Budget 2013 and its affect on one Irish town




NESTLED in the village of Glanworth, 10km from the North Cork town of Fermoy, lies the House of Franc.

Franc, aka Peter Kelly, is one of Fermoy’s most famous residents (remember, the town is also home to Riverdance legend, Michael Flatley).

But there are few national personalities who could attract such a steady stream of winter day trippers to a renovated mill house situated beside a 13th century castle in a remote part of rural Ireland; a location Franc describes as “a little gem”.

However, Franc is a household name thanks to his television profile and a much-loved household name at that.

The day we visited, he was showing wedding candle options to a bride-to-be and her mother. The three were chatting animatedly and somehow Franc happened to mention that he once wanted to be a dental nurse.

“Ooh,” gasped the mum, shocked. “Aren’t we all very lucky that you didn’t?” she said beaming as if he were her son.

Franc is and has to be at the very heart of the House of Franc. His wedding planning business office is based here and the centre’s manager, Máiréad O’Sullivan, admits that every group that books lunch will inevitably ask if Franc is around.

The gift shop is remarkably good value; you’d expect a much higher mark-up. The tea room is shabby chic romance: Antique chairs, white roses in vintage bottles, mismatched tea sets, and a grandfather clock. And since last week, the building is covered in a layer of deep snow as Franc has also gone into the artificial pumped snow business.

“It is very tough at the moment. You really have to keep re-inventing your business. It’s not about making money now. It’s about survival. Nobody is making money. They’re just paddling,” he said.

“I always think that no matter what you have to keep trying if you want to keep going.

“You have to take a chance and develop something so people will come to it. That’s the approach I took with the mill and with the snow business. We’re investing hugely in the Fermoy area when nobody else is. I got interested in the pumped snow as I saw that we needed it for events. I’m now the Irish agent for snowbusiness.ie and we’re doing snow for Christmas parties, car companies, drinks companies.

“People are also buying it so people can wake up to snow on Christmas morning,” he said.

Franc, like very many other business people in Fermoy, was totally opposed to any tax hikes, universal social charge (USC) hikes or increases in Vat in the budget.

“This budget needs to jumpstart the economy not kill it off totally. Instead of increasing Vat, reduce it, and reduce tax and you’ll get things moving. People will have more money in their pockets. The machine of the economy needs to start moving. People need to spend if we are to keep jobs in this country.”

On the other side of Fermoy, lies a very different business. Peter Merrigan’s company, Triace has been manufacturing and servicing pressure washers for small business since the 1970s.

His washers are practically bespoke as he tailors each washer to suit the individual needs of a particular business or agricultural holding. In this way, he staves off competition from low-cost economies. He too was fiercely opposed to any tax hikes for middle income earners.

Like local financial adviser, Adrian Godwin he believes that the fat cats are getting away too lightly and they must be targeted in this budget. The middle income bracket are already pin to collar, he said.

“I strongly believe that there should be means testing of children’s allowances. Why should a joint income of over €100,000 be entitled to the same rate of children’s allowance as those on a single income of €20,000? A higher rate of tax should also be attached to pensions over €70,000 per annum.”

Brian Twomey closed his shop in Fermoy six years ago, renting the building out to another sports retailer. He was one of the lucky ones, getting out when times were good. A six-time black belt, when he isn’t working as a relief postman, he is down at the karate club beside Fermoy Town Park.

As chief instructor, he has expanded the club, developed wheelchair karate and offers pay-as-you-go classes for people who can’t afford gym fees anymore.

“It’s nice to give something back. Times are not easy and from what I can see things are so hard for people in business that they are just working for the Government to pay tax, Vat and the like. The people are acting as collection agents for the Government as they starve,” he said.

“If Government really want to help small business, they’ll reduce the cost of Vat, diesel, and petrol so it will help reduce their cost base.”

The rising cost of diesel and fuel is a recurrent theme amongst the people of Fermoy. Cars aren’t a luxury for them. It’s how countrypeople get to work, school, and into town. Darts or buses aren’t an option and so there was serious concern last week about further fuel taxes.

However, there’s no denying recession does bring some positives. Joe Kearney of the Grand Hotel reckons he’s a sharper businessman now.

