish jobs and Irish businesses.
Fergus O'Dowd (Louth, Fine Gael)
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I support the motion put forward by Deputy Mitchell. When I first heard the debate about the travel tax, I thought that Ryanair and Aer Lingus were overstating their case. When I met with representatives of both companies, they showed me their figures and the statistics are exceptionally clear that the €10 travel tax has a significant impact on their fares. They showed me how Internet bookings are very price sensitive. While a €10 tax may seem very little, it actually stops people from coming to this country.
The important thing about this motion is that we are concentrating on the Government and on an issue that has a negative impact on our tourism industry. It is time for the Government to think again. Tourism is one of the easiest areas in which new jobs can be created. Tourism also has a significant seasonal impact. Removing the tourist travel tax will lead to a massive spin off and will be inversely proportionate to what is happening now. There will be significant growth in the number of people coming into Ireland to spend more money. There will be a spin off with the creation of new jobs and it will also help the airlines.
The airlines are one thing and the airports are quite another thing. We need to make our airports cheaper for our airlines to use and to make them more attractive and more cost competitive. I am amazed that the Government spent €850,000 for a tendering competition that it never completed to build a second terminal at Dublin Airport. It wasted taxpayers' money in an apparently significant attempt to get competitive tendering to run the airport. A number of multinational companies competed which had access to billions of euro and which employed tens of thousands of people in airports around the world, but the Dublin Airport Authority was fast-tracked outside this competition. The Government decided that none of the competing companies qualified, so the DAA got the contract. The DAA also runs the airports in Cork and in Shannon. It is a fix for the State monopoly, and it is a monopoly that does not make sense. It is shameful that those international companies that entered into this process did not make it to the second stage.
The Government's policies are ossified. There is a State monopoly running our airports and it is losing money hand over fist. It is driving airlines out of this country and Government policy is keeping tourists out. It is an indication of how the Government is out of touch.
Pat Breen (Clare, Fine Gael)
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I am currently compiling a report for the Council of Europe on the crisis confronting the European civil aviation industry. As part of this work, I met the CEO of Air France-KLM last Friday in Paris, Mr. Pierre Henri Gourgeon. He described Ireland's decision to introduce the €10 air travel tax in the middle of a recession as a disaster for an island nation that is so dependent on air access. He pointed out that the Dutch Government moved quickly to axe a similar tax when it was introduced in Holland, having witnessed the dramatic effect it had on passenger figures. Schipol Airport lost over 1 million passengers following its introduction.
When air services are axed or capacity is reduced, it hurts tourism, airlines, airports - including Shannon - and car hire companies. It has certainly hurt our region. Recently, I met a taxi driver who waited outside the terminal building at Shannon Airport from 7 a.m. to 3 p.m. before picking up his first run. Bed and breakfast establishments, hotels and publicans are also feeling the pinch. Airlines across the globe are axing jobs, including Aer Lingus. Many workers at Shannon Airport are fearful for their future, having already made big sacrifices in their efforts to try to secure the airline's viability. There is also uncertainty about the future of its vital Shannon operations, including the maintenance base.
We are now on the verge of losing a significant amount of Ryanair business at Shannon. The arrival of Ryanair transformed that airport five years ago, delivering passenger numbers from 300,000 in 2004 to 1.9 million last year. That was prior to the introduction of the air travel tax. Several of Ryanair's popular holiday routes were supported by people all over the west. In addition, the entire western seaboard from Donegal to Cork now has no connectivity to the EU's main administrative centre in Brussels, which is a disaster for companies in the region.
This week, a report in The Irish Times suggested that the Dublin Airport Authority is considering introducing a levy for passengers departing from Shannon. We do not know if this levy is an additional tax, a proposal to transfer taxes paid by passengers directly to airlines, or simply another income stream for the Dublin Airport Authority to fund the costly T2 terminal. Whatever the case, and many issues have to be clarified in this respect, it is clear that before any further discussions take place on airline charges or additional levies, the €10 air travel tax must be abolished. It has been a disaster for the aviation sector.
As Deputy O'Dowd said, Ryanair, Aer Lingus and CityJet do not often speak with one voice, but they have now called for this tax to be abolished. Michael O'Leary has said that he will reinstate routes at Shannon and Dublin airports if the tax is abolished, which would bring more tourists into the country. Last Friday, the CEO of Air France told me that it is only a matter of time before the tax is abolished anyway, as the loss of revenue for airlines, airports and the tourism sector far outweighs the amount of revenue collected from the tax.
I am disappointed there is not a single Cabinet Minister here. Where are the Ministers for Finance and Transport? Where are the Government backbenchers? It shows the interest they have in the tourism sector and in abolishing the travel tax. The Minister of State should tell the Minister to have the courage to call Michael O'Leary's bluff on the travel tax in order to reinstate these flights. Mr. O'Leary won the PR battle on hangar 6. A wise man once said, "If you are willing to admit you are wrong, you are right".
I congratulate Deputy Tony Killeen on his appointment as Minister for Defence. He should have the courage to let Shannon's voice be heard at the Cabinet table. This tax should be abolished because it is counter-productive. Shannon Airport and the mid-west should have the breathing space they need to ride out the recession. I commend Deputy Mitchell for bringing this timely motion before the House. I hope the Government will heed it.
Deirdre Clune (Cork South Central, Fine Gael)
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I am happy to support this motion that has one simple message, namely, to abolish the €10 airport tax that is crippling the tourism industry. We are going through a global recession and both air traffic and tourism have suffered as a result. Passenger figures for international airports are levelling off, while some are increasing. Sadly, however, the figures for Ireland continue to deteriorate and even the latest figures for the early months of this year show a decline.
Last year, tourism revenue dropped by €1.1 billion on the previous year. Meanwhile, overseas visitor numbers fell by almost 1 million over the same period, which represents an 11.6% drop. The UK is Ireland's largest tourism market but UK visitors declined by 16% in 2009. Visitors from North America were also down, by 8%. There has been a consequent effect on employment in the sector. It is estimated that 31,000 jobs were lost last year and, unfortunately, it is predicted that a further 10,000 jobs will be lost this year. Those are stark figures. It does not stack up to say that there is a global recession because figures for other European cities are stabilising.
We must re-examine this punitive travel tax which has been imposed. Previous speakers have said that airlines can clearly track passenger movements showing that the €10 tax is a disincentive for intending visitors. It is nonsensical to impose such a tax on a small island nation that is so dependent on air connections to mainland Europe and the USA. The tax is strangling our airports and tourism sector. It makes no sense. The tax was introduced previously in other countries but they quickly saw the folly of their ways and abandoned it.
I appeal to the Government parties to examine this matter sensibly. We have heard about the downward figures and the pleas from airlines to abolish the tax. Let us put it up to those airlines and ask them whether they will restore axed routes to our airports if the tax is abolished.
The situation is serious. I speak as a Deputy representing the constituency which includes Cork Airport. Last year, passenger numbers through Cork Airport were down by 15%, falling from 3.25 million in 2008 to 2.7 million in 2009. The figures for January this year are down by 17%, which is alarming. In recent weeks, we have lost two vital connections to the UK because BMI pulled two routes. I appeal to the Minister to examine this punitive tax, which makes no sense to an island nation.
