Dáil Éireann debate -
Thursday, 4 Jul 2024

I thank the Deputy for raising this issue. The Department of Finance's retail banking review published in November 2022 concluded that cash still has an important place in our economy and it recommended that the Department of Finance develop access to cash legislation to establish a framework to ensure that the future evolution of cash infrastructure in the State will be managed in a fair, orderly, transparent and equitable manner. It also recommended that the starting point should be the level of cash infrastructure based on the levels prevailing in December 2022.

My predecessor published the general scheme of the finance (provision of access to cash services) Bill 2024 in January of this year. The Bill provides that the Minister for Finance shall prescribe regional criteria to require that a specified percentage of the population must be within a distance of not less than 5 km and not more than 10 km of an ATM. There must be a minimum number of ATMs per 100,000 people and a specified percentage of the population must be within a distance of not less 5 km and not more than 10 km of cash service points. These are locations where cash can be lodged and withdrawn and where there is in-person assistance available. Bank branches with cash services and post offices satisfy this definition.

Provision is also being included to address local deficiencies in the ability to access cash should these occur, even if the more general regional criteria are being complied with. Credit institutions with shares of current accounts and household deposits above levels prescribed by the Minister will be responsible for ensuring compliance with the access to cash criteria. To ensure the obligations imposed by the legislation remain objective and proportionate, the access to cash criteria will be reviewed by the Central Bank following the publication of population data in each new census. Reviews can also occur between each census if cash demand drops by more than 15% in a calendar year compared with the previous calendar year, at the request of the Minister for Finance or at the Central Bank’s own initiative.

The Bill also brings ATM deployers and cash in transit providers within the regulatory perimeter of the Central Bank of Ireland. Drafting of the Bill is nearly completed and I intend to seek Government approval to publish it in the coming weeks.

It is hugely important that the Bill be brought in as a matter of urgency because, as the Minister stated, it is important that cash is available. It remains a critical part of our economy in so many ways. There were issues with cash being withdrawn from various banks and so forth in rural and urban communities. That has thankfully stopped, but it is important there is a sound basis in legislation for it. The Minister stated he will be hoping to get Government approval for the Bill shortly and to bring it before the Oireachtas in the autumn. Will he outline the timeframe? It is crucially important there is a solid legislative foundation for cash within society.

I agree with the Deputy's points, particularly with regard to rural communities and the regions. That is why a specified percentage of the population must be no less than 5 km and no more than 10 km from an ATM. There must be a specified number of ATMs per 100,000 people and a specified percentage of the population must be within 10 km of a cash service point. These are locations where cash can be deposited and withdrawn and where there is in-person assistance available. Bank branches and post offices satisfy this definition. We are keen and will try to bring the Bill to Second Stage when we return in the autumn. With the co-operation of everyone in the House, we will try to advance it to Committee Stage and through the two Houses. It is important this Government enacts this important legislation. My predecessor as Minister, Deputy Michael McGrath, put significant work into this. We also had the pre-legislative scrutiny process and engagement with the European Commission, which had to be consulted on the framework of the Bill. All of that work has been concluded and, as I said, I expect to get Government approval in the coming weeks.

This is the Minister's first set of questions as Minister for Finance. He could make himself popular if he were to announce that the Government is going to scrap what is probably the most hated tax in history, the universal social charge that was introduced as a temporary charge. Will he announce its scrapping for all income under €100,000?

I thank the Deputy for raising this issue. The universal social charge was designed and incorporated into the Irish taxation system in 2011 to replace two other charges - the health and income levies. The primary purpose of the USC was to widen the tax base and provide steady income to the Exchequer to provide funding for public services. The USC is an individualised tax, meaning that a person’s liability to the tax is determined on the basis of individual income and personal circumstances. It is a more sustainable charge than those it replaced and is applied at a low rate on a wide base, which ensures that it is a stable and sustainable source of revenue for the State. The USC yield was €5.4 billion in 2023, with a similar yield expected in 2024. The USC is an important source of revenue to the Exchequer to fund public services. There is currently an exemption from USC for any individual who earns less than €13,000 per annum. It is estimated that in 2024, 37% of all taxpayer units will be exempt from USC.

