Consumer A walks into Ikea in Dublin and buys a white Ekthorp three seater sofa for €329. Consumer B walks into Ikea in Belfast and buys the same sofa for €312 (£269). Both consumers will probably go home content that they’ve got a pretty good deal. Consumer A says ‘I suppose I could have gone to Belfast and saved €17, but the petrol would have cost that or more anyway’. This is the oft-repeated excuse ROI shoppers give for not bothering to cross the border and save. And it’s true, the petrol is an issue. However it doesn’t eradicate the fact that Consumer B is making a considerable saving to his overall pocket on the above sofa. He will then make a saving when he pops into Tesco or Sainsbury’s on the way home. He will save money when he goes to a restaurant that evening. He will also save when he goes for a few pints afterwards. Each individual transaction may not amount to a huge difference compared with the Republic. But collectively, Consumer B is making a massive saving over the course of a year. The fact remains, Irish people pay more for goods and services across the board. Government policies and a national apathy have created a situation where we live in a country whose capital city is the sixteenth most expensive in the world while its economy is in deep recession. The figures don’t add up.
I have been living in London for five years and recently moved back to Dublin. I’m a member of that rare group of ‘immigrants’, reversing the massive tide of emigration from Ireland. I have been struck by many things since my return to this country, most notably the disparity in the costs of products and services between London and Dublin. I watched in shock from England when the Irish bailout was announced in December 2010. My one hope at the time was that perhaps this would help bring down the price of consumer products. I’m afraid it hasn’t helped much! According to the latest figures from the Central Statistics Office, Ireland still pays 20% more than the EU average for goods and services. People are struggling. But for too long the sole reason given for this has been the huge unemployment rate. This view needs to be married to the extortionate cost of living in this country. I know of families that are thinning their milk with water to make it go further. The average price of a litre of milk in Ireland is €1.19 whereas in the UK its €1.00 (89p). If the average family drinks five litres of milk a week, then the UK consumer is saving over €49 a year compared to their Irish counterparts! They say milk is good for the bones. With those prices I’m not sure it’s worth it. I’d rather the arthritis thanks.
So why exactly is Ireland so expensive, despite our economic travails? There are a number of factors which have led to this situation. One of the biggest obstacles is the high rate of VAT in Ireland. Irish VAT at 21% is among the highest in the EU. France, Germany, the UK, Spain and Holland all have lower VAT rates than us. Even though the UK’s VAT rate is only 1% below us, the price discrepancy remains aggressively high. The cost of doing business is troublesome in this country. Upward only rent reviews have been an important factor on how much retailers charge for their products, especially restaurants. High rents of commercial property cause businesses to charge their customers more. The government is currently deciding on their course of action on this. The Irish Times said recently ‘The proposal (to end upward-only commercial rent reviews) would mean tenants who have an existing lease and who can demonstrate their rent is higher than the market dictates can appeal to their landlord and ultimately the courts to have a new rent set’. Something must be done about this issue as many retailers are currently trapped in ‘upward only’ leases while business stagnates. It is an untenable situation. Labour spokesman, Chris Lynch, says, “These rents were set at the top of the property bubble, so what you have is boomtime rents and recession-time retail incomes,” Shipping costs is also an issue for imported goods. A simple example is the fact that the overall cost of a purchase from Amazon.com is going to be higher for the Irish consumer compared to the British consumer because the postage will be significantly more expensive. One can understand this. What is a lot more complex to understand is the biggest reason of all: Many Irish people are willing to pay more. Michael Dell, the CEO of Dell Inc, was asked why his PCs are cheaper in the UK even though they were manufactured in Ireland. His response? ‘Well, Irish people will pay more…simple as that’. While this statement is of course infuriating, it is also revealing of the Irish consumerist psyche. Is our willingness to pay above the odds a hangover from the days of the Celtic Tiger? Has the willy-nilly, slap dash of cash mentality been embedded? Problem is, this time there ain’t much cash to slap dash. I often hear Irish people remark when they return from a holiday on the continent, ‘Wow, the value for money in the restaurants was amazing!’ Of course it was; because you were outside the culture of over-priced Ireland. In fact the statement should be reversed. It’s not about the continent being value for money. It’s about Ireland simply existing above and beyond what is average. So when we leave this country, stuff seems cheap. Look at the example of an identical main course in an Irish and a British restaurant. Pizza Express is an English company that has a huge chain of restaurants across the UK. They also own the Milano restaurants in Ireland. Their menus are identical. Well, except for the price of course. The Four Seasons pizza in the UK restaurant costs £9.10 (€10.64), whereas in the Irish restaurant it costs €12.45. The bill, arriving no doubt with a smile, will cost the Irish consumer 15% more. And yet the Irish consumer will probably be happy with that price. I have heard my Irish friends respond positively to the price lists on menus in Dublin when I am doing otherwise. What people think is good value in this country is a view not shared by people from other countries. What must tourists think when they come here? It would be enough to turn me off if I was a holiday maker considering a trip over to Ireland. Am I quibbling over a couple of euro? Why did Irish people love going to the former Eastern Bloc cities like Prague during the nineties? Beautiful architecture, tick. Interesting culture, tick. Cheap, TICK! It’s not the saving on one product that counts. It’s the cumulative saving over the course of a holiday, or in our case a life time if you live in Ireland. In many cases it is not a mere quibble. The discrepancy is often alarmingly transparent. H&M is a popular Swedish clothing company, exporting their goods to Ireland and the UK. A double breasted black jacket costs £49.99 (€57) in the UK but in Ireland the exact same jacket costs €69. That’s a 17% price hike. And in case the consumer wondered about this, they’ve generously printed both the sterling and euro prices on the label for our convenience! Surely we can’t blame shipping costs here. The clothes in British H&M stores come from Sweden too!
The Minister for Finance, Michael Noonan, will introduce a VAT rise of 2% in January 2012, bringing the new figure to 23%, 3.4% higher than that of France. The government believes that this will be a more popular way of increasing their revenue, as opposed to hiking up income tax. They may indeed be correct about that. However, the price of goods and services is a deeper issue than that of popularity. It’s about the simple access to goods. It’s about making this country an attractive destination for people to visit and live in. It’s about reducing emigration. It’s about looking at the broader picture of the cumulative effect of the high cost of goods. Most importantly, it’s about Irish people reversing the Celtic Tiger culture of consumer apathy towards the cost of goods and services. We still have a tendency to say ‘It’s grand. Ireland is expensive. Accept it’. What if we don’t accept it? We can already see many Irish people becoming a lot more savvy about the way they purchase goods. Lidl and Aldi are thriving! During the Celtic Tiger everyone had to have their own lawnmower and their own DIY kit. It’s totally unnecessary for every family on a road to have these. We need to move towards a culture of sharing things, working together in order to make a practical difference. I’m not suggesting a socialist revolution! What I am suggesting is a more social approach to the way we use products. If you lend Jimmy your power hose, Jimmy will lend you his strimmer. Why not? What’s the point in everyone buying one? The very notion of having to own every single thing wreaks of Celtic Tiger greed. We can’t afford that mentality anymore. The only way we can bring prices down is if people stop buying expensive goods. Simple measures like choosing an own-brand product rather than a branded product makes a huge difference to a shopping bill. It brings me back to Michael Dell…’Irish people will pay more…’ How long can that last?
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