While Shannon can speak for itself, I wish to appeal for the independence of Cork Airport. It does not make any sense for the Dublin Airport Authority to make decisions for Cork. The DAA does not have a sense of what is going on in the Cork region or what a vital piece of infrastructure Cork airport is. An independent airport could act on its own behalf, while competing with other airports on this island. We need such competition which would bring energy and enthusiasm to the airport. The word "competition" does not exist in the Minister's vocabulary, but this important strategic decision could and should be taken by the Government.
Frank Feighan (Roscommon-South Leitrim, Fine Gael)
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I congratulate Deputy Mitchell for bringing this important motion before the House. I appeal once again to the Government to admit it has made a mistake of gross proportions. This tax is anti-rural, anti-development and anti-regional. Ireland West International Airport at Knock, which is close to where I live, received no subsidies or other help from the Government. Any subsidies it received were to build infrastructure. While most people do not realise it, we have had a departure tax for the last ten or 15 years. Each passenger that departed from Knock International Airport paid €10 tax because they were loyal to that airport. We saw that the money was going into the airport's infrastructure, which was run by the most professional administrative team in the country.
The Minister should meet the people at Knock Airport and see what they have done. They have built a huge infrastructure, including car parks, with money from emigrants to the United Kingdom. It was the Irish diaspora who came back. They have been hit with a €10 tax. Some of the people coming back have also been hit with a second home tax. It is lousy and it is unfair. All flights out of Knock are more than €300, and now there is an extra €10 tax. Is this how the Government treats innovation? Is it how it treats development by a professional and successful company? What we need to do is to put those people in there and let them make a complete hames of it, as happened with the Dublin Airport Authority, and the Government will then bail them out. This is how it rewards innovation and professionalism - by putting the boot in. That is not what should happen.
I used to fly to the south of the Netherlands, but because there was a tax to be paid when leaving Eindhoven, I decided, when Ryanair began to fly to Weeze Airport near Dusseldorf - it no longer does so - to fly into Dusseldorf instead and stay there, thereby denying the Dutch authorities my money. However, the Dutch authorities had the sense to see they had made a mistake. I ask the Minister to turn around and admit he was wrong, and we will give him credit for reversing this decision.
It is worrying for rural Ireland that only 12,500 cars are available for hire this year. I can hire a decent, mid-range car from Sixti in Europe for €19.95 a day; there is nothing similar in Ireland. If the Minister is serious about bed and breakfasts, rural tourism and regeneration of the rural economy, he should reverse this tax. We will all say to the Minister "Well done".
Kieran O'Donnell (Limerick East, Fine Gael)
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I commend Deputy Mitchell on her motion. I will speak in the context of Shannon Airport, which is the international airport for the mid-west and the western seaboard, and specifically with regard to my own constituency area of Limerick.
Governments introduce taxes to collect revenue, so one would not expect a loss of revenue to result from the introduction of a tax. The travel tax brought in €160 million over a 12-month period, but there has been a loss of nearly four times that figure in revenue, along with 3,000 jobs and possibly more. There has also been a reduction of 1.2 million in the number of passengers departing from Ireland. It makes absolutely no sense.
The Minister for Finance is forever giving examples of what has happened in other countries. Why did he not mention what happened in the Netherlands, where such a tax was introduced and then, when the authorities saw the error of their ways, removed? It is a disgrace that the only mid-west Deputy in the House at the moment is Deputy Cregan. Not one of the relevant Ministers - the Minister for Finance, the Minister for Transport, or the new Minister for Tourism, Culture and Sport, Deputy Hanafin - is in the Chamber.
Seán Haughey (Dublin North Central, Fianna Fail)
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They are in Áras an Uachtaráin, as far as I know.
Olivia Mitchell (Dublin South, Fine Gael)
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There are a few Ministers other than the Minister of State with responsibility for children.
Fergus O'Dowd (Louth, Fine Gael)
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There is no President there either.
Olivia Mitchell (Dublin South, Fine Gael)
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I am sure she will rush back.
Kieran O'Donnell (Limerick East, Fine Gael)
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I hope they will make it back before the end of the debate.
The problem is that there should be a junior Minister with specific responsibility for this area. Neither of the two Ministers of State here tonight has specific responsibility for the travel tax.
I call on the Government to consider the damage it is doing, see the error of its ways and reverse this tax. We have a new Minister from the mid-west in the shape of Deputy Tony Killeen, who is now the Minister for Defence. Like my colleague Deputy Breen, I ask that the new Minister exert his influence at the Cabinet table and ensure the reversal of this tax. Deputy Killeen has a history of supporting Shannon Airport. Now, not only does he have influence as a Deputy, he is also at the Cabinet table. I ask him to ensure this tax is reversed because it is having a detrimental effect in terms of the number of passengers coming in.
There is the issue of the tourism industry in Limerick, where there are many hotels and guesthouses. In addition, the Government will not extend the car scrappage scheme to include short-term hire vehicles. I ask that reason prevail. The Government should consider the example of countries such as the Netherlands, which reversed a similar tax. We must ensure there are no more job losses. Ryanair has stated emphatically that the reason it is cancelling some of its routes is the travel tax. If the Minister for Finance will reverse this tax, we should see Ryanair flights continuing from Shannon. Fifteen routes are due to be discontinued in the next two weeks.
This is an important motion for the mid-west and Limerick. I call on the Minister for Finance to reverse this tax with immediate effect and allow the tourism industry in Limerick and the mid-west to flourish.
Jimmy Deenihan (Kerry North, Fine Gael)
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I acknowledge the initiative of Deputy Mitchell in introducing this motion, which is timely. In 2009, we lost almost 1 million visitors and €1 billion in associated revenue. Every market suffered a loss, including the domestic market, which is the backbone of so many of our rural tourism enterprises. It is true there was a worldwide recession, but we certainly inflicted a lot of damage on ourselves as well. The stubborn resolve of the Government to retain the €10 departure tax made matters much worse than they would otherwise have been and, as we know, caused Ryanair and Aer Lingus to reduce their short-haul services into all Irish airports.
One aspect of the tourism industry that worries me is the lack of cars available for rental this year. The number has fallen from 28,000 in 2008 to 18,000 in 2009 and perhaps 12,000 - according to some - or 10,000 this year. This will have a devastating effect on rural tourism across the country but particularly in Kerry, where there are no rail services and one needs a car to get to places such as Dingle, Kenmare, the Ring of Kerry and north Kerry. A total of 33% of American tourists - one of the main groups of tourists in Kerry - require cars. There is no doubt that the severe shortage of current-year models, particularly automatics, during last year's peak season resulted in lost business.
I will mention in the short time available some initiatives that could be taken by the Government. The Minister could extend the vehicle scrappage scheme to cover current-year ex-rentals; this was of considerable importance in the past. He could also postpone the elimination of the VRT refund, another incentive that existed in the past. Both of these could be done quite easily.