With regard to the Deputy’s proposal, I am advised by Revenue that the cost of increasing the USC exemption limit to €100,000 in 2024 is estimated at €2.2 billion and €2.5 billion on a first and full-year basis, respectively. As such, this proposal would give rise to a shortfall of more than €2 billion that would have to be generated from alternative sources. It would furthermore significantly narrow the tax base and place an increasing reliance on a smaller number of taxpayers. This, in turn, would expose our economy to significant risks in the event of a future economic downturn. Ireland has one of the most progressive personal income tax systems in the world, which plays a crucial role in the process of income redistribution. Our redistributive tax system has been acknowledged by the IMF, the OECD and the ESRI. It is my view that a broad-based, progressive income tax system where the majority of income earners make some contribution according to their means is the fairest and most sustainable income tax system in the long term. As such, I have no plans to abolish the USC for individuals earning below €100,000 per annum.

Does the Minister accept that the universal social charge was introduced effectively as a bank bailout tax? Always in answer to this question, it is stated that the USC combined two taxes, but in reality it was a massive increase in those taxes, generating a lot more revenue for the State. It was intended to be a temporary measure. It was an emergency measure in response to the crisis, to effectively give money to enable the bailout of the banks. It was intended to be done away with but we are stuck with it. Before the last general election the then Fine Gael leader, Deputy Leo Varadkar, made an election promise to scrap the USC. The Government was formed and it did not scrap the USC. It betrayed that promise. However, at a time when we have a projected surplus of €65 billion in coming years, is it not time to give ordinary workers a break and lift this burden from them?

The USC plays a vital part in meeting many of the expenditure demands placed on the Exchequer. At over €5 billion, its yield is an important source of revenue for funding all of our public services and, as such, I have no plans to abolish it.

It is important to point out that, in 2016, joint research by the Department of Finance and the ESRI found that the USC represented a more stable form of revenue than income tax. The findings highlighted that USC revenues would fluctuate by less than income tax revenues whenever income was volatile, for example, when the economy moved from a point of significant growth to contraction. Given the openness of the economy and its susceptibility to economic shocks, the USC’s contribution is important in the context of stability in the State’s revenue resources, which the Deputy has to recognise as being important. He spoke about the Exchequer making a greater contribution in order to abolish the television licence fee and fund other expenditure demands, but here he is asking us to abolish the USC. That would narrow our tax base and significantly increase expenditure. That is not a sustainable fiscal position.

Every year, we outline in our budget submission how this can be done. We increase the revenue the State raises and broaden our tax base by going after the major corporations that pay very little tax. We take the burden off ordinary workers – those who are earning less than €100,000 – and introduce a millionaire’s tax. We have a high-income social charge and increased rates of income tax. We ensure that corporations actually pay their taxes and increase the rate of corporation tax. It can be done. It is just a political choice.

Deputy Chambers has only just become the Minister for Finance, so this is not on him, but does he accept that it is fundamentally dishonest to use a crisis to introduce a new tax while letting everyone believe it is to be a temporary emergency measure only to then say it will be kept because it is a very good measure for raising revenue? I warn him that this will be an issue in the coming general election. It arose time and again during the local and European elections. People still hate this tax and they know it was meant to be temporary. They want to see it gone and the Government will pay a political price if it does not accede to that.

I have set out the position. USC is an important revenue source for funding many of our public services. To make this proposal cost neutral would require significant changes. For example, the proposal would have the effect of increasing the top marginal rates of tax for PAYE and self-employed income earners from 52% and 55% to 60.5% and 63.5%, respectively. A significant increase in high marginal tax rates is a disincentive to work and would cause harm to our international competitiveness.

The Deputy is assuming that the corporations his group references in its pre-budget submission every year would stay in Ireland under a Government led by the group. Many of them and their workers would fear the group leading a Government. The corporations would abandon our country out of fear that such a Government would abandon our enterprise and industrial policy, which has brought 2.7 million people into full employment and led to us running a significant surplus of €3.1 billion so far this year, which is money that we can put aside for the future so that, if our economy ever slows, we will have the ability to intervene. All of that economic planning would implode under the Deputy’s fiscal and economic policies.

It was remiss of me during my previous question not to congratulate Deputy Chambers on his appointment as Minister for Finance. I offer him every good wish as he endeavours to take hold of a very important Department. Doing so is well within his grasp. I thank him for his co-operation in the various portfolios he has held over the past four years. It has been a pleasure working with him.

The disabled drivers and disabled passengers scheme is no longer fit for purpose. I am Chair of the Joint Committee on Disability Matters, where the question of putting a proper scheme in place is constantly raised. Perhaps the Minister might outline his and the Department’s thinking on this matter.

