I move:
That Dáil Éireann deplores those actions of the Government which have reduced the competitiveness of the Irish tourist industry and recommends that subventions necessary to restore competitiveness be provided.
We decided to table this motion because of the serious position in which the tourist industry is at the moment. It is the third largest industry in the country after agriculture and the manufacturing industry. Not alone is it a large industry but it is a very specialised type of industry which can have an effect on the economy far greater than the total value of the takings from the industry would indicate. I propose to examine the industry now in the light of the various price changes that have taken place, in the light of the tax impositions and tax extensions in recent times which have resulted in adversely affecting the competitiveness of the industry.
In order to examine properly the damage done to the industry by the January budget we must look at the position of the industry immediately prior to the budget and consider how it had been faring up to that point. The earnings of the industry in 1975 were estimated at £162.3 million. If that figure is related to GNP for 1975 the return from tourism does not seem very great but that narrow view would not be a full or fair assessment of the industry. Tourism is an invisible import-export industry and the earnings from tourism are of advantage from the point of view of an economy suffering from a serious balance of payments problem. The earnings from tourism also have a multiplier impact since the money passes from person to person, resulting in additional personal income, additional savings and additional revenue to the Exchequer. The regional impact is important because there is a more equitable distribution of wealth. For these reasons the total value of tourism is above and beyond the £162.3 million estimated earnings for 1975.
It must be borne in mind that the 1975 figures are the figures for an industry suffering a recession. The potential of the industry on a return to more normal conditions is bound to be much greater than the present return or than the percentage of gross national product. The contribution to GNP is just over 4 per cent. There is a great danger—indeed, there is evidence—that the value of tourism is being measured in an oversimplified fashion and judging the significance of the contribution in that way greatly under-rates the real and immense value of the industry to the country and to the economy. The tourist industry, unlike the bulk of our manufacturing industry, utilises raw materials produced within the country. The earnings from tourism filter through the economy in a dramatic fashion. They are equivalent, in fact, to a spending power of an additional 150,000 home consumers.
Some people believe that the vast bulk of the earnings from tourism go to hotels, restaurants and so on. That is not so. The benefits of tourism are spread right throughout the whole community. It is calculated that approximately 10 per cent of the jobs in banking and insurance result from tourism, that 20,000 jobs in the wholesale and retail trade are provided by tourism, 4,000 jobs in the entertainment business, 7,000 in the clothing and textile industry and some 2,000 jobs in the drink and tobacco industries.
On the agricultural side the tourist industry consumes some 2½ million gallons of milk, 36 million eggs, 2,000 tons of butter, 6,000 tons of meat, 15,000 tons of vegetables. Those are considerable amounts of agricultural produce and they show quite clearly that tourism has a very dramatic effect on the economy as a whole. Another important aspect of tourism is that it is an export industry because it deals in foreign currency and it thereby enables the Irish economy to run a larger balance of trade deficit than would otherwise be feasible. Tourist revenue, though declining, still makes up 10 per cent of foreign earnings and it permits our imports to be financed and a higher level of consumption of foreign products.
Another important impact tourism can have on the economy is that of job creation. It is a labour intensive industry. It employs in the region of 118,000 creating employment for approximately 10 per cent of our total labour force. Without tourism the Irish manufacturing section would be much smaller than it is. It can easily be seen from this that it is an industry affecting all of us. As the third largest industry it deserves the attention and assistance befitting an industry of its size.
In the past three years Bord Fáilte's promotional budgets have shrunk steadily in real terms and that at a time when competing countries are increasing their allocations. We are not keeping pace with these countries. We are not keeping pace with inflation. It is the height of foolishness to allow the promotional budget to decline at a time when our economy is so dependent on this industry. Curtailment of expenditure is not in the national interest. Instead of allowing the budget to shrink Bord Fáilte should be given additional finance and a greater impetus to enable that body to go out and fight competitively for our share of the market. Our share has dropped and it is no answer at this stage to allow tourist promotional budgets to shrink.
Coming to the recent budget, the first thing we notice is the Government's compete lack of understanding about the tourist industry. It could only be a total lack of understanding of tourism that made the Government decide to increase value-added tax and the other elements which affect the tourist industry. The recent increases in VAT, tobacco, petrol, drink, car-hire and hotel services will undoubtedly have a dramatic effect on tourist expenditure. In particular, it will affect Britain, which is our key market. In the British budget today they increased petrol by only 1p per gallon and on luxury items VAT has been decreased. When petrol was increased by 15p in 1974, we were told that it was to ensure that Northerners would not come across the Border to buy petrol here. We made the case at the time that because of security that would not be so. It was not so, and now the boot is on the other foot. Following the British budget, I hope the Government and the Minister concerned will take a hard look at our petrol prices and do something about decreasing that 15p.
The tourist industry will only progress if no serious obstacles are put in its path. After the boom time of the 1960s tourism suffered a severe setback, particularly in the last three or four years, and this was clearly seen in the high percentage of hotels that went out of business in the last two years and the general slackness in hotels. When that setback was coupled with adverse conditions in all sectors of the economy, the major part of which was clearly due to Government mishandling, it was obvious that the tourist industry required special consideration if it was to return quickly to the level of progress that had been made in the 1960s.
