VAT IN Northern Ireland has risen to 20 per cent, prompting criticism that the policy will hamper recovery and provoke a new rush to southern Border counties for petrol and diesel.
The rate jumped from 17.5 per cent at midnight yesterday. The British chancellor of the exchequer has ordered the hike as the UK moves to raise an extra £13 billion (€15.24 billion) in revenue as the Conservative-Liberal Democrat coalition struggles to rein in a massive deficit.
Criticism of the move in the North centres on the negative impact the tax rise, estimated at an average £520 (€610) per family per year, will have on a badly depressed local economy.
Unionists and nationalists alike have condemned the hike as a regressive move which will hit the poorest hardest. The rise is also expected to start a fresh drive to Border filling stations by motorists as the gap between Northern and Southern road fuel widens further.
Diesel prices in Northern Ireland are edging towards £1.35 (€1.58) per litre, with unleaded petrol usually costing just a few pence less.
“This VAT hike is the last thing our hard-pressed retail sector needs, particularly after a month of bad weather, un-gritted pavements and the drought,” said Glyn Roberts of the NI Retail Trades Association. “It is a major mistake and one which will cost Northern Ireland’s small businesses and consumers dearly.”
He said the move will do “absolutely nothing to restore consumer confidence and get them spending again. It could well result in a further drop in consumer spend which could mean more unemployment and business closures”.
Political reaction was also sharply critical of the move.
DUP Upper Bann MP David Simpson said: “VAT is a poll tax that is applied at the same level to everyone regardless of their ability to pay. Lower income families who use weekly income for essentials like food and heat will be especially hit by this tax rise.”
Sinn Féin economy spokesman Mitchel McLaughlin warned: “It will reduce spending power of the consumer and will therefore affect any economic recovery while increasing inflation. It is another example of the mistaken economic policy of cutbacks, rather than investment, to escape recession.”
He added: “If the British government were really interested in addressing the burden that the banking system has placed on the budget then they should address the cause of the problem in the interests of wider society.”
Foyle MP and former SDLP leader Mark Durkan said the VAT rise would “hurt many people”.
“Those who are less well-off have less disposable income and fewer choices about spending. It is they who must spend what little they have on necessary goods and services and this increase will leave them struggling further.”
Addressing overall British government policy on the economy he said: “The chancellor’s decision to increase VAT and his ‘squeeze on welfare’ strongly challenges his claims to have delivered a ‘tough but fair’ budget. When the government claimed it had produced a progressive budget we argued that it was clearly regressive, making the poor carry far more of the burden of deficit reduction.”