John Cummins (Fine Gael)
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I feel this is an important and timely Commencement debate on the pressures being faced by small businesses right across the country. To be clear, I am talking about those that are predominantly high-labour, low-margin, food-based businesses, but also small retailers like the corner shop and newsagents. We all know that many elements of our economy are doing exceptionally well at the moment.There are record-low unemployment levels because of the pro-business approach by the Government over the past number of years, particularly during the pandemic period when exceptional supports were put in place for individuals and businesses to stay afloat. We know that was the right thing to do because of how well our economy bounced back after the pandemic. Equally, I am sure the Minister of State would acknowledge that there is a cohort of businesses which are struggling at the moment. I speak to those small businesses every week across Waterford city and county. They are the heartbeat of our cities, towns and villages. They are the cafés and restaurants where we have our special occasions, the fish shop, butcher and bakery where we get essential items and the newsagent and deli where we get sandwiches and newspapers. The Minister of State visited many of them with me last year in Dungarvan and Waterford city. One business owner to whom I spoke last week, who has a café and restaurant, has a margin that has gone from 9% to 1% in a very short time. That is not because of anything he has done differently. That is the point. There is no one factor that has caused these pressures. Rather, the cumulative effect is squeezing margins. Energy costs for businesses continue to be exceptionally high. We supported businesses last year through the temporary business energy support scheme. While domestic rates are starting to come down, business rates are still very high. They are causing problems. The minimum wage increased to €12.70. It is not the increase itself but upward pressure from those a few euro above the minimum wage that is causing the squeeze. Tax warehousing will be an issue for many. While there has been a reduction in the amount of warehoused debt and the number of businesses that have warehoused debt, there must be in-built flexibility over a short period. Those businesses need to know that flexibility will be available to ensure they can trade out of this challenging period.

The common denominator across the businesses that are struggling is that they are food-based. The Minister, Deputy Donohoe, introduced a special rate of 9% at a difficult time in November 2020. That was increased for the whole hospitality sector in the last budget back to the normal rate. There is a strong case for differentiating between food-based businesses and the wider hospitality sector. We saw price gouging across the hotel sector, largely by the chains in the capital and not by smaller hoteliers in regional Ireland. Food-based businesses are struggling.

A communication campaign is needed around the increased cost of business support grant scheme. What is it exactly? How will it be paid? It is essential for cash flow at the moment. It is vital that support gets out to businesses now and not in a number of months. They need cash flow in now, in January.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I am grateful that Senator Cummins raised this matter. I appreciate his constant support and championing of businesses across the city and county of Waterford.

It is understandable that many of those businesses are concerned about rising costs at the moment. At present, small businesses are facing several challenges due to rising energy costs, inflation and a tight labour market, which the Senator mentioned. I also want to make clear that we in the Government are aware that while many of these costs are out of control, some have been generated due to policies we introduced - good policies we stand by and are important. While increasing the minimum wage, paid sick leave and various types of family leave and introducing a new public bank holiday are good moves and fundamentally the right thing to do, we acknowledge that they come with costs. For any business that closes, it is a difficult decision which I wish to acknowledge, as well as any business struggling at the moment, looking over the accounts on a Sunday night, perhaps, at the kitchen table at home, never mind with their accountant. I want to be clear, however, that we are engaging with small businesses to hear their concerns. Last week, a meeting took place between the Restaurants Association of Ireland, the Minister, Deputy Coveney, and my office at which the supports the industry needs were discussed. We are open to helping where we can but we need to ensure supports are designed to have the maximum impact.

The Department prepared a report examining the impact of recent costs on businesses with a direct focus on legislative and policy changes initiated by the Government. Many businesses fed into this report, shared their experiences and even their own costings and financial figures to ensure their sector and its needs were represented. This report is being finalised in the coming weeks and will impact and provide a pathway for decisions moving forward. The report is at a high level. We have not gotten into the full detail. It is being discussed with our colleagues in the Department of Social Protection. Having discussed it with the Department economist who compiled it, the vast majority of businesses are able to take on these costs easily. In retail, many of the large multiples are already paying the living wage so moving the minimum wage up does not impact them. There is a direct impact on food-based businesses, which the Senator cited, such as restaurants and cafés, which are perhaps separate from hotels, as well as certain pubs and bars and much smaller retailers - not all of retail but small retail. The common denominator between these sectors is that they are low-margin, high-labour.

The Senator asked about the increased cost of business grant. This is a short-term measure to provide immediate relief to up to 95% of rated businesses. As it stands, we have budgeted €257 million. These refunds will go to about 143,000 small businesses. Under the terms of the scheme, if a business paid less than €30,000 in commercial rates last year, it will receive a cash injection of up to €5,000 in the first quarter of this year. It will be targeted at exactly the businesses the Senator mentioned. It is not to cover every cost. There has been an element of misinformation, which was not deliberate. Some people are wondering if it is a commercial grant rebate and whether there is an application process. The answer is "No". We are working with our colleagues in the Department of Housing, Local Government and Heritage and hope this will be a direct cash injection using the rates system to calculate the amount paid and as a reverse payments method. Rather than paying money out of your account to the local authority for commercial rates, you will get a cash injection back using the same method. We expect all of these grants to be paid out by the end of this quarter. There is no application process needed. The Senator also mentioned TBESS, which is a wonderful scheme but it did not have a huge pick-up because it was quite complicated. We budgeted double the amount paid out in the TBESS for the increased cost of business grant. It will get to more businesses quickly. It is only a start. There is an awful lot more that can be done. I am open to further suggestions from the Senator and other colleagues.

Eileen Flynn (Independent)
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I welcome the students from Glasnevin and their teachers. It is powerful to see our young people coming into the Houses. We hope they enjoy the rest of their visit.

John Cummins (Fine Gael)
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I also hope they have an enjoyable day. To follow on from some of the Minister of State's points, the increased cost of business scheme must get to businesses quickly. I stress the need for immediate dialogue with local authorities to ensure it gets to businesses. It is not misinformation but more of a misunderstanding of what the scheme actually is. A communication campaign by the Department around what it actually is would be useful. When will the report on the increased cost of business be published? Most importantly, will the 9% VAT rate for food-based businesses in particular be looked at again? I feel it has to be.

Neale Richmond (Dublin Rathdown, Fine Gael)
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Dialogue has already started with local authorities on the increased cost of business scheme. The Department of housing and local government has been working with the Department since the budget was agreed to make sure the scheme is fit for purpose. I fundamentally agree with the Senator that a massive communications campaign is needed beyond the political narrative. We will ensure that information is provided, tying in local authorities and local enterprise offices.The report will, I hope, be published in the next fortnight. That report will go a long way towards influencing and deciding policy objectives of the Government going forward.

The Senator is correct regarding the VAT rate and the emergency cut to 9% that previously applied. It was extremely effective. It was a lifeline for many businesses but, unfortunately, it was too good for too many businesses and many businesses that did not deserve it were getting it. I fundamentally believe that we need to examine the VAT rate for food-based businesses as a priority including restaurants, cafés and small retail as well.

I realise we are over time, a Chathaoirligh, but please allow me the latitude because an issue raised by the Senator that I did not address in the first place relates to tax warehousing. That debt falls due on 1 May. The Minister for Finance, Deputy Michael McGrath, has announced that he is working with the Revenue Commissioners to make sure there is flexibility in terms of payments and repayments. We do not want this to be the sword of Damocles hanging over any business. We are going to make sure that no business will have to close. They will pay their tax debts but in a way that will make sure they are able to stay open.