Budget 2021 has an 'awful lot of sugarcoating'

Andrew Moloney in Hook & Ladder's flagship cafe on Sarsfield Street, Limerick. Picture: Brian Arthur

For Andrew Moloney, chief operations officer of the Hook & Ladder chain of cafes in Limerick, Waterford, and Clare, this year’s budget was “an awful lot of sugarcoating.” 

On a surface level, many of the supports sound great, but Moloney is concerned about the fine print: “When you go and try to get it off them, they try their hardest to get it back.” 

He is particularly sceptical of how businesses might qualify for the Government’s new Covid-19 Restriction Support Scheme (CRSS) and questions whether it may be in people’s line to shut their doors completely rather than try to operate at reduced capacities or offer takeaway services.

The scheme is a “nice gesture” he said, but for places who have lost 80 per cent or more of their turnover, “it won’t do a whole lot”.

On the positive side of things, he said the extension of the tax warehousing scheme with no interest was welcome, alongside a reduction in VAT from November. He was particularly grateful that the VAT reduction was coming into effect in two weeks, giving the businesses some welcome relief in the run-up to Christmas.

However, he's worried that despite Level 3 due to elapse in three weeks, tougher restrictions could continue to plague the industry into the Christmas season.

“Three weeks became three months pretty quickly in March, so we’re a bit scared."

“If Christmas is gone, you’ll see nearly every small, independent retailer close because Christmas is everyone’s cash cow. Without that six weeks, people won’t be able to survive," he said.

VAT Reduction 

A reduction in the VAT rate for the tourism and hospitality industry from 13.5% to 9% is “in recognition of the challenges” faced by specific industries, Paschal Donohoe told the Dáil today.

But “a VAT reduction on zero sales is zero,” said Cork publican and restauranter Sean McCarthy whose main feeling post-Budget was that the Government failed to address the most pertinent and pressing issues for those in the food and drinks industries in this year's budget.

“During normal times it was a footfall driver. At the moment, we are operating with reduced numbers or closed and a vat reduction on zero sales is zero," adding that a significant reduction in excise duty or a VAT reduction on alcohol might have been more pertinent.

Sean McCarthy of Tequila Jacks, SoHo, Paddy The Farmers and the East Village. Picture: Larry Cummins

“We’re competing with the off licences and supermarkets and they’ve done nothing for excise or a reduction in Vat on drink.” 

 “We were talking about a reduction of up to 15% in the excise tax. We were looking for an extensive reduction so that people can generate revenue to pay their bills.” 

“Not weekly bills but the outstanding debts that everyone has accumulated since March.” 

He said he feels the wet pubs were “completely forgotten about.” 

“It's just mind-boggling that they're doing nothing for an industry that is the backbone of the country," he said.

Covid-19 Restriction Support Scheme 

As regards the CRSS "any cash payment" that will help pay bills is welcome, but it won’t be “a long term aid," McCarthy notes. 

“Level 3 is upon us at the moment, but there are talks it's only for three weeks. If we’re out of level 3 in two weeks' time, that payment stops."

Mr McCarthy, who runs Tequila Jacks, SoHo, Paddy the Farmer’s, and the East Village in Cork, said most businesses are accumulating debt outside of Level 3 restrictions due to reduced numbers and higher costs related to Covid-19 compliance.

“The lifespan of that cash benefit to businesses is going to be very short," he said.

Most disappointing was the waiver on commercial rates, which was only extended until the end of 2020.

“We would all need our commercial rates to be waived until September or October of next year to give us any chance of recouping our losses and paying off existing debts," he said. 

Overall, he feels that this year's budget hasn’t delivered on key areas and much uncertainty remains regarding the future of the support schemes.

The Government has indicated there will be an extension to the Employment Wage Subsidy Scheme after it expires next March, but Mr McCarthy is worried that its set to be replaced with an unknown "variable".

“There’s a lot of big picture headings, but we don’t know the mechanisms. And for a business, we need to plan."

Industry Reaction

Drinks Industry Group of Ireland (DIGI) chair Liam Reid welcomed the new measures announced today as "essential first steps in addressing the grave challenges facing the sector."

However, he said recovery will be a long road and pointed to Ireland's high excise tax on drink as one serious impairment to that recovery.

"Publicans, restauranteurs, hoteliers, brewers, distillers, and other industry businesses are losing money that could be invested in recovery," he said.

The Vintners Federation of Ireland (VFI) described the CRSS as a "meaningful support" its for members and noted that while the reduction in VAT may be of little use to most hospitality businesses at present, it's their hope they can avail of its full benefit in 2021. 

Adrian Cummins Chief Executive Restaurants Association of Ireland. Picture: Gareth Chaney/Collins

Adrian Cummins, Chief Executive of the Restaurants Association of Ireland described Budget 2021 as a "life-line for the restaurant and hospitality industry."

He welcomed the reduction of the VAT rate and extension of the Employment Wage Subsidy Scheme (EWSS) but noted his disappointment that the EWSS and Pandemic Unemployment Wage supports were not restored to their previous rates. 

"The supports offered in today’s budget are welcomed," he said, but "there are still some long hard months ahead."