It is unfortunate that the new Minister for Tourism, Culture and Sport, Deputy Hanafin, is not here; I know she is in the Phoenix Park. When I was in the US last week, I met officials from Tourism Ireland, who explained that in the last two years 30% of airline capacity from North America had been lost. That is a considerable amount, encompassing Aer Lingus flights from San Francisco and Washington and the US Airways flight from Shannon Airport to Philadelphia. US Airways is still flying to Dublin, but not to Shannon. I also met a travel agent in Chicago who explained to those with me, including the county manager, that fewer people are travelling to the mid-west of Ireland because there is no direct connection between Chicago and Shannon. People were coming for short holidays of four or five days but they are no longer doing so. I appeal to the Government to make approaches to Aer Lingus, Continental and other airlines servicing Ireland for 2011. The challenge we have is to fill the seats in 2010 but the Minister should make direct approaches to airlines for 2011 to restore the capacity at least to what it was two years ago.
Seán Haughey (Dublin North Central, Fianna Fail)
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I wish to share time with Deputies Cregan and Dooley. I will take 20 minutes.
Seán Haughey (Dublin North Central, Fianna Fail)
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I am pleased to have this opportunity to address the House this evening on behalf of my colleague, the Minister for Finance, on the air travel tax and the wide range of issues raised by Deputies so far in the debate.
Brendan Howlin (Wexford, Labour)
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Is the Minister of State proposing an amendment?
Seán Haughey (Dublin North Central, Fianna Fail)
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Yes, it relates to the tourism sector and the economy as a whole.
Olivia Mitchell (Dublin South, Fine Gael)
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We thought our motion was being accepted.
Seán Haughey (Dublin North Central, Fianna Fail)
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I move amendment No. 1:
To delete all words after "Dáil Éireann" and substitute the following:
"— notes the unprecedented reduction in international economic growth and disturbances in financial markets over the last two years and the impact this has on all sectors of the Irish economy;
— commends the Government for its policies to return stability to the public finances, which is helping to restore confidence both internationally and domestically;
— commends the approach taken by Government on the appropriate balance struck between revenue raising measures and necessary expenditure reductions in its response to dealing with pressures on the public finances;
— notes the positive reaction that the Government's prudent and decisive approach has engendered in international economic commentators and the tangible positive impact of lowering the interest cost of servicing Ireland's national debt;
— notes the need for 'fairness' to be at the core of any revenue raising measures required to shore up our public finances;
— considers that the impact of the air travel tax on tourism has been considerably overstated in the context of overall purchasing decisions by visitors; and
— commends the actions which the Government and the Irish tourism industry are taking, both together and independently, to respond to these challenges, including:
— the continuing commitment of the Government to the progressive delivery of its key tourism investment priorities in marketing, skills development, enterprise support and product development, within a framework of sound public finances and value for money, noting that the tourism services budget was increased in 2010 by 2% to over €150 million, against a background of fiscal retrenchment;
— maintaining the level of overseas marketing activity in real terms, led by Tourism Ireland and supported by industry partners, investing €26 million in a marketing drive in the first half of the year, including the biggest ever programme of activities to showcase Ireland during the St. Patrick's Day period;
— Fáilte Ireland's new advertising and promotional campaign to encourage holidaying at home this year, with a budget of €4 million, rooted in extensive consumer research and consultation with the tourism industry, in particular by promoting the great value that holidaying in Ireland offers to the consumer;
— Fáilte Ireland's support for enterprises, helping them to achieve real cost savings and efficiencies and providing a range of training and business supports to individual tourism businesses, investing over €11 million in 2010 in the form of direct supports and advice;
— the role of the Office of Public Works in the conservation, protection and management of the built heritage and its pivotal contribution to the sustainable development of tourism in Ireland; and
— other significant developments this year which will assist the tourism sector such as the opening of the new Convention Centre Dublin in September which is expected to give a major boost to business tourism, the new Aviva Stadium and the completion of the inter-city motorway network."
Deputies will see why the Government cannot accept the motion during the course of the debate. This House is acutely aware of the challenging economic conditions in which we find ourselves. The public finances, particularly tax receipts, have been very severely impacted by the sharp deterioration in the economic environment. Tax revenue in 2010 is expected to be in the region of €31 billion, a decline of over 30% on the level of taxes received in 2007. Tax revenues are now back to 2003 levels and gross voted current expenditure has grown since by approximately 65%.
The gap that has emerged between revenue and expenditure is unsustainable and this is why the Government has taken such significant measures to restore order to the public finances over the past 18 months.
Olivia Mitchell (Dublin South, Fine Gael)
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It is doing so by stopping visitors.
Seán Haughey (Dublin North Central, Fianna Fail)
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In that regard, the 2010 budget forecast the stabilisation of the deficit in 2010, notwithstanding declining economic activity. Many of these measures have been difficult and painful but we are committed to reducing the general Government deficit to under 3% of GDP by 2014.
The strategy behind the Government's medium-term fiscal plan is based on two interrelated areas: inspiring confidence, both internationally and domestically, that the deterioration in the public finances has been arrested; and restoring Government expenditures and revenues to more sustainable levels, thus ensuring that debt does not rise to unsustainable levels. The current level of borrowing is not a sustainable long-term solution as increased borrowing in turn leads to high interest costs and ultimately represents deferred taxation.
Recent market developments once again underline the importance of continuing to take firm and decisive action to restore stability to the public finances. This will in turn help return the economy to a sustainable growth path. Over the period 2011 to 2014, it is expected that growth will return to the economy on an annual basis and that growth in tax revenues will resume. Further adjustments in the fiscal position will be required over the coming years to restore the public finances to a sustainable position. Challenges and difficult choices remain but we have embarked upon the correct path and that has been recognised and commended internationally.
There are emerging indications that the economy is beginning to stabilise, with macroeconomic and fiscal data published in recent months generally in line with expectations. A consensus is developing among commentators that the economy is likely to begin growing again in the second half of the year and re-establish itself on a full-year basis in 2011. This perspective is broadly shared by the Department of Finance.
Competitiveness is improving and significant progress has been made to return the public finances to a sustainable footing. It is notable that during these challenging times, a broad consensus has prevailed regarding the action needed to preserve our hard-earned economic and social progress. Our economy and workforce are resilient and across the wider economy we are seeing a number of necessary adjustments which will help restore our cost competitiveness. In particular, there is a decline in the general price level and there is evidence of an improvement in labour costs. These developments will help position us to take advantage of an improving outlook for the international economy and we can expect to see domestic business and consumer confidence returning. This will ultimately translate into increased economic activity and increased employment opportunities.
Over the past number of decades there has been sustained investment in our greatest resource, our highly educated and skilled workforce. This will enhance our potential to grow as future economic development will be focussed on harnessing emerging opportunities in knowledge-intensive sectors. This is being underpinned by initiatives such as the establishment of the innovation task force and the pursuit of policies to facilitate the development of a smart and green economy. We have also made significant investment in areas such as productive infrastructure, which will enhance our competitiveness and capacity to grow. A high level of capital investment is being maintained and for 2010 it will be 5% of GNP, twice the EU average.
The air travel tax represents just one of the measures the Government has taken in an effort to broaden the tax base and shore up the gap that has emerged between revenues and expenditure which is simply unsustainable. The Government accepts that the airline industry, along with other industries within the transport sector and beyond, continues to go through a difficult trading period. However, the Government does not accept that the decline in passenger numbers experienced by the airports in the State is due to the introduction of the air travel tax.
Pat Breen (Clare, Fine Gael)
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The Minister of State should ask the airlines.
Seán Haughey (Dublin North Central, Fianna Fail)
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The difficult trading period in the airline industry arises primarily from weak world economic activity. The present decline in air travel is an international phenomenon and as a result, aviation services are contracting on a global basis.
