Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I wish to thank Senators for raising this matter for discussion and I welcome the opportunity to speak to Members about the supports in place for our very valued tourism and hospitality sector.

At the outset, I wish to put on record the importance the Government and I place on the tourism and hospitality sector, and particularly its contribution to the Irish economy. It is not just the businesses that operate or the tax revenue that is raised. It is the tens of thousands of people - more than 160,000 of our fellow citizens according to the latest CSO figures - working in the sector, in every city, every town and every county.

Having had the great privilege of serving as a Minister for Transport, Tourism and Sport, I saw at first hand the benefit for our economy, for our society and for our culture, of a successful tourism and hospitality sector, and of the excellence of those who work in it and how hard they work.

As Senators will recall, in budget 2021 the Government brought down the VAT rate for the hospitality and tourism sectors from 13.5% to 9% as part of its response to Covid-19. When the measure was introduced it was planned to last 14 months, from 1 November 2020 to 31 December 2021. This was extended to 31 August 2022 and was then further extended to 28 February 2023. This is a measure that has already been extended twice. As is clear from my Budget Statement, it is not proposed to extend it beyond this date.

These extensions were made in recognition of the fact that the tourism and hospitality sectors were among those most impacted by the public health restrictions put in place throughout the pandemic. Through no fault of their own, bars, hotels and restaurants had to close on multiple occasions in response to the public health crisis. It will take some time for me to forget the two Christmases in a row when we had to ask the hospitality sector to either close down or significantly change how they were working on days of notice. The most recent and final extension of the measure will provide further support over the busy November and December period and early into the new year.

It is important to remember that all of these VAT reductions have a cost. The estimated cost of the measure when it was first introduced, from 1 November 2020 to 31 December 2021, was €401 million. The estimated cost of the extension to 31 August 2022 was €251 million. The estimated cost of the final extension is €250 million. The overall cost of this measure from 1 November 2020 to 28 February 2023 is €902 million. Clearly, this is a very significant sum.

The debate about this issue should recognise that the reduced VAT rate has only ever been one part of the support package that the Government has provided for the sector. As Senators are aware, over the course of the pandemic this Government introduced a broad range of Covid-19 supports for businesses such as the employment wage subsidy scheme, EWSS, and its predecessor, the temporary wage subsidy scheme, TWSS. The objective of both schemes was to support employment and maintain the link between the employer and employee insofar as is possible. These were economy-wide schemes that operated across all sectors of our economy. There is no doubt that the tourism and hospitality sectors benefited from these measures the most, and they needed to, as their businesses were impacted directly and repeatedly by public health restrictions. In money terms, the overall support provided by EWSS and TWSS was in excess of €10 billion. Payments were made to more than 50,000 employers in respect of more than 700,000 employees.

Unfortunately, as we all know, the pandemic has been followed by a global energy crisis. This is not something that the world was expecting or, in many ways, prepared for. Russia’s awful war on Ukraine has sent shockwaves throughout the global economy, most clearly in the energy and commodity markets. Virtually every country is struggling economically as a result. The inflationary pressures from energy have been further compounded by the imbalance between demand and supply that emerged as the economy reopened. As I outlined in my budget speech only a few weeks ago, as a result of these factors, headline inflation in Ireland, similar to other advanced economies, is now running at highs not seen in many decades. That is why the Minister for Public Expenditure and Reform, Deputy McGrath, and I, with the agreement of Government, focused on making budget 2023 a cost-of-living budget. In this regard, as announced in the budget, a temporary business energy support scheme, TBESS, is being established to assist businesses with their energy costs over the winter months. We will have it up and running in a matter of weeks. It will be administered by the Revenue Commissioners and will operate on a self-assessment basis. A monthly cap of €10,000 will apply and an overall cap will apply on the total amount a business can claim. The scheme is being designed to be compliant with the EU state aid temporary crisis framework and will need to be approved by the European Commission in advance of any payments being made. It is a significant intervention by the Government in the Irish economy to protect employment. Indeed, it was the single largest announcement on budget day. If forms a very large part of the overall once-off package. We must weaken the ability of a shock to income becoming a loss of jobs. This new policy will help employers with their rising bills and help to save their businesses. It is an economy-wide scheme. It will support businesses across every sector, including tourism and hospitality. Another significant measure taken by Government, which is currently benefiting many sectors of our economy, including tourism and hospitality, is the VAT reduction for gas and electricity from 13.5% to 9%.

I will make a few concluding points. Any decision that the Government makes on issues such as the further extension of the VAT reduction for hospitality must be balanced against the costs of other measures the Government is taking. That is why I am not proposing to extend this measure, as I believe that other measures such as TBESS, which is not available at the moment, will provide significant assistance to the sector.

As all Members in the House are aware, the Government has a responsibility to be careful with our public finances. I make the case that because of how the public finances were managed before Covid-19 and during Covid-19, we have managed to help at a time when help was needed. We now have a new challenge to which we must respond collectively, namely, the accelerating and rising cost of living. How we have managed our finances to date has allowed us to act swiftly and decisively, while also striking a delicate balance between helping those with cost-of-living pressures and not making them worse by adding fuel to the inflationary fire.

As always, the Government and I will continue to work to ensure that we engage with every sector and do what we can to support sectors in meeting the challenges that face us.I will continue to engage with all parties in the Oireachtas to identify how the Government can serve our people best.

I thank the Seanad again for raising this matter. I have to go to the Dáil for the debate on a particular Bill, but I look forward to hearing from all who will contribute to the debate here. I hope to be in a position to respond at the end.