“You’re constantly monitoring what you’re doing to see if you can do it better,” he said. “In the past couple of months, one of his combi ovens went out of insurance warranty and had to be replaced. He didn’t buy a new oven which could have cost €20,000 but bought a second hand one from Google offices in Dublin. It cost about €5,000.”

Mr Kearney also said he has a calibre of staff now that he “could only have dreamt of during the boom”.

“One of our chefs is a sous chef who was formerly at the Maryborough Hotel and Spa. He made the choice to work locally as he was spending so much money on fuel to and from Cork. He is living in the area, has family in the area and the move here made sense for him. He’s producing stuff for us now that we couldn’t have imagined before.”

But talk to any adult in Fermoy and they’ll tell you a lack of jobs is the biggest challenge facing the area. The unemployed are also drowning in debt often incurred when both partners in a relationship were in well-paid jobs.

However, employers think that it’s not as simple as creating jobs. They have been offering jobs in supermarkets, hotels, and in sales but they have had difficulty securing the right candidate.

“We’ve had countless interviews with people who’ve sent in CVs, who want to work, but then we show them what we can offer them, they say with medical cards and all they are better off on the dole. Even casual hours or part time isn’t a runner,” said Mr Kearney.

Mr Godwin, who runs a financial services business, has encountered the same problem as has Michael Riordan, who owns the SuperValu supermarket.

“I’d like to see more incentives for people to get off the dole as it’s not easy to hire people. I have people telling me that with families, they won’t work for anything less than €40,000. Something has to be done to make working more attractive,” he said.

All the employers are also arguing that local authority rates are far too high, making it increasingly difficult for many struggling businesses to keep their doors open. Managing cashflow is a priority for them as credit is near impossible to access.

Mr Merrigan said: “Fixed taxes such as rates should be made easier to pay. Instead of having to pay rates for example as a lump sum, it should be possible to pay them in 12 monthly instalments by direct debit. Simply collecting rates in this manner would ease the burden on the business and make budgeting in councils much easier as they can calculate exactly how much income is coming every month rather than relying on last minute payments, which may or may not arrive.”

As far as the people of Fermoy are concerned, there has been enough cutting, enough austerity. It’s time for some governmental imagination, some innovation. It’s about creating a fiscal environment where businesses are given incentives to grow and to hire people and where people are incentivised to work.

Take Mr Kearney’s proposed tax relief on business equipment expenditure: “Very many of the food and heating appliances we use have seven-year lifespans after which they can’t be insured anymore so we have to replace them. This is a huge cost to us so I’d like to see some kind of Vat or tax relief on this expenditure in the budget.”

Joe Kearney, Hotel owner

The bottom line is people just don’t have money to spend. Having your lunch or dinner out, going for a pint, aren’t necessities. So we have to make sure that any money customers spend here is money well spent. We’ve cut back to core staff since the downturn.

We don’t have office administration, a general manager, etc, anymore. We’re all about the personal service and tried and tested staff. It’s not about bells and whistles such as decor. Those days are gone.

Another big issue for us is the huge amount we are paying on rates, yet the council aren’t making the town attractive for people to come in here. We’ve lost about 14 or 15 parking spaces with the flood relief works and this has meant our daytime business is down by about 60% since the works started. More and more, I think the NRA, the local authorities, are entirely detached from the reality of how hard it is to run a business.

This idea of us being forced to pay sick pay? I won’t be able to do it. Full stop. I’ve always had a flexible attitude to sick days. Time in lieu builds up. People can use time in lieu, holidays or whatever. But being forced to pay it? I can’t do it. You’d have to look at how many permanent staff you have compared to casual staff. Also employer PRSI. What is the reason for that? To me, it’s just a cost for the privilege of having an employee as it doesn’t bring any benefits. The cost of employer PRSI must be looked at as the Government needs to make it easier for people to employ people, not more difficult.

Maintaining the hotel’s machinery is another huge cost for us. Yet, we need them all to stay open. Very many of the food and heating appliances we use have seven-year lifespans after which they can’t be insured anymore so we have to replace them. This is a huge cost to us so I’d like to see some kind of Vat or tax relief on this expenditure in the budget.

Business is all about survival now so we need some help.

POST-BUDGET: Joe was happy the tourism 9% Vat rate was maintained. However, he said the squeeze in the middle is ridiculous with property tax, PRSI hikes, etc. He said the hike in wine prices will cost 20c per glass.

