Cross-Border shopping levy could boost economy
BELFAST BRIEFING:THERE is a wide-ranging debate raging in the North over the state of the Executive’s finances and the impact this could have on the local economy in the near future.
One camp believes there is a black hole lurking in the accounts, while the other is convinced there is still a pot of gold waiting at the end of the Stormont rainbow.
The truth lies buried deep in Nigel Dodd’s Department of Finance, whose officials are trying to convince anyone who will listen that everything is fine.
The Executive is set to lose £123 million from its budgets in 2010/2011 as part of a drive by the UK chancellor to achieve “efficiency savings”. This is far from the worst-case scenario. It appears that Alastair Darling, even in the middle of a crippling UK recession, has managed to find a little extra cash – £116.4 million – between now and 2011 to ease the pain of cuts.
Regardless of how the savings are dressed up, the fact is that sooner or later, the North is going to face a massive shortfall in its local budgets. Political leaders have committed themselves in the words of the Alliance Party to “cheap populism rather than prudence”.
The Executive plans to abolish prescription charges next year and has repeatedly deferred plans to introduce water charges and has frozen rates. What this translates to in reality is that the Executive has been spending money faster than it can find it.
Victor Hewitt, director of the Economic Research Institute of Northern Ireland, recently told politicians that once the recession takes hold “there is an ever-widening circle of collateral damage to the rest of the economy . . . and we are beginning to see that. It may well be that it will be shorter and sharper than we expect, or it may be sustained. In the worst-case scenario, it might turn into some sort of depression,” Hewitt warned.
He has urged politicians to indulge in some imaginative thinking when they are exploring “the potential for raising additional resources”.
There has yet been no evidence of any “imaginative thinking” on the part of politicians when it comes to new ways of raising money and not spending it.
Perhaps in light of the latest statistics and the fact it is one of the North’s only booming sectors, political leaders should look “imaginatively” at capitalising on the cross-Border shopping boom.
There is growing evidence of increasing numbers of consumers travelling north to spend their euro in British supermarket multiples who in turn quickly export their profits to the UK.
Figures from the Central Statistics Office which estimate that up to €500 million has been lost in tax revenue as a result of cross-Border shopping is equivalent to an increase in consumer spending in the North of 2 to 3 per cent.
Cross-border trade delivers a significant boost to Border cities and towns. It underpins employment and has sustained retail jobs that might otherwise have disappeared as a result of the downturn in consumer spending.
But despite the massive profits Sainsburys and Asda have enjoyed from stores in Newry and Enniskillen, the net reward for the North has been minimal. The UK multiples source local produce and services, but the rise in cross-Border trade has not benefited local suppliers.
Richard Ramsey, an economist with Ulster Bank, believes the boost cross-Border shopping appears to deliver to the local economy may actually be in danger of being “overplayed”.
“It is still a positive, but the issue centres on what scale it is benefiting the economy outside of Border areas,” he highlights.
Sainsburys, Tesco and Asda between them employ over 15,100 people in 70 stores across the North. Sainsburys and Asda make no secret of the fact that cross -Border shopping is boosting the profits they take out of the North.
David Davidson, Sainsbury’s regional operations manager in the North, said: “As the recession has taken hold, the number of cross-Border shoppers has climbed steadily thanks to the favourable exchange rate and the fact that customers are now prepared to travel further to purchase goods at low prices.”
So in light of the popularity of cross-Border shopping, perhaps the North’s political leaders should take business into their own hands and do something radical. I am sure at least one of them has thought about introducing a small, nominal shopping tax for anyone crossing the Border to enjoy the delights of the British multiples?
Or perhaps politicians might want to look at establishing a voluntary contribution scheme that cross-Border shoppers would pay – a donation as such to Northern Ireland plc. It would not be legal, but it would raise significant sums, help create jobs and restore the Executive’s depleted budgets. At least then all of the North could benefit from cross-Border shopping.