Dáil Éireann díospóireacht -
Wednesday, 14 Feb 2024

Vol. 1049 No. 5

Business Costs for Micro, Small and Medium Enterprises: Motion [Private Members]

Deputy Noel Grealish

I move:

That Dáil Éireann:

recognises that:

— Micro, Small and Medium Enterprises (SMEs) are a critical pillar of the Irish economy;

— the people who create and lead SMEs throughout the country are incredibly diverse, from family-owned businesses, rural-owner managers, traditional to high growth and technology start-ups;

— there are more than 1.2 million people employed by SMEs in Ireland;

— according to the Central Statistics Office, SMEs represent up to 99.8 per cent of active enterprises, with 69.2 per cent persons employed, which generated 41.5 per cent turnover, and Gross Value Added of 34.8 per cent in 2021; and

— the vast majority of these enterprises are micro-sized enterprises that employ less than 10 people;

notes that:

— Government policy decisions have increased significantly the cost of doing business, particularly in the SME sector;

— many SMEs, including rural and regional micro, small and medium sized businesses, are facing significant cost challenges;

— PricewaterhouseCoopers recently predicted that the number of business insolvencies would grow to 1,000 this year, with the retail, hospitality, and construction sectors coming under particular pressure;

— input costs due to the increases in energy, inflation, insurance, cost of labour, national minimum wage increases, higher Pay Related Social Insurance (PRSI), plans for pension auto-enrolment, extended sick-pay entitlements on top of Value Added Tax (VAT) increases, along with many other input factors are making it very difficult for small businesses to continue trading;

— the recent Ireland's Experience Economy survey from the Irish Business and Employers Confederation found that additional costs associated with energy, inflation, and labour were leading concerns for businesses in the hospitality, retail, travel, food, drink, tourism, and entertainment sectors;

— increased wage levels for those on employment permits will have additional implications for the food processing, horticulture and healthcare sectors;

— a combination of higher costs will lead to rising prices and closures;

— the present challenges to business viability in the restaurant and hospitality sector has the potential to significantly affect tourism this year; and

— increases in the national minimum wage will not address the cost-of-living issue for employees because, in the absence of access to affordable housing, most increases in wages will go to pay increased housing costs;

calls on the Government to:

— immediately establish a taskforce representative of micro and small business with Government Departments and agencies personally chaired by a Cabinet Minister to review the application of all Government controlled costs and to reduce Government charges and costs of doing business, with quarterly updates provided to the Oireachtas Joint Committee on Enterprise, Trade and Employment;

— as an interim measure:

— reduce the current VAT rate of 13.5 per cent to 9 per cent for food businesses in the hospitality sector before Easter;

— ensure the 8.8 per cent employer's PRSI rate covers the full national minimum wage level by increasing the 11.05 per cent threshold from €441 to €495.30 per week, commencing before Easter;

— expedite the work permit process and abolish welfare traps which will greatly aid staffing shortages; and

— revise the debt warehousing scheme to allow longer repayment schedules and preferential interest rates to retain business viability and sectoral employment;

— develop an action plan for financial education to strengthen the financial management skills of small business owners and managers;

— create a panel of industry expert advisors and mentors for SMEs partially funded by the State;

— expand access to credit initiatives for SMEs; and

— enhance flexibility in Government procurement of State services to permit Departments, such as Education, Health, Defence, and Housing, Local Government and Heritage, to procure supplies from local suppliers, as opposed to relying solely on central purchasing.

I thank Deputy Shanahan for putting together this motion and for all the work he has done to support it. He is a great supporter of SMEs. I also compliment Ms Cáit Nic Amhlaoibh on her excellent work in drafting this motion. I call on the Government to support it.

Small businesses have borne the brunt of the changes in the economy and world affairs of the past few years, with Covid, Brexit, the war in Ukraine, global supply problems, labour shortages and sky-high energy prices forcing up the cost of materials and goods. Energy costs may have fallen recently, but they are still at a level that is crippling for small businesses. These businesses are threatened. Who in this House cannot list off the names of a dozen or more enterprises in their constituencies that have gone to the wall in recent years because they could not remain economically viable? These are not just faceless businesses but enterprises that are the very heart of our communities – the local shop, the hairdresser and the café, just to name a few – and that offer vital employment to hundreds of thousands of people, often in areas where there is no major source of employment and the nearest is many miles away. This goes far deeper than just providing local employment, though. These are the people who are keeping our communities alive and our little villages and towns vibrant.

Due to the difficulties posed by the Covid-19 pandemic, the Government, to its credit, introduced a facility for companies to warehouse or postpone the payment of certain taxes. At its peak, the total debt warehoused by almost 105,000 companies surpassed €3 billion. Businesses in every county benefited from this stay of execution, including 5,600 in the Minister of State and my county of Galway, where some €115 million in taxes was postponed. I welcome the Government’s announcement of extending the period to repay this debt with no interest charged.

A major impediment to the survival and continued success of SMEs is the shortage of labour. Indeed, a survey undertaken last year for Chambers Ireland found that almost 90% of SMEs were struggling to recruit essential employees. There has been a significant improvement in the employment permit system for non-EU workers, but once a permit has been granted, employers have to wait up to two months for an entry visa application to be processed. There is no logical reason for the employment permit and entry visa not to be processed together in a single application and timely fashion. This would accelerate the whole procedure. In 2023, just short of 31,000 such work permits were issued. While that was below the 2022 total of almost 40,000, it was still nearly double the numbers seen in previous years. This shows that there is a real demand in many sectors, from healthcare to hospitality and from shops to cafés and restaurants, for workers from other countries to fill the gaps that are impacting on the way enterprises are doing business.

It would also help smaller businesses if a welfare trap contained in the regulations governing the payment of jobseeker’s benefit were removed. As matters stand, the benefit is paid in respect of the days people do not work but if they work more than three days, they do not get anything. The problem is that any number of hours worked is counted as a full day. If a local shop brings in someone to cover business for a couple of hours, that counts as a full day’s work. Resultantly, people feel that they would be better off not working at all if the alternative is them losing their benefit. This issue has to be examined. It is a disincentive to part-time employment. Setting a fair limit on the number of hours worked in a week rather than days would get over this problem and help the small businesses and individuals concerned.

Our group’s motion includes a call on the Government to increase the threshold for moving onto the higher rate of employer’s PRSI to reflect the increased minimum wage. This is another example of the many areas where Government policies and decisions impact directly on small businesses. The task force we are seeking to have established would help to better inform the Government on the effects of its decisions on the sector that provides the vast majority of employment in Ireland. Our motion also calls for a reduction in the VAT rate from 13.5% to 9%, which is crucial if small businesses are to survive.

Deputy Peadar Tóibín

Gabhaim buíochas leis an nGrúpa Réigiúnach agus leis an Teachta Matt Shanahan ach go háirithe as an obair atá déanta aige ar an mBille seo, agus le Cáit Nic Amlaoibh freisin a thug tacaíocht a thabhairt don ghrúpa chun an Bille seo a chur chun cinn.

The Government presides over a two-tiered economy, in that it has rolled out the red carpet for the FDI sector but has left the indigenous enterprise sector as the poor relation. FDI is good and we need a healthy, functioning FDI sector, but indigenous enterprise is actually far more important because it employs many more people. It is also stickier, which means it is less mobile and more likely to remain in this country and is more embedded in the supply chain of products it gets from the country.

That indigenous business is far better spatially delivered across the country too. It is not just located in the big urban centres; it is in the smaller towns and provincial villages across the country as well.

The problem is that this Government has treated the indigenous enterprise sector very badly in the last number of years. These enterprises have suffered significantly. Most especially, the hospitality sector has suffered. In many ways this sector is like the canary in the coalmine. It suffers from reduced spending far earlier than most other business sectors and therefore is more prone to shocks within the economy as well. The hospitality sector suffered significantly under the Covid restrictions the Government delivered and it now owes an incredible €1.8 billion in Covid taxes. Rip-off Ireland, which is hammering so many people, is especially difficult for small businesses. Ireland is one of the most expensive countries in the world. Switzerland is probably the only country in Europe where a whole basket of products is more expensive. The costs of goods and services are 46% higher here than they are elsewhere in the EU. That is really hurting small businesses as they are consuming many of these things, such as energy, electricity and so on.

The worst thing is that the Government is a driver of these costs. The Government received more in VAT, excise and carbon taxes last year than ever before. In the middle of a cost-of-living crisis, the Government is quids in while small businesses are suffering. Products such as tobacco and alcohol in particular are extremely highly taxed here and of course that affects the hospitality business in a significant fashion. On top of this, the Government has heaped a number of other costs on small businesses, for example, increases in sick pay and the minimum wage and, soon, auto-enrolment. While many of these increases are good for society in many ways, unfortunately the cost has been put on the shoulders of small businesses, without the necessary help from the Government. That is incredible. We have seen the number of insolvencies increase significantly over the last while. PwC has stated the rate of insolvency is two and a half times higher in the hospitality sector than it is throughout the rest of enterprise.

Another pressure the Government heaped on small businesses was the increase in the VAT rate in hospitality. This is a major mistake. The biggest mistake is that the Government is treating all of hospitality as one homogeneous sector. It is not a homogeneous sector. There is a massive difference between big hotel companies and small businesses such as restaurants, bars and cafés. They have completely different business models, completely different experiences and they are being hit in a completely different fashion. The Government should differentiate those sectors within hospitality and reduce the VAT rate for restaurants, cafés and pubs to 9%. That would make an enormous difference to the viability of these businesses. It would mean that some of them could function into the future.

This is a Government whose members have never been self-employed or had their own businesses. They have no real experiences of the blood, sweat and tears it takes to keep a business going. The Government is oblivious to the needs of these businesses. There is a disconnect between its understanding of the economy and the day-to-day experience of small businesses. I ask the Government to start talking to those businesses now.

Deputy Cathal Berry

I am delighted to be in the Chamber to speak on this very important topic. It is a topic that rarely gets a mention inside the Dáil Chamber, actually, so it is good to be speaking on it this morning. In general terms, we are supportive of the State's industrial policy. As Deputy Tóibín said, FDI and multinationals are very important and we should roll out the red carpet for them. They provide jobs, corporation tax and a million and one spin-offs downstream. However, we should also extend that red carpet to our own industries and SME sector. They are not looking for preferential treatment; they are just looking for equality of treatment. As Deputy Tóibín said, corporation tax is fluctuant, unreliable and very mobile. However, any corporation tax from our sector stays in Ireland. Not only are these companies invested in Ireland but they are also embedded here.

