A tough December Budget can dampen pre-Christmas spending. But will it make people stay within their means this year?
After months of speculation, kite-flying and sometimes terrifying leaks about the “most savage budget in the history of the State” we now know exactly what €3.5 billion of cuts and tax rises looks like. It is not pretty.
Few people have escaped the cuts that Michael Noonan and Brendan Howlin announced in the Budget on Wednesday, but despite their best efforts to be cast as a two-headed Grinch there was a broad consensus among consumers and retailers who spoke to The Irish Times that things could have been worse.
There was agreement among everyone we contacted that cuts to respite care allowances seem particularly cruel and that many families will be worse off by close to €2,000 a year as a result of the Budget. But at least the speculation and the fear of the unknown are over.
David Fitzsimons of Retail Exellence Ireland, the umbrella group for thousands of retailers, is surprisingly upbeat after the Budget. He is optimistic that consumer sentiment will improve significantly in the days ahead.
“There was so much scaremongering before the actual Budget that people were terrified. There was talk of a 4 per cent increase in the universal social charge, much higher property taxes and a major increase in PRSI, but, while it is far from good, maybe it is not as bad as people feared,” he says.
He is angry about the timing of the Budget. Back in the good old days when budgets were giveaway affairs, nobody really cared when they moved from early spring to the lead-up to Christmas.
But timing matters in times of austerity, and the dread that many people felt in the run-up to Wednesday has drained some of the comfort and joy from the start of the season to be jolly, says Fitzsimons. “Having the Budget so close to the most important trading period of the year for thousands of businesses is insane and does untold damage. I can’t see why they can’t make all the big announcements in early November and then allow people get on with it.”
Ireland’s butchers
Few traders will be busier in the coming weeks than Ireland’s butchers. Pat Whelan is one of Ireland’s most successful butchers; from his farm in Co Tipperary he supplies meat for his shop in Clonmel, the acclaimed James Whelan Butchers concession in the Avoca Food Market in Monkstown, south Dublin, and an award-winning online business.
He is a fifth-generation butcher and has seen good times and bad. He has noticed a definite shift in consumer spending habits over the past three years, and he believes consumer sentiment is holding up surprisingly well in the face of ongoing economic turbulence. He has noticed “a more measured response from customers. They still want to buy quality, but now they are buying just enough as opposed to too much.”
The downturn started in 2008, but spending in his butchers’ shops was not tempered until two years later. “We actually saw growth in 2008 and 2009, as people started eating out less and cooking at home more, but as time has gone on people have started buying less.”
People coming into his shops are “making more informed decisions, asking more questions and poking and prodding their purchases more closely”.
Although people may be more careful when it comes to talking turkey, they will still spend. “People still want something special,” he says. “Christmas is a very important time for Irish people, and I think many people will make a real effort to have a good one this year and will do what they can to make that happen.”
Like Fitzsimons, Whelan is appalled by the timing of the Budget. “Sentiment is everything, and people were very frightened this year. I wonder if the politicians time the Budget for now in the hope that, with so much going on in the run-up to Christmas, people will just forget about what happened by the time the new year comes.” He’s not convinced that people will be so forgetful.
Colin Jephson’s family have run the Ardkeen Quality Food Store, in Waterford, for 45 years. Like Whelan, he has managed to keep the doors open and business ticking over during the downturn, but it has not been easy. “I keep being told that we will be okay, because people have to eat, but there still has been a real shift in people’s shopping habits since the boom ended.”
His customers “have been dreading this Budget for months, and they have been holding back on spending out of fear”. At least now people know what they can expect from the year ahead.
Jephson is not entirely pessimistic and believes that his shop will “continue to do okay in our niche, which is Irish artisan products. People recognise that they might be a bit dearer, but they recognise the value of high-quality products.
“I think Christmas will be okay this year, and people will find the money they need and then use January and February to recover financially. Those months will probably be pretty bleak for us.”
Christmas spending
Despite the upbeat forecasts of some retailers, consumer spending for Christmas is continuing to fall. It will be down slightly on last year, but, despite the easing back, Ireland remains defiantly festive and will once again be top of the EU spending league.
The average household will get through almost €1,000 before the tree comes down in early January, according to a survey published by Deloitte last month.
