Cross-border shopping can be the new patriotism

[This is taken from A Note from the Next Door Neighbours, the monthly e-bulletin of Andy Pollak, Director of the Centre for Cross Border Studies in Armagh and Dublin]

There has been a lot said and written about cross-border shopping and patriotism in the weeks running up to Christmas. As a person with a passing interest in both subjects (the latter mainly on the terraces at Lansdowne Road), I wonder if I might add my two ha’apence.

Irish Finance Minister Brian Lenihan started it all with his unwise ‘call to patriotic action’ in urging Irish people to accept the harsh cuts of his October budget. He then compounded the error when he told RTE listeners last month: ‘When you shop in Northern Ireland, you’re paying Her Majesty’s taxes, you’re not paying taxes to the state that you live in.’ 1Inevitably the people ignored him. The main consequence of that budget for the average Irish citizen north of a line from Dublin to Galway (and even further south) seems to have been to drive them in even larger numbers across the border to do their Christmas shopping. The price differences between North and South – helped by a dramatically weakened Sterling and a 2.5% cut in VAT in the UK compared to an 0.5% rise in the Republic – are now the stuff of legend: Irish-made Kerrygold butter twice the price in Dublin as in Lisburn; a bottle of Irish whiskey £14 cheaper in Northern Ireland; and a wide range of goods from breakfast cereals and Pampers to women’s shoes and cups of coffee over 30% more expensive.

Not surprisingly, it didn’t take Northern politicians long to weigh in on the other side of the argument. Peter Robinson, stressing that he was not trying to score any ‘cheap political points’, nevertheless couldn’t stop himself commenting: ‘In truth it is good for us all. Northern Ireland gets a significant economic boost, and people in the Republic might save enough on their shopping to help pay their higher taxes and their health bills.’ 2 Jeffrey Donaldson found it ‘interesting that the Irish Government supports a united Ireland, but when it comes to patriotism, that only extends to the 26 counties of the Republic.’ 3 Martin McGuinness said he was ‘gobsmacked that we are being excluded from the all-island economy.’ 4

A man with no political axe to grind, Bill Tosh, the head of Dundalk Chamber of Commerce, put the central issue of cross-border prices most succinctly when he pointed out that Larry Goodman produces a large proportion of the meat sold on the island from his base near the border in County Louth: ‘It’s all the same meat but somehow it ends up costing twice as much down south. That’s obscene.’ 5

Paul Cullen, Irish Times consumer affairs correspondent, noting the Dublin’s Fianna Fail Lord Mayor’s call for its citizens to show ‘civic patriotism’ by choosing to shop in the capital rather than go North this Christmas, commented: ‘It might seem strange for a member of the Republican Party to suggest that patriotism cannot be exercised north of the border. After all, isn’t the most patriotic thing to buy Irish-made goods wherever they are sold (and preferably at the cheapest prices), especially when the retailer down South may be foreign-owned?’ 6

Or as one Limerick reader wrote to the Irish Times: ‘When Aer Lingus moved its Heathrow service from Shannon to Belfast, objectors were told it was done because costs were lower in the North. We were informed by various politicians and commentators that this was a free market, that we were all one island. However when ordinary people head north to shop for the same economic reasons, they are branded as “unpatriotic”.

The prominent Southern economist Jim O’Leary pointed out that the more Southerners went North, the more pressure there would be on Southern retailers to cut their profit margins, costs and prices, and ‘this is as it should be.’ The problem of floods of people heading North to buy cheaper priced goods was part of the wider problem of the South’s lost competitiveness. The Republic’s main weapon in the fight against the current severe economic recession would be to cut its excessive production costs (and even more excessive retail prices) and thus start to compete internationally again. ‘One could argue that it is our patriotic duty to do what we can to bring that about, including travelling North for our shopping until that has happened,’ was his provocative conclusion. 7

I’m no economist or business leader, but here’s my two ha’apence worth. Maybe we need to be moving towards a new kind of all-island patriotism which transcends the narrow domains of traditional Irish nationalism or British unionism. This should be based on the conviction that what we are striving for ‘in the common name of Irishmen’ (and Irishwomen) is what brings the greatest benefits to the people of the whole island. We don’t want to get into a situation like that in the 1920s, when the Irish Free State broke away from Britain only to see its ‘independent’ standard of living fall significantly. In the new post Belfast and St Andrews Agreement Ireland, the best political and business leaders are those who can ensure the maximum benefits for all the people of the island, nationalist and unionist and other, North and South, whatever the colour of the governments in Dublin and Belfast. I suggest that should be the new pragmatic, patriotic maxim for the early 21st century.

