Thursday, 29 September 2022
Ceisteanna Eile - Other Questions
10. To ask the Minister for Culture, Heritage and the Gaeltacht the steps she is taking to address rising costs of operation for the hospitality sector, specifically with regard to their impact on tourism. [47326/22]
11. To ask the Minister for Culture, Heritage and the Gaeltacht if she will outline her engagements with representatives of the hospitality sector, with specific regard to tourism, since 1 January 2022. [47327/22]
The Minister of State will be aware of the massive increases in operational costs faced by the hospitality sector this year. Electricity prices are skyrocketing and food prices are up significantly, while insurance and other expenses are putting businesses at risk. While I of course welcome the measures for small and medium-sized enterprises announced yesterday, the budget also quietly included a rise in the VAT rate for the hospitality sector in March from 9% to 13.5%. Any supports allocated to the sector will obviously be gobbled up by that increase. What is the Department doing to support this struggling sector?
I propose to take Questions Nos. 10 and 11 together.
The Tánaiste and Minister for Enterprise, Trade and Employment and the Minister, Deputy Catherine Martin, co-chair the hospitality and tourism forum. In the context of their respective roles, the focus of the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media is on the development of tourist traffic within or to the State and the development and marketing of tourist facilities and services in the State. The wider hospitality sector is a key enterprise sector as well, providing employment to people all over the country.
Specific policy areas within the Tánaiste's Department, such as the operation of the work permits system, are vital factors in how that sector operates.
The Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media, Deputy Catherine Martin, regularly meets and remains open to engaging with a wide variety of tourism stakeholders and representative bodies. Department officials have also engaged with the Department of Enterprise, Trade and Employment, Fáilte Ireland, Tourism Ireland and tourism representative bodies in order to understand further underlying issues surrounding the recovery of the tourism sector and to emphasise the importance of maintaining a strong value proposition at the core of tourism. The recovery oversight group recently submitted its fourth report to the Minister. The report notes that while much headway has been made in implementing the recovery plan presented in September 2020, a range of current tourism challenges, as set out in the report, means that significant headwinds remain.
Regarding addressing the rising costs of operation, the aim of budget 2023 is to support the tourism industry to recover and grow in a sustainable way. A total of €214.762 million has been allocated to the tourism sector. A total of €15 million in additional funding has been secured for overseas marketing of Ireland. This includes €5 million to develop further a new tourism initiative aimed at stimulating international demand. An additional €15 million is being provided for a range of industry initiatives including skills development and retention, domestic marketing, the hosting of American college football and sustainability. Other allocations include €36.5 million in capital funding for tourism product development for the continued delivery of enhanced visitor experiences.
Budget 2023 includes wider measures that tourism businesses can avail of to assist with escalating energy costs and to plan for the future. This includes a €1.25 billion temporary business energy support scheme providing qualifying businesses with up to 40% of the increase in electricity or gas bills up to €10,000 per month. Departmental officials have sought clarification on a number of points of particular relevance to tourism to ensure the scheme offers the best possible support to the tourism sector.
I raised similar points with the Minister for the Environment, Climate and Communications, Deputy Eamon Ryan, last week but I am not convinced that the Government appreciates how many family-run businesses and SMEs are close to closing. It is likely that many will at least shut temporarily during the winter and some may not reopen without proper support. The VAT rate for the sector is increasing in March. The exorbitant prices people have to pay for some Dublin hotels was cited as a rationale for the change to VAT but the whole sector will have to pay for that. Rural businesses are suffering because of the prices charged in Dublin hotels. Cafés, restaurants, pubs and hotels in rural areas like west Cork need targeted interventions now because their closure will have a disproportionate effect not only in terms of people losing jobs, but a reduction in footfall will have a knock-on impact for suppliers and producers.
Another operating cost of which the Minister of State will be aware is the insurance and financial fees that SMEs are being hit with. I know this is not his Department's direct responsibility but it seriously impacts the viability of small businesses. West Café and Wine Bar in Bantry, a family-owned business, posted on social media that it had to pay over €800 in fees for card payments for just two months which is ridiculous. During Covid going cashless was encouraged and now it is practically the norm but businesses are paying severely for that. I ask the Minister of State to raise this issue with the Minister for Finance. It is yet another operating cost for hard-pressed SMEs in the hospitality sector. On top of those massive operational cost increases, businesses in Bantry have been forced to close today for a whole business day as the town is without power. The ESB has cited essential maintenance but surely that kind of maintenance and disruption should be planned for overnight, for a Sunday or for any time that would avoid further massive disruption to already-struggling businesses. We need joined-up thinking in this regard because there is only so much businesses can take.
