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Why the Budget Didn’t Help the Hospitality Industry

Words: Shamim de Brún
Images: Unsplash

This budget is excellent PR for the government, but it stops short of being helpful to hospitality businesses.

Energy

The FF/FG party line was that businesses would qualify for up to ten thousand euros per month to help with their energy costs. But this was all smoke and mirrors. The fine print on this measure means it only helps ease the strain to the tune of forty per cent of monthly energy bills. Moreover, with energy bills increasing by four hundred per cent, this cushion will not relieve the business enough not to pass the increase on to the consumer.

This energy bumper essentially falls as short as giving social welfare recipients their extra twelve a week. It’s disguised behind dazzling billion numbers that deflect from what the policy does.

Rising energy bills are frighteningly impacting hospitality businesses in particular because there is a lot of energy used in cooking and freezing. It is one of the most energy-consuming businesses to run. There is very little an individual business can do about this. Restaurants must heat water to wash dishes. They must heat the stove to cook the food and refrigerate it for freshness. They must have a freezer for many other perishables – such as ice cream.

Wages

While the minimum wage going up is a good thing, it does mean that wage packets for hospitality industries are increasing. A business would usually absorb this. But when this rise is combined with other rising costs, this expense will be passed on to the consumer.

VAT

There was no subterfuge, though, around the VAT kerfuffle. The budget outlined yesterday that FF/FG would not extend the current 9% hospitality VAT rate. Instead, it is set to increase to 13.5% on 28 February 2023.

This increase will make Ireland’s tourism VAT rate the second highest in the European Union. It will be far above other European countries where tourism is a significant part of their economies. Such as Portugal, Turkey and Malta.

Leo Varadkar did say they would review the situation surrounding this before it increases in March. It is, however, believed by many this is a punishment from Pascal O’Donough in retaliation for hotel price gouging this summer.

This can’t be proved. But that hasn’t stopped Twitter or the industry from pointing out that this is out of step with a ‘cost of living crisis’ themed budget. The Chief Executive of the Restaurants Association of Ireland called the budget a “big disappointment.” 

Good News

In good news, the price of a pint didn’t go up.

In better news, cider production finally has the same level of governmental support as craft beer. For years it has been relegated to an afterthought. So it’s great to see the industry getting the investment it needs to bare fruit.

Overall, the budget is made to look like the government cares about the industry while pushing an already squeezed majority of independent small businesses to the point of closure. We can only hope FF/FG will get it together over the winter and do better. But holding your breath doesn’t seem like a good plan.

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