When a corporation or multinational company has a problem, it has good access to the Government. It gets a sympathetic ear and, as a general rule, if it is a solvable problem, the problems are addressed. We would like the same access to be given to SMEs but we do not feel it is being given. They have a number of problems that are not being addressed. The number one problem is cost base. We notice general cost increases in respect of energy, insurance and the cost of credit. Government-specific cost increases that have come in over the last few weeks are causing major problems. They are progressive and very laudable. It is good to improve the minimum wage, introduce automatic pension enrolment and create an extra bank holiday. The extra bits and pieces for employees are really important and we welcome them. However, given that they are Government initiatives, the lion's share of the burden of implementation should fall on the Government rather than the SMEs. The latter are happy to play their part but they are playing more than their part at this stage.

If these changes came individually in isolation, it would be fine, but they have arrived in combination and the cumulative effect is creating a big problem, particularly in the hospitality sector, as my colleagues said. These are important businesses like cafés, family-run restaurants and gastropubs. The issue is not just the financial impact; it is the social impact as well. A lot of employees in our villages get their first job working in cafés and restaurants as waitresses and waiters. Their first pay cheque, with all the autonomy and dignity that comes from that, comes from these companies. From a social point of view, in many villages around the country there is only one café. It is a case of no café, no community. The café is the centre of gravity of an entire village and it is very important that we keep these doors open.

As a solution-focused group, the Regional Group has a number of solutions and recommendations. I will pick three in the time available. The first one is the VAT rate. It is vital that VAT is reduced from 13.5% to 9%. That should be the permanent rate. It is the appropriate rate for food services in the hospitality industry, for sure. It would also help to drive down inflation and keep the doors open, which is very important. With the hospitality season kicking off for the summer, it is very important we get tourists in. If Ireland gets a bad reputation for being a high-cost economy, it will be very hard to change that narrative. We want Irish tourists staying in Ireland for their holidays rather than going to Spain and Portugal.

The second recommendation is about eliminating the welfare traps, as we mentioned. Someone on the working family payment or carer's allowance can only work 18 or 19 hours a week. I was at a company in Clane on Friday that is offering contracts from 18 to 19 hours up to 26 hours a week. There are employees who want to take these contracts but cannot do so because they will lose their welfare benefits, which is appalling.

The last point is probably the most important one for me. Launched by the Taoiseach about three years ago, "Look for Local" was a great campaign that encouraged Irish people to shop local because of the benefits of doing so. The State and the Government should practise what they preach. We have a very centralised procurement process. Administrative convenience should not be the number one priority when it comes to procurement. We should be pushing authority and autonomy down to the local level.

I welcome last week's decision by the Minister for Finance, Deputy Michael McGrath, to reduce to 0% the interest rate on warehoused debt. It was very important. The big lesson for me is it did not require a budget to do that. We should not wait for the budget in October to bring in these changes. It can be done. If these solutions are implemented, the Minister will have the support of the House. Not only will he achieve consensus but I believe he will secure unanimity.

Deputy Michael Lowry

It takes initiative, conviction and courage to start a business. Those who take that leap of faith stake their future on making that business a success. No business sets out to fail. Managing a business involves hard work. It is time-consuming, demanding and full of stress and worry. It is constant, unrelenting pressure. It takes an emotional and physical toll on those who take on the ownership of a company.

Trying to cope and deal with regulatory and compliance requirements is a big issue for small businesses. They do everything possible every day to increase turnover in order that VAT and taxes can be paid, workers can be paid and the overheads and ever-increasing input costs can be paid. All of this involves a lot of sweat and long hours, and at the end of it the books in many cases are not balanced. For all the effort, therefore, the owner of that business ends up effectively paying his workforce and paying the State with little or nothing left for himself. That is the problem small businesses face at the moment.

There was widespread disillusionment felt by the struggling hospitality business sector up and down the country last week when the Minister for Finance categorically rejected our calls to reduce the 13.5% VAT rate to a more manageable 9%, a reduction that would afford such businesses some level of relief and offer them a glimmer of hope for survival. These are the cafés and restaurants dotted across our towns, across Tipperary and across the country, and the pubs that serve food to bolster their trade. They employ local staff. They provide a social hub for local people to meet and chat. They do not make a fortune but do need to make a profit. They need to see a return for their efforts.

In November of last year, approximately 50 restaurants, cafés and food outlets across the country closed. They were joined by another 140 food-led businesses that closed their shutters between July and October 2023. The post-Christmas lull in trade has brought further closures, including across my county of Tipperary. Jobs have been lost and premises have been left vacant. As a result, rates and taxes have been lost to the State. Social protection is naturally obliged to assist the disemployed. Suppliers have been impacted as they too battle to keep their heads above water and maintain their staffing levels. Every business, no matter how big or small, that closes its doors creates a spiral. In cases like these, when one door closes another prepares to close. SMEs make up 99% of all Irish businesses. In the year just gone, 1.17 million people across Ireland were employed by small and medium-sized businesses. A significant majority of those businesses fell into the micro-sized category, employing fewer than nine people. These people include sole traders such as electricians, plumbers, carpenters and painters, and our independent retailers, such as the shops and pubs we have on the streets in our towns. Many of them have traded for generations and have become an integral part of our communities.

In advance of budget 2024, Accountancy Ireland highlighted that SMEs across the country were concerned about the increasing cost of doing business. It recommended limiting any increase in the national minimum wage in the year ahead to the rate of inflation. It opposed the 12% increase recommended by the Low Pay Commission. It strongly advised that such an increase would place a significant burden on the majority of SMEs. That advice went unheeded. Instead, additional costs such as automatic pension enrolment, raised PRSI contributions, extended sick leave entitlements and additional bank holidays were added to the financial worries of small businesses. These are progressive measures and welcome, but the cost of implementation should fall to the Government, not the employers. These decisions have rocked many micro-businesses to their core. Growing numbers across every small business model are crunching the numbers and the bottom line is bleak, particularly in the hospitality, retail, tourism and horticulture areas. Plans to expand staff numbers are replaced with worries about how to retain staff. The inability to afford staff has become a gloomy reality. Meanwhile, workers face the real prospect of unemployment.

Minister of State at the Department of Children, Equality, Disability, Integration and Youth (Deputy Anne Rabbitte)

I move amendment No. 1:

To delete all words after "Dáil Éireann" and substitute the following:

"welcomes:

— the introduction of measures aimed at improving working conditions in Ireland, such as the right to request remote work, sick pay legislation (mandatory paid sick days), pension auto-enrolment, Parent’s Leave and Parent’s Benefit, an additional public holiday and the transition to a Living Wage;

— the broader direct and taxation measures contained in the 2024 Budget package, aimed at alleviating some of the cost pressures faced by Small and Medium Enterprises (SMEs);

— the introduction of the once-off Increased Cost of Business (ICOB) Grant Scheme, which will provide €257 million to small and medium sized businesses and is estimated to support 143,000 or 95 per cent of commercially trading businesses; and

— the recent announcement regarding the tax debt warehousing scheme, whereby the interest rate applying to warehoused tax debt has been reduced to zero per cent;

acknowledges:

— the sustained Government supports to assist Irish enterprises across successive periods of disruption in recent years and the deployment of extensive Exchequer resources to this end;

— the recent Government initiatives taken to support the enterprise sector and the availability of the 9 per cent Value Added Tax (VAT) rate to the end of August 2023 (in recognition of concerns raised by the hospitality and tourism sectors);

— the extension of vital energy supports including the 9 per cent VAT rate on gas and electricity for a further year to the end of 2024 and the temporary excise rate reductions applying to auto diesel, petrol and marked gas oil until the final day of March 2024;

— the continued supports available to businesses relating to improvements to working conditions in Ireland, such as the right to request remote work, sick pay legislation (mandatory paid sick days), pension auto-enrolment, Parent’s Leave and Parent’s Benefit, an additional public holiday and the transition to a Living Wage;

— the wide range of financial, mentoring and training supports on offer to Irish SMEs from Government agencies, including Enterprise Ireland as well as the Local Enterprise Offices; and

— the Government’s ongoing engagement with business across multiple sectors through various Department of Enterprise, Trade and Employment platforms, such as the Hospitality and Tourism Forum, the SME Taskforce, the Enterprise Forum and the Retail Forum; and

supports:

— the decision by Government to undertake a joint assessment of the cumulative impact of changes to working conditions on employers by the Department of Enterprise, Trade and Employment, working jointly with the Department of Social Protection; with a view to taking the necessary policy initiatives to support businesses in sectors under financial pressure where appropriate; and

— the Government's ongoing commitment to monitor the business environment for potential threats and subsequent solutions.".

The impact of rising prices is not unique to Ireland but an issue facing all major economies around the world as the effects of the pandemic unwind with the rapid resumption of economic activity and, more recently, the geopolitical uncertainty following the invasion of Ukraine. The Government, under the auspices of the Department of Enterprise, Trade and Employment, continues to hold ongoing engagements with businesses across multiple sectors through various platforms such as the hospitality and tourism forum, the SME task force, the enterprise forum and the retail forum.

While the Government is acutely aware of the cost pressures affecting SMEs in Ireland, it is worth mentioning that the most recent and forthcoming changes to improve working conditions are a necessary step in ensuring that workers in Ireland can avail of the same conditions as in many of our trading partners. The Government remains cognisant of the fact that certain sectors may be subject to additional payroll costs. For many other sectors of the economy, however, the impact of this range of measures will be minimal and will give rise to an associated suite of benefits to those working in these sectors, especially low-paid staff. Meanwhile, the extension of sick pay and pension coverage to staff in all sectors will ensure that living standards remain high for all types of workers and that those in certain low-paid roles can avail of entitlements already available to other workers.

According to recent work undertaken by officials in the Department of Enterprise, Trade and Employment, these improvements are also expected to bring wider societal benefits and will serve to bring Ireland in line with other advanced economies. For instance, the proposed living wage in Northern Ireland has been set at a rate higher than that in effect here, while workers in Northern Ireland already have long-standing access to entitlements such as statutory sick pay and an auto-enrolment retirement savings scheme. While these changes to working conditions will bring many benefits, in particular for employees, it is recognised that businesses may face rising costs, in particular in the short term. The situation is being monitored continuously with a view to identifying measures which may support businesses in this transition.