Seán Haughey (Dublin North Central, Fianna Fail)
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Passenger numbers through Irish airports have declined, as have those of our international counterparts, including those where there is no travel tax in place.
Seán Haughey (Dublin North Central, Fianna Fail)
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This downward trend is evident for periods prior to the introduction of the air travel tax. Furthermore, passenger numbers for other modes of transport have also experienced broadly similar declines. While this is not a desirable position, it is clear that the air travel tax is not the substantive cause for the decline in passenger numbers.
Ireland is not unique in applying a tax on air travel. For example, our nearest neighbour, the UK, has applied a similar tax for a number of years.
Pat Breen (Clare, Fine Gael)
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How can we as a small island nation be compared with the UK?
Brendan Howlin (Wexford, Labour)
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Allow the Minister of State to speak.
Seán Haughey (Dublin North Central, Fianna Fail)
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The UK recently revised its air passenger duty; with the minimum rate at £11 and is up to £55 for long-haul flights. Those rates will increase again later this year. Similar taxes apply in France, Australia and New Zealand.
Kieran O'Donnell (Limerick East, Fine Gael)
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What about Holland and Belgium? They removed it.
Seán Haughey (Dublin North Central, Fianna Fail)
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The rates for the Irish air travel tax are not unreasonable both for shorter and longer journeys when compared to rates in other countries. Taking the UK as an example, a person travelling within the UK will be liable to pay the UK air passenger duty of £11, or €12, on each leg of the journey. Therefore, a passenger departing from Manchester to London will be subject to the £11 tax and on the return journey departing from London to Manchester that passenger will also be subject to the £11 tax, giving a total tax liability of £22, or around €24.
Olivia Mitchell (Dublin South, Fine Gael)
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They are locations not requiring incentivisation. There is no incentivisation here.
Seán Haughey (Dublin North Central, Fianna Fail)
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In Ireland, a person travelling within the State will be liable to pay €2 in tax on each leg of the journey, giving a total tax liability of €4. Furthermore, the UK rates in respect of longer flights range from over four times higher to five times higher than the Irish rate.
The Government acknowledges that low-cost travel has been good for Ireland.
Pat Breen (Clare, Fine Gael)
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It should contact Michael O'Leary and call his bluff.
Brendan Howlin (Wexford, Labour)
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Allow the Minister of State to address the House without shouting him down.
Seán Haughey (Dublin North Central, Fianna Fail)
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The pioneers in this area deserve to be commended. However, we must, in analysing the new tax, not overplay its impact. For illustration purposes, the House might wish to note that at present a fare from Shannon to London Stansted that is initially presented as €15 with a similar €15 return fare will actually cost a passenger over €100 when all charges are included, excluding the air travel tax. This assumes no luggage is checked in which would cost more. Included in the €100 is a €5 credit card handling fee per flight segment. This practice has been the subject of much criticism by consumer bodies.
Pat Breen (Clare, Fine Gael)
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Legislation could be introduced to ban it.
Seán Haughey (Dublin North Central, Fianna Fail)
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In addition, there is a recently introduced on-line check-in fee of €5 per flight segment. If a person cannot check in on-line, there is a €40 check-in fee per flight segment.
I should point out that a person flying from any airport in the UK to Ireland is already paying, through the airlines, £11, or around €12, in air passenger duty to the UK Exchequer. Airlines do not appear to have any difficulty in applying the UK air passenger duty. In the case of long-haul flights a €10 tax as a proportion of the total price of a return fare is minimal.
It should be recognised that visitors to Ireland are only subject to the tax on the return journey. The additional €10, or €2 in the context of a much larger purchasing decision involving travel, hotel expenditure, etc., should have only a limited effect on tourist numbers. It must also be recognised that airlines benefit from an international tax exemption on jet fuel. The extent of this benefit is illustrated by the example that the tax, as a percentage of the price of a litre of petrol, is currently in excess of 60%.
A sense of balance must be brought to this debate. In the past few years, exceptional growth in air travel, to and from Ireland, took place.
Seán Haughey (Dublin North Central, Fianna Fail)
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At home, strong disposable incomes and consumer confidence led some people to take several air trips per year. It should come as no surprise, however, that in view of uncertainties in the economy generally, consumers have shown some reluctance to take or plan trips abroad. An air trip abroad generally involves expenditure of several hundred euro. To solely blame the introduction of a modest air travel tax of €10, or €2, for the reduction in passenger numbers is stretching credibility.
Pat Breen (Clare, Fine Gael)
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It is the perception that is important.
Olivia Mitchell (Dublin South, Fine Gael)
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It is not the people who are paying the tax, it is the airlines.
Timmy Dooley (Clare, Fianna Fail)
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Perception is what Fine Gael is good at.
Seán Haughey (Dublin North Central, Fianna Fail)
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I cannot quite understand how an airline that has complained vigorously about the €10 air tax, on the basis of price sensitivity of customers, can then introduce a non-discretionary on-line check-in fee of €5 per flight or €10 per return flight.
Pat Breen (Clare, Fine Gael)
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Cityjet, Aer Arann and Aer Lingus also complained about the tax.
Seán Haughey (Dublin North Central, Fianna Fail)
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The introduction of a relatively modest air travel tax is an important revenue-raising measure in the context of the significant financial challenges we now face.
Pat Breen (Clare, Fine Gael)
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What about the revenue on which the Exchequer is losing out?
Seán Haughey (Dublin North Central, Fianna Fail)
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The Minister for Finance has no plans to abolish the air travel tax because, in essence, it is fair-----
Olivia Mitchell (Dublin South, Fine Gael)
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If the Government does not want tourists to come to Ireland, that is fine.
Seán Haughey (Dublin North Central, Fianna Fail)
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-----and will raise approximately €125 million in a full year in circumstances where additional revenues are required to narrow the budget deficit. In addition, it also serves to widen the tax base.
Olivia Mitchell (Dublin South, Fine Gael)
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What about the revenue that is being lost?
Kieran O'Donnell (Limerick East, Fine Gael)
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Over €300 million is being lost.
Pat Breen (Clare, Fine Gael)
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The Minister of State should-----
Brendan Howlin (Wexford, Labour)
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I ask Members not to shout down colleagues.
Olivia Mitchell (Dublin South, Fine Gael)
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It is very difficult-----
Brendan Howlin (Wexford, Labour)
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Deputies Breen and Mitchell should certainly not shout down the Chair.
Brendan Howlin (Wexford, Labour)
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They had their opportunity to speak and a similar opportunity should be afforded to other Members.
8:00 pm
Seán Haughey (Dublin North Central, Fianna Fail)
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Deputies are subject to pleadings from various interest groups, some with more robust cases than others. In the current climate, we must apply sound and balanced judgment to such pleadings. The Government's view is that in this case the impact of the air travel tax has been significantly overplayed. Do people really believe that the abolition of the air travel tax would lead to the number of tourists visiting Ireland rising significantly because the cost of coming here might decrease by €10?
The Government acknowledges that the tourism industry makes a vital contribution to employment, economic activity and exports. It also contributes by encouraging social inclusion and access to labour markets. With the support of the Government, the Department of Arts, Sport and Tourism and the tourism agencies, the tourism and hospitality sector can overcome the current challenges and make a major contribution to Ireland's economic renewal.