Martina Cotter, Credit Union Manager

The people that I see suffering the most after the budget are the couples where both were working full time and on good money before the downturn. Now one of them has now lost their job and the other could be on shorter time or even have lost their job too. They still have big mortgage repayments, are very often in negative equity and a lot of these people, if they are working, are working in Cork City and so are really feeling the increased petrol and diesel costs. Yet, these people will be impacted by the new property tax and are terrified as they have big loans, apart from mortgage debt, from when times were better. Their income has collapsed.

There is no doubt too that children’s allowance is a big help to a lot of struggling families. Any cuts in this will really impact lives. Children’s allowance allows them to pay everyday bills.

I think it’s also really important for the finance minister to realise just how much debt there is out there. There are some people who on paper have good incomes but when you take their debt outgoings into account, one matches the other. How can they cope with additional taxes? I really believe that the Government needs to better monitor how credit cards are handed out. Also, I’d like to see the Personal Insolvency Bill coming into play quickly. That will be a big relief to people who are just drowning in debt.

I have serious concerns about recent press leaks saying that jobseekers benefit is to be reduced from a 12-month payment to a nine-month payment. This will really affect people who won’t after the nine months be entitled to jobseekers allowance as their partner is working. Remember these people have large mortgage and other debts.

WHAT SHE THOUGHT: The removal of the PRSI threshold will impact, as will the child benefit cut and this new property tax. These cuts and taxes will affect people’s ability to spend and pay bills. I was pleased diesel and petrol weren’t touched or income taxes increased. But again no measures to help people with big mortgages and big personal debt.

Michael Riordan, Director SuperValu Fermoy

The number one issue that needs to be addressed if we are to get this country moving again is the banks.

They say they are open but you would need to be Indiana Jones to jump through the number of hoops they are putting in place if you want to access money. They are making it very hard. There is just hoop after hoop so accessing credit becomes this long drawn-out process that is very difficult for a fast-moving business.

I also worry about how this budget will hit the average guy, the guy going to work trying to keep going. The minute you hear the budget being mentioned in the news, we in the retail business see a drawback in spending.

I don’t think you can hit these guys any more as they have high outgoings and year after year, the budgets are reducing their take-home pay.

As for the public sector, they’re hitting the wrong people, the gardaí, the nurses. It’s the people on top of the pile, in big management jobs, that need to pay more in this budget not the guys out on the front line.

Ever since the Tiger left this country, we’ve been trying to manage costs. We’ve cut cost after cost but we can’t cut costs like electricity and gas or taxes. The Government needs to be aware that employers’ pots aren’t endless. They could help us with these costs. One of our highest costs after wages is ESB.

The Government can control the unit cost of the ESB. The Government needs to become more active in trying to keep businesses open and people in jobs. It’s cheaper for them to do this than pay social welfare.

There is certainly an issue out there about people who don’t want to work. There are a lot of genuine people out there who want desperately to work but there are others that as long as they have the air to breathe won’t work.

Finding a solution isn’t easy but we are still finding it hard to get good suitable, conscientious staff.

WHAT HE THOUGHT: This budget is hitting everyone but the low to mid earners with the big mortgages are going to find it much tougher. I’m glad, though, that they decided against the enforced sick pay. It would never work.

Peter Merrigan, Manufacturer

There are some half-baked ideas that have been raised in the past number of months that need to be discounted completely as they are simply frightening to employers and employees.

For example, the idea that it would become mandatory rather than voluntary for employers to pay unvouched sick pay. This idea, if put in to practice, would be too easy to be exploited and would be disastrous to a small business.

Also any increase in Vat, fuel, vehicle registration tax or on any necessity would be simply inflationary and would probably realise no more tax as the sales of these products would simply contract further. Cork is a centre of employment for a huge amount of people in this town so fuel costs are a big, big factor in their lives.

Rather than taxes, the emphasis should be laid on job creation as every extra job creates a lowering of social welfare expenditure and an rise in all tax takes. The first item on the job-creation agenda should be measures to ease access to credit for small businesses.

It is obvious that large businesses are still being funded by the banks while they don’t wish to know smaller businesses and yet small businesses and agriculture are the backbone of Ireland.

Even if the Government levied 0.5% on small business loans as credit insurance then at least we might get access to the credit we need to keep our businesses turning over.