Furthermore, it is important to recognise the range of supports the Government has made available to businesses to deal with shocks ranging from Brexit to Covid-19, supply change disruption and the rising energy costs associated with the crisis in Ukraine. These include the Covid-19 commercial rates grant and waiver schemes, the restart grant and the small business assistance scheme for Covid, and the Ukraine enterprise crisis scheme, alongside measures such as wage subsidies and tax warehousing. The Government has been proactive in limiting the fallout from higher rates of inflation in input costs and prices. Prior to budget 2024, a total of €12 billion, 4.5% of national income, was provided in direct relief to absorb some of the impact and ease the burden of inflation on households and businesses. The main programme introduced by the Government to alleviate cost pressures on small businesses was the €1.3 billion temporary business energy support scheme, TBESS. Nearly 7,000 businesses in the hospitality sector received support from the scheme.

The Government has maintained this consistent approach of providing valuable supports during times of crisis. This is evident with the recent increased cost of business, ICOB, grant announced by the Minister, Deputy Coveney, in budget 2024 as well as the business users support scheme for kerosene, launched in September 2023. To elaborate, the increased cost of business scheme was announced as part of budget 2024 and will provide a grant to benefit a significant number of small and medium-sized businesses at a cost of €257 million. The ICOB grant will be available to up to 143,000 businesses, or 95% of all commercially trading business, operating from rateable businesses in all corners of Ireland. Officials in the Department of Enterprise, Trade and Employment are leading the introduction of the ICOB grant, working in conjunction with local authorities, the Local Government Management Agency, the County and City Management Association and the Department of Housing, Local Government and Heritage. A service level agreement is being drafted between the Department and local authorities to underpin the operation of this scheme. This service level agreement will cover the delivery, funding and oversight arrangements for the grant scheme.

The role of the small companies administrative rescue process, SCARP, must also be acknowledged, providing an accessible and cost-effective restructuring process for small viable companies experiencing temporary financial problems. It has been welcomed as a valuable addition to the State's restructuring toolkit for our small company sector.

The use of SCARP continues to be monitored. I note that a total of 50 small companies have availed of the process to date.

While uptake is low to date, it is important to note that this is in the context where liquidation activities, while rising, remain below pre-pandemic levels. The increase in applications this year in comparison to the first year of operation must also be highlighted. Positive feedback from the enterprise sector and practitioners suggests that SCARP is well positioned to assist companies in the period ahead, which is reflected in the registration of almost 65% of approved rescue plans with the Companies Registration Office, CRO. The availability of SCARP as a means to restructure can also encourage creditors to engage constructively with viable companies in distress, diminishing the necessity to enter into a formal process.

A further range of positive supports were introduced through budget 2024, all of which were largely welcomed by both small and large enterprises across the country. Some of these included the extension of the 9% VAT rate on gas and electricity for a further year to the end of 2024; the temporary excise rate reductions applying to auto diesel, petrol and marked gas oil which were due to expire on 31 October 2023 were extended until the final day of March 2024; an increase to the VAT registration thresholds for goods and services, meaning a substantial reduction in the administrative and cost burden for many small businesses across the country and; the extension of the accelerated capital allowances, ACA, scheme for energy efficient equipment beyond the end of 2023 to assist SMEs with environmentally friendly purchases and to alleviate cash flow concerns for smaller firms.

Furthermore, the Government accepted the recommendation of the National Competitiveness and Productivity Council, in its report entitled, Ireland's Competitiveness Challenge 2022, to undertake an assessment of the combined impact of recent and forthcoming changes to working conditions. The Department of Enterprise, Trade and Employment is currently working with the Department of Social Protection on this report, which is supported by evidence received from both employer and trade union perspectives. This report is currently being finalised and will play a pivotal part in informing future public policy responses made by the Government.

Finally, in relation to tax debt warehousing, the Minister for Finance has earlier this week announced a significant change to the tax debt warehousing scheme of a reduction in the interest rate applying to warehoused tax debt to 0%. Therefore, in light of the positive supports for businesses and in consideration of further measures that it intends to undertake, the Government's countermotion is proposed for consideration.

Deputy Verona Murphy

The civil servants who wrote that speech actually received a wage increase of 10.5% in the last few weeks. Their increase is probably more than a lot of the SMEs I am representing here today will achieve in profits - for the courage and conviction of opening up a business in small parts of rural Ireland. Small businesses employ people who can fit in a job for a few hours in their working life. It is not good enough that we do not have a senior Minister here. I am sorry the Minister of State, Deputy Rabbitte, has been thrown in at the deep end to read a speech of which she had no knowledge at the start. We are representing every region and rural part of Ireland here today, as well as the urban centres, which are struggling. It is not good enough that the Government is playing politics. We have the Fine Gael leader and Taoiseach, Leo Varadkar, saying that of course we can operate a split system of VAT, but it falls to the Fianna Fáil Minister, Michael McGrath, to do so. The Government should not play politics with people who are struggling.

The Minister of State has nodded her head all morning at what we are saying. I concur with all my colleagues, but she will vote against this tonight. She will vote with her party, because that is what happens when we elect party politicians in this country. They are elected by their constituents - the struggling SMEs, the hospitality sector, hairdressers and beauticians, but what do they do when they come up here? They forget about their constituents. They vote with their party, no matter how detrimental it is. The two individuals beside the Minister of State get their 10% increase, and so does she and so do I. I do not want it.

I want the Government to do its job. I want it to support SMEs and reduce the VAT rate because what it is doing currently is making oligarchs out of all those who have decided to buy up every derelict building in the country to turn it into an IPAS centre and be paid millions for doing so. The Government has not supported the nursing homes in the same way. They are closing in order to try to obtain that oligarch money the Government is providing. The Government has ruined the accommodation sector in rural Ireland, which supports these SMEs. In addition, I am getting letters from people with Airbnbs who feel that the policies the Government is bringing in through regulation will put them out of business. It is trying to force them to become long-term rental properties for which they are not suitable. If nothing else, I ask the Minister of State to take that back to the Cabinet and her Government colleagues and tell them that will not work. All they will do is close down the Airbnbs who do support the SMEs, in order for them to be sustainable. They support their neighbours by making a menial living and small profits and all they are asking the Government to do is to keep them viable and sustainable, first, by reducing the VAT rate, which would be fair and, second, by increasing the threshold at which the employer pays PRSI.

Nobody in the Regional Group disagrees with an increase in the minimum wage or with paying a little more benefit when it comes to sick pay, but why level it at the SMEs? Why not use some of the money the Government is gaining from the corporation tax to pay for it itself? Is it because the Government had to raise an extra €500 million for the children's hospital, which was originally to be €250 million. We are now at €2.5 billion, we are years late and the hospital is not in service.

It is unbecoming of anybody to sit in government on that side of the House and tell SMEs they are not worthy of a senior Minister to be present for the debate. I am not denigrating the Minister of State, Deputy Anne Rabbitte, but the senior Minister for Enterprise, Trade and Employment or the Minister for Finance should have come in here to listen to the people who are representing the constituents who elected them. That is what we are doing on this side of the House. We are working with the people who are struggling in the businesses who provide employment for a little over 99% of the working people in Ireland. I am very aggrieved for them today.

I extend my best wishes to Deputy Kehoe, who is not going to run in the next election, but after his statement yesterday on local radio in Wexford I do not think there will be too many in tears. He said this requires a budget - this menial measure of reducing the VAT rate by 50% - because that is what the Minister increased it by when he put it up. He said it had to be done in a budget. He spent 21 years in the House, yet he has not learned that it does not need a budget, because it was done last week with the tax debt warehousing. I ask the Minister of State to seriously consider this and to bring it back to the Government. We do not accept the Government amendment, but on behalf of the SMEs I ask that she would accept this motion.

Deputy Peter Fitzpatrick

Micro, small, and medium enterprises, MSMEs, are instrumental in shaping the economic landscape of emerging markets. Their ability to innovate, generate employment, and contribute to regional development makes them indispensable. Despite challenges, the growth potential of MSMEs is undeniable. In emerging markets, the private sector consists of more than 95% of small but growing businesses, SGBs, also referred to as MSMEs. These enterprises play a crucial role in fostering innovation, generating employment opportunities, and driving economic development. MSMEs often function as the catalysts for economic inclusivity, as they provide jobs to a significant portion of the population. MSMEs constitute 95% to 98% of all businesses, produce 50% of GDP, and generate 1.2 million jobs in Ireland, representing 99.8% of active enterprise.

These enterprises encompass family-owned businesses, rural-owner managers, traditional to high growth and technology start-ups and often have deep roots in local communities, contributing to regional development and growth. They are widely known for their agility and ability to adapt to market demands quickly. Yet, with increasing input costs due to increases in energy, inflation, insurance, cost of labour, national minimum wage increases, higher PRSI, plans for pension auto-enrolment, extended sick-pay entitlements on top of VAT increases, along with many other input factors, MSMEs are finding it very difficult to continue trading.

The cumulative impact of these cost increases, as well as the looming deadline of May 1 to pay off warehoused tax debt from the Covid restrictions period could lead to 1,000 business insolvencies this year, with the retail, hospitality and construction sectors coming under particular pressure. This has been particularly evident in the past two weeks in light of a spate of high-profile closures in the hospitality industry. The present challenges to business viability in the restaurant and hospitality sector have the potential to significantly affect tourism this year. Tourism is the cornerstone of the economic viability of our regional towns and villages. We need to create a roadmap towards ensuring Ireland is an attractive place to do business, not crucify the tourism and hospitality sectors with cost increases. The tourism sector has always relied heavily on overseas visitors, especially in my constituency of Louth and east Meath, as we border the North. However, the Government needs to recognise the importance of the tourism industry to every town and county. We need to support the delivery of enhanced tourism amenities in line with the objectives of the new National Development Plan 2021-2030. As an interim measure, my colleagues and I in the Regional Group are calling for a reduction of the current VAT rate of 13.5% to 9% for food businesses in the hospitality sector, as well as cutting the PRSI rates for struggling SMEs by Easter. Adjusting the 8.8% employer’s PRSI threshold to a ceiling wage of €495.30 per week will be a lifeline for many businesses. We are calling for a revision of the debt warehousing scheme to allow longer repayment schedules and preferential interest rates to retain business viability and sectoral employment.

While the Ukraine credit guarantee scheme provided €1.2 billion in low-cost lending to business, along with the temporary business energy support scheme, we need to support the sector in any way we can, which we can today. It is not only important that we relieve the pressures and costs on these sectors but also that we safeguard jobs and protect the industry. There are evident challenges across the business and SME sectors. Coming off the back of the pandemic, the hospitality and tourism sectors have made a good recovery. Yet, I have spoken to many businesses in Dundalk, County Louth and east Meath over recent months. I have been flabbergasted by the cost increases they are facing. These businesses need every support we can give them to keep their doors open in the coming months.