The 2010 budget recognised the tourism and hospitality sector as being both critical and labour-intensive and incorporated a range of measures to renew Irish tourism. The overall tourism services budget was increased by 2% on the 2009 figure to more than €153 million in 2010. The allocation for capital investment in tourism product development increased threefold to €21 million. This investment will be focused on completing the upgrading of some major tourism attractions, developing a select number of new visitor attractions, improving infrastructure for recreational cycling, walking and water-based activities and heritage attractions.
The tourism marketing fund has a provision of €44 million for 2010. This will enable the level and value of investment in overseas marketing of Ireland, as recommended in the report of the tourism renewal group, to be maintained in real terms in 2010. Better value for money in purchasing advertising space, currency advantages and once-off expenditure in 2009 relating to the redevelopment of Tourism Brand Ireland will ensure that there is no adverse impact from the nominal reduction in the 2010 allocation.
The Government further demonstrated its commitment to tourism by including it in a range of cross-cutting measures such as the employment subsidy scheme, the work placement programme, the credit review system and incentives for investment in energy efficiency. All of these schemes and programmes support sustainable tourism enterprises and employment.
Furthermore, tourism businesses accessed the second call for applications under the employment subsidy scheme, operated under the aegis of the Department of Enterprise, Trade and Employment, under which total support of €65 million is available to protect vulnerable employment. The industry will also benefit from the establishment of the credit review system for all SME sectors, including tourism. Further specific measures that will help tourism include the changes in alcohol excise duties and VAT and the rail travel initiative aimed at senior citizens visiting Ireland from abroad.
We have been experiencing the impact of an international recession of unsurpassed severity. Every major economy - including those of our key source tourism markets - is suffering. In Ireland's case, the position has been exacerbated by unhelpful exchange rate movements and the challenges faced by the domestic economy. Tourism worldwide saw a significant downturn in the second half of 2008 - this continued into 2009 - as a result of the global economic slowdown and loss of consumer confidence. There were just under 7 million overseas visitors to Ireland during 2009. This figure represents a drop of 11.6% compared with 2008. Outbound trips from Britain were particularly affected, with the euro-sterling exchange rate making it extremely challenging to attract visitors to Ireland and eurozone destinations generally. The motion notes that tourists from the UK were down 16% in 2009. However, this must be seen in context, particularly because, in the same period, visits by UK residents to Europe decreased by 16% and to North America by 20%.
In common with many other businesses, tourism businesses are experiencing difficulties with regard to capacity, costs and credit supply. These difficulties are exacerbated by lower visitor numbers. Some of these problems must be addressed by the tourism industry. Others are being addressed by the Government, for example, through NAMA and in the context of the supply of credit to businesses in general. The Government will continue to work with the industry to help it manage its way through these difficulties by stimulating demand, helping to address costs or securing access to credit.
Tackling the excess capacity that undoubtedly exists in the hotel sector is a complex matter and would ideally require a market response over time. This year is again likely to be tough for the hotel sector, with further adjustments taking place as the market responds to excess room supply. This process will gain further momentum in the coming months as more banks seek to clean their balance sheets and dispose of underperforming loans. These market-led adjustments are necessary to restore some level of equilibrium to the hotel market.
We share the concerns of business people with regard to costs relating to labour, local authority rates and energy. That is why we took measures to, for example, secure a reduction in energy prices last year. The fact that consumer prices in Ireland have now fallen back to 2006 levels shows we are responding flexibly to the crisis. This has been recognised by the European Commission and international markets and has assisted in restoring confidence in the Irish economy. The tourism industry has made great strides to reduce costs and increase productivity during the past two years.
The Government has decided that the joint labour committee, JLC, wage-setting system will remain in place as a protection for low paid workers. In that context, the Industrial Relations (Amendment) Bill 2009, which has passed all Stages in the Seanad and which is currently before the Dáil, will modernise and strengthen the existing system for the making of employment regulation orders, EROs, and will provide for that system's more effective operation. The legislation will also strengthen the manner in which the functions delegated to JLCs are supervised by the Labour Court and ensure that a clear set of procedures and principles, within which these functions are to be discharged and made subject to Oireachtas scrutiny, is set down.
When the Bill was published, the Government also announced that it proposed to introduce an additional provision - to be effected by means of a Committee Stage amendment - to facilitate the inclusion in EROs and registered employment agreements, REAs, of an inability-to-pay mechanism. This mechanism will be similar to that provided under the National Minimum Wage Act 2000 and will further strengthen the relevant provisions against future court challenges and protect employment in situations where employers are faced with severe economic challenges.
Commercial rates are a form of property tax levied by local authorities on tenants of commercial properties in their administrative area. The levying and collection of rates is a matter for individual authorities. The determination of the annual rate on valuation, ARV, which is applied to property valuations to calculate rates, is subject to decision by the elected members of a local authority in the context of its annual budget. The Minister for the Environment, Heritage and Local Government is nevertheless aware of the economic pressure on local businesses and in 2009 and 2010 he specifically requested that local authorities exercise restraint in setting commercial rates to support competitiveness in the economy and to protect the interests of communities.
The Government has made tough decisions but they are in the long-term interests of the economy and its people. These decisions have involved raising additional revenues and reducing expenditure. It is recognised by many international commentators that we are getting the balance right. In that context the full year yield of €125 million from the air tax is important. It is, in essence, a fair tax and its impact on tourism numbers has been overplayed.
Pat Breen (Clare, Fine Gael)
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My God, the Minister of State has got it so wrong.
Seán Haughey (Dublin North Central, Fianna Fail)
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I commend the amendment to the House.
Timmy Dooley (Clare, Fianna Fail)
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I welcome the opportunity to contribute to this debate. For a long time I have believed that tourism is a vital cog in the economy of the country. Now more than ever it can play a very significant role in the realisation and re-establishment of a level of economic activity in our country. It can be the stimulus for which we are crying out. It can be the capacity to attract foreign investment at a time when the foreign investment with which we were more familiar has dried up. For that reason I welcome the appointment today of Deputy Hanafin as the new Minister for Tourism, Culture and Sport. It sends a very strong signal that a person of her calibre and stature in Cabinet has been appointed to take on such an important role at this time.
May God help us if the Opposition believes that the abandonment of the €10 travel tax is the solution to the problem that exists with tourism today.
Timmy Dooley (Clare, Fianna Fail)
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The reality is that over the past five to seven years we got extremely good at selling to ourselves in many respects within the economy and none more so than in tourism. An amount of short breaks are sold and marketed from one end of the country to the other to fill hotels developed on the basis of tax incentives, some of which I supported at the time. However, I must say that the focus is entirely wrong if we do not return to attracting people to the country in the way we did in the past.
In the past, people came here for many reasons, such as genealogy, with people from the United States coming here to trace their roots. Unfortunately, that business is declining. As we move from generation to generation, the link in families is much more tenuous and people are less likely to travel. People come for fishing, scenery and many other reasons, or they did in the past. However, they are no longer prepared to do so because we now compete with many other markets. People have moved on from the links that were there and the product we thought we had.
We have not been good at developing the next layer of product. The future of tourism in this country depends on giving people a reason to be here. They will not come because we are €10 or €5 cheaper or because we have good access. It is about wanting to come to Ireland and developing products. It has been shown throughout the world that people travel for product, attractions and facilities. We must get those in place and we need money to do so.
