5th November 2009
OPINION: As the Christmas lights are now up in the shops, it is time wish An Taoiseach a ‘Merry Christmas’, writes JOSEPH MORGAN
Pulling into the car park at the shopping centre in Newry, Northern Ireland, at the weekend, I couldn’t help but recall the words of An Taoiseach, Brian Cowen, earlier this year as he criticised the public for ‘cross-border shopping’. At the time, it was all being blamed on a 30% drop in the value of Sterling and ‘unpatriotic’ behaviours.
To paraphrase George Orwell: “Shopping in the rip-off Republic good, shopping in Northern Ireland - at greatly reduced prices - bad.” There is nothing quite like the sight of a politician wrapping themselves in the national flag.
What Mr Cowen was less keen to point out is that the government has already started down the road of delivering a ‘triple-whammy’ to the Irish retail sector just in time for the run-up to Christmas.
The first hit came earlier this year. In the budget last April, it was announced that the Christmas bonus paid to welfare benefit claimants would be axed this December. All those in receipt of payments such as state pensions and unemployment benefit normally receive an additional weekly payment just before Christmas to help them through the most expensive time of the year.
There is plenty of evidence to prove that welfare claimants spend all the money they receive directly into the economy as having just enough money to live on means that it all gets spent in the week it is received. That’s an estimated €500 million already gone out of the normal Christmas shopping cash-flow this year.
The second punch is about to be delivered and will be far harder than the first. The next budget statement is due in the first week of December. It has already been widely forecast (by the government, as well as the pundits) that most of the €4 billion in savings required will be achieved by taking the axe to welfare payments and public sector pay. If it comes out of money that is going directly into peoples’ hands then once again, it is coming directly out of the economy and spending into the retail sector.
In addition to those cuts, we are also advised to expect more indirect demands on our money such as property and carbon taxes.
The third strike, and possibly the real knockout blow to the retail sector this Christmas, is much harder to quantify but will potentially dwarf the first two.
In a straw poll of fifty friends and relatives, the overwhelming majority (94%) said that they will be drastically cutting back on their spending this Christmas due to the current economic environment and fears about whether they will have a job this time next year. Some of them have already lost their jobs this year and as the redundancy payment and savings run out, every item of spending is being scrutinised to ensure the mortgage is paid and there is a roof over their heads.
Presents to nieces, nephews, in-laws and other less immediate relatives or friends are for the chop. The extra spending on luxuries for the table will be pared back.
The general feeling of economic depression and fear felt by people seems to be something that our government is completely out of touch with.
Figures from the Central Statistics Office (CSO), released earlier this year, show that sales in December 2008 fell by over 8% compared to a year earlier. I have some bad news for the retail sector here: it’s looking like this December is going to be a lot worse.
And cross-border shopping figures prominently in that prediction. One friend showed me the UK and Irish catalogues of a ‘well known retail chain’ that showed the price for a particular child’s toy at €50 here and £30 (about €33 at current exchange rates) in the North. Her exact words were: “It’s a no-brainer really. I’m going to be buying all the presents in Newry and I might as well get the food and the wine while I’m there as that’s cheaper too.”
Meanwhile, back in the car park, the long queue of cars with Dublin registrations lined up one after the other made spotting a local Northern Ireland plate rather like looking for a hen’s teeth. Those shoppers were clearly paying a lot of heed to our leader’s words.
The ‘consumer-led recovery’, allegedly to be brought about by NAMA getting credit flowing into the economy again, is one of the key drivers that our government is telling us will lift the Irish economy out of recession.
Quite apart from the fact that my poll shows that nobody wants the banks’ credit facilities in the foreseeable future, Ireland’s economic recovery is starting to look as likely as bumping into the real Santa on Christmas morning. There is a greater chance of seeing the IMF walk in to take over our fiscal administration.
As An Taoiseach sits down to his dinner on December 25th, I hope he spares a minute to think about the many thousands of men, women and children who have gone without this year. Perhaps he will resolve to reduce his own salary in the New Year to less than that of the President of the United States – it is currently greater - and pump that back into our ailing retail sector if it so concerns him.
Merry Christmas, Mr Cowen.