If we look across the pond, the British Government released an action plan to support small and medium-sized enterprises from 2022 to 2025. This aims to reduce the barriers for SMEs when it comes to being part of a department’s supply chain. The plan is designed to help SMEs achieve sustainable growth, which will offer innovation, responsive customer service and fantastic employment opportunities. The plan is flexible and allows the commercial function within the department to continually seek new opportunities, hear feedback directly from SMEs and action that feedback to create a level playing field for SMEs in competing against larger organisations. With this plan, the UK Government is committed to enhancing the UK’s reputation as the best place in the world to start and grow a business. With that in mind, in the long term, we are calling for the immediate establishment of a task force representative of micro and small business with Departments and Government agencies personally chaired by a Cabinet Minister. The aim is to review the application of all Government-controlled costs and to reduce Government charges and the costs of doing business. We need to enhance flexibility in Government procurement of State services to permit Departments such as education, health, defence, and local government to procure supplies from local suppliers, as opposed to relying solely on central purchasing. We believe that by providing quarterly updates to the Oireachtas joint committee on enterprise, this will ensure that this will be a task force for action, not talk.

Deputy Louise O'Reilly

I will caveat this by saying there is absolutely no disrespect meant to the Minister of State. I thank her for being here. There are two Ministers of State and one Minister in the Department of Enterprise, Trade and Employment. I find it a little bit of a stretch that not one of them could find some time to be here. Notwithstanding that, I am very grateful that the Minister of State is here to hear it. I am sure she will bring back what she hears to her colleagues in government. Given the issue under discussion, it is regrettable that neither the Minister nor the two Ministers of State could find some time in their schedules to come to the Chamber for this debate.

I thank the Chair for the opportunity to speak in support of SMEs and microbusinesses in the State. Sinn Féin supports the principles of this motion. I thank the Deputies for bringing it forward. Sinn Féin forewarned of the crisis now affecting the SME sector and has consistently asked for a range of bespoke measures to help viable but vulnerable businesses. For over a year now, we have been highlighting the crisis facing SMEs, particularly in the hospitality and retail sectors. This crisis is driven by a range of factors including the fallout from the pandemic, the war in Ukraine, the inflation crises, low margins and increased business costs such as insurance, energy and materials, among others. Analysis from Deloitte Ireland revealed that corporate insolvencies reached the highest level in five years after a 25% rise in 2023. Of the 663 insolvencies last year, hospitality and construction saw a 62% increase, showing that inflation is having a particularly potent impact on these sectors. Over the past number of weeks, Sinn Féin has met stakeholders across the SME, hospitality and broader business community to hear their concerns, solutions and views on the economic outlook for 2024.

The response by the Government to the cost of doing business crisis facing the SME sector has had a limited impact and has become a significant source of frustration for business. Many of the decisions taken by the Government have been a day late and a dollar short. This failure has been the hallmark of the Government over the past two years and was writ large in the utter catastrophe which was the temporary business energy support scheme, which was the flagship Government scheme announced in budget 2023. TBESS funding was earmarked to support business in budget 2023 but the scheme was a failure that only expended 11.5% of its €1.3 billion budget. Sinn Féin, like many in the business community, had hoped the more than €1 billion underspend would be reprofiled but instead it was returned to the Exchequer. The newest flagship business support scheme announced by the Government in budget 2024 is the increased cost of business scheme. It too has come in for significant criticism from the SME sector. The ICOB scheme allocates €257 million for a one-off cash injection for SMEs. It is targeted at small and medium businesses operating directly within a premises commercially rateable by a local authority and encompasses about 140,000 businesses. While €257 million looks like a big figure, when you see how far it has to stretch, you realise it will make very little difference to many businesses. Many have complained there has been no further clarity on the application process nor the date by which they will receive grant aid. Definitive clarity on this scheme is urgently needed.

The Government announced last week that it would bring forward changes to the tax debt warehousing scheme introduced at the height of the pandemic. Since the summer of 2022, Sinn Féin has called for a sensible response to the recovery of warehoused tax debt to ensure all moneys owed under the tax warehousing scheme are recovered, while not putting small and medium enterprises and microbusinesses at risk. This call was reiterated at various stages over the past two years, particularly as the economic climate became more difficult for SMEs, as evidenced by the more than €90 million in warehoused debt that is becoming uncollectable due to liquidation, examinership, cessation of trading and bankruptcy. At the eleventh hour, the Government responded to the calls of Sinn Féin and businesses and announced welcome changes to the warehousing scheme. It is essential that the SME and micro sectors receive adequate support and attention because of their significance in employment levels, value added and social and economic importance. Many SMEs such as pubs, cafés and restaurants have had a significant cultural importance in our local communities. It is important that they get the support they need at this crucial juncture because for many people, their local café or gastropub is the heart of the community. The Minister of State will know this from her own community - it is not just the place where people go for a cup of coffee, it is where they go to congregate. Many people get their first jobs in those businesses. They are the lifeblood. We will not know what we have until they are gone. I encourage the Minister of State to bring back a clear message from this debate to her colleagues in the Government.

Deputy Rose Conway-Walsh

I thank the Regional Group for bringing forward this motion. It is important. It is timely that we are speaking on it this morning. I, like all other TDs and my colleagues, live in a community in which businesses are struggling. I cannot remember a time when so many businesses were concerned about escalating costs which they just cannot manage. Many are family-owned businesses that employ two, three or four people. They cannot even take a wage themselves at the end of the week. Something is drastically wrong. There are 304,947 SMEs operating in Ireland and 99% of active enterprises employ 70% of the workforce. I ask that the Government focuses on what those businesses need. I am afraid that the Government has stopped listening to the struggles these businesses are going through. The majority of these firms are family-owned, established, non-export businesses or businesses that have just started up. We need them as employers in our communities. If you walk around any town, you can see many of those businesses that do not want to shut down making the decision to shut down.

Why are they doing so? It is because they are sick and tired of announcements by the Government from which nothing ever materialises. My colleague, Deputy O'Reilly, has just pointed out that we are sending €1 billion that was earmarked for small and medium businesses back to the Exchequer to do something else with. Businesses are asking me how we are doing that. Is it that these businesses are not important enough? We have to ask why these businesses are shutting down and struggling so much. As I have mentioned, there was a situation in respect of LNG that led to a great many businesses being excluded from TBESS. An awful lot of these schemes discriminate against people in rural Ireland who do not have natural gas. I ask the Government to wake up and to see what is happening with small businesses. Astronomical rates are being charged. Businesses just cannot afford them. They are on their knees. There has to be a collective effort to ensure that these businesses survive in these counties and continue doing the good job they have done for a great many years.

Deputy Mairéad Farrell

An tAire Stáit and I both know the very real impact business closures are having across Galway. This is an issue we see in our cities, our towns and our more rural and isolated areas. In any local town, you will see the coffee shop, the butcher, the local grocery shop, the bars, the restaurants and the hotels. Any one of these closing can have an impact on the area. If we ignore the fact that these businesses are struggling and that businesses are telling us that they are going to have to close their doors, we do so at our own peril because of the impact these businesses have on their local communities, the vibrancy they bring to them and the job opportunities they create and because the amount of money in circulation increases when people are employed in the local area. One business owner in the Connemara area, a very rural area, contacted me to say that they are extremely concerned that they will not be able to keep the doors open until the summer. That is the kind of impact we will see if we do not take this crisis seriously at this very moment in time.

Inné, phléigh muid an méid atá ag tarlú sa nGaeltacht maidir le cúrsaí pleanála. Dar liomsa, baineann sé seo ar fad le buninfreastruchtúr nó bunseirbhísí na Gaeltachta. Muna bhfuil daoine in ann teach a thógáil, a fháil ar cíos nó a cheannach, ní bheidh siad in ann fanacht sa nGaeltacht. Ar an taobh eile den scéal, muna bhfuil gnólachtaí agus an cineál seirbhísí sin sa gceantar agus muna bhfuil caiféanna, bialanna agus tithe tábhairne in ann fanacht ar oscailt, ciallaíonn sé sin nach bhfuil na bunseirbhísí sin ann. Dúirt gnólacht áirithe liom go bhfuil siad an-bhuartha nach mbeidh siad in ann fanacht ar oscailt go dtí an samhradh toisc go bhfuil siad ag streachailt an oiread sin. Tá sé fíorthábhachtach go n-éistfidh an Rialtas leis na comhlachtaí sin mar beidh sé fíordhona dá mbeadh orthu dúnadh.

Deputy Paul Donnelly

As the Minister of State will be aware, one of the biggest overheads for a small business is the cost of heating and electricity. I will raise the particular issue of small businesses operating as social enterprises. I refer to small cafes, community centres, community crèches, kids' clubs and recycling and upcycling businesses. There is a vast range of small businesses out there. The core objective of social enterprises is to provide community services on a not-for-profit basis. Money earned by these small businesses is used to fund and improve the business and to pay a living wage so making ends meet in the current cost-of-living crisis is extremely hard for many of them.

The use of green energy would greatly reduce social enterprises' overheads and improve overall well-being in our communities. The initial installation of solar panels, wall insulation, heat recovery systems and electric car charging points is very expensive and would decimate the budget of any small social enterprise. We need to ensure that proper funding is allocated to businesses to help with these installations and to ensure they are dealt with separately within the planning procedures to prevent any delays when they are ready to make that transition.

I draw the Minister of State's attention to something that was on the television the other night, namely, the incubator hub in Tallaght. This is a project aimed at start-ups and small enterprises in south County Dublin. It installed solar panels, heat pumps and heat recovery systems with air exchange. This is all designed to deliver carbon-neutral heating and power. The hub's energy is now provided solely through green means and it provides power and heat to co-working spaces, start-up SMEs and the hub's cafes. By providing proper funds and reliefs and amending planning regulations, we can allow these community hubs and social enterprises to become centres of excellence for sustainability, offering a comfortable co-working space and coffee shops with a minimal environmental footprint in the local community.