I propose to take Questions Nos. 77 and 81 together.

The Deputy should note that my Department and I share concerns that the disabled drivers and disabled passengers scheme, DDS, is no longer fit for purpose and believe it should be replaced with a needs-based, grant-led approach for necessary vehicular adaptations that could serve to improve the functional mobility of the individual. However, this is a matter for the Government because, while my Department has oversight of the DDS, I do not have direct responsibility for disability policy.

As the Deputy is aware, the national disability and inclusion strategy, NDIS, transport working group recommended that the DDS be replaced with a modern, fit-for-purpose vehicular adaptation scheme. This is in line with the general view that we need to move away from a medical criteria-based approach to a needs-based approach. Under the aegis of the Department of Taoiseach, officials from relevant Departments and agencies are meeting to discuss the issues arising from the NDIS report, including how the DDS can be replaced. The Department of Finance submitted a note to the group with my predecessor's approval in mid-January. This note outlined a proposal for a replacement scheme with a needs-based, grant-led approach for necessary vehicular adaptations. Further consideration is being given to this matter through a group established in the Department of Taoiseach, which will start its work shortly and is expected to report in the autumn.

Regarding Deputy Wynne's question, only a related family member who is the primary transporter and carer of a disabled passenger who holds a primary medical certificate, PMC, is eligible for DDS provisions. I note that there is a specific and limited provision whereby a ward of court, who must be a PMC holder, may involve a non-related carer who is therefore eligible for DDS provisions. I am informed by Revenue that there are very few such cases.

Regarding the Assisted Decision-Making (Capacity) Act 2015 and the transition of wards of court to provisions under the Act, this matter is being considered by my officials, including the policy implications of this transition for the DDS.

I thank the Minister for his response. The Joint Committee on Disability Matters held an all-day meeting on 8 April. One of the main issues raised that day related to the criteria for the primary medical certificate. Some of the legislation that acts as the basis for the certificate dates from the late 1960s. Many people have said that the DDS is not fit for purpose but that the various other schemes and grants available to people to provide transport have been done away with over the years.

A report was sent to the Department of Finance in January. There is a great deal of interaction between that Department and the Departments of the Taoiseach, disability and health. I ask that the Minister do whatever he can to ensure that the report is published early this autumn and that, if legislative change is needed, it be laid before the Houses as soon as possible. On the face of it, one would expect certain people to qualify under the criteria for the primary medical certificate, but once they are assessed, they do not qualify and they are left without any mode of transport. This is a crucial issue. One fifth of the population has a disability of one type or another. There are many issues in the disability sector, but this one should be taken off the table and resolved once and for all.

I acknowledge Deputy Chambers's recent elevation to the post of Minister for Finance and I wish him well in his new role.

I have been raising in the House a particular case for the guts of two years. William cares for John in Kilkee, but purely on the basis that they are not related, they have been deemed ineligible for the disabled drivers and disabled passengers scheme. This has had detrimental effects on John’s health and access to treatment, as he cannot get into William’s car. Kilkee is a long distance from University Hospital Limerick and Croom and it is disappointing that I have not been able to get this matter resolved for John and William. John has actually missed out on important knee operations that he has needed. There is also the social and quality of life aspects, in that he has not been able to travel with his carer.

I will answer Deputy Moynihan first.

Extensive work is ongoing involving the Department with the group established by the Department of the Taoiseach. As I said to Deputy Pringle earlier, it is crucial that we try to make progress in this area. It has been going on for too long with too many reports and not enough progress for people who require the reform. Extensive work will now start to try to bring a report by the autumn. The intention of this, led by the Department of the Taoiseach, is to try to bring various structures together once and for all to bring about the necessary reform that has been referenced.

I appreciate the kind words of Deputy Wynne. To answer her question, there is a specific and limited provision which I set out in the reply whereby wards of court must be PMC holders and may involve a non-related carer who is eligible for the DDS provisions. With regard to the assisted decision-making Act, the transition of wards of court provisions under the Act are being considered by the officials, including the policy implications of the transition for the DDS. If Deputy Wynne sends on more details it will help to inform the wider discussion in the context of the decision-making Act.

