We set a low bar for ourselves as a democracy when two wealthy Kerry businessmen-cum-TDs will not reveal the details of what they traded their constituents’ votes for when they agreed to support the new Government.
Instead, we and the people of Kerry have to settle for Michael Healy-Rae’s assertion that “you couldn’t put a figure” on it “because it is so much”.
It’s ludicrous that we find ourselves in this situation, but it is also partly – if not mostly – our own fault. We have a penchant for treating politics as a theatre and the Healy-Rae brothers have shown themselves adept at playing the jester. As with Shakespeare’s fools, the joke is really on us.
The Dáil register of interests shows the two men are able and wealthy businessmen. Danny Healy-Rae’s business interests include a pub, a farm, a bus-hire business and a plant-hire company. His companies do business with Kerry County Council and Bus Éireann.
His brother, Michael, lists himself as a postmaster, farmer, service-station owner, plant-hire operator and owner of 25 properties. He supplies diesel to the council and rents it some of his properties.
If you had to hazard a guess as to what was on their wishlist for supporting the Government then you would probably include a cut in the VAT charged on hospitality from 13.5 per cent to 9 per cent. Danny Healy-Rae has spoken it about in the Dáil at length, most recently last November in the run up to the election when he chastised the Minister for Finance Jack Chambers for not cutting the rate in the budget.
The VAT rate for hospitality is a hot issue in Kerry given the relative importance of tourism in the county. If it were on their list then the brothers were pushing at an open door. Fine Gael had committed during the general election to reducing the VAT rate for food-based hospitality to 11 per cent within 100 days of taking office.
The loudest voices are those of the owners of businesses that are no longer viable - their anger is understandable
The Programme for Government negotiated between Fine Gael, Fianna Fáil, the regional independents and the Healy-Raes acknowledges that increased cost pressures on hospitality and other sectors will entail changes to VAT, PRSI and other measures. A cut in the rate for food-based hospitality to 9 per cent is pencilled in for the next budget.
The problem is that the case for a cut in VAT on hospitality is not a strong one. The sector is growing and adding jobs at steady clip. The most recent Quarterly Labour Force survey from the Central Statistics Office showed that the accommodation and food services sector added almost 17,000 jobs in the 12 months to the end of last September. Total employment was 200,000, up 9.2 per cent.
Recent inflation figures also weaken the argument for the need for a cut. The annual average rate of inflation last year was 2.1 per cent. This compares to an increase of 6.3 per cent for 2023 and an increase of 7.8 per cent for the year before.
The most recent figure – for the end of December – was 1.4 per cent. The largest price increases were recorded for restaurants and hotels, which upped prices by 4.7 per cent. This indicates the sector is putting up prices by more than inflation, which will feed through to the bottom line.
In truth, what the figures show is that the market forces of a capitalism are doing their Darwinian thing in the restaurant and hospitality sector. Unprofitable restaurants may be closing, but people are finding work elsewhere in the industry as new places open and others continue to make money.
These arguments were made back in the autumn when the Tax Strategy Group reviewed the case for maintaining the temporary reduction in the VAT rate for the hospitality sector. The group recommended putting the rate back up. If its arguments were valid then, these are doubly so now in light of the recent labour force and VAT data.
This may be the case, but the reality is that the actions of economist Adam Smith’s hidden hand do not really cut much ice in Kerry or elsewhere.
The loudest voices in the debate are those of the owners of the businesses that are no longer viable in the changed circumstances. Their anger is understandable: they are losing their businesses and livelihoods. They are also very hard for politicians to ignore and particularly those with the modus operandi of the Healy-Raes.
The campaign to cut the VAT rate is for hospitality is redolent of what political commentator Robert Shrimsley described in a recent Financial Times article as “kiss-it-better” government: the pressure that is put on those in power to respond to headlines and campaigns to fix something even if action is not warranted.
Once campaigns have reached critical mass – as the one to cut VAT for hospitality has – there is a political cost for not responding and facing down the lobby groups. This is the situation the new Government and finds itself in, but it has bought itself 10 months to find a way to wriggle off the hook.
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