Deputy Donnchadh Ó Laoghaire

I thank the Regional Group for bringing forward this motion. It is timely and we support the principles within it, although our approach to resolving these issues may be somewhat different. For more than a year, Sinn Féin and, in particular, Deputy O'Reilly have been highlighting the crisis facing SMEs, particularly in the hospitality and retail sectors. In the city of Cork, we have seen a slew of long-established and well-regarded businesses close in the city centre. Since Christmas, we have seen the closure of Tung Sing, which had been there for 60 years, Pigalle, Twilight News and Nash 19. They were all forced to shut their doors because they cannot afford to trade in the city centre. In the first instance, my thoughts are with the staff and their families. This will have been a devastating blow to them. These are a great loss to the city and their closure raises serious questions regarding the hospitality sector across the State, as well as specifically in Cork.

There are many viable but vulnerable businesses that have tried to keep going and keep afloat but that have struggled with warehoused debt, including tax debt. It has been our view for some time that some of these debts needed to be elongated with more time given to businesses to repay those debts. At the eleventh hour, the Government responded to those calls from Sinn Féin and from business and announced that the interest rate on tax debt would be cut to 0% and that Revenue would take a flexible approach to repayments, on a case-by-case basis. We welcome that but this decision could have been arrived at earlier.

It is also the case that many of the supports that are available to businesses are too difficult to access. One of the biggest issues businesses raise with me is the cost of energy, which has skyrocketed. Some businesses are extremely energy-intensive. I refer to things like dry cleaners and beauty salons. These businesses can be very small but still use a great deal of energy. Some of the supports, including the temporary business energy support scheme, TBESS, are too difficult to access. TBESS has been a failure. There had been a budget of €1.3 billion but there was an underspend of €1 billion. That is an enormous shortfall. The scheme is too cumbersome and difficult to access and it is much harder for small and medium businesses, which comprise the majority of hospitality businesses, to avail of. We had hoped that the underspend would be reprofiled and distributed to struggling SMEs but that money was returned to the Exchequer and lost to business.

The response of the Government to the cost-of-doing-business crisis facing the SME sector has been ineffectual and a significant frustration for businesses. It is essential that the sector receive adequate support and attention because of its importance to employment levels and the addition of value and its social and economic importance. We need to see the Government listening to and implementing our proposals to ensure that our towns, villages and city centres are the destinations we want them to be.

Deputy Martin Browne

Communities across the country are seeing the closure of restaurants and other small businesses. In Tipperary town, we recently saw two such restaurants closing down. It is worrying that such a situation has been allowed to arise in a town that has been allocated a task force because of its level of deprivation. We have seen similar closures in Carrick-on-Suir and other towns around the country. Small businesses are the backbone of each of our communities. According to the RAI, 280 cafes and restaurants have closed in the last six months alone. That needs to be addressed as soon as possible because the effect of closures in a small community on the area's overall economy and social well-being can be profound. As one business said when announcing its closure recently, "We were not just a cafe and restaurant, we were a community hub".

Businesses tell me of the difficulties they have had in applying for the temporary business energy support scheme. This was a considerable factor in the underspend, which resulted in only 11.5% of the budget being spent. Deputy O'Reilly and Sinn Féin had called for the scheme to be simplified and expanded, which was not done. We hope that the unspent funds would be redistributed among struggling SMEs but, unfortunately, that money was returned to the Exchequer with only a small amount allocated to the increased cost of business scheme. We are aware of the last-minute moves regarding tax warehousing but other measures need to be introduced promptly.

Living wage ambitions and the extension of paid sick days are necessary policies to ensure workers can live decent lives. It is for this reason we have continuously called for the Government to investigate the value of time-limited supports for vulnerable businesses to meet their new obligations on the journey to a living wage.

On the issue of the increase in employers' PRSI, I note that Sinn Féin would put the emphasis on the employers most able to pay using the portion of income in excess of €100,000. We understand that these have had a significant impact on operating costs. Sinn Féin is also a proponent of expanding access to credit with low interest rates and elongated repayment periods to help SMEs through this period.

The hospitality and construction sectors saw a 62% increase in insolvencies last year. That trend cannot be allowed to continue. I appeal to the Minister of State, Deputy Calleary, to consider all approaches available to him and in the interest of cafes, restaurants and all those other small business we need to keep our communities vibrant.

Deputy Ruairí Ó Murchú

I do not believe there is anyone in this entire building who has not been contacted by those in business. I thank the Regional Group for bringing this motion forward and giving us the opportunity to debate. We know the issues being faced by micro, small and medium enterprises. We have often had an over-and-back in relation to energy costs. There is an accommodation crisis and a property crisis. We know the cost of rents. No doubt this is a significant factor in the costs for businesses and this is before one even talks of rates. We know the issues we have had for a considerable period around insurance and public liability. Some moves have been made in that regard but with a lot of them we should probably have been in the place we are now a lot earlier. I believe that a further journey has to be made with regard to insurance companies. There is an element of ensuring we keep the pressure on. This is before anybody has to look at any sort of capital outlay and particularly for building costs. Businesses will welcome any sort of injection of cash or anything that helps them at this point. Everybody has spoken about the issues currently facing the hospitality sector.

As for the increased cost of business scheme, there are question marks around the timeline and how easy it will be for those to access it. We know from a lot of businesses that this will not cut the mustard. I will not start naming places in my home town of Dundalk that have spoken to me on it as they probably would not thank me for it but the Minister for Enterprise, Trade and Employment has said in a lot of these cases - especially hospitality businesses that are involved in food production - there are real difficulties and there would be a need for some sort of targeted scheme. We need to deal with that. The point has definitely been made in relation to the temporary business energy support scheme and the fact that €1 billion of underspend could have been reprofiled. We definitely could have simplified that system. We have to look at doing this a lot better. We welcome the moves on warehousing tax debt but many of these things could have been simplified a lot earlier. I seek some detail on what is being proposed for the hospitality sector.

While I have the Minister of State in front of me, we have spoken before on manufacturing and a particular manufacturing company, Enterprise Ireland and engagement. At times, their added cost can sometimes be offset by capital outlay, which would allow them to operate on a wider level. I will come back to the Minister of State and the senior Minister on the matter of PayPal and Glen Dimplex and the need for Government engagement, especially on the case of workers in Marks and Spencer with 57 job losses in Drogheda.

Deputy Ged Nash

I am pleased to speak on this solutions oriented motion on behalf of the Labour Party. The Labour Party is a party that uniquely values and understands the issue of work, the question of work, the dignity of work, and the value of work that contributes to our society. We cannot have the kind of decent work that we strive to have if we do not understand how business works and if we do not try to create the conditions in which viable businesses thrive. This is the essence of social democracy: good jobs in a regulated market economy that works.

We accept that there are many good and viable businesses that are struggling to survive at present. We meet those business owners every day. The reasons for their vulnerability are many and complex. The conditions and the costs of simply being in business have escalated and are escalating. This is causing real anxiety for business owners, the people who - in our experience - are the very last to get paid. Since 2017 or 2018 we have not had what one might call normal trading periods or a horizon that might be viewed by SMEs with great confidence. There was the threat of a bad Brexit, we had the pandemic and there is war in Europe and the consequences of that. The response by the State and the supports provided to enterprise to meet the employment and business challenges faced by this polycrisis were unprecedented.

Those supports worked and we got through that but I fear that with the winding down of supports and when the tide goes out, many businesses will be exposed and in danger. I put it to the Minister of State that they will be exposed due to still high energy costs. Businesses are vulnerable and unable to invest because of the high cost of borrowing as a result of still very high interest rates, limited competition in retail banking and limited access to alternative forms of finance. The insurance sector is still charging high premiums despite Government reforms. Businesses are worried about higher labour costs as workers understandably seek higher wages, partly as a result of Government failures on housing supply and rent control, expensive services, the high cost of childcare, and the cost of living.

This motion proposes many sensible ways in which the Government can support the indigenous enterprise sector. I have had the privilege of being a Minister of State at the Department of Enterprise, Trade and Employment for two short years. We brought in a range of measures, new initiatives and legislation to help improve the environment for new businesses, to help them work and to create new jobs. We did this at the time with a reforming zeal that made us adamant that every single job is valuable and every business deserved a chance. We need a renewed target and focus at the heart of Government. We did this because while our foreign direct investment sector is the part of the economy that gets the headlines, as do our internationally high performing Enterprise Ireland client companies, the unsung heroes are the people in small-town Ireland and in our cities who are responsible for 1.2 million jobs, which is close to 70% of our entire labour force. We set up the successful local enterprise office network, Microfinance Ireland, new credit guarantee schemes and codes of practice to get SMEs paid on time. We also set up the retail forum now chaired by the Minister of State, Deputy Richmond, recognising that retail is the single biggest private sector employer, as well as introducing online trading vouchers to get businesses online; placing a real focus on high-potential startups and a renewed and unprecedented focus at the time on the economic potential of cultural enterprises and the design sector. The list goes on. At present, there is an anxiety about additional costs being imposed on businesses that are just emerging from a difficult time, albeit a time when they could rely on very generous State supports.

We in the Labour Party have been calling for moves to a living wage, moves to bring employer PRSI up to EU norms, an auto-enrolment pension scheme and other important delayed initiatives to bring us up to basic European social standards. We make no apologies for that. Most business owners understand the need for these initiatives. The Minister will understand, however, that businesses find it difficult that this is happening all at once. It need not have been like this. This is the point. These are measures that could have been introduced between 2016 and 2020 on a progressive and planned basis but the then Government, backed by the Minister of State's party, chose not to. In failing to do all of this then, the Government quite frankly has made a rod for its own back.

The motion is correct that we need a fresh and renewed focus on the SME sector and on locally traded businesses that need to be minded. What does that mean in practice? I am attracted to the idea contained in the motion of a standing group, or a task force as it is described, on small and medium enterprises. While a task force suggests it is a short-term measure, I believe there should be a standing group at the heart of Government addressing these issues given the prominence and importance of the SME sector. The sustainability of the SME sector cannot be addressed by piecemeal and short-term cuts to the VAT rates, for example, and time-limited and expensive subsidies that do not deal with the fundamentals and are of questionable efficacy anyway. I believe that a group as described in the motion should be set up, however.

When we in the Labour Party engage with local restaurant owners up and down the country in our constituencies and when we get down to the roots of the challenges they face it is not in the end ever about VAT. When it is stripped down, it is about energy costs, labour supply, commercial rates, high commercial rents, high costs of insurance and insurance claims and a lack of affordable finance. To take first things first, if the right decisions are made, these are areas the Government can help to regulate, manage and control. In recent months, for example, we called for an extension to and more flexibility in the warehoused tax debt.

The Minister for Finance has delivered on that. The Labour Party has argued cogently that the Government took the wrong approach on energy costs. The low take-up of the temporary business energy support scheme, TBESS, proves that.