I do not believe the tax will generate enough money to develop our attractions. We have to see tourism attractions in the same way as we see roads. They are vital parts of our infrastructure and over the coming years we have to develop our capital programme in a way that looks to attract that tourism investment and spend from outside Ireland rather than doing what we have become very good at, which is selling to ourselves.
The tax is irrelevant. It is not the reason somebody would not come to Ireland. When one considers the array of taxes and the cost generally, €10 is an insignificant amount of money. Over time, it will probably be removed because it will become irrelevant in the overall scheme of things because of the investment needed. In the current environment it is necessary. We have a significant and difficult budgetary position and therefore there is no reason we should not retain the tax.
As Deputy Breen knows, the simple fact of the matter is that 80% of the passengers going through Shannon are outbound. A person who stays at home and does not travel should not be expected to subvent a person travelling and taking money out of the country to spend it elsewhere. Somehow over time, the idea has developed that Ryanair is delivering tourists to the mid-west and the west. It is not. It is taking Irish people away for short breaks and holidays. It is getting traffic through the airport-----
Timmy Dooley (Clare, Fianna Fail)
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-----but it is losing money for the economy.
Pat Breen (Clare, Fine Gael)
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I know it. My sister is involved in tourism and there are many French people-----
Timmy Dooley (Clare, Fianna Fail)
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Deputy Breen is buying into this notion. He spoke about calling Michael O'Leary's bluff on the travel tax-----
Timmy Dooley (Clare, Fianna Fail)
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-----and that he would return all of these services. However, Michael O'Leary clearly stated that instead of the 2 million passengers he would deliver 1.2 million passengers if the tax was removed and the charge he currently pays was reduced by half. At present he is paying very little and half of very little is next to nothing.
Timmy Dooley (Clare, Fianna Fail)
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If Deputy Breen thinks the taxpayer who is not travelling should-----
Timmy Dooley (Clare, Fianna Fail)
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-----be in some way subventing services, it is ridiculous.
Schiphol Airport was discussed and that is a totally different scenario because people transit through it and a €10 tax on a stop on the way to somewhere else is irrelevant.
Pat Breen (Clare, Fine Gael)
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What about Heathrow? That is a hub.
Timmy Dooley (Clare, Fianna Fail)
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I would like Fine Gael to clarify what one of its MEPs meant by stating that the party wants separation for Shannon Airport. Will the Fine Gael leadership tell us whether that is Fine Gael policy? If it is we have much to worry about at Shannon.
The approach being taken by the Government on the future of Shannon Airport was referenced by the presentation and development of customs and border protection facilities at the airport. That is a way forward. Recently, I had the opportunity to meet Hilary Clinton. She was very thankful to the Government for the support for troops passing through the airport. Has Fine Gael changed its position from the previous occasion this House voted on the landing of troops at Shannon?
Timmy Dooley (Clare, Fianna Fail)
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Perhaps on this occasion it will support it.
Timmy Dooley (Clare, Fianna Fail)
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On the previous occasion it had an opportunity, Fine Gael voted with a number of Independents to remove-----
Pat Breen (Clare, Fine Gael)
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That is our policy. We have no problem with it.
Timmy Dooley (Clare, Fianna Fail)
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-----US troops landing at Shannon. Perhaps it has changed its opinion and we would like to hear it.
Brendan Howlin (Wexford, Labour)
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I must call the next speaker. Deputy Dooley is taking up the time allocated to Deputy John Cregan.
John Cregan (Limerick West, Fianna Fail)
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Like my colleague, I welcome the opportunity to say a few brief words in the House on this issue. I cannot quantify the impact a €10 travel tax will have on passenger numbers through our airports. With the greatest respect, I do not think people on the other side of the House can quantify it either.
Olivia Mitchell (Dublin South, Fine Gael)
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We can quantify the 3,000 jobs.
John Cregan (Limerick West, Fianna Fail)
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What is coming across-----
Kieran O'Donnell (Limerick East, Fine Gael)
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Studies have been done.
Brendan Howlin (Wexford, Labour)
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Allow people to speak please.
Timmy Dooley (Clare, Fianna Fail)
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Michael O'Leary economics again.
John Cregan (Limerick West, Fianna Fail)
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What is coming across to me is that it is partly to blame for passenger numbers at our airports decreasing. I cannot quantify that and I do not know the impact it is having. However, as other speakers mentioned, at least this is an upfront charge. It is a tax and revenue for the country. During my time in local government if, at the time of the Estimates I was to suggest removing €125 million of revenue I would immediately be asked where I would find the money to replace it.
Kieran O'Donnell (Limerick East, Fine Gael)
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The Government introduced it.
John Cregan (Limerick West, Fianna Fail)
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In my opinion, and from what the Minister of State said, the tax will not be withdrawn at this point in time. Therefore, it is futile to come to the House to suggest that it should when we all know it will not.
Olivia Mitchell (Dublin South, Fine Gael)
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We might as well stay at home.
Kieran O'Donnell (Limerick East, Fine Gael)
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That is great logic.
John Cregan (Limerick West, Fianna Fail)
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We could be far more positive for our region and we should promote ideas so our region can benefit from an improved position in Shannon Airport. I am greatly concerned about the future of Shannon Airport, as are all my colleagues in all parties in the mid-west region.
Autonomy was mentioned and Cork Airport is in the same position as Shannon Airport. There does not seem to be a huge problem or a huge issue with the travel tax or as big an issue with passenger numbers. It is linked to the DAA, as is Shannon. Perhaps in the coming months if the new board at Shannon Airport was to put forward a viable business plan - as I am sure it will - we could consider whether it stands up and means that the airport can go it alone and be successful.
Deputy Deenihan was honest in his comments on the decrease in passenger numbers from North America. He referred to the drop in the mid-west region. He stated passengers were arriving in Dublin but not in Shannon. The travel tax is not causing that issue, with all due respect.
Olivia Mitchell (Dublin South, Fine Gael)
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We do not state that it does.
John Cregan (Limerick West, Fianna Fail)
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The travel tax is applied at all airports. It also applies at UK and French airports. From the figure I have seen I understand that every airport in the world is suffering a similar drop in passenger numbers.
Olivia Mitchell (Dublin South, Fine Gael)
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In Europe they are increasing.
John Cregan (Limerick West, Fianna Fail)
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Many of those have no travel tax attached whatsoever.
Olivia Mitchell (Dublin South, Fine Gael)
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None introduced it during a recession.
John Cregan (Limerick West, Fianna Fail)
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It is far more incumbent on us-----
Timmy Dooley (Clare, Fianna Fail)
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It is that more Irish people are not travelling.
Brendan Howlin (Wexford, Labour)
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Allow the Deputy to conclude.
John Cregan (Limerick West, Fianna Fail)
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It is far more incumbent on us to ensure that we work together for our region and airport so that we have a strong gateway into the mid-west region and the west as we have always had and of which we have been very proud. However, work in this regard must start in Shannon and nowhere else. It must start in Shannon with the new board and all Deputies from the mid-west region must work together to ensure the restoration of Shannon Airport to its former status because with all due respect, in a manner akin to the hangar 6 issue, Mr. O'Leary is trying to cod the people of the mid-west in respect of Shannon Airport with his sweetheart deals and is trying to get in and out for nothing. Unfortunately, that will not work.