We need the Government to support and invest in family businesses and SMEs now because that will pay dividends down the road and save many towns and villages. We know how crucial the hospitality sector was in our recovery from the last recession.
I share the Deputy's frustration with regard to the ESB and agree there should be better co-ordination to support businesses in towns and villages when particular maintenance has to be done. It is unfortunate that a day's business has been lost. There should be better engagement on such matters.
On the Deputy's wider points, I will raise the issue of the cost of card payments with the Minister for Finance. On the reduced VAT rate, as the Deputy knows, in line with the recommendation in the tourism recovery plan a reduced VAT rate of 9% for the sector was introduced from 1 November 2020. It was originally designed to apply until the end of 2021 but this was extended to 31 August 2022 and later to February 2023. Thousands of tourism and hospitality businesses across the country did not have to apply different VAT rates during the year which further enabled them to stabilise their businesses. The reduced VAT rate promoted business survival, supported employment and helped somewhat to stabilise prices in the sector during what was a very difficult time because of Covid. The reduced VAT rate has been a very important element of the business supports secured for the sector in the last two years as it is being rebuilt. The Minister for Finance has referenced the reduced VAT rate as one of a number of supports the Government provided for tourism and hospitality businesses over the course of the pandemic but it was designed as a temporary measure, with a sunset clause included in the enacting legislation. The rate will be kept under review, as the Minister for Tourism, Culture, Arts, Gaeltacht and Sport, Deputy Catherine Martin, has stated previously.
The Government fully acknowledges the impact of inflation and the economic stresses and difficulties that businesses are facing, including food and energy costs, increased wages in a very competitive labour market, and the cost of insurance. That is why the Government is providing significant support. There is a lot of co-ordination between the tourism and hospitality sector, the Minister and the Tánaiste. The Government will really try to partner and support businesses over the winter period.
While I acknowledge that there is lots of Government engagement with the sector, ultimately there is a significant discrepancy between what tourism and hospitality businesses in Cork south west are telling me and the messaging from the Minister of State, his Department and others. The Government must be getting similar briefings to the ones I am getting but the urgency and need is not being reflected in Government policy or in the budget. I recognise that this is a cross-departmental matter and appreciate the Minister of State saying that he will talk to various Ministers about the other relevant issues.
The Minister of State's Department is responsible for tourism which is a major employer, especially in rural areas, where communities are solely dependent on tourism and agriculture. I recognise what the Government has said about the VAT rate but the point I am trying to make is that there is such a profound difference between how businesses operate in rural areas and how they operate in Dublin. If it is necessary to increase the hospitality VAT rate, can the Government provide more targeted supports for businesses in rural areas? One cannot compare the kind of price gouging by hotels in the capital city with how hotels operate in more rural areas. Somehow the Government could not figure out how to target particular households in the context of the energy crisis but it did manage to figure out how to do it for businesses. Will the Department look at more targeted supports for businesses in more rural areas that cannot operate in the same way as the urban-based hotels, restaurants and cafés? Such businesses are the single largest employer in many towns and villages.
We absolutely acknowledge the importance of the tourism and hospitality sector for employment in the regions and that is why in budget 2022 the Government allocated €67 million in additional funding for tourism, which brought the overall budget to €288 million. A total of €50 million was provided for tourism business continuity. Many schemes were operated through Fáilte Ireland, including the €8 million restart grant plus scheme. The tourism recovery plan increased tourism marketing from €46 million to €81 million.
In the last two years the Government has provided unprecedented support for the tourism and hospitality sector in an effort to maintain its viability through the Covid period. The Minister for Finance has established the new temporary business energy support scheme which will mitigate some, though not all, of the costs that businesses face. We want to ensure continued employment and viability in the sector. The Minster, Deputy Martin, and the Tánaiste regularly engage and work with the sector on the challenges it faces and that will continue during the winter period.
Tuesday's budget was about getting significant allocations for the sector and that has happened again and the horizontal supports will help businesses through the coming months. I will relay the Deputy's concerns and feedback to the Minister.