Deputy Peter 'Chap' Cleere: The Vintners’ Federation of Ireland, VFI, AGM took place last week at Mount Wolseley in my constituency. The message coming directly from publicans is that rural pubs are under enormous pressure. Closures are accelerating year after year. Since 2005, more than 2,200 pubs have closed across the country. More worrying again is that the rate of closure is increasing, with approximately 128 pubs closing every year.

We have to be honest about what that means for rural Ireland. When a pub closes in a village or small town, we are not simply losing a business premises or a commercial enterprise; we are losing a meeting place and a venue for traditional music, fundraisers, sports clubs and community gatherings. In many communities, we are losing the last remaining social space where people can come together. For older people in particular, the local pub often acts as an important defence against loneliness and isolation. In many areas, it is one of the last functioning community hubs left standing. Rural pubs are not just businesses. They are part of the social infrastructure of rural Ireland.

Despite that role, many publicans face what the VFI describes as an existential threat to their survival. The cost pressures they are dealing with are extraordinary. Electricity costs have risen by 70% in the past five years, alongside insurance and every other operational cost facing small businesses. It is important to note that the restoration of the 9% VAT rate for food service is very welcome and will undoubtedly provide essential support for many hospitality businesses. However, the reality is that many smaller rural pubs do not serve food and, therefore, cannot meaningfully benefit from that measure. In fact, the VFI estimates that two thirds of smaller rural pubs are excluded from the benefit of the reduced VAT because they are traditional drinks-only establishments.

That is why the VFI proposal for the on-trade sustainability scheme deserves serious consideration ahead of budget 2027. It is a targeted, capped and structured tax credit proposal that is aimed specifically at supporting smaller pubs that are struggling with rising costs and declining viability. The proposal will provide support linked to verified draught product supply costs, with a cap of €20,000 per premises, ensuring the support is proportionate and targeted towards smaller operators. Importantly, there is a precedent for this type of support within Government policy. We already provide tax credits to support film and television production, digital gaming and unscripted television production.

This is about rural sustainability, protecting local employment, supporting tourism and maintaining social cohesion in communities that are already feeling under pressure from depopulation and loss of services. The OECD recently highlighted the importance of community infrastructure and social spaces in sustaining rural communities and local economies. The GAA has warned about the erosion of rural social infrastructure and specifically identified the loss of pubs as contributing to declining community vibrancy. This issue goes well beyond one sector. It is fundamentally about whether we are serious about protecting rural Ireland and the communities that sustain it. Will the Government seriously examine the VFI’s proposed on-trade sustainability scheme ahead of budget 2027 and recognise that protecting rural pubs is ultimately about protecting rural communities?

Deputy Jennifer Murnane O'Connor: I thank the Deputy for raising this important issue and highlighting the role that pubs play in Irish life and culture by providing a central hub and meeting place in towns and villages across the country. The Government’s commitment to the sector was most recently demonstrated by the reduction in the VAT rate to 9%, recognising that the sector is highly labour-intensive. It forms a key part of the domestic economy and is expected to support over 150,000 jobs across the country. We can help to keep the doors open and the jobs going by providing clarity and certainty for these hospitality businesses.

I assure the Deputy that while the Department of Finance receives pre-budget submissions from a wide range of stakeholders in advance of each budget, all are given consideration as part of the annual policy cycle. I am aware that the Department has received and acknowledged a submission from the VFI outlining a proposal for a payable tax credit for pubs. The proposed payable credit would be linked to the number of draught product kegs purchased by a business, and it would be subject to a per-premises cap of €20,000.

Proposals for new tax expenditures are examined by reference to the Department’s tax expenditure guidelines, which outline the Government’s approach to how tax expenditures are best used, noting that these narrow the tax base and how they should be evaluated. A number of issues at a European level will need to be taken into account during these deliberations, including state aid requirements. Measures that confer a selective advantage on a specific sector have the potential to constitute state aid and, therefore, could not be introduced unless compliant with an existing framework or by undertaking a full notification process.

It should be noted that the tax credits available for film and digital games are all approved state aids, largely under the terms set out in the EU’s Communication from the Commission on State aid for films and other audiovisual works, which would not have relevance to the on-trade sector. This is what the Minister for Finance has highlighted. Additionally, any tax credit given to rural pubs, or, indeed, to all pubs, and which is based on the supplies of alcohol products to those pubs, would have to be considered in the context of the alcohol structures directive if its effect, in practice, were to give relief from the rate of alcohol excise paid on alcohol products. This directive lays down a harmonised approach to excise duties on alcohol in the EU. It defines alcoholic beverages and sets out the basis on which excise duties on such products are to be established by member states, as well as the conditions for the application of reduced rates and special regimes. These are the issues Ministers are looking at.

It is worth noting that there has been no general increase in excise duty rates for alcohol since 2014. While the retail price of beer has risen over that period, the excise duty has remained unchanged and, therefore, the total tax as a percentage of the retail price of each pint is lower than it was more than a decade ago.

I assure the Deputy that the Government is conscious of the challenges facing all businesses in the current economic climate. The Cost of Business Advisory Forum is working to look at the structural issues that are driving up costs and the steps that could be taken to mitigate them. It is important to note that we understand the overheads and the way costs have risen for businesses.

It is also important to highlight that a number of existing tax supports are available to all business, including the on-trade environment, to encourage investment in the economy, particularly in indigenous SMEs. These supports include the employment investment incentive, the start-up relief for entrepreneurs and the start-up capital investment. A range of direct expenditure supports are available to business and details can be found online at the national enterprise hub. Notwithstanding what I have said, the matters raised in the Deputy's submission will continue to inform ongoing policy consideration in the context of the budget. It is with the Minister.

Deputy Peter 'Chap' Cleere: I appreciate the response but this issue requires a stronger sense of urgency from the Government because the trend lines are moving in the wrong direction. We are seeing more than 120 pubs close every year in this country. Once these businesses disappear from rural communities, they very rarely come back. What concerns many publicans is that although Government policy increasingly recognises the cultural and economic importance of pubs in theory, that recognition is not translated into practical support measures that reflect the realities they face on the ground

The VFI proposal is a measured and targeted one. It is capped and linked to verified supply costs. It is focused on the on-trade sector and particularly on smaller rural pubs. Importantly, it seeks to support those traditional pubs that do not benefit from the reduced 9% VAT rate because they are not food businesses.

There is a broader point here about parity of esteem. The State rightly supports sectors viewed as culturally or economically valuable through targeted tax credits and incentives. It is done for film, gaming and television production. Surely there is a strong argument for supporting one of the most recognisable parts of Irish social and cultural life, particularly when it plays such an important role in sustaining rural communities. Ultimately, this is not just about pubs; it is about whether rural Ireland continues to have a place where people can gather, connect and maintain community life. Once those spaces are gone, the social consequences are very difficult to reverse.

Deputy Jennifer Murnane O'Connor: What the Deputy has spoken about is really concerning. He can be assured I will go back to the Minister for Finance. I am aware of the importance of local pubs to Irish culture and the Irish economy, particularly in local and rural areas, which we are both from.

[click here for the full debate]