Andy Pollak

1 Belfast Telegraph, 27 November 2008
2 Business World, 28 November 2008
3 Belfast Telegraph, 27 November 2008
4 Today with Pat Kenny, RTE, Radio 1, 22 December 2008
5 Irish Times, 25 November 2008
6 Ibid.
7 Irish Times, 12 December 2008

  • daisy

    Presumably Brian Lenihan was equally forthright in warning northern car drivers not to drive over the border to get cheaper petrol and diesel?

  • “the best political and business leaders are those who can ensure the maximum benefits for all the people of the island, nationalist and unionist and other, North and South”
    That’s a very materialistic way of looking at things. In my opinion the best political leaders would be those who did the most to ensure that the things that are uniquely Irish about Ireland such as the language, sports, heritage sites and traditions are promoted and enriched. A rich Ireland that is nothing more than a poor mélange of Britain and the USA is not something that interests me in the least.

  • mnob

    The advantage of the border is that it shows the ROI much more quickly and dramatically the effects of its economic policy (for better and worse).

    The truth of the matter is that the ROI has become too expensive in relation to its peers. Today it shows in shoppers going north, tomorrow it is demonstrated in business leaving.

    Ultimately this is an advantage as the alternative involved politicians taking unpopular decisions in the dark.

    In the good old days the republic could address the imbalance by devaluing its currency – a short sharp shock. Now the same effect (and problems) will be achieved by a long and deep recession where the cost of living is brought into balance with that in the rest of the eurozone (which will also be declining !)

  • runciter

    Maybe we need to be moving towards a new kind of all-island patriotism which transcends the narrow domains of traditional Irish nationalism or British unionism.

    Do you really believe any of this stuff?

  • “The advantage of the border is that it shows the ROI much more quickly and dramatically the effects of its economic policy”
    You have a point here. However, the north’s economy is based to such a large extent on the public sector and fiscal transfers from Westminster that you are not comparing like with like. Basically on many fronts the ROI cannot compete with the North because of the Roman Abramovich-like influence of Westminster.

  • Mick Fealty

    Did you read the whole post run?

    Patriotism and economic wellbeing don’t always conjoin in the nicely convenient way our politicians would sometimes like them to. Indeed, I think patriotism is being inappropriately hammered on to the end of what is a fairly desperate appeal to enlightened self interest.

    Robinson’s remarks hint at a wider problem; which we’ve seen reflected in the debate/non debate over what the Republic might do about the Common Travel Area; in the face of international terrorism.

    Getting North and South to coincide more, requires steering much more closely to course taken the former (in the case of the Republic) Mothership.

    That East West axis is not there simply to make Unionists feel better about the Belfast Agreement. It’s there because without the two sets of axes there is little chance of the economic alignment between North and South that many nationalists (with both small and big ‘n’s).

    As for the appeal to patriotism, that’s real enough in the Republic. It’s a small country that has chosen the low taxation route; if indirect taxation drops then everyone will suffers eventually.

    That growing gap in the public accounts is real enough.

    As a collective citizenry it is utter madness to forsake local retailers to shop in Northern Ireland. Yet, as individuals it is utter madness not to.

    CCO’B’s Two States continue to have their play…

  • ‘When you shop in Northern Ireland, you’re paying Her Majesty’s taxes, you’re not paying taxes to the state that you live in.’

    1. Any one remember the previous threads on differential corporation tax, most recently in connection with Lenihan’s October budget?

    2. One comment then (ahem!) noted Lenihan’s “declaration of hostilities” against Sarkozy’s concept of harmonising business taxes:

    The 12.5 percent rate of corporation tax is an important element in our taxation system. It has been a cornerstone of our industrial development in the last decade. I want to emphasise that this rate of tax is not for changing upwards and it will continue to be a central part of Ireland’s economic brand.

