Strangford DUP MLA Simon Hamilton has warned of the dangers of the government increase in the standard rate of VAT from 17.55 to 20%.
A member of the Assembly’s Finance and Personnel Committee, Mr Hamilton said, “Everyone knows that the nation’s public finances are in a sorry state and that our level of borrowing needs to be better managed, but this increase in VAT from 17.5% to 20% is not without serious consequence. In fact, not only will people have to pay more for many goods and services, the effects of the Coalition Government’s decision to raise the standard rate of VAT could be damaging and dangerous for our own economy here in Northern Ireland.
“Increased prices in the High street could see an increase in the level of inflation resulting in possible hikes in the interest rate by the Bank of England to curb rising inflation and higher mortgage payments for householders.
“Our shops and businesses – who are already going through exceptionally tough times – could see their trade further hit. It is significant that both traders and those in the hospitality industry have spoken openly about how the VAT increase could see significant job losses in their sectors. Retail and tourism are two of our economy’s biggest sectors and any adverse impact upon them could be devastating for Northern Ireland. We also need to remember that Northern Ireland is the only region of the UK still in recession and thus any VAT increase which could depress trade is worse for our province than for elsewhere in the UK.
“Our border towns have befitted from cross border trade with southern shoppers seizing the benefit of lower prices in Northern Ireland but the VAT levels are now closer with the Republic of Ireland’s at 21%. Could cross-border business be negatively impacted?
“Worst of all, it is widely acknowledged that because the worse-off spend proportionately more of their incomes on VAT rated goods, then it will hit them hardest putting already vulnerable people in more peril.
“I believe that this VAT increase is the wrong measure at the wrong time for Northern Ireland and it is deeply regrettable that some local politicians actually supported this VAT increase last May”, he added.