On the primary medical certificate criteria, we had an awful lot of submissions for the all-day meeting on 8 April, particularly on single amputees who had been involved in accidents in which they acquired injuries that changed their lives. This in particular was one of the issues raised. We had many correspondents from throughout the country on this. I cannot underestimate the frustration people have with the scheme. I ask the Minister to do whatever he can in his role to make sure the report is published as a matter of urgency. Many members of the disability matters committee have raised this issue in the Dáil and Seanad. I want to lend my voice to it. We need to get this resolved as a matter of urgency to show good cause to people who have disabilities and who are trying to carve out the best life for themselves with a disability. I appeal to the Minister to do whatever he can to ensure it is published and legislation is brought in for a new scheme as soon as possible.

I will send on the information about the case I mentioned. I heard in one of the responses earlier that another group will be established and it will report in the autumn. People watching at home will see another group and another report and will ask whether it is absolutely necessary. In a response I received in February, the Minister's predecessor outlined to me that he submitted a proposal for a replacement scheme for the DDS which would be a needs-based grant-led approach for necessary vehicle adaptations. In respect of this, can any progress be made in the interim so we do not have to wait for a long time? People sitting at home are very frustrated at this point. They do not want to hear about further delays but about progress and solutions that would make their lives better.

I thank the Deputies for raising this issue. I accept the ongoing frustration leading to both points that have been made. We are pursuing the reform of this in the context of the structure that has been established in the Department of the Taoiseach. As I said to Deputy Pringle earlier, I will be pursuing a timeline on the matter when the report is received. To respond to Deputy Moynihan's point, I will engage with my colleague the Minister of State, Deputy Rabbitte, on further reforms that might be required, which he has referenced, and I will come back to him directly on it.

This is an issue I have raised numerous times. It is about insurance costs. The insurance industry continues to rip-off motorists and small businesses with high prices. Since 2020 the insurance industry has recorded sky-high profits while paying out dividends to their shareholders. For years the insurance industry called for reforms to reduce the cost of claims. This is what it got through the personal injury guidelines. In three years we still have not seen costs being reduced to the level the industry promised. In recent months we have seen costs increase.

I take this opportunity to wish the Minister, Deputy Chambers, all the best in his new role. So far he has proven to be a very understanding and kind boss and I hope that continues for the next few months of the Government.

I thank Deputy Doherty for the question. Insurance reform remains a key priority for the Government and the reform agenda has been set out via the action plan for insurance reform. As per the most recent action plan implementation report, published earlier this year, the vast bulk of the actions it contains are now either delivered or initiated. The importance the Government places on this issue is evidenced by the fact that implementation is overseen by a Cabinet committee sub-group on insurance reform chaired by the Tánaiste. Nevertheless, the Government is aware that certain groups continue to face difficulty in terms of affordability and availability of certain insurance lines. Accordingly, we continue to prioritise the delivery of the action plan, which will bring benefits to individuals, businesses and households alike.

Since assuming my current role, I have been in the process of meeting with all the main insurers in the Irish market, as well as a representative body of insurance, the Law Society, Brokers Ireland, business representative groups, those representative groups that speak on insurance reform more generally and consumer groups to discuss the key issue and to set out with most of them the Government’s quite clear expectation that savings arising from this whole-of-government reform agenda will be reflected via reduced premiums as well as increased availability of cover.

Many international insurers have noted the pace and scale of our reforms to date and point to Ireland as a positive example of Government action in this sector. We have recently seen a number of new entrants to the market with existing providers also expanding their risk appetite to underserved areas, with various sector representative reporting reductions in the rate being charged for liability cover. This question is specifically on the Bill proposed by Deputy Doherty and if it is agreeable I will answer that in a supplementary response.

That is perfect. I am sure the Minister of State's new boss will be as good to him as his predecessors were. I will note that the Minister has not started in the same way as his predecessors did. When there was a clash with the ECOFIN meeting and the budget in the past his predecessor asked the Minister of State at the Department of Finance to travel to the ECOFIN meeting. The Minister of State was Michael D'Arcy at the time and he represented Ireland at the ECOFIN meeting while the Minister for Finance was here delivering the budget. Obviously the Minister of State's boss has decided to bring forward the budget and not have the Exchequer returns for September available to him. He was not the only predecessor of the Minister who asked Ministers of State to represent them. The Minister of State's predecessor, Deputy Carroll MacNeill, represented the Minister for Finance as late as last year at the ECOFIN meeting. This raises the question, as I asked the Minister earlier, as to why he did it.

