A careful Christmas or one last blowout?

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.