Brian Hayes (Dublin South West, Fine Gael)

This is an interesting debate on all sides and we will do our best to answer all the points made. Senator Quinn is right in saying that this is a delicate plant. It is not an exact science. Our commitment in the programme for Government was to reduce tax on labour-intensive industries from 13.5% to 12% across the board. We examined this again and, as an initial measure, decided the way to go was to concentrate on the tourism sector, which is the most ready, willing and able to ramp up the numbers of tourists. We have made a significant announcement about the air travel tax and about PRSI. It makes logical sense, if we are encouraging people to experience this country, to do whatever we can to reduce their costs on a whole range of different activities that they will engage in while they are in the country. The Government has adapted its approach. Rather than implementing a blanket reduction in VAT from 13.5% to 12% for all labour-intensive industry, we focused on tourism to try to increase visitor numbers and get an early win in terms of additional jobs. That is exactly what the objective is.

With regard to Senator Reilly's point, there is also a commitment to re-examine increasing the top rate of VAT. The Senator is right in saying that this could have unintended consequences, particularly along the Border area, where there is such a difference in tax from one side of the Border to the other. These proposals must be examined in the round. We are seven months away from the next budget and the Minister for Finance is engaged with all of this. We are very aware that a change in one area of tax could have a devastating effect on employment in another area. We must see how this initiative works first.

Senator Byrne's amendments were ruled out of order, but they are fair points to make. Why include one set of goods and services and not others? He does need a reply on that. The Senator has proposed that a poverty impact assessment be undertaken on the basis that the VAT reduction is not being applied to certain sectors. There is a cost in all of this, as the Senator is well aware. Given that the entire package must be fiscally neutral, we were obliged to weigh up the cost of reducing VAT in one part of the economy as opposed to another. The Senator makes a fair point in referring to the many citizens who are being pushed to the pin of their collar and will be even more so as winter approaches and there are substantial home heating bills to be paid. However, it is better to deal with that issue through the social welfare code rather than as a stand-alone VAT issue. The budget allocation for the existing national fuel allowance scheme is €230 million this year, a substantial commitment which may well increase next year based on the numbers finding themselves in a poverty trap because of high fuel costs. It is something we will have to review separately. It is the view of the Minister for Finance that it is better to deal with it by way of the social welfare rather than the VAT code.

Senator Thomas Byrne has also asked why newspapers are included in the VAT reduction. The 9% rate will apply to printed materials such as brochures, maps, programmes, leaflets, catalogues and newspapers. As many of these goods are relevant to tourism and EU legislation allows for such a reduction, it was decided to include printed material among those items to which the new lower rate would apply. Buying these types of printed material is part and parcel of the tourism experience for many visitors.