I have a Bill before the Dáil which the Government supported but stalled for a year. It is now before the committee. I want a clear answer on whether the Minister supports the Bill. It would hold the insurance industry to account and force it to state whether it is passing on all of the savings to customers or whether it is pocketing them. I believe it is pocketing a portion of the savings.

To address the clear point of the question, in 2021 Deputy Doherty introduced a Private Members' Bill, the Judicial Council (Amendment) Bill, to the Dáil. At its core, this would require insurers to provide information to the Central Bank of Ireland on the impact of personal injuries guidelines through amendment to the Judicial Council Act. On 30 May 2024 Deputy Doherty informed the Business Committee of his intent to move the Bill to the select committee for consideration. As the Deputy is aware, the Bill’s financial implications are being evaluated by the Oireachtas. I outlined at yesterday's committee meeting that no request for a money message has yet been received by the Department of Finance.

Notwithstanding this, the concerns the Government has in relation to the Bill include an overlap with data already collected by the national claims information database, in turn presenting potential costs and burdens on the industry, along with questions around the utility of the proposed information to be collected. Furthermore, the Bill's broader scope compared to similar legislation in England and Wales raises proportionality issues. It must also be noted that insurance costs in England and Wales have increased by approximately 17% in recent years.

Accordingly, given the NCID's well established role, additional reporting as proposed is seen as being redundant and counterproductive. In short, while there is merit to the impetus of the Bill, there are other means that could perhaps do this in a more effective manner. However, I am committed to working with the Deputy on those other means going forward. The processing of the Bill is a matter for the Oireachtas at this stage.

To go back to the example I gave, which was from budget day in 2019 for budget 2020, the Minister for Finance delivered the budget and the junior Minister represented him at the ECOFIN meeting. It is not the case. Junior Ministers have represented the Minister for Finance. The Eurogroup meeting is the day before, with the Minister, Deputy Donohoe. There is no reason he cannot be here. He attends informal ECOFIN meetings, but not the formal meetings in most cases.

When we were in the convention centre during the early days of the Covid-19 pandemic, the Minister told us there were other ways to do this. We have seen insurance prices increase. According to the CSO, which is only indicative - we have to wait another year for the Central Bank data - insurance prices have increased every month for the past ten months. We are hearing on the ground that is the case. I carried out a survey to which 700 or 800 people responded and 90% of them said their insurance prices have gone up. This is about holding the insurance companies to account. They have to live by a version of this law if they operate in the North or Britain. The same major insurance companies that operate here, operate in those jurisdictions. Why do we not hold them to account? We have legislation that can do no harm. It is about holding these companies to account and putting a downward pressure on prices, which is badly needed.

I absolutely agree with the Deputy that we need to hold them to account and that we need to see downward pressure on prices. The Deputy cited CSO figures. I note that CSO figures, when compared with those from 2019, have gone down exactly 39.6% in motor insurance alone. We have the NCID data, which is the most robust form, that shows a consistent decrease in the price of insurance since 2019. However, we saw a small uptick of 0.5%, an average of €7 per premium, at that latter end of last year.

The Deputy made a clear comparison with England and Wales. Where has the return been in the cost of premiums in England and Wales? They are going up in those jurisdictions. We want to see the insurance companies held to account. They will all be before the committee with the representative body. I have met every one of them in my first 12 weeks of office. I will meet them again in the next six to eight weeks. We have already invited them. I hope to start that in the next fortnight and I will continue to press. We accept their reasons, such as inflation, costs and footfall, but crucially, we can acknowledge that in the round, insurance costs have gone down drastically compared to a number of years ago. The data shows that. We want them to go down further. The level of availability has spread out a lot. That is not using anecdotal evidence. It is clear in the market.

There is an awful lot more to do and-----

The VHT was announced in budget 2023 and legislated for in the Finance Act 2022. The key objective of this tax is to increase the supply of homes for rent or purchase by encouraging the owners of vacant, habitable residential properties to bring those properties back into use. The tax applies to properties which are residential properties for the purposes of local property tax, LPT. Therefore, as with local property tax, VHT applies to habitable residential properties and does not apply to derelict or uninhabitable properties.

