Plan to cut VAT on hospitality sparks ferocious row between ministers

Extra.ie​

2 days ago

A spat between the Coalition parties over Fine Gael plans to cut VAT on hospitality to 9% has developed into a 'a ferocious row'.
Simmering tensions about where budgetary cuts will land this autumn came to the fore last week between Fianna Fáil and Fine Gael over the issue of VAT cuts.
After years of record spending increases, the review prior to the Summer Economic Statement came as a shock to ministers. Senior Fianna Fáil Minister of State Niall Collins. Pic: Gareth Chaney/Collins Photos
In an extraordinary attack on the proposal, which would devour two thirds of the money allocated to tax cuts, the senior Fianna Fáil Minister of State Niall Collins said luxury and five-star hotels benefiting from a universal rate reduction to 9% would sit 'very, very uncomfortably with me'.
However, Enterprise Minister Peter Burke has doubled down in his determination to see the €1billion cut through.
He told Extra.ie: 'The reduction on VAT is a promise we made to the hospitality sector in good faith. I am fully committed to its delivery as it is core and central to sustaining the 228,000 jobs in that sector, many of which are in regional locations. Enterprise Minister Peter Burke. Pic: Sam Boal/Collins Photos
'The tourism sector is a €9billion industry and one which I am focused on supporting particularly with our new tourism strategy which will be published in September.'
But one Fianna Fáil minister said of the proposal: 'Fine Gael once again appear to be forgetting they are the junior partners. They do not decide tax policy and they certainly are not going to be allowed to create a scenario where the public will be furious over a measure that will only benefit a few coffee shops.' Tánaiste Simon Harris, Taoiseach Micheál Martin and Sean Canney, Independent TD for Galway East, speaking at a press conference for the launch of the Government's Summer Economic Statement and the National Development Plan for the next five years. Pic: Niall Carson/PA Wire
Responding to Fine Gael plans to front-load the cuts during Micheál Martin's term as Taoiseach, one Fianna Fáil senior figure warned: '(FG leader) Simon Harris may want to be the new Bertie Ahern but he won't do it at our expense.'
In a further indication of the new levels of tension surrounding expenditure, a number of legal challenges are being prepared by representative groups in the education sector should the Coalition fail to adequately fund schools.
One education sector source said: 'There is trouble and underspending across the board, from primary education to third level. Serious trouble is coming down the tracks if ministers don't perform.
'We don't do press releases or complaints on the Order of Business. We are going to hold the Government to account over their legal responsibilities and we are prepared to take the legal route to defend the fiscal integrity of schools and the State's legal obligations to deliver appropriate facilities for children.' Taoiseach Micheál Martin. Pic: Sasko Lazarov/RollingNews.ie
The proposed challenges will increase concerns within the Government that it faces a destabilising summer of internal discontent over fears that Ireland faces its first austerity budget in a decade.
One senior Government source said: 'Paschal [Donohoe] and Jack [Chambers] are engaged in a great act in expectation management. There is a great tidying-up process: all the cycle lanes, all that green stuff, we are not wasting that money.'
Another senior Government figure added: 'The budget will be factually expansionary, look at the figures. We are, however, laying down the marker in the Summer Economic Statement to stop runaway stories.'
However, Cian O'Callaghan, Social Democrats acting leader and finance spokesman said: 'It is clear that after the big giveaway pre-election budgets, citizens are facing difficult times. Cian O'Callaghan, Social Democrats acting leader and finance spokesman. Pic: Gareth Chaney/Collins Photos
'The Government can spin all they want about returning to normality. The truth though is that people experiencing the frontline of the cost-of-living crisis are and will experience the very real return of austerity budgeting.'
Despite attempts by Government ministers to calm their TDs, unease remains high within the Government ranks. One Government source said: 'There are billions of one-off payments facing the axe and it is not going to be pretty.
'Look at James Lawless, he let the cat out of the bag too early on third level registration charges and he hasn't been seen since, he has disappeared.'
However, a Fine Gael minister said: 'There's no great plot against Fianna Fáil, it is simple logic. When it comes to cutting, do you want to be unpopular now or would you prefer to be unpopular in five years' time. Our friends need to calm down.' Minister of State James Lawless. Pic: Sasko Lazarov/RollingNews.ie
The pre-budget negotiations could be a chance for Mr Chambers to put himself in position for a future leadership bid.
A FF source said: 'There may be a bit of leadership-building going on with Jack [Chambers] as well. At some stage Micheál has to go and let's face it, at 64 he is nearer the end than the beginning.'
Another Fine Gael source noted of 34-year-old Mr Chambers: 'He hasn't made too many friends in Fine Gael going around the place being led by the nose by his officials. Even the Tánaiste had to battle for Defence spending.'
Unease is also growing within Fianna Fáil with sources speculating that succession factors may be at play when it comes to the vigour with which Mr Chambers is going about his task.
The source added: 'There is a bit of an invisible leadership competition building up between Jack and Jim O'Callaghan. Big Jim is going very well at the moment so Jack may be trying to out-do him by generating a reputation as a great reformer of the public finances.'