Every good business idea needs cashflow to put it in to practice, every new employee taken on requires a breathing space until such time as they become revenue producing. A line of credit allows this to happen. Imagine what a 10% rise in employees in small businesses would create by way of a revenue stream?

Anyone returning to work should be free of all taxes for three months and an employer should not have to pay PRSI for the same length of time.

The minimum wage should be reduced for unskilled workers as it is unfair at present for employers to take on and upskill workers on a wage that is uncompetitive with our fellow EU countries.

WHAT HE THOUGHT: It did nothing to create employment. It was a mediocre budget if nothing else with the property tax hitting hard. Many people won’t pay that tax though as they can’t. Where was Labour in this budget? It’s just like another Fianna Fáil budget. The haulage rebate is to welcomed though as this is good for the cost of goods .

Margaret Keevers, Publican

We’ve fared very badly this year. It was unbelievable. People aren’t going out. We’re here since 1986 and I’ve spent hours and hours with customers yet I look around this afternoon and there’s only four or five in the bar.

I know November can be quiet as some people go off the drink but there are some regulars that I haven’t seen in months. If a Saturday night is dead, it’s a vicious circle. If somebody looks in and sees there’s no atmosphere, they’ll just move on to a more lively place.

And then there’s the many more who won’t entertain going out for a drink. They drink at home as it’s so much cheaper. The stricter drink-driving laws and the fact that drink is being sold so cheaply in supermarkets is killing us.

The underselling in supermarkets is ridiculous. Why are the Government doing it? It causes problems for hospitals and mental health services. We have an off licence too but we can’t compete with the big retailers yet we are forbidden from buying our alcohol from the big multiples for resale. I could buy cheaper from them than I can buy from a wholesaler myself.

And then just recently, Diageo decided to increase the pint of Guinness by 10c. What happens if the tax on alcohol goes up again in the budget? Is there any future for pubs really?

Bupa leaving Fermoy had a big affect on us. Fewer workers coming in for lunch. Fewer solicitors coming in between meetings.

We still have to find money for the heating, the electricity, the €580 each month for Sky TV. To be honest, I can’t see any improvement for us until the general economy improves. All we can do now is hope for a good December.

The young people are good for meeting up in pubs when they come home for Christmas. They’ll hopefully give us an end-of-year lift.

WHAT SHE THOUGHT: Margaret wasn’t happy with the failure to tackle below-cost selling in supermarkets. She was also very unhappy with excise duty hikes on beer and wine.

Adrian Godwin, Oaktree Finical Services

Fermoy Business Action Group had a big meeting recently about rates. But you know what, at least they get something for their rates. They get lights, bins, and public toilets.

I’m five miles outside the town in Killmagnier in the middle of nowhere paying huge rates for no services. I’m paying nearly €3,000 a year and I’m getting no government assistance at all. It’s incredible. The only reason that I moved out of the town is that I couldn’t get a decent priced rent anywhere in town.

There are vacant units at places like the Blackwater Shopping Centre where the rents are so expensive, it’s absurd.

I’m in business for the past two years and in spite of everything, business is growing. I employ 10 people. But I’d like to see a higher tax rate for higher earners. I’m telling you most of them aren’t paying more than 28% tax. They all have section property write offs and various ways to reduce their tax bill. My customers tend to be the lower earners, the small building contractors. I help them with life cover, health cover and the like.

I’d also like to see more incentives for people to get off the dole as it’s not easy to hire people. I have people telling me that with families, they won’t work for anything less than €40,000. Something has to be done to make working more attractive.

I think that for the first 12 months after unemployment, a person should get full dole. For the six months after that, they should get 75% of their dole and the remaining 25% if they are involved in local community projects such as helping the GAA, Tidy Towns, community councils, etc. After 18 months of unemployment, dole should be cut to 50% if they are not involved in a community project.

WHAT HE THOUGHT: Increases in capital gains tax (CGT) and capital acquisition taxes (CAT) will make land handovers more costly. The Dirt, VRT, and motor tax hikes are madness. Where are they going? The property tax is also madness for people who paid huge stamp duty in the boom and are most likely in negative equity. Increases to self-employed PRSI? What benefit do we get from it? And if they are taxing maternity benefit, why not tax social welfare?

VISIT OUR DEDICATED BUDGET 2013 SECTION FOR FULL BUDGET COVERAGE

We tracked all of the Budget 2013 announcements in our live blog here.

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