Returning to 9% Vat rate 'would cost well in excess of €700m'

The minister denied that the closure of over 570 restaurants, cafes, and other food businesses since September 2023 signals the death of city centres. Picture: Burak K/Pexels

The decision on whether to return to a lower Vat rate for the hospitality sector is not just one of "commitment and courage" but also one of cost, the minister for public expenditure has said.

Hours after celebrity chef Dylan McGrath announced the immediate closure of two high-profile Dublin city restaurants because business is "simply not sustainable anymore", Paschal Donohoe said that returning to the 9% Vat rate would cost well in excess of €700m'.

"What the Government will have to do is look at the many different competing pressures that we have regarding how we can spend money and allocate resources on Budget day, and make the best decision overall," the minister said.

Mr Donohoe added that he appreciates the difficulties facing hospitality businesses but a 9% Vat rate would have a "very, very large impact on the budget and would absorb a large amount of the money that would be available to use".

He denied that the closure of over 570 restaurants, cafes, and other food businesses since September 2023 signals the death of city centres such as Dublin.

"I know there are challenges, I know there are businesses that will find it a struggle but we are trying to help them," Mr Donohoe said.

Addressing increased public expenditure in recent years, he said that it has risen alongside an increasing population and additional needs that have developed, particularly in health.

"We have also seen tax receipts grow ahead of that and we are now one of the very few countries in Europe that has a budget surplus, and a budget surplus which in the last year alone was well over €8bn," Mr Donohoe said.

Public Expenditure Minister Pascal Donohoe said the 9% Vat rate would have a 'very, very large impact on the budget'. 

Many people may not feel as though they are seeing value for money from the increased spend, he admitted, but argued that waiting lists for main procedures in hospitals have fallen for two consecutive years, health outcomes after a major health incident has significantly improved, and life expectancy is now one of the highest in the EU.

Public policy and government expenditure has played a significant part in these successes, Mr Donohoe said.

The suggestion by the Taoiseach Simon Harris for establishing a department of infrastructure is a welcome one and will be "the kind of change that can make a big difference," according to the minister.

The proposal will help the Government face the big challenge in a few years stemming from the large number of large infrastructure projects coming down through the planning process inside the same term of government, he said.

The minister will work with the Taoiseach over the coming months to flesh out how this could be achieved.