We have called on the Government to do something practical to address labour supply in a tight labour market such as reviewing the stamp 2 permission to enable those who are currently allowed to work 20 hours a work to take on more hours, thereby automatically introducing more labour supply into a tight market. I also urge the Government to keep our permits system under regular review and make it more responsive to proven and identifiable labour market needs. Another action would be to process international protection applications more efficiently and consider allowing applicants to work sooner than the system currently allows.

The Government should have the courage to carry out a full and comprehensive review of, and initiate a change of approach to, the whole principle of what is a Victorian commercial rates system. It is an inequitable system for bricks-and-mortar businesses, which have to carry an unfair share of the cost of local services. Last week, Irish Small and Medium Employers, ISME, proposed that the 1% training levy be suspended for a time. Given that the training fund is in surplus, that proposal could be considered for implementation on a short-term basis to give some relief. More than ten years after their establishment, it would be timely to review the remit of the local enterprise offices, LEOs, as well as that of Enterprise Ireland. Alternatively, we might examine the prospect of creating a new agency to focus in a targeted way on the prospects of medium-scale businesses in Ireland and how we can scale them up and make them more productive.

All of these measures, taken together, could have a real impact for SMEs. While we have some issues with aspects of the motion that has been brought forward, we support its broad thrust and what it is trying to achieve.

Deputy Catherine Murphy

Our aim is to have a strong economy and a fairer society. The small-to-medium sector is a critical part of that. There are a number of elements to the motion that need to be broken down. In the case of retail, there is no doubt that a different type of competition is now going on with so much happening online. That competition is causing problems for those business owners who have to provide a building, pay rent and rates, heat the building, provide car parking and do everything else that goes with running a business. There are issues that need to be looked at distinctly and that is one of them.

The cost of energy is a critical issue. I have a memory of the awfulness of the inflationary spikes in 1975 and early the 1980s. Inflation went as high as 21% at it peak. There were two spikes, both of which were preceded by an oil crisis. That tells us something about the importance of a sustainable and affordable energy supply. One of the causes of inflation, which was a knock-on consequence of Russia's war on Ukraine, was having to find new energy sources. That is one of the drivers of costs. The fallout from the very high inflationary environment in the 1970s and early 1980s was the awfulness of the 1980s, with dole queues, no jobs and people emigrating en masse. It is important to appreciate that there is a tail that goes after these kinds of shocks. That has to be managed.

Looking at retail, restaurants and other customer-facing businesses bring a vibrancy to our communities, whether in cities, towns or villages. They give us something distinct. The one thing we do not want is to have a lot of redundant buildings because that degrades our towns and villages. The passive security of having a vibrant town or village centre is undermined by such closures. We must pay serious attention to those sectors.

I have spoken to businesses owners employing good numbers who say the cost of energy and insurance is a particular challenge. I was shocked to hear the difference in what they were paying prior to the war in Ukraine and what they are paying now and how difficult it is for them to keep going. Most of our industrial focus has been on FDI. There needs to be a renewed focus on the small-to-medium sector. If we neglect it, we will see job losses. We must be conscious of the fallout from the previous and much more radical problem with inflation. It was very difficult to get that under control.

On wages and the minimum wage, there was an exodus of staff during the Covid period. Good employers are having a real problem retaining staff, with many of them paying more than the minimum wage, for which I am very glad. However, anyone who thinks the minimum wage is a living wage is not paying attention to the work that has been done on that. According to the Parliamentary Budget Office, between 2016 and 2022, increases in the national minimum wage did not keep pace with increases in average hourly earnings. The minimum wage might have gone up by 15% but earnings in the rest of the economy went up by 22%. It is really important to appreciate that people on the minimum wage spend all their money. They do not have any residual money to save; all of it is spent on necessities.

Other factors are driving the cost of living for people on low incomes. One of those, and a critical one, is the cost of accommodation. Costs in the economy, particularly the cost of housing and energy, are driving wage demands and are a major issue for almost everyone. There is a perception that the insurance issue is dealt with but it most certainly is not. Some of the increases in premiums we are seeing are closing down businesses. This situation cannot be allowed to elongate. It must be dealt with in a timely way. There is a real issue there that is driving up costs. There is no doubt in my mind that price gouging is going on in the insurance sector and it is having an impact on some businesses.

We are in a time of full employment. We should be looking at the areas where there can be a real impact on costs. The focus of attention should be on energy, insurance and the kind of competitive disadvantage we are seeing for other businesses versus the companies such as Amazon. We are not collecting commercial rates from the latter and they do not have to pay the kinds of rents being asked in our towns and villages. We must get to grips with this issue because it is impacting hugely on the retail sector.

That has to be dealt with as a matter of urgency. We need some equalisation on that. I will leave it at that.

Deputy Richard Boyd Barrett

I thank the Regional Group for bringing forward the motion to discuss SMEs and the supports they need. The first thing I want to do is to advocate on behalf of the 26,000 small enterprises who are the taxi drivers of this country. They are very concerned, at the moment, about moves to deregulate the taxi industry that are being spearheaded by some other SMEs that - do not get me wrong - have a legitimate concern, specifically those in the pub trade, restaurants, night entertainment and so on, who have teamed up with Uber and some of these other ride-hailing app people to argue that there is a chronic shortage of taxis and that effectively we need to introduce the Uber-type model for taxis, where anybody can be a taxi driver and where there is complete deregulation. The taxi drivers - 26,000 of them and their families - are very concerned. I agree with them that this is not the way to go. First, huge numbers of those taxi drivers have invested large amounts of money in buying new taxis, often electric vehicles, and they have big loans with the banks. If there is wholesale deregulation of the taxi industry, that will seriously impact on their ability to make a living and, therefore, their ability to pay back loans, which are very large loans in many cases, for expensive new taxis. We should not go down that road.

Linked to that, we should also not lower the entry requirements for going into the taxi industry because when people get into a taxi, they need to know they are going to be safe. They need to know they are in a properly regulated taxi with somebody who knows the business, knows the area and is not just somebody who can put themselves on an Uber app with the potential danger that they do not really know who is driving them and so on. That is important. The taxi drivers would say that some of the figures being put out by Uber and some of the others about the chronic shortage taxis are inaccurate. Apparently, FREENOW has very different figures on the availability of taxis. It is certainly the case that at certain times we see long lines of taxis waiting long periods to pick up a fare. The taxi drivers admit that there are pinch points at particular times of the day, or particularly at night. How do we address that? It is unfair to put the burden of solving that problem solely on the shoulders of taxi drivers. We need more frequent or expanded public transport and bus services at night, which can help the small businesses that depend on night time trade but not put an excessive burden on taxi drivers to fill a gap in the provision of late night transport. The other thing is that taxi drivers will point out their safety concerns. Many taxi drivers do not like driving at night because they are worried about their personal safety. It is up to the Government to address those safety concerns but deregulating the taxi industry is not is not the way forward. Critically, the Government, the National Transport Authority and anybody who is looking at this issue needs to engage with the taxi drivers and treat them with respect. The last time we had deregulation of the taxi industry, it was a total disaster for taxi drivers and it should not happen again.

The second group I want to advocate for consists of our many actors, musicians, performers, dancers, writers and directors, of which there are tens of thousands, who have helped contribute to the culture and music of this country - things we often take for granted. They are mostly sole traders. They have a very precarious existence, going from gig to gig, and very a poor income in many cases. Most of our artists and the people who contribute to the films that we see on television or who work in music live in poverty and in very precarious circumstances. They need more support. I believe that the basic income for artists should be extended to all those who work in the in the arts. It is also critically important that the Government addresses the copyright issue in terms of intellectual property rights and royalties - in other words, for writers, directors, actors and so on who are being robbed of the royalties they should get for their performances. They get paid for making a television programme or whatever but then the producers run off of the royalties when the same thing is distributed on Netflix or whatever it is, and they are not getting paid. That is a breach of the copyright directive. The use of buy-out contracts being enforced on writers, directors and performers by producer companies has to stop. It is contrary to the copyright directive, it is contrary to the law and it is an abuse and exploitation of our writers, actors, performers, dancers, musicians, composers and so on. I ask the Government to seriously examine that.

Generally, there are some people who rightly want to be small businesses, loan traders and so on. There are other people who are wrongly classified as those things because it suits their employers not to give them proper jobs. That is widespread in a whole number of industries. The arts is another area where it is widespread. If you want to be a small business, that is fine, but if you are actually an employee who is clocking in from nine to five and working from the same person again and again, even if it is episodic or in the gig economy, you should be classified as an employee so that you get your holiday entitlements, sick pay, pension rights and so on and so forth.

My last point is on the generality of SMEs. When small and medium enterprise owners come to me, their concern is rates. It is one of the big concerns. It is not fair that a small café pays the same rates, per square metre of the business, as a bank that is making billions of euro in profits. We should have a differential scheme of rates based on revenue and profits, and not one whereby the butcher, the baker and the candlestick maker are paying the same level of rates as huge chains and banks that are making enormous profits. I also believe that we need a not-for-profit insurance company that provides insurance that is actually affordable for small and medium enterprises. Finally, we have to do something about massive rent increases for small businesses that can often put them out of business at a stroke.

Deputy Michael Collins

I thank the Regional Group for bringing this very timely motion. Elaine Fitzgerald Kane, the chairperson of the Irish Tourism Industry Confederation, said recently that the tourism sector has been abuzz with discussion about the significant number of closures of food-led hospitality businesses in January 2024, particularly when compared to January 2023. The scale of these closures is both astounding and distressing. We have witnessed too many livelihoods lost and gaping voids left in the fabric of numerous communities across our nation. These closures have sparked conversation about the future of our social outlets. Where will we go now for our daily cup of coffee? It was often a social interaction for many. Where will we celebrate special occasions? Where will we gather after a funeral?

Regrettably, this wave of closures was not unexpected. It had been anticipated and flagged to the Government. The backdrop of this situation is the escalating cost of doing business in the aftermath of the pandemic, which has been exacerbated by the recent increase in VAT and other Government-controlled costs, with warehoused tax liabilities due to be repaid by May. Many business owners cannot envision their businesses and livelihoods surviving in the current operating environment. The typically challenging early months of the year have taken on a new level of difficulty for our seasonal tourism community this year. While recent measures announced by the Government are welcome, they have not been timely or substantial enough to save many food-led hospitality businesses and livelihoods.

