NI retail body: VAT cut a €13.9bn waste

The British government’s £12.5bn (€13.9bn) VAT cut to stimulate consumer spending was a complete and utter waste of money and has done nothing to help businesses in the North, a retailers body claimed today.

Chancellor Alistair Darling’s decision to temporarily reduce the rate from 17.5% to 15% last year did little to save the local shop owners who have been forced to close as a result of the recession, according to the Northern Ireland Independent Retail Trade Association.

NIIRTA’s Chief Executive Glynn Roberts told a committee of Stormont Assembly members that spending the money on cutting front-line taxes would have been a more sensible way to encourage people to spend.

During the Enterprise, Trade and Investment committee hearing on the economic downturn Mr Roberts also warned that the North would soon be a region of retail ghost towns if planning policy was not quickly amended to limit the number of suburban shopping centres.

The committee also heard from the NI Consumer Council which expressed concern at the 64% jump in the number of house repossessions last year.

Mr Roberts, who said yesterday’s budget offered nothing to small businesses, described the VAT cut as a nonsensical move.

“The VAT cut cost the UK exchequer £12.5bn (€13.9bn) and it was a complete and utter waste of money,” he told members.

“It has not brought about an increase in consumer spending. We have seen the long list of retailers that have closed their doors in the last six months, it has not helped.”

He noted that many foodstuffs were exempt from VAT and the 2.5% cut on taxable goods was tiny when compared to the massive reductions shop owners had to offer to try and attract shoppers.

“We would have much preferred front-line taxes being reduced for families to ensure they are spending more and indeed for businesses who are struggling at this time,” he said.

He added: “Two and a half per cent is a drop in the ocean when many retailers prior to Christmas were having sales of 40%, 50% even 60% off. Two and a half per cent was a nonsense.

“Then of course the 2.5% will be re-introduced in January of next year so retailers have the added burden of changing all their prices back again.”

The government has vehemently defended the VAT cut, claiming it has helped to inject much-needed money back into the economy.

Mr Roberts also said Stormont’s long awaiting revision of town planning policy (PPS5) had to cut down on the number of multinational stores setting up on the outskirts of urban areas.

“If the current planning policy is not resolved or reviewed we are looking at the loss of thousands of jobs,” he said.

“We are looking at our towns reduced to really effectively retail ghost towns we can already see this in Antrim and Lurgan and I very much regret that.”

He said he was not against big retail outlets setting up in the North, as long as they were located in town and city centres.

“We really have a choice, at the end of the day do we want vibrant town centres full of a dynamic mix of niche, independent and multiple retailers with good streetscapes with good environments that are good for elderly people, people who have mobility issues, or do we want retail ghost towns with ugly boxes at the edge of towns? That is the challenge we face.”

Committee member Jim Wells (DUP, South Down) said the politicians had to back words of support for independent retailers with real action.

“There’s not much sense in this Assembly or councils beating our chests in supporting the small retail sector when we are prepared to cut the ribbon on a megastore which is going to suck the life blood out of our towns,” he said.

Earlier the committee had heard from representatives from the NI Consumer Council, who outlined the impact the recession was having on householders.

Julie Megrath from the council said the two thirds rise in home repossessions in the North from 2,213 to 3,628 in 2008 was very worrying.

She noted that this compared with only a 4% rise in England and Wales and said this was due to the introduction of measures across the water to try and reduce court actions that have not yet been implemented here.

“Individuals and families are struggling and there has been a 300% increase in the demand for debt advice services from one housing organisation, the Housing Rights Service,” she added.

Ms Megrath highlighted how families in the region were having to cope with the fluctuating nature of the commodities market and noted that while home heating oil bills were down 40% on last year, electricity was up by 36%.

She said consumers in Northern Ireland were also facing more problems than those in the rest of the UK because they had to pay more for most of their insurance products.

“Historically consumers here have poorer financial products such as bank accounts and insurance,” she said.

“Our recent report into insurance showed we paid significantly more for car, building and contents insurance compared to those in GB.”

A scheduled appearance before the committee by representatives from the Irish Congress of Trade Unions was postponed to a later date.