Budget 2023 must protect viability of Experience Economy
Ibec, the group that represents business, is calling on Government to use Budget 2023 as an opportunity to enhance the competitiveness and productivity of the Experience Economy which underpins our social, tourism and business ecosystems.
The Ibec Budget 2023 submission outlines that this can be achieved by supporting companies in the economy at a time when input costs especially energy have risen to an unsustainable level, investing in revitalising the vibrancy of city centres, making sure the unwinding of remaining Covid supports is done sensibly, and ensuring that the sectors’ skills and technology base is ready for the competitiveness challenges ahead.
Ibec Executive Director of Membership and Sectors, Sharon Higgins said: “Embedding competitiveness is critical to building resilience in businesses across the economy as the global trading environment continues to shift in the aftermath of Covid and Brexit.
“Whilst winding down emergency supports for Covid from €7 billion in 2022 to around €1 billion in 2023, Ireland must continue to invest in the competitiveness and productivity of the sectors worst impacted and the Experience Economy in particular.
“Ibec believes that there is a need for direct supports for those households and industries most exposed to spiralling energy costs. Fiscal policy must also be flexible over the winter and potentially into 2023 should a continued deterioration of the inflationary environment occur.
“Budget 2023 must also see continued investment and support to promote the Experience Economy through funding for tourism, festivals, events, conferences, public realm improvements and wider entertainment industry promotion and product development – with a renewed focus on town and city centres in the post-Covid era.”
The set of measures seeks to protect our Experience Economy and make the best use of the Brexit Adjustment Reserve. The Brexit Adjustment Reserve funds of €600 million in 2023 should be used to future proof the worst impacted sectors from the increased costs of trade due to Brexit. Around half of the fund should support investment, skills, trade and innovation in Brexit exposed sectors in 2023.
Amongst the other key asks of the Experience Economy detailed in Ibec’s Budget 2023 submission are:
• Make the 9% rate of VAT permanent: Given the significant scarring on the sector, its debt overhang and the significant cost challenges it will face in the post-Covid era we believe that from March 2023 the 9% rate of VAT for the Experience Economy should be made permanent. A failure to do so would lead to a rise in inflation in 2023 of roughly 0.5%.
• Increase funding for overseas tourism promotion and product development: Increase funding for overseas tourism and event promotion, direct grants and product development by €20m by 2023.
• Ensure revenue debt warehousing works: Excess debt is proven to slow investment, productivity and growth in companies. The State also has a legitimate objective to maximise Exchequer cash collection. However, this cannot come at the expense of survival for viable firms and future economic growth potential. As such the commencement of Phase 3 of the Revenue Tax Warehousing Scheme from January 2023 must be kept under review generally as we get a clearer read of economic conditions and consideration should be given to extending the timeline for sectors such as the Experience Economy and aviation which are likely to face public health restrictions for longer.
The Experience Economy comprises of businesses and a workforce that employs hundreds of thousands of people across the island of Ireland to deliver world-class experiences. It encompasses hospitality, retail, travel, food, drink, tourism, entertainment, technology, events and organisations in the arts, cultural, sporting and heritage sectors.
Prior to Covid, over 330,000 people were either employed or supported directly by demand from the Experience Economy, and the industry spent almost €4 billion every year on purchases of goods and services, including over €1 billion in purchases from domestic food and drink suppliers. Before the pandemic, it comprised of €4.5 billion in wages, salaries, and employment taxes every year. Up until 2020, spending in the Experience Economy accounted for more than one euro in every three euro spent by a household in Ireland. This compares to the one euro in every four euro in the EU as a whole.