Surely be to God, Fine Gael and Fianna Fáil politicians are out around the countryside every weekend when they get back to their constituencies. Are they staying inside in bed?

Do they not understand the crisis that many of these cafés, restaurants and pubs are going through? There is not a care in the world in here. I brought this issue up with the Taoiseach about two weeks ago and his answer was appalling. It was more or less that these companies were going to the wall anyway and that we should move on. This is appalling and it is time for the Government to understand that the VAT rate must go back to 9% immediately. That is the first move of many that the Government must make, or is it happy for these businesses to shut their doors on the people?

Deputy Michael Healy-Rae

I welcome the Regional Group bringing this to the floor of the House. SMEs, particularly in rural and regional areas, are under significant pressures. Government policy decisions have increased the cost of doing business, with input costs such as energy inflation, insurance, labour and VAT increasing, making it increasingly difficult for small businesses to continue trading. This is particularly true for businesses in the hospitality, retail, travel, food, drink, tourism and entertainment sectors. I know that in County Kerry, which I am there to represent, the tourism capital of the western world, places such as Killarney and others around the Ring of Kerry, including great towns like Killorglin, Castlecove, Sneem, Caherdaniel and Kenmare are finding it increasingly difficulty. Many cafés, shops and restaurants have sadly closed. They have great businesspeople and great employees providing a great service, and unfortunately they had to shut their doors. I am disappointed that Fianna Fáil and Fine Gael in Kerry are asleep. I announce it in this House that they are asleep. Their political representation here is asleep. I am sorry to say that but I am saying it because I hear it every day from those businesspeople in County Kerry. They ask me what in the name of God the Government it is doing and why it is not doing something to keep their doors open. What the Government is doing is wrong. You are all asleep.

Deputy Richard O'Donoghue

On a light note, I wish you all a happy Valentine's Day. Publicly, I have to say that I apologise to my wife, Kay, that I will not be home this evening, but we will make it up later in the week and might go for a bite of dinner.

I am an employer myself. From the point of view of small businesses, we can hit on all the different topics such as the wage increase. All the employers that I met wanted to have the minimum wage increased. Many of them were left with no option but to up their outlooks to make sure they could cover. The Government has done nothing for them. It could have reduced the VAT rate to 9%, which would have meant that people could have increased their wages and that companies did not have to up their rates in cafés and so on to counteract it. That is what the Government failed on.

If you have a small shop in Limerick or anywhere in a city where there is high footfall, you pay so much in rates per square foot. If you have a small business in a county and are trying to have all the different things for people in the locality, with a bigger premises but not the footfall, you are being penalised by so much per square foot. The Government has to look at footfall when it is doing rates systems. There could be a small shop which is sustainable and a bigger shop in the countryside which does not have the footfall, which is penalised for looking after the local people.

Deputy Danny Healy-Rae

I thank the Regional Group too. First of all, one size does not fit all. Increasing the VAT for restaurants, pubs and some hospitality sectors is not fair. Many of them are crying like they never cried before, especially in places like Killarney, where footfall is falling because of an increased number of beds in hotels in that sector being handed over to asylum seekers and refugees. Some 36% of the bed nights have gone to those. Places like Killarney have to be treated specially to reduce the VAT to 9% and do something about the rates. The other sector that I am very worried about is small and medium-sized enterprises. It is grand to afford the employees extra sick days. I believe it has been five up to now and it will be ten next year, but how will the employers keep going? Yes, I was an employer myself. People have to try to pay fellows on Friday evening. The Government cannot bring in laws that will help one and crucify the other. Friday evening comes very quick if you have people to pay and families depending on you. The Minister of State has to do something about that.

Deputy Carol Nolan

I thank the Regional Group for tabling this excellent and timely motion, which I will support. I know that in my constituency, there are 1,530 businesses which currently have liabilities of €23 million warehoused as part of the tax debt warehousing scheme. There are 755 businesses in Offaly with tax debts of €11 million, while in Laois there are 775 businesses with €12 million in debt. While the move by the Minister to reduce the interest rate is welcome, it does not remove the key difficulty of the repayments per se. We will all have seen the correspondence from the Restaurants Association of Ireland, highlighting the fact that the recent wave of small independent restaurant and café closures followed directly from the 50% increase in the hospitality sector's VAT rate last September, from 9% to 13.5%. That has been well documented in national and local media. This morning, I am calling for the VAT rate of 9% to be reinstated immediately to prevent further closures of small businesses. We are all seeing it in our constituencies, where businesses just cannot keep going. The VAT rate is the primary cause of closures. According to the Restaurant Association of Ireland and its members, the 9% VAT rate is the only alternative. Hairdressing businesses need this as well.

Deputy Catherine Connolly

I thank the Regional Group for this motion. It is putting the spotlight on something extremely important. It is a practical motion. It asks for a task force and an interim measure. It recognises the absence of access to affordable housing and housing in general. The only little problem I have is with the language to abolish the welfare trap. It is put in a very negative way. What the Regional Group is really asking is that the benefits the person gets from social welfare would continue, which assists the business. I would have phrased that differently. I totally agree with the Regional Group about procurement and the importance of changing that. I know the Minister knows this himself. I know that what I still call the VEC in Galway has repeatedly brought to our attention that it is absolutely limited in what it can do, with local businesses losing out completely. All of the figures have been stated so far. What can we say? There are almost 1.2 million people, as Deputies have repeatedly and rightly said, because it is a staggering figure. These small to medium enterprises accounted for 99.8% of all enterprises. The figures are staggering.

I have any amount of correspondence from businesses in Galway. If I have time to talk about one, i gcroílár na Gaeltachta, it will really capture how important a small business or restaurant is to the whole of County Galway. If I do not, I will send it to the Minister of State. I welcome all of the supports that have been given by Government. My difficulty is that they have been once-off supports, without a sustainable plan. This motion is asking for a sustainable plan. Transformative action is needed on this. That is not happening. Why do I say that? We have been told in two different reports, once when Brexit came and another when the Gaeltacht did a review, that small enterprises in Gaeltacht areas were particularly vulnerable. There was an ESRI working document too that said we were particularly vulnerable.

I have a letter from somewhere right beside TG4 that was set up during the middle of Covid. One paragraph captures what that small restaurant does for the area, from the middle of Connemara to Moycullen, Oughterard, Ballinasloe and up to Mayo, with regard to accessing local products, including organic vegetables, organic eggs, meat from Oughterard, sausages, and a whole list of things. I cannot believe what it is doing. It has captured it in one paragraph. If the Government was to produce a plan that would reward local businesses for sustainability and transformative action, I would be totally behind it. I think it is the way of the future.

Deputy Marian Harkin

I thank the Regional Group for highlighting the crisis that is facing so many micro, small and medium-sized businesses, which everyone says are the backbone of this country. The crisis is one that threatens their very ability to remain viable or, in simple terms, to just keep their doors open.

As in life, I accept that there is no certainty in business. None. However, businesses have to be able to plan and find a way to make a modest profit. Otherwise, they have to close their doors. Some of the Government's policies are good and we agree with them, which I will come to in a moment, but when Government policy intervenes to the extent that it puts such extra costs on businesses, then it has a responsibility to look at the viability of those businesses and assist them. As I said, the Government has increased the minimum wage and introduced new sick pay legislation and auto-enrolment for pensions. Everybody agrees that these are positive steps and need to be done, but it cannot ignore the impact those extra costs have on small businesses.

The reason I and, I presume, the Regional Group are emphasising small businesses is that they rely on their core business and transactions, whether it is selling a cup of tea or a sandwich, a litre of milk or a kilogram of mincemeat, to make their profit, whereas many of the larger companies have property and forestry investments. In my constituency, they certainly have. That keeps those larger businesses afloat. They can hold on and survive when smaller businesses that rely, as I said, on their core business close their doors. Those businesses will close their doors while larger businesses, those which have interests elsewhere, can survive and hoover up the businesses that were there. The Minister of State and I know that has a greater impact in small towns and villages in rural Ireland and the regions.

I will not name businesses, but in the hospitality sector alone there have been six closures in my constituency since the VAT rate was increased from 9% back to 13.5%. There was another announcement today of a significant closure. The VAT rate for hospitality businesses must be reduced to 9%.

Deputy Michael McNamara

I thank Deputy Shanahan and all his colleagues in the Regional Group for giving us the opportunity to discuss this very important issue. In my constituency, as in his and those of all in that group, including Deputies Berry and Lowry, small businesses are under pressure, hospitality businesses in particular.

I will focus a little on County Clare. Businesses there are under pressure for two reasons, one of which is of the Government's making and one that is not. The Government has increased the costs for small business through increasing the national minimum wage, etc. It will say that is only fair to keep pace with inflation. Indeed, people have to be paid to keep pace with inflation. However, small businesses are not able to pass that on to consumers because there are fewer consumers. The majority of hotel rooms across north and west Clare, where most hospitality businesses are based, are filled with Ukrainians fleeing the situation in Ukraine. To be very clear, that is not the fault of Ukrainians or the Government, but the Government has to bear that in mind and has to introduce measures. The increase in the VAT rate from 9% to 13.5% effectively stripped out the margins of those hospitality businesses. Going from Bellharbour all the way down the coast to Ballynacally, such businesses are the major employers. Their margins are gone. I ask that the Government revisit the VAT issue, even if it is only for counties or parts of counties where such a large proportion of bed numbers are taken up by Ukrainians because those businesses are taking a huge hit.

I will also mention farming businesses. They might not be considered to be SMEs but they are small businesses. They are under significant pressure because, like the hospitality sector, their costs have risen dramatically in the past two years but the price they are getting for their product has not increased. It fell precipitously last year with regard to milk. It stabilised with regard to beef but it is not rising to match the cost of inputs. Again, their margins have gone. People cannot operate without profits.

An Cathaoirleach Gníomhach (Deputy Marian Harkin)

There are about 16 minutes left. Perhaps it could be shared.

Deputy Dara Calleary

I will try my best. There is a lot to respond to-----

Deputy Denis Naughten

Sorry, but this is repeatedly happening in the House. Under Standing Orders, the party that moves the Private Members' motion has the last ten minutes of the debate. That is sacrosanct and is protected. We have ten minutes, whatever way the time is divided up. That is what is in the Standing Orders.

An Cathaoirleach Gníomhach (Deputy Marian Harkin)

I thank the Deputy. I asked for advice but I did not get-----

Deputy Denis Naughten

I have already provided advice, both privately and publicly, on a number of occasions.

An Cathaoirleach Gníomhach (Deputy Marian Harkin)

I ask the Minister of State to adhere to Standing Orders.

