The full benefits of the £145m Spend Local scheme may have been lost for reasons that include its extension until Christmas, academics at Queen’s University have said.
But the initiative’s architects at the Department for the Economy insisted it had been a “clear success” and accused the academics of lacking knowledge of the project’s purpose.
Professor John Turner and David Jordan suggested that the scheme — giving every adult, regardless of their means, a £100 pre-paid debit card to spend in bricks-and-mortar shops – should instead have targeted lower-income households.
The money could also have been spent on maintaining the £20 weekly uplift to Universal Credit which ended in October, they added.
In research published on the Economics Observatory website, Prof Turner and Mr Jordan argued there was evidence that targeting less well-off people resulted in a stronger boost to overall spending.
A similar scheme in Jersey put a further £100 into the bank accounts of some pensioners and people on benefits.
“Perhaps the Northern Ireland scheme could have replicated this, targeting of those who are least well off, thus raising the fiscal multiplier of the public expenditure,” the economists said in their report.
That was one lesson from Northern Ireland’s experience which should inform decisions by other UK regions considering similar schemes, they added.
They they also argued that the timing of the scheme had led to more “substitution”, with the money on the card substituting money that would have been spent anyway, especially in the run-up to Christmas.
The initiative was to have been launched in late August or September.
In May, a civil servant told the Department for the Economy’s Stormont scrutiny committee that the department wished to avoid a roll-out later in the year when Christmas spending would be taking place.
Research commissioned by the department identified the months before Christmas as the period in which the scheme would make the most difference.
However, delays with its implementation led to an extension of the spending deadline from November 30 to December 19.
The department said: “It is disappointing that the report’s authors clearly misunderstood the main policy objectives of the high street scheme and do not have a full grasp of how government finances and funding streams work.
“The high street scheme was designed to provide an economic stimulus directly into the local economy and to see a reorientation of spend away from online back into bricks-and-mortar shops. It has clearly met both of those objectives.
“To date, the scheme has already injected more than £128m into our local retail, hospitality and service sectors.
“[It] has been credited by a range of high-profile organisations including Retail NI, the Northern Ireland Retail Consortium, PwC and Ulster Bank with contributing to increased sales and footfall on our high streets in comparison with elsewhere in the UK.
“Therefore, by any objective analysis, it is clear the high street scheme is a clear success.”
Mr Turner, a professor of finance and financial history, and research fellow Mr Jordan said the scheme had emerged out of policy experimentation.
It will ultimately be judged on how much additional expenditure it has generated through indirect spending, such as spending by staff whose wages are supported by people spending their cards in a particular shop, they said.
But they added that the scope for additional spending was risked by factors such as people’s instinct to spend the money on things that they would have been buying anyway, in some cases using the money saved to pay off debts.
The authors said there was also a risk of “leakage” because the sum could be spent at UK or internationally owned retailers and would not necessarily remain within the Northern Ireland economy.
They claimed the scheme would have raised more economic benefits if it had been run from August to October.
It also ended up coinciding with rising fuel and food prices, so people were using the card to cover essentials, they said.
Mr Jordan and Mr Turner remarked that the £145m budget for the scheme was 0.7% of the total public expenditure by the Executive in the 2020/21 fiscal year.
They said the decision to spend the money on the scheme meant other policies had lost out.
“For example, the money spent on the Spend Local scheme could instead have been used to maintain the £20 uplift in universal credit for one year,” the report added.
“This reinforces the important point that public expenditure decisions are not taken in isolation.
“The marginal benefit of each pound spent needs to be weighed against other potential uses, particularly when there are severe pressures on the Executive’s budget, including the longest NHS waiting lists in the UK.”