John Paul Phelan (Fine Gael)

I welcome the Minister and what he had to say. I also join with him in complimenting the members of the review group on the publication of the report, New Horizons for Irish Tourism. I largely agree with what the Minister has said. The report contains an in-depth analysis of the tourism industry. I agree with the Minister that the industry finds itself at a cross-roads and compliment him on initiating the process which resulted in this report. I am pleased it makes strong recommendations, unlike many reports which tend to contain weak recommendations, and I hope the Government and those involved in the tourism industry can act on them.

It is clear from the report and from a number of surveys carried out recently that there are two main problems within the tourism industry in this country, the most serious one of which is the perceived lack of competitiveness. The other, according to a recent survey on the reactions of tourists to Ireland carried out by my colleague, Deputy Deenihan, is the significant problems associated with access to the country and transport for tourists within the country. When the lack of competition is mentioned, the response from the Government, especially by the junior partner, is to ask people to shop around. I hope the Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Harney, does not ask those who are considering visiting Ireland and who think it might be a little expensive to shop around. It is important that they continue to come here in increased numbers. It is also worth noting the reaction to the report by those involved in the tourism industry. They have indicated that the goals set out are attainable.

The perceived lack of competitiveness is felt across all aspects of Irish society. There has been a downturn in our general competitiveness over the past couple of years. In 1999, Ireland was the fifth least expensive of the 15 member states in the European Union, but a recent survey has shown it to be the second most expensive. In four years Ireland has gone from a position of being very competitive on price to one where we find ourselves in big trouble.

This can be attributed to a number of factors. The problem of rising insurance premiums has probably been the main issue for the business sector over the past few years. I welcome the Bill to establish the Personal Injuries Assessment Board, which will finally be initiated in the House over the next couple of days. The board should have been established a number of years ago and the legislation should have been in the House sooner.

The report makes a number of key recommendations. It mentions that indirect tax rates should be brought into line with those in competing countries. A simple example concerns the VAT rate applicable to hotels which, at 13.5%, compares unfavourably with France, referred to by the Minister, where the rate is 5.5%. That is a strikingly large difference and goes some way towards explaining the difficulties with costs experienced by the tourism sector.

I was interested in the Minister's comment that bilateral consultations have taken place with the Department of Finance on taxation issues. While he is not in a position to provide the House with details of the budget, will he outline the extent of these consultations and what, if anything, can be expected from them? Last year, on budget day, we were all surprised at the increase in VAT announced by the Minister. It was not flagged beforehand. If something like that was to occur again this year, it would have a detrimental effect on the tourism industry in particular.