Numbers crunched by this newspaper suggest that the sum will be much higher for many families. This figure of €960 is almost four times more than the parsimonious Dutch but at least 40 per cent less than the cost of an Irish Christmas five years ago.
A recent Christmas spending report by the Irish League of Credit Unions found, perhaps unsurprisingly, that eight out of 10 Irish adults feel worse about their financial situation this year.
However, nearly two-thirds said their Christmas would still be enjoyable and money would be spent, regardless of where it came from.
The credit unions’ pollsters even went as far as the North Pole – and found that Santa Claus will spend an average €170 on presents for Irish children this year.
When asked, 56 per cent of consumers said they would experience a shortfall in spending this year, with just over three-quarters saying they thought we spent too much at Christmas.
A further 70 per cent suggested it would take more than a month to recover from overspending at Christmas. That is not to overstate the debt that will be left after Christmas; according to the credit-union survey, most adults will have cleared the debts by the end of March.
Mandy Johnston, a spokeswoman for the Irish League of Credit Unions, says people needed to remember “that Christmas really is about giving . . . not robbing the family finances”. She warns people to avoid “moneylenders and consider that if you cannot afford to pay for something without a loan, you cannot afford it”.
Moneylenders
Emma McEnroe is an unemployed single mother from Tallaght. She knows all too well what happens when you do business with moneylenders, as she has used their dubious services to fund Christmases past. Not this year.
“I used to go to moneylenders, but I realised how much I had to pay back and decided it was best not to go near them. A lot more people are using them.”
McEnroe has two sons, aged seven and eight, and normally she saves as part of a Christmas club, putting aside €20 each week. “I’d have around €1,000 by now,” she says. “This year I just didn’t have that €20 to put away.”
Instead she has borrowed €500 from the credit union and another €200 from her mother. “I’ll be in debt in the new year,” she says ruefully. “I just seem to be short of money every week now.”
McEnroe’s story is wearily familiar. “This year I won’t be getting myself any new clothes or anything. I’ll just make sure I have the children’s clothes and presents.
The shortage of money has seen her and her friends develop an ad-hoc co-op. “If we don’t have enough money to do the shopping for the week we’ll go to each other’s houses and cook and shop for each other.”
McEnroe says January will be grim, but she is still upbeat. “I love Christmas anyway, but that’s because I have children. If I didn’t, I’d probably be saying I hate it.”
Mandy Johnston accepts that it has been “a hard year”, but she says people could still be “savvy when it comes to shopping at this time of year”.
She suggests that a Christmas spending budget is more important now than ever, as is writing a list. “This will allow people to be in a better position to keep a tight rein on the Christmas-shopping costs.”
Personal budgets
Michael Culloty of the Money Advice and Budgeting Service is very concerned about moneylenders. He says his organisation has seen a 50 per cent increase in the numbers getting in touch since the downturn.
“Many of the people who go overboard with Christmas spending are the ones who have said no all year. Sometimes they wait until Christmas before they buy their children clothes, and, while money is tight, I think people still want to have at least this one celebration each year.”
Of course, the problem of how to fund it is very pressing. “People need to think about the whole year and how they are going to keep a roof over their family’s heads and feed them over 12 months, not just over Christmas,” he says.
“The problem with moneylenders, both legal and illegal, is growing and has got worse as access to affordable credit has dried up. When banks and credit unions stop lending, and credit cards have been cancelled, where do people who need a couple of hundred euro go? Moneylenders.
“We hear anecdotes about the illegal moneylenders, but people are afraid of them, and because they are illegal we can’t really do much about the problem.”
Culloty is not concerned about the timing of the Budget. It is not the most pressing issue he will face in 2012. “Retailers don’t like it, but it is not something that keeps me awake at night. Is there ever a good time for a budget like this?”
Additional reporting by Patrick Freyne
‘With luck by March I’ll be back on my feet’ Shoppers outline their Christmas plans and budgets
Gary Clarke is a chef from Ashbourne in Co Meath. “I work full time as a chef and I’m in college studying to be a marketing manager. I’ve an income of around €26,000. Things are tight. They have been since about 2010. This year my girlfriend said she didn’t have money to get me anything, and I said that as long as I had her I didn’t care. The only thing I’ll spend money on this year will be my nephews and nieces.”