Minister of State at the Department of Enterprise, Trade and Employment (Deputy Dara Calleary)

I will, but the Government is only getting 20 minutes in a two-hour debate. That also needs to be looked at.

I thank the Regional Group for proposing the motion. I particularly acknowledge the fact that many of its members are businesspeople and bring practical knowledge, unlike some of the suggestions we heard today. It is very important to say that the Government has been incredibly attentive to business needs over the years. We have introduced many measures for firms most affected by the changes and, as Deputy Nash referenced, the range of challenges that have faced businesses since 2016. We have assisted through commercial rates waivers, particularly in the context of Covid, restart grants, and small business assistance schemes. In the context of energy, which was referred to, there are the temporary business energy support scheme, the Ukraine enterprise scheme and other schemes. We have shown ourselves to be incredibly flexible.

We have also completely reformed the environment in which insurance operates. We have reformed the profile of risk to the extent that insurance companies should now be providing discounts. I agree with those Deputies who said the situation is not resolved. It is not resolved. The Government does not see it as resolved but we are committed to holding the insurance industry's feet to the fire to pass on the benefit of the reductions, in the context of the profile of risk, directly to profile holders. I am working with the Minister of State, Deputy Carroll MacNeill, on that. We are working to expand the range of options and, most importantly, to ensure that the work done by every Member in this space is passed on to businesses and homeowners.

Warehousing tax changes have been dismissed as something minor but they are quite significant. In the context of interest being reduced and the changes made by the Minister, Deputy Michael McGrath, work permits have been expanded and made more flexible. Quite a lot is happening in the current crisis.

In the context of the reduced 9% VAT rate, many Members made proposals for time-limited responses and measures. The 9% VAT reduction was initially supposed to be a time-limited measure. The most recent reduction was applied from 1 November 2020 to 31 August 2023. The total estimated cost of the reduced hospitality and tourism VAT measure during that time was €1.2 billion. It was made clear at the time that the Government's intention was for no further extension. Can those who come to the House every week to agree to every Private Members' motion point out where we will get the additional €1.2 billion from? Groups come here every week who sign up to every issue as if money were no object. That is not a particularly business-focused way of doing it.

Deputy Michael McNamara

What about the Government's approach?

Deputy Dara Calleary

We are focused on introducing a number of schemes. There has been much criticism of some of the administrative burden of schemes. The increased cost of business scheme is being designed in a manner that will get money quickly to businesses and will invest more than €250 million in small businesses over the coming quarter. The Department is finalising the arrangements for that scheme. We are working hard to get that money out to the smallest of businesses. We have changed it from what was outlined on budget day in response to feedback.

I will point to other issues. The 9% VAT rate on gas and electricity has been extended by 12 months to the end of October 2024. That will assist with some of the pressures on businesses as a result of rising energy costs. We also increased the VAT registration thresholds on goods and services on budget day, which will take many businesses away from administrative and cost burdens in the current period. The temporary excise reductions that apply to auto diesel, petrol and marked gas oil, which were due to expire on 31 October 2023, are being extended until the end of March 2024. A wide range of supports is available to smaller businesses through local enterprise offices, Enterprise Ireland and Údarás na Gaeltachta, which was referred to by some Deputies.

Our Department is very aware of and in touch with the current pressures on business. We are regularly engaging with hospitality and small business through the enterprise and retail forums. We are constantly engaged with them around the pressures.

We also have to operate within a budget, and within the parameters of a budget laid down here last October. We will continue to engage with business and support business, as we have through the most incredibly challenging of times in the term of this Government. We stood by business and stood up supports, and we will continue to do so.

Deputy Denis Naughten

Every week we hear the disheartening news of local, long-established businesses closing their doors for good. This loss is not just a blow to our economy, but to the fabric of our communities in urban and rural areas. Our businesses are the lifeblood of local communities, and the heart of these communities. It seems the Government has yet to grasp the full extent of the crisis engulfing the hospitality sector and, by extension, the wider small business community. The recent wage increases and the hike in VAT on food from 9% to 13.5%, coupled with the new sick leave mandate, are compounding increasing operational costs, especially energy costs, which have more than doubled since Covid. The cost-of-living crisis has reduced footfall as consumers, faced with rising prices, cut back on spending. Staff shortages are becoming more acute, with fewer people viewing the hospitality sector as a viable career path. As a result, the very fabric of our communities, woven through our cafés, restaurants and pubs, is under threat.

The proposals we present today are a set of measures aimed at providing immediate relief and a sustainable path forward for our local businesses. First, we are calling for a reduction by one third in the VAT rate for those selling food in the hospitality sector - our cafés and restaurants. Second, we are calling for the reinstatement of the lower employer's PRSI rate for those on minimum wage. We need to see those measures enacted before Easter. This interim measure is crucial to keep the doors of our struggling enterprises open. This is not a financial reprieve or, as some suggest, delaying the inevitable. This is a statement of support acknowledging the invaluable role our businesses play in the economy and the social fabric of our communities.

More fundamentally, we are calling for the establishment of a task force with teeth, akin to the successful mobile phone and broadband task force of the past. That was acknowledged by both the State and private sector as helping to facilitate the rapid roll-out of telecommunications infrastructure across the country. This new task force would not merely serve as a discussion forum, but be as a proactive body with the authority to tackle Government red tape and the escalating costs imposed on small business. Chaired by a Cabinet Minister, it would ensure that small business concerns are not just heard but acted upon with quarterly progress reports presented to the Oireachtas joint committee on enterprise. This task force would examine every Government controlled cost impacting on small business, from licensing fees to regulatory charges, and work toward reducing these burdens. Its role would be to cut through the bureaucracy that often stifles innovation and growth to ensure small businesses have the support needed not just to survive but to thrive.

The situation is dire and the time for action is now. The Government's recent dismissal of the need to adjust the VAT rates, despite Government TDs and Ministers - none of whom came into the House today - calling for such actions only adds to the urgency of our motion. Let us not divide the House on this issue. Together we can influence change and ensure that our small businesses, the backbone of our local economies and communities, receive the support they critically need. Let us stand united in our call for action, for the survival of our small businesses and the future of our communities. I commend the motion to the House.

Deputy Matt Shanahan

I thank Cáit Nic Amhlaoibh, our parliamentary assistant, and my Regional Group colleagues for their work on this motion.

It is bad form that six of our speakers this morning were speaking to a health Minister as opposed to a Minister the Department of Enterprise, Trade and Employment. Furthermore, not one Fine Gael Deputy has taken part in this debate. It speaks volumes for the party that claims to be all about business in this country.

Our motion has three core asks and they are simple. We call for the reintroduction of the 9% VAT rate for the food and hospitality sector, an extension of the 8.8% employer's ceiling on wages up to €495 per week and the establishment of a Government task force, as outlined by Deputy Naughten, to get to the heart of the challenges facing small business. We are calling for these measures because we recognise the increasing cost burden on small business, many of which are as a result of Government policy. Government is the most material contributor to the cost of doing business in this country. Legal costs, insurance, costs of credit, local authority charges, energy, the national minimum wage and tax compliant VAT are all set by Government and cannot be bid downwards by small business.

VAT is a sales tax, and we have one of the highest VAT rates on food among EU countries. In most peer economies, VAT ranges from 5% to 9%. On wages, large enterprises of 250 workers or more, which exclude public servants, now make up 40% of those employed in Ireland. Public servants make up an additional 18% of the employed population. This group of the working population has robust access to job security and pay and conditions. A stable revenue base is also the norm for this group. However, the other 42% of the working population is represented by the small and medium enterprise sector. These businesses tend to suffer more fragmentation, more domestic competition and more competition in margin retention. To understand that, the Minster of State just needs to look at how they grow. They often remain small simply because the market offering they have is small. Nonetheless, they have significant value in terms of community employment, as well as their amenity and social offering and the cultural value they create and offer to this country. They are often an intrinsic and significant component of our tourism offering.

As has been outlined, many small businesses face rising costs and they are not recoverable for marginal increases. These businesses are therefore going under. The minimum wage increase and addition to employer PRSI have added €3,152 to the annual cost of hiring a single employee at minimum wage level. For many employers, this wage increase has also increased further because of the relative effect on other employees. Employers accept that people must be paid an adequate wage. The problem for small business is that all other costs are also increasing, and business demand and customers' ability to pay is finite. These increased costs cannot be borne by small businesses.

The public-private sector pay gap is one of the largest in Europe and it distorts the thinking of Government. Small microbusinesses cannot compete with pay levels benchmarked against high-paid civil servants and large FDI in the technology and pharmaceutical sectors. The Government has to accept this policy reality in its policy formation. I revisit the need for the small business sector to be represented at the high-level group within the Labour Employer Economic Forum, LEEF. I have repeatedly asked for this and clearly see that the voice of small business is not being heard.

I turn to other points of note. The Department of Finance advises that its Skillnet allocation cannot go up this year because of fiscal spending rules. Meanwhile, there is more than €1.4 billion sitting in the National Training Fund. If the money cannot be spent on training, the 1% training levy should be suspended until it can. Businesses have also been paying 0.5% PRSI for the statutory redundancy fund since 1979, even though a later Minister, Joan Burton, eliminated the statutory redundancy rebate. I ask again that the Government either reinstate the rebate or knock 0.5% off employer PRSI. Some of the short-term SBCI loans drawn down during Covid are maturing and borrowers need time to repay. I ask that the Government take a similar position to this accrued debt, as it has done under the warehoused debt provisions.

On radio in recent days, a Fine Gael Deputy said of our motion that we were being populist. Is it now populist to listen to businesses in our constituencies that are crying out for recognition of the challenges they face? Is it populist for TDs to suggest that TDs outside of Government might have policy ideas that reflect the needs of our constituents?

Is it populist for us to state that a significant proportion of our entrepreneurs, young people and business owners and managers feel that Ireland is fast becoming a place where they are not encouraged to start, develop or maintain a viable small business? It is obvious to me that many who are framing policy in this House have no experience of the costs or challenges involved in starting or maintaining a small business. They are obviously also oblivious to the impact of Government-sponsored charges and levies.

The requests in our motion are not populist. They are the minimum required to show support to the small and medium-sized business sector. I ask the Minister of State to encourage the Government to listen intently and implement the supports we are calling for. If he cannot do that, we will ask the House to vote on the motion.

Amendment put.

An Ceann Comhairle

In accordance with Standing Order 80(2), the division is postponed until the weekly division time this evening.