    The 12.5% corporation tax is subsidised by taxes and levies on personal income and consumption (as well as by murderous cuts in health and social welfare).

    3. Given a free market and a small island, spot the connection.

    I expect there one word (“murderous”) above could cause offence. Good: Mary Harney’s “policies” on cancer prevention, screening and treatment fit it neatly.

  • Dave

    “Maybe we need to be moving towards a new kind of all-island patriotism which transcends the narrow domains of traditional Irish nationalism or British unionism.”

    Actually, what we need is less organised subversion of the Irish state by those who are promoting a quisling agenda, and more organised promotion of nationalism by patriots of the state.

  • DC

    Globalisation Dave, globalisation.

  • Tony

    The NI prices in shops are subsidised by the rest of GB shoppers.

  • GavBelfast

    Beyond Andy Pollak’s guff, maybe it’s just a case that we are better off the way we are because, as things are at present, we benefit from an influx of Southern shoppers, but if the situation is revered, we can take shelter in what is still the world’s fourth or fifth largest economy.

    Tony,

    That’s the way of the world. One could say the same about Shetland, Anglessy or Cornwall.

  • “One could say the same about Shetland, Anglessy or Cornwall.”
    I don’t think that that is a fair comparison. For a start the 60%+ public sector economy of NI is not comparable with any other region of its size in the UK. While GB is willing to subsidize the party of course NI is better off (economically) in the UK. The question is when they will turn off the tap. Will they always provide that shelter you mentioned?
    You picked outlying regions of the UK but the six counties would not be outlying at all if they were part of an all-Ireland state and it is pretty certain that the Belfast Dublin corridoor would be the economic fulcrum of Ireland. Partition may make political sense for unionists but it makes no economic sense if the fiscal transfers from the UK centre are taken away.

  • catchagrip

    At the moment I’d say the prices are subsidized by RoI shoppers.

  • GavBelfast

    Aidan,

    That’s why NI is better-off as part of the UK.

    Everywhere else in the UK benefits from “fiscal transfers” from London. I could equally have picked Durham, Argyll and Carmarthenshire if they float your boat better.

    The Union makes economic sense to NI – the current weak £ just helps the retail sectors, and the spin-offs from it as a bonus in these difficult economic times.

  • Gav,
    I think that you are ignoring my point. No other part of the UK is subsidized to the degree that NI is. No other comparable region has a public sector comprising more than 60% of the economy. Yes, you are right that NI is better off economically but it is still sad that unionists would rather remain a subsidized peripheral region of the UK rather than be part of the same country as their fellow Irishmen.

  • eranu

    aidan, im not an expert but im fairly sure prices in shops have nothing to do with the public sector or regional subvention. are you just having a pre Christmas anti NI rant?
    the prices in shops in NI are pretty much the same as anywhere else in the UK. most are national chains with shops in every majot town and city.
    southerners would be better asking themselves why their country is so expensive.

  • Eranu,
    If NI were not a heavily subsidized region of the UK the shops would be more expensive and the differential would be a lot less. In fact there would also be a much smaller retail sector in the north. Everything is unbalanced because NI does not have a normal economy. That is why we are not comparing like with like.
    That is not to say that the ROI is not a rip-off. I live in Holland so I see the price differences very clearly every time I go home.

  • eranu

    aidan, you’re doing the thing that all anti NI people do. they pick on a corner of a country that is ‘poorer’ than the rich corner of the country and then treat it as a separate country. the UK is a single state with one capital city etc.. you may aswell pick on Mayo and say if it wasnt heavily subsidised by the wealthy dublin area then it would be more expensive etc because it doesnt have a normal economy etc..

    i take it your not heading home for Christmas?

  • Eranu,
    I think that calling me anti-NI is framing things a bit dramatically but you are right that I see no economic argument for the polity. Your response is merely to say that you are happy being a marginal outlying region of the UK instead of being an integral part of the Irish economy and actually achieving its economic potential. Fair enough, we are not in disagreement and unless the financial arrangements of the UK change I am pretty sure that nothing will change any time soon.
    No, I’m not going home for Christmas. It is a lot of hassle getting from here to the west of Ireland with small kids so we have ended up staying where we are for the last few years.

