VAT move threatens to kill off recovery hopes

The Government's proposal to increase the top rate of VAT on certain products is a dangerously counter-productive move which could set back consumer spending and ensure Ireland remains entrenched in a domestic recession. The move has understandably been met with anger by business interests. Athlone Chamber of Commerce, for example, hit out at the proposal and called on Government TDs in this region to vote against the plan. Its president Michael O'Brien said: "When prices go up people buy less, especially in recessionary times. With the advent of the household charge, the septic tank charges, the carbon tax, people's pockets will be hit severely. This will put retailers who are struggling from week to week to pay rent, business rates, water charges on the brink of closure, potential job losses and will drive consumers to buy on line or to the North where VAT rates are lower." And whilst it is often the case that business groups are driven by the need to protect profits, in this case, the concerns are broader. Anybody involved in a business which is sustained by consumer spending will know how fragile consumer confidence can be. People are extraordinarily price conscious and a VAT rise before Christmas will hamper any festive spending boost expected by businesses. In Athlone, there are significant retail and commercial vacancies on the town's main streets. Hardly a week goes by without another business shutting its doors, many of which have been part of the area's retail landscape for generations. Of course, this is offset by the opening of other businesses, but the gains have not, as yet, offset the losses. Towns such as Athlone and Moate are dependent on small businesses as the lifeblood of the economy. Yes, larger chain stores help to provide choice and sometimes value for money, but the heartbeat of any Irish provincial town remains its local shops. In many towns, small businesses are also facing significant rates bills to a local authority system which is over-elaborate and overly dependent on funding from the commercial sector. In Athlone, there appears little appetite at local government level to consider ways to alleviate the burdens on local businesses. Issues such as VAT and the head-in-the-sand approach to rates by local authorities threaten to unravel the social fabric of many of our towns. The Government says it is duty bound to hike VAT rates thanks to the agreement with the 'troika' (the European Central Bank, the IMF and the EU). If it continues to dance to the off-key tune demanded by the troika, it may find itself returning cap in hand, asking for more. There can be no growth if cuts and extra costs are the only medicine in town.