Niall Ó Donnghaile (Sinn Fein) | Oireachtas source

Cuirim fáilte roimh an Aire agus an díospóireacht. Táim sásta go bhfuil seal againn an t-ábhar seo a phlé. The Minister will be glad to hear I will not take the whole seven minutes, and I appreciate he may be about to make a changeover. Nevertheless, I will make some important points on this welcome discussion.

These statements are timely and very important, as Members have outlined. The reduced VAT rate of the hospitality and tourism sectors was introduced on 1 November 2020, which was an understandable response to the pandemic, and is due to expire by the end of February 2023. This support has cost more than €900 million. It was appropriate for the State to introduce this measure at a time when consumer demand collapsed during the pandemic. The Minister acknowledged at the time that this was a measure to support cash margins rather than to reduce prices.

We are now in a very different situation in which the biggest challenge facing businesses is their energy costs. A temporary VAT cut has the advantage that it is a shovel-ready measure that is easy to implement quickly. It has been argued that it can provide a short-term boost to the economy by giving people more money to spend and by incentivising consumers to bring purchases forward to take advantage of temporarily lower prices. A temporary VAT cut is most effective as a stimulus when firms that will be affected by the cut can accommodate additional demand and are likely to respond by passing a VAT cut onto prices.

The question is whether a VAT cut is for the purpose of encouraging businesses in the tourism and hospitality sectors or to improve their cash margins. If it is the latter, the question is whether this is the most effective way to support businesses with their energy costs at this time. Evidence in the report submitted to Fáilte Ireland by Indecon indicates that the previous VAT reduction for the tourism and hospitality sectors was not passed onto consumers. This is simply to state that it is likely this measure is intended to improve price margins rather than incentivise reduced prices. The question we have to ask, therefore, is whether this is the most effective way to support businesses with their energy costs, given it would incur an annual cost of around €470 million.

We in Sinn Féin believe the most effective way to use public money and support businesses with their energy costs is through a tailored support package that targets the energy costs of businesses. As part of our budget 2023 submission, we proposed a scheme for businesses similar to that which was introduced in Luxembourg whereby a portion of a qualifying business’ energy bill increase would be covered by the State, with appropriate limits in place. The Government is now implementing a similar scheme, the TBESS. What is important now is that it operates at speed and scale to support businesses struggling with massive energy bills.

Sinn Féin also proposed a €2 billion energy support loan scheme managed by the Strategic Banking Corporation of Ireland, SBCI, which would lend through the commercial banking sector. The Government is now implementing a similar scheme, the Ukraine enterprise crisis scheme. Again, its design and implementation will ultimately be key. Given the depth of uncertainty surrounding this energy crisis, all policies must be kept under constant review to ensure the State's response is both agile and dynamic, which includes keeping the proposal for the extension of the 9% VAT rate under review.

I again thank the Minister for coming to the Seanad. It was an important opportunity for Senators to raise matters and it is welcome that he was present with us.