Elaine Corkery is shopping in Cork with her husband, Anthony. “We’ve accepted that all the entertaining at Christmas is going to be based around home. Going out to the pub is gone. Christmas is about having food and drink in, and having people around. That’s what we like best. Our children are 11, 23 and 26. The two older ones had moved out, but they’ve moved back in because they couldn’t afford it. We’ll spend €400 on the one who believes in Santy and €200 on each of the others. Our budget for each other is €50. The one thing we never cut back on is turkey. We get a fresh organic 14lb turkey from the butcher.”
Kay Messent from Graiguenamanagh, Co Kilkenny, is retired. “My husband and I don’t really do Christmas. It’s not due to the recession. At my age the Budget didn’t affect me much. I just don’t like it. I don’t go shopping. We don’t have turkey.
“I give things at other times of the year. When I had small children and there was a lot more money around, I bought into it. But things were more frivolous then, and now, in the second part of my life, we’ve decided that’s not what it was about.”
Linda McMahon and Linda McKenzie are childminders who live in Dublin 4.
McKenzie: “I have three young children, and we’re on a very tight budget.”
McMahon: “I have one child, but he’s grown now and gone abroad.”
McKenzie: “It’s very different now. Before, you’d go to one shop and do all the shopping for Christmas there. Now you go from Lidl to Tesco, looking for bargains.”
McMahon: “You’d be watching the sales, and if you see a turkey reduced you’d buy that. In the past you’d go to your local butcher and give him the business. Now we haven’t got the money, so we can’t.”
McKenzie: “We will go into debt over Christmas.”
McMahon: “We’re all borrowing off each other, depending on who has a few bob or who has a credit-union loan.”
Liam Mac Roibín is a student who lives in central Dublin. “I told my ma not to give me anything, and she told me she’d barely be able to give me €20. Seven years ago my younger brothers were getting games consoles and clothes. Loads of people I know who wanted to go to college had to go to a PLC instead because no one can afford the fees.
“I don’t have money to budget. My Christmas scheme is to hopefully find some money and get everyone something, even if it’s from a €2 shop.”
Martina Kancyte is from Lithuania and lives in Dublin 8. “My little girl is too young for Santy, but the grandmothers are really excited. I don’t have to budget more for this Christmas. I never spent much money.
“In previous years I was a student and had less money, but now my partner and I have jobs, so we’re in an okay position.”
Mark Denneny is a mature student from Timahoe, Co Kildare. “I was working for five years in Dublin Airport, but I took redundancy and went to college. I’m studying architectural technology in Bolton Street. I’ll probably finish it and head abroad with everyone else.
“I’m basically living on €180 a week. Trying to make that stretch is hard. I worry about things such as taxing the car; that’s gone up. And I believe the [student] registration fee has gone up, so I’m waiting to see how that affects me.
“I try to spend around €300 on my daughter at Christmas, but this year things are more stretched, so it might be €200. I wouldn’t cut back on home comforts such as heating or food. I always tend to run into debt at Christmas, but with luck by March I’ll be back on my feet.”
Martina O’Connor is a student in Cork. “I’m not buying presents for anyone this year except my mum and dad. I’m a student – I’ve gone back to college to study childcare – and I can’t afford extra presents.
“In other years I would always have bought a new dress for Christmas. This year I’m buying nothing for myself. I’ll wear last year’s dress. I used to go out all the time over Christmas. This year everyone is meeting up for one big night.
“I have an older and a younger sister. They both went to Australia this year to find work. So it will be just me at home with my parents this Christmas, and it will be very different. I’m heartbroken.”
Angela Riordan is shopping in Cork. “I have no idea what I spend at Christmas. There will be six people in the house on Christmas Day, but our children are all grown up. We do Kris Kindle for each other, and the budget is €150 per person.
“We usually go over the top with food, and have a bit too much: fancy party things from Marks Spencer, vol au vents, that kind of thing. Last year we didn’t use them all. This year we’ll buy less of that kind of food, and I’ll cut down on drink. We’ll be more careful with what we spend.”
PATRICK FREYNE and ROSITA BOLAND