Olivia Mitchell (Dublin South, Fine Gael)
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When the jobs are lost that will be seen as a great idea.
Mary Upton (Dublin South Central, Labour)
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With the permission of the Leas-Cheann Comhairle, I wish to share time with Deputies Ferris, Broughan and Jan O'Sullivan.
Mary Upton (Dublin South Central, Labour)
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The Labour Party will support this Opposition motion. Both my colleague, Deputy Broughan, and I have been opposed to this tax since it was first mooted. Despite the Taoiseach's shuffling of the deckchairs earlier today, it is clear that the importance of the tourism sector has never been appreciated by the present Government or any other Government led by Fianna Fáil over the past 30 years. The facts regarding tourism speak for themselves. In 2008, tourism contributed €6.3 billion in revenue, comprised 4% of the Irish economy's GNP and provided 128,400 jobs in the accommodation and food sector. This was more than the number of people employed in either the agriculture or financial services sectors at the time. It is clear that tourism is an economic lifeline nationwide and towns such as Lahinch, Dingle and Dunmore East thrive on the tourism trade. It is an indigenous industry and the jobs generated therefrom remain in Ireland. Tourism in Ireland means jobs and growth in areas that frequently have no major industry. Such areas are kept thriving in a manner that would otherwise not be possible due to the Government's failure to implement a successful spatial strategy.
In common with nearly every other sector of the economy, 2009 was a black year for the tourism sector. The total number of overseas trips to Ireland declined for a second year in a row. Nearly 1 million fewer people visited Ireland in 2009 than in 2008. Our largest market, the United Kingdom, suffered the greatest fall of 16% or more than 600,000 visitors. The decline in visitors from the rest of Europe, North America and other areas was of 8.7%, 2.4% and 12.5%, respectively. Against this background, it beggars belief that the Government insists on retaining the air travel tax, which was first imposed with effect from 30 March 2009. In response to Deputy Cregan's comments, no Member is pretending that the air travel tax is the sole cause of the fall in tourist numbers. While a number of other factors clearly are involved, this is an additional factor that, on consideration of the figures, is quite significant and substantial and should not be ignored. For example, the chairman of Fáilte Ireland indicated that the introduction of the tax would result in a net loss to the Irish economy of more than €30 million on an annual basis. A report commissioned on the air travel tax by Aer Lingus, Ryanair and Cityjet from Amsterdam Aviation Economics to which a number of Members already have referred concluded that the estimated revenue losses would be €482 million, up to 3,000 jobs and 1.2 million in departing passengers in a full year of the operation of the €10 departure tax. This compares to a tax take to the Exchequer of just €160 million. Even the report from the tourism renewal group commissioned by the Department of Arts, Sport and Tourism stated that the abolition of the air travel tax was an urgent action for the survival of the tourism industry.
When speaking earlier, the Minister of State was quite selective in the countries he chose as examples. As he managed to ignore those countries which removed the tax, having had their fingers burned, I will balance the equation a little. In July 2008, the Dutch Government introduced an air passenger tax targeting the collection of €418 million. A subsequent Dutch study calculated that the tax cost the Dutch economy €1.6 billion. The Dutch Government saw the light, did the sums and abolished the tax in July 2009. Similar taxes have been removed in Belgium, Greece and Spain. As an island nation, air transport is more important for Ireland than for any of our continental neighbours, which have integrated road and rail networks. Which part of the arithmetic, coming from a number of disparate sources, does the Minister not understand? All the number crunching indicates there is a serious negative impact from the travel tax. This is the experience of other countries that have taken the sensible decision to reverse the tax. Consequently, it is time for the Minister to wake up to reality and to set about dismantling a tax that is costing money. Ireland is highly dependent on air travel and as an island nation our choices are pretty limited in respect of inducing people to travel here as the number of alternatives, such as luxury liners, are few and far between. Moreover, the Government's own report on the sector by the tourism renewal group to which I referred earlier highlights clearly the economic short-sighted nature of the travel tax when it states
As an island destination ... Ireland cannot afford to incur a competitive disadvantage that makes routes to and from Ireland less attractive for operators seeking to maximise their return.
However, the Government continues to stick its head in the sand and to build further barriers to entry at a time when the global tourism market is shrinking. This simply makes no sense. Our tourism industry is under serious stress and instead of creating additional barriers for prospective tourists, it is time to consider ways of making the country more accessible.
In the 21st century, the major growth markets in tourism principally will be based in Asia. The countries concerned, including China, India and Saudi Arabia, are countries with which Ireland does not have strong cultural, historic or linguistic ties. Consequently, for Ireland to capitalise on these potentially huge markets, it is essential to address problems surrounding travel visas for example. It is completely unrealistic that it can take up to six months for a prospective Chinese visitor, for example, to acquire a visa to come to Ireland. The timeframe for getting such visas must be challenged, without compromising the necessary formalities and minimising the risk of unscrupulous operators illegally gaining access to the country. While I appreciate this primarily is a matter for the Department of Justice, Equality and Law Reform, the issue must be highlighted. How many people nowadays plan their holidays six months in advance? The Internet now operates as the new reception desk at the travel agent and many potential travellers plan, book and change their minds within a few days or weeks. If travellers from China who wish to come to Europe have a choice between Ireland, where they must apply six months in advance or Scotland, where the processing time is much shorter, they obviously are much more likely to choose to visit Scotland. If the Government is serious about attracting a new cohort of potential visitors from new and emerging target countries, such artificial barriers must be scrapped.
Moreover, for those same visitors to spread the good news about Ireland, there must be a commitment to and an investment in the services they require. For example, what plans are in place to ensure that an appropriate level of language facility will be provided? It is no longer good enough to assume that all our visitors will be satisfied to accept our limited language services, especially when they potentially can get a better quality of service elsewhere. It should be a basic requirement and, if necessary, a targeted requirement that hotel receptionists, tour guides etc. should have a working knowledge of at least three languages other than English. In addition, part of such a language development programme should be that languages such as Mandarin, Arabic and so on should be targeted for specific guides or hosts in Ireland in order that visitors can be matched to the appropriate language service. We require a co-ordinated action plan on this issue to begin to target immediately this issue before it reaches a crisis point.
While I welcome the addition of the free travel plan on Irish Rail to all visitors to Ireland aged over 66, which is a highly positive development, there is scope to extend this facility to all CIE services for this particular cohort of visitors. The extension of this facility to all CIE services for visitors who are over 66, initially during off-peak periods, will provide an opportunity for a sector of the market that will be likely to spend more time in Ireland and will be encouraged to move outside the capital city, thereby bringing much-needed revenue to parts of rural Ireland. Were the scheme limited to off-peak times, there would be no reason it could not be run on a cost-neutral basis. I note the State already paid CIE approximately €76.4 million through the Department of Social and Family Affairs in 2009. The lack of broadband services nationwide continues to hamper the tourism industry. It is indicative of the Government's lack of commitment to a real spatial strategy offering equal opportunities and services to citizens regardless of their location in the State that we have such a paltry level of broadband connectivity outside the major urban areas. Every bed and breakfast in Ireland should be in a position to provide an on-line service to attract tourists.