In spite of difficult conditions and the lack of Government leadership and planning, the tourist industry, by 1st January, 1976, was showing some slight signs of moving forward. The various interests in the tourist industry took heart and planned a major effort so as to get the maximum benefit from the better trading conditions that appeared to lie ahead. Although recession conditions prevailed on 1st January there was certainly light at the other end of the tunnel.
In no business or enterprise can it be more accurately said that the customer is always right than in the tourist industry. People in Britain, Germany, France and other countries have a wide range of choice when they are contemplating a holiday abroad. The only way we can ensure that a worth-while number of those potential holiday makers will decide to come to Ireland is by making a holiday in Ireland enjoyable and good value for money. The Minister for Finance and most of his Cabinet colleagues have talked a great deal in recent months about the need to keep our manufacturing industries competitive. Workers have been warned of the dire consequences if they insist on wage increases to fully offset the increases caused by inflation. Yet we have hardly had a mention from the Government side of the House of the equally present need to ensure the competitiveness of the tourist industry.
When a recession hits a wide section of people in any country holidays are cut down and in some cases cut out altogether. The essentials of life must be paid for, and, therefore, expenditure on holidays is likely to be the first thing to suffer. A country such as ours offering holiday facilities must, in such circumstances, ensure that charges are attractive, and, in particular, no action should be taken that would worsen that situation.
A short time ago Bord Fáilte produced a tourist development plan consisting of nine volumes. The plan is a very detailed and comprehensive set of documents, but it is only so much wastepaper if we cannot keep our prices competitive and give value for the money spent by the tourists. Last Sunday one of the papers set out the Government's 14-point plan, No. 12 of which stated:
The Government will carry out a new dynamic development programme for tourism to enable the industry to overcome its present difficulties and to get back on the road to progress.
Far from doing anything to overcome the difficulties of the tourist industry, the Government made difficulties for tourism, first, by their inept handling of the economy, and, secondly, by those savage and ill-judged increases in the budget of January, 1976.
I want to examine the effect of that budget on the tourist industry. In the circumstances that existed it was reasonable to expect that the Minister would have taken action to help the competitiveness of one of our major industries or, if circumstances forced him to increase costs for the industry, that he would have provided subventions to ease the burden. Had the Minister set out to harm the tourist industry he could hardly have taken more effective action than he took.
In present difficult conditions it is not easy to get tourists to come here. The ill-judged actions of the budget have made our position more difficult. The Minister placed many travel agents and hoteliers in a very difficult position because they had to either renege on their commitments to people who booked accommodation with them or run their businesses at a loss. Some carriers, such as Aer Lingus and CIE, are semi-State bodies but the remainder are private companies. Because tourism is basically a private enterprise industry, it has suffered at the hands of the Government, as has the rest of the private sector.
The chairman of Córas Tráchtála spelt that out very bluntly some days ago. In The Irish Press of 30th March, 1976, I read:
A wide-ranging attack on the Government's fiscal policy was delivered yesterday by Mr. Colm Barnes, chairman of Córas Tráchtála, the State export board, who said that it was time for the Government to demonstrate political conviction to integrate the economic and social strategies that will once again make Ireland a land of opportunity....
They see the present political climate in Ireland as hostile to business. This is a sad and serious state. Mr. Barnes, who is also chairman of Glen Abbey and the Northern Bank Finance Corporation, said that the business community saw fiscal legislation as destroying their recovery prospects.
A good example of the difficulties facing tourists coming to Ireland in sufficient numbers in present economic circumstances is the poor return to Aer Lingus for their low-cost fare schemes. They introduced this scheme especially for emigrants. In The Irish Press of the same day I read that
...the scheduled return fare from London to Dublin will rise to £53, London to Cork £62 and London to Shannon £64. Aer Lingus has a comprehensive list of reduced prices for certain types of travellers to Ireland which in view of soaring air fares should be doing better....
The service is available at £32.50, no more than the return second class rail boat fare.
Mr. Kelly, speaking for Aer Lingus, said they might have to reduce the individual services where there is no response. He said there was no point taking off with only a few people on board. That will give some idea of the competitiveness of the industry.
I will now look at other headings in the budget which created difficulties for tourists. The first is the increase in the price of drink. There has been a great deal of discussion in recent months about the high consumption of alcohol in Ireland. When the Minister applied those huge increases to beer, wine and spirits, many people reacted at first by saying that drink was a luxury. It may be classed as a luxury for our own people, but as far as tourists are concerned, drink is not a luxury. It is as much a part of their holiday package as food. If we are to sell this country as a tourist centre we must accept these facts. If the price of drink is increased by heavy taxation this will be a major step towards pricing ourselves out of the tourist market. The increases applied in the budget of January, 1976, and the VAT increases applied on 1st March, 1976, have dealt a body blow to tourism, the licensed trade and the Exchequer returns. These increases were ill-judged and created serious problems for the trade. If they had been halved, they would have yielded the same amount to the Exchequer. The expected increases to the Exchequer, which did not come about, will be felt by the Minister and the country.