The VHT is only one part of a much broader suite of measures being implemented by the Government to address vacancy and bring properties back into use. For example, initiatives such as the vacant property refurbishment grant and ready to build scheme provide financial incentives for people to buy and refurbish vacant properties and sites for their principal private residence. A residential property is within the scope of VHT if it has been occupied as a dwelling for less than 30 days in a 12-month chargeable period. A chargeable period for the purpose of this tax runs from 1 November to 31 October each year. The first chargeable period ended on 31 October 2023. The first self-assessed returns were due on 7 November 2023 and the tax was payable on 1 January 2024. The next returns for the tax will be due on 7 November this year.

For the first chargeable period, the rate of the tax was three times the property’s existing base LPT charge. For the chargeable period ending 31 October 2024 and subsequent chargeable periods, VHT will be charged at five times the property’s existing base LPT charge, as provided for in the Finance (No.2) Act 2023. VHT operates on a self-assessment basis where the number of properties in scope and the amount of tax payable depends on the self-assessed returns submitted by property owners, the number of properties declared as liable and the number of property owners entitled to claim available exemptions from the tax. Revenue has confirmed that, as of June 2024, more than 6,400 properties have been declared as vacant, with exemptions claimed in respect of more than 2,600 of these properties. Approximately 3,750 properties have a liability to VHT, amounting to €2.2 million.

I thank the Minister for his response and congratulate him on his appointment, as I did not do so when I stood up earlier.

Do the Minister or the Revenue Commissioners have an estimate of how many vacant properties might be liable for VHT? Does the Minister agree that the number he quoted of 6,400 and the actual number that paid the tax is very low? Do the Department or the Revenue Commissioners have any link with the vacancy survey project, which is supported by the Department of housing and carried out by the local authorities? It might give a better indication of how many vacant properties there are. Am I correct that the census showed more than 166,000 vacant properties? Does the Minister agree that is a long way, if it is even partially correct, from the number of vacant properties that are actually paying tax?

Tackling vacancy is a key priority for the Government and is part of the wider Housing for All strategy. The Deputy has submitted a question on this to my colleague, Deputy Darragh O'Brien.

As to the Deputy's question about the Revenue Commissioners, they are engaged around the VHT. It is collected on a self-assessment basis and applies under specific criteria. We have a range of other databases that use different statistical bases to define vacancy. The primary purpose of the vacant property register administered by Revenue is the administration of the vacant homes tax.

I will engage in a meeting with the Revenue Commissioners in the coming weeks on the Deputy's specific questions about their level of engagement with other Departments. There is collaboration on this across the Government. It was introduced as an important reform to try to deal with issue of vacancy. It is complemented by the work of my colleague, the Minister for Housing, Local Government and Heritage, Deputy O'Brien, on the system of grants he has advanced. I will come back to the Deputy directly about Revenue's direct engagement. However, there has been a collaborative effort across the Government with the introduction of the tax and tackling vacancy as part of Housing for All.

Does the Minister agree that because the tax is self-assessed, many people might not know about it? What imperatives are on people to report they have a vacant property that might be liable for this tax? If people just sit there and do not do anything and even want to sell their properties later, because it is not on any register there will not be any clawback at that time as there would be with other taxes. Does the Minister agree that a lot of tightening up needs to be done to make this tax the incentive it should be for people to bring properties back into use?

The Department of Finance has engaged regularly with the Department of housing. The review of the derelict sites levy is also an important context. A number of practical challenges have been identified in addressing dereliction, such as difficulties in identifying properties and their owners. That is one challenge.

This tax itself is part of a broader suite of measures which is being advanced. The vacant homes action plan that was published by my colleague, the Minister, Deputy O'Brien, is part of the wider footprint in addressing vacancy. I will come back to the Deputy on Revenue's direct engagement and on what level of detail or information it has, which is part of the Deputy's wider question. I said I would be meeting with that office in the coming weeks.

This question has to do with the tax measures that might be considered to support the hospitality sector. Yesterday, representatives of the hospitality sector were in Leinster House and were lobbying Members of the Houses with respect to supports, were telling us that the sector was under pressure and that many of its members are on the verge of running out of liquidity. Is the Minister is aware of this and has any work been done in his Department in this area? In particular, has the Minister any information as to the pressures this sector is under?

I propose to take Questions Nos. 108 and 111 together.

As the Deputy will be aware, the 9% VAT rate was applied on a temporary basis to the hospitality and tourism sectors until 31 August 2023 when it reverted to the 13.5% rate. The 9% rate was introduced on 1 November 2020 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.