  • Listen my namesake!

    Most people in the 26 counties will shop for something cheaper in another part of Ireland. Thank fuck they don’t have this fetishistic, slabbering onanism of the 26 county state and its wreteched institutions which you profess everytime you type on the comment box in this website. Fucking blueshirt!

  • I tried to post this some eight hours ago. A good time was had by all in the local. I come home. Alas, the wee pups are back home from College; and VirginMedia can’t cope with the strain.

    So, here goes for another attempt:

    The argument that, somehow, the rest of the UK “subsidises” the NI retail sector escapes me.

    True, there is a disproportionate public-sector employment in NI, which needs to be remedied — not by mass redundancies of public-sector workers, but by growing the private sector.

    Then there are the curious discrepancies between NI wage rates and the rest of the UK. Try this for full-time employment:

    (£/week/2006 for Men/Women/All):
    All UK: 487.4 386.8 447.1
    London: 631.3 511.6 572.4
    Northern Ireland 422.9 378.5 405.2

    To spell that out, male rates are lowest in NI (considerably so, by about a factor of about 10%), female rates are close to the UK mean (the effect of public service employment paying proper rates to women), and in only the North-East and Wales (by not greater differences) are “all” less than NI.

    The whole of the retail sector is in the private sector, which means that individual firms decide whether or not to operate in NI, and how to set their prices. If anything, price-levels in NI tend to be somewhat above the UK average: the last time I looked, that applied even to locally-sourced products (fruit and veg were a particular surprise). There is no element of subsidy in that, surely?

    Why not revisit my original suggestion: one of the causes of customer-price differential between NI and the RoI is the deliberate policy of the RoI Government to have the consumer taxed differentially-high to provide the lower corporation taxes? In other words, subsidised multi-national employment in the RoI: public sector employment in NI. Fair enough?

    Final thought: why the griping? Are we not all members of the EU? Is cross-frontier commerce (for individuals as much as for corporations) a “good idea”? Is shopping in Newry or Derry somehow less honourable than the traditional SE England booze-cruise? Do I complain (you bet I do) when I buy my Apple products from the UK website, and find that they are sent from Cork so I pay RoI VAT?

  • Mack

    There are a number of reasons why retail prices are higher in the south. Historically, the Groceries Order limited retail floor space to a low level per shop, and prevented below cost selling. This was only repealed very recently (and I think there are alternative floor space restrictions now in place).
    One purpose of this was to preserve Irish town centres from efficient but souless out-of-town shopping centres that have hollowed out some US and British cities.
    It looks like Northern Ireland is one giant out of town shopping centre for Irish (Republic) towns now. Maybe the government will allow the development of large scale, efficient shopping centres on Irish (Republic) soil in the future, in order to prevent this problem recurring.

    Regardless, this current crises will force Irish retailers (and the whole supply chain) to become more competitive & efficient, one way or another.

    I note in today’s Indo a journalist complained that the fall in Sterling hadn’t led to lower prices in Ireland. This is as you would expect (most goods are not sourced from the Sterling area despite the fact that most retailers operate there also) – I expect it will lead to higher prices in the UK eventually, and much lower margins for retailers there sooner rather than later. (The benefit of Sterling’s collapse to the retail industry there will be temporary).

  • Mack

    Or to put it another way – the best way to lower prices in Ireland would be to set up a Special Retail Zone on cheap land in North County Dublin (just off the motorway, near to the ports). Reduce VAT only within that zone (say to 10%), completely remove or reverse floor space restrictions (i.e. a shop would need to be bigger than a minimum size to operate within the zone). This way you pass distribution costs to the consumer (who can absorb them by shopping in bulk) – with the larger floor space per unit retailers can benefit from economies of scale. As shoppers are buying in bulk, they can discount heavily and still make a large profit by selling volume.
    As this shopping environment would be more productive per worker – you could still pay the retail workers in it relatively high wages. The state would collect all the VAT. The special retail area could, even more so than Newry, be a dual currency zone and allow retailers to operate and pay their taxes in whichever currency (Euro or GBP) was more profitable for them.

    Retail in Dublin city centre & suburbs would be crucified, but is that going to happen anyway?