The annual report of the Dublin Licensed Vintners' Association, circulated on 30th March, claims that there has been a 40 per cent fall in takings in the licensed trade since the increases in drink prices. They also expect a loss of jobs. I read in The Irish Times that the association in their annual report claimed that there had been a 40 per cent fall in takings in the licensed trade since the latest tax increase on drink last month and warned of widespread unemployment in the industry. The heading in The Evening Press was “Drink Trade Chief Slams High Taxes”.
VAT on hired cars is very serious. Hired cars are indispensable to the successful development of mobile tourism. Did the Minister for Transport and Power and the Minister for Finance not understand that the bulk of the Irish car hire business is transacted with tourists? Eighty-five per cent of our car hire revenue comes from foreign earnings. While this revenue may be small when compared with the total tourist earnings, without car-hire firms many tourists would not visit Ireland and their expenditure would be lost to the country. The car-hire industry, although totally involved in tourism, has never benefited from development or interest grants or subsidies of any kind. Now that industry is expected, without any notice, to bear a staggering increase in tax. The Government should be concerned that the number of car-hire firms has halved since 1969. They should also be concerned that because of this 10 per cent VAT more companies will go out of business.
The increase in VAT charges for the hotel industry has come at a time when the industry has passed through years of difficulties. The viability of many of those hotels is threatened. The inter-hotels comparison survey carried out by Stokes, Kennedy, Crowley on behalf of the hotel industry and Bord Fáilte indicated that the hotel industry has been in difficulties for some years. This report showed that in 1974 the entire hotel industry only recorded a profit before taxation of 2.4 per cent of the turnover. The result is even more dramatic when one realises that in parts of the west and south many of the hotels have either made no profit at all or they have recorded a loss. Nearly 50 per cent of the hotels lost money in 1974. It is not expected, due to the VAT increase and the increased labour and energy costs, that the industry did any better in 1975.
The effect of the new tax impositions on the hotel industry is viewed with great dismay by many experts. A high proportion of the benefit of the industry every year is contracted for well in advance of the tourist season. In most cases the sales campaign takes place the previous July or August. There are firm prices for package tours, inclusive of accommodation, and in many cases transport and car-hire prices have already been agreed. It is estimated that 200 promoters have agreed prices at least six months in advance. This contract activity of the hotel business is highly competitive. The volume of this activity is critical to the industry. Many hoteliers depend primarily on the advance booking for survival.
Do the Government not know that many of those have pre-contracted much of their business on the basis of 6.75 per cent VAT? A brochure entitled "Ireland, 1976—Motoring Holidays with B & I Line" has stamped on it "holidays guaranteed, no surcharges". Inside the cover it states that "the prices published in this programme will not be subject to any surcharge during the validity of this brochure". Was it not also known that many hundreds of thousands of pounds were spent on printing the promotional brochures and distributing them abroad? At the time of the budget was it not also understood that Aer Lingus had guaranteed their prices against surcharges? They published this guarantee in their printed literature. If those surcharges are applied they will force people either to cancel their holidays or the industry will have to bear the cost.
The country must honour our word. Bord Fáilte have circulated this literature stating that the promoters are carrying those fixed prices for their holidays. It turns out that the quoted prices cannot be honoured because of the action of the Minister for Finance. If a tourist is quoted a price he expects it to be honoured. A person who finds the charge increased before he can avail of the holiday resents this. As a tourist centre we cannot expect to be taken seriously if we renege on our commitments. The Minister, by the imposition of those taxes, has placed tourists in a very embarrassing position. They must either renege on booking their holidays or the industry must run their business at a loss.
The result of the present economic conditions is that the domestic demand is depressed and, therefore, any growth in the economy must come from exports. In order to get the economy moving again it is essential that our exports be developed to the greatest possible extent. Tourism is an export industry and is well placed to stimulate growth in the economy. When one considers that the number of jobs which originated from the tourist industry in 1975 was 118,000 it can be seen why the needs of the industry should be given high priority by those responsible for the economy.
The Minister has claimed that the subvention suggested could not be paid to the industry. He should keep in mind how substantial the contribution of this industry to the Exchequer is. The tax content of tourism is around £30 million per year. This shows that the tourist industry is making a very worth-while contribution to the national economy which is of particular value in our present circumstances. I understand the Minister made a statement on the Canadian flights plan. The Irish Times of 31st March stated:
The promoters of the flights from Canada claimed yesterday that Ireland stood to lose between $3 million and $5 million from the decision. The Minister's action was taken after Aer Lingus complained to the Department of Transport and Power that the operator was "dumping" seats and would seriously affect traffic on its own services from Canada.
I understand that last year the tour operators organised a series of 15 charter flights to Ireland and they carried in the region of 2,300 tourists. They were operated by an independent Canadian charter company. It was a successful promotion and, in the light of that success, the company decided to expand the charters this year. They got sanction from the Canadian Government for 39 flights with a 7,000-seat capacity. The flights were from Toronto and Montreal to Shannon and Dublin. They were restricted. They were allowed only a 20 per cent increase on last year by the Minister. I would be glad if he would explain that decision to restrict the inflow of tourists.
