Retail in need of ‘urgent action’

URGENT action is needed to stimulate consumer spending south of the border, according to Retail Ireland who said the exodus of shoppers to the North will cost 25,000 jobs this year.

Finance Minister Brian Lenihan admitted that it was a mistake to increase VAT in the October budget and said e700 million has been lost in revenue from shoppers going North.

As the Government aims to cut the e4.5 billion gap in public finances with the April 7 budget, it has been urged to drop the VAT rate to stimulate retail sales.

Mr Lenihan told a private business lunch on Friday that increasing VAT from 21% to 21.5% was “an error on reflection”.

Dublin MEP Eoin Ryan (Fianna Fáil), who attended the lunch at the Marine Hotel in Sutton, confirmed that the minister had admitted the mistake.

“Many ministers for finance right across Europe made decisions last year which they later found were wrong decisions because the financial crisis is changing so fast,” Mr Ryan said.

Retail Ireland warned that 25,000 retail staff will lose their jobs this year.

Director of Retail Ireland, Torlach Denihan said: “Retail sales fell by the largest annual drop ever recorded last year and 25,000 retail staff will go on the Live Register this year. The Government should consider a targeted reduction in VAT for a specific period to stimulate retail sales.”

Meanwhile, new research has found that cross-border alcohol shopping will cost e100m in lost revenue and 400 jobs in 2009.

Economist Anthony Foley from Dublin City University (DCU) who carried out the research said increasing job losses and pay cuts will drive more shoppers up North.

Mr Denihan said urgent attention should be given to reducing the excise levels on alcohol: “Our excise rate is 40% higher on spirits and 23% higher on wine than in the North. Alcohol is the single biggest common factor in cross-border shopping trips; shoppers travel north to buy alcohol and end up buying other items too.”

Fine Gael finance spokes- man Richard Bruton said the current economic crisis should be used as an opportunity to “totally reinvent Ireland”.

He said there was a need to “totally reinvent the way we run our Government, the way we spend our money, the way we do our business, the way we protect employment, the way we do social partnership”.

Mr Bruton said money allocated in the April 7 budget should be “performance driven” and “create an impetus for efficiency”.

“We have to revolutionise the way we do our budgets. You can’t have a situation now where budgets are about the demands of agencies and not about the needs of ordinary people. Agencies should be coming in bidding for money on the basis of what they deliver,” he said.