The economic rationale for a VAT rate reduction at that time, as it was in 2011 when it was also reduced to 9%, was to lower consumer prices, encouraging higher demand, more output and an increase in employment.

Despite facing numerous successive headwinds over recent years, the domestic economy has proven to be remarkably resilient. Looking ahead, as inflation eases, the real disposable income of households should recover and support consumer spending. As a result, households are on a stronger financial footing and this will support demand for contact-intensive services, including the tourism and hospitality sectors.

On employment, between the end of 2020 when the 9% rate was reintroduced, and the final quarter of 2023, total economy-wide employment expanded from 2.3 million to reach a record high of 2.71 million, an increase of over 17%. The labour force survey for quarter 4 of 2023 indicated that employment in the accommodation and food service sector stood at 183,000.

It is important to remember that VAT reductions, even temporary VAT reductions, have a cost to the Exchequer. The estimated cost of the 9% VAT rate for tourism and hospitality, from 1 November 2020 to 31 August 2023, was €1.2 billion. This represented a very substantial support by the Government to the hospitality and tourism-related sectors. The cost of a further temporary VAT reduction to 9% for a full year is estimated to be €764 million. Even where the measure is restricted to food and catering services, the estimated full year cost is €545 million.

In making any decision in relation to VAT rates or other taxation measures, the Government must balance the costs of the measures in question against their impact and the overall budgetary framework.

Finally, the Deputies should note that any decisions about VAT rates for this area is a matter for consideration as part of the budget 2025 process.

I thank the Minister for his response and I understand it is part of his budget consideration and that he cannot speak directly about this issue now. Has the Minister's Department carried out any analysis of that sector and of the hospitality and the food sector in particular? Has he or his Department engaged with the representative bodies from that sector and, if so, can he tell the us what transpired and what findings has his Department come to with respect to the pressures that the sector is under, or at least that it says it is under, in particular on the food side?

Both my colleagues, the Ministers, Deputies Peter Burke and Catherine Martin, have extensively engaged with the tourism and hospitality sector. I know that my colleague, Deputy McGrath, when he was Minister recently met the sector also. That is why the Government responded in budget 2024 with the increased cost of business grant, which aims to provide financial support to small and medium-sized businesses who operate a rateable premises at a cost of €257 million.

Broader supports were also announced, including the extension of the 9% VAT rate on gas and electricity, for example, which was another support. There has also been a range of other measures brought by the Minister for Enterprise, Trade and Employment, including raising the employer PRSI threshold from €441 to €496 with effect from 1 October. That will ensure that employees earning the weekly equivalent of the national minimum wage will pay the lower rate of employer PRSI of 8.8%.

We are conscious of the particular cost increases which have been impacting businesses but I would say, more generally, that the purchasing power of households should strengthen as we enter the latter months of the year, with wage inflation now exceeding the flat rate of inflation. That should see improved consumer spending, which retailers in the hospitality sector should see in their businesses over the coming period. My colleagues, the Ministers, Deputies Burke and Martin, are having ongoing engagement on the wider cost implications and no decision has been taken in the context of budget 2025.

I understand that an economic analysis was carried out with respect to the impact of the quite correct changes which the Government has brought about on the sector. This refers to the various changes we have done. I understand that impact is quite strong. Can the Minister comment on that? With respect to the increased cost of business grant, that is a one-off payment but the sector is looking for an ongoing support and not just a once-off grant.

Again, the issue of loans is an issue where many businesses are reluctant to get into further debt.

Could the Minister comment on those two issues, namely, the economic impact of the changes which the Government has brought about with respect to various leaves, sick leave, pensions, and so forth? Also, on the issue of ongoing supports, would the Minister agree with me that the sector needs ongoing supports and not just once-off payments?

I know that extensive work was done towards the latter end of last year, in which the Minister of State, Deputy Richmond, was involved in his previous role. That is why we responded with the increased cost of business scheme and also providing for the other ranges of support which the Minister, Deputy Burke, has advanced around the national minimum wage and having the lower rate of employment PRSI also. We are trying to advance supports for businesses, particularly around the cost implications. I know that the specific VAT 9 group speaks to that as the solution but it is a broader issue with regard to what the cost implications of that might be. That is why, as part of the ongoing process, the Minister, Deputy Burke, has engaged with businesses.

I am also clear to say that the current economic position should see a strengthening of consumer demand, which will help the retail and hospitality sector and that has to be and is an important context around budget 2025 also.