The potential value of the industry is being damaged by the gaps that must be bridged, many of which are fairly basic. I refer to better signage, an integrated ticket system, enhanced language skills, expansion of the free travel scheme and maximising our niche markets, such as golf for surfing. None of these is particularly demanding, other than a vision to develop some form of long-term strategic development for the industry and the will to influence it. The motion under discussion pertains specifically to the removal of the air travel tax, which has been demonstrated to be what might be described as a loss leader in many other countries. The only difference between them and us is that we are much more dependent on air travel to attract visitors to the island of Ireland. Second, most of these countries have seen the light and have abolished a tax that in effect is costing their economies money. Third, we are not pretending that the air travel tax is the only issue around tourism and the problems therein.
As an aside to all of the matters relating to the tourism industry, another factor that would allow more rapid action on tourism would be the facility to access information directly via the appropriate Minister in respect of legitimate questions by Deputies. I am referring to quangos. It is clearly not simply a question of just one Department, as this is a major issue. Unless we can get accurate information quickly for when our constituents and members of the public need it, we will continue to damage the tourism business.
Martin Ferris (Kerry North, Sinn Fein)
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I thank the Labour Party for the time allocated. We support the general thrust of this motion and the proposal to withdraw the air travel tax. It is true, as the statistics prove, that the tourism sector has experienced a considerable downturn during the past two years, which has had an impact in terms of business closures and job losses. However, it is also a sector that has the potential to recover more quickly than others, given the apparent recovery in the economies of some of the countries from which many of our visitors come. Indeed, it has been noticeable that there seems to be, anecdotally at least, somewhat of an increase even in recent months in visitors from some European countries.
We have completed a report on the sector and Senator Doherty hopes to submit it to the tourism committee. Some of the findings in the report would indicate there is potential even in the current climate to expand, particularly if the economies of some of the countries from which many of our visitors come are ahead of us in terms of recovery.
The motion also refers to the Office of Public Works and the development, or lack of development, of public sites. This was another theme that emerged in the report. There is significant potential not only to develop existing heritage sites, but to expand the whole area of cultural tourism. During the Great Depression in the United States, the Democratic Administration under President Franklin Roosevelt established similar commissions as part of its efforts to stimulate growth and recovery. Not only did it provide people with employment, but it also contributed to the creation of much of what the American people have today in collections of folk music and so on. Such an approach would require the Government to turn its back on its current austerity measures and use its imagination to stimulate growth across a range of sectors, including tourism.
Many areas of unique interest attract people to Ireland, including music, literature, sport, family and local history, folklore and so on. It might be possible to develop these to a greater extent and to employ people locally in schemes to develop sites, create cultural centres and do family and historical research. The evidence from places where this has been done would indicate it has been a successful approach. Perhaps that might be something that could be done instead of closing down community schemes as is currently the case and either leaving people with nothing to do or giving young people no option but to leave the country.
I would be concerned that the reference in the motion to the joint labour committee is part of a concerted effort to undermine wage levels further in what is already a low paying sector of the economy. There has been intensive lobbying by businesses, including from within the hotel and catering sector, against the minimum wage and against the rates set by regulatory orders. This has been successful to the extent that the Government is proposing to allow businesses to opt out of wage agreements by claiming that they cannot afford to pay people what are already fairly basic levels of pay. This argument needs to be resisted, as does the argument that sectors like tourism are dependent on paying people low wages.
Hotels did well during the good years and at a time when wage levels did not rise above the rates seen in other sectors. Wages within the tourism sector still remain low. The minimum wage of €8.65 per hour is paid to a substantial number of tourism workers. The average hourly wage is only €10.57 for people with more than ten years experience and €10 for those with less than four years experience. Given the high cost of living, a 40-hour average working week makes it difficult for many workers in the sector to make ends meet. The average weekly earnings for workers in hotels and restaurants in the last quarter of 2008 was €481.38, which represented an increase from €411 in the same period of 2004. Further cuts in wages and the erosion of conditions and standards of employment would not be acceptable to most people in the sector, something that is emphasised by unions representing its workers. Cutting wages and undermining working conditions therefore ought not to be seen as the means to help the sector to recover.
The argument for cutting wages and abolishing the minimum wage is also dishonest. As we all know, many people who have children and are earning low wages are entitled to claim the family income supplement, FIS. In effect, what this means is that low wage employers expect the State to subsidise them by making up the difference. By paying FIS, the State is recognising that the minimum wage is insufficient to maintain a family in any reasonable way. The Government is dishonest in proposing to allow employers to drive down wages when it knows it will need to pay their employees from State funds.
Other cost factors could be considered. As the motion mentions, many businesses within the tourism sector are subject to the same credit constraints affecting many other indigenous businesses, making it difficult for them either to survive the downturn or to lay the basis for recovery. This is a considerable problem for small businesses, not least of all those involved in the tourism sector, as they are being crippled by credit constraints. The same banks are now in the dock or rather ought to be in the dock over the manner in which they loaned out massive amounts of money to property speculators who had far less of a strategy than most of the smaller businesses now being rejected out of hand when they apply for loans and that were often rejected at the same time because the money was being squandered, leaving us in our current mess.
This matter needs to be examined, not only in respect of the tourism sector but overall, especially given that the banks have benefited from the generosity of the taxpayer thanks to the measures introduced by the current Government. Given that the State has stepped into the banking sector in this way, it ought to be able to insist that the banks extend credit to those businesses that believe they are capable of expansion. It has been argued that the State has no role in this area, but surely if the State and the taxpayers are responsible for saving the banks and some of those to whom they lent, it ought to be able to intervene and ensure that the banks serve the public interest instead of doing as they have been up to now.
The motion also refers to the issue of the so-called zombie hotels. These are hotels that were built by property developers to avail of tax concessions and anything up to an estimated 200 of them could effectively come into public ownership after being transferred to NAMA. Most of the hotels in question are not viable, but the fact that they exist is contributing to the vast overcapacity in the sector, estimated at 15,000 too many hotel beds, and adding to the difficulties facing the genuine operators that must compete with them. It would be a ridiculous situation if the taxpayer was to carry what are, with a small number of exceptions, loss making hotels. NAMA should close any loss making hotels that end up on its books and sell the properties if there is a market for them. Alternatively, it could use the buildings for other useful purposes. However, if that occurred, it should not be the signal to push hotel prices back up to where they were. Hoteliers rightly make a case about the zombie hotels undermining their businesses, but some of them also forget that, when things were better and before the sharp decline in tourism, many in the sector overcharged and increased prices way above anything justified either by demand or costs.
The tourism sector is one that has great potential and my county has benefited much over the years from the revenue and jobs tourism, both from overseas and domestic visitors, has brought about. It is important to have a strategy to ensure that the sector not only survives, but that it is in a position to take advantage of any economic upturn and a potential increase in numbers travelling from abroad.
As part of this strategy, some of the areas referred to in the motion need to be addressed, including access to credit. However, I would strongly argue against any attempt to impose wage cuts on those who are already working in what is on average a low paid sector of the economy. There also needs to be a concerted effort to increase this country's potential as a destination for cultural tourism. There is a huge opening in that sector if it is marketed properly and developed. That could also tie in with job creation within communities. Every community in Ireland has something to say and heritage sites and local history and culture could be further developed.