Post Tory-DUP deal, Northern Ireland’s economic outlook has not improved

Now that the minority UK government of the Conservative Party has signed a Confidence and Supply Agreement with the Democratic Unionist Party (DUP) of Northern Ireland, in return for an extra £1 billion of funding from Westminster, does that mean Northern Ireland’s economic outlook has somehow improved? Hardly. In the current conditions, Northern Ireland faces a tough rocky path to economic and political success, especially in trying to attract foreign inward investment.

From a business perspective, Northern Ireland has long faced stiff competition from its neighbour, the Republic of Ireland. A company wishing to locate on the island of Ireland has a straightforward financial decision—does it pay the Republic’s 12.5% corporation tax, or the 20% rate of its northern neighbour which is applicable throughout the UK? These figures alone are persuasive and that is why Stormont, home to the Northern Ireland Assembly, lobbied Westminster to consider it a special entity, and drop Northern Ireland’s corporation tax rate to match the competition. Due to be implemented in April 2018, this now looks to be on hold.

Brexit has added to the list of adverse factors. Bombardier, Northern Ireland’s largest manufacturing employer, wanted the UK to remain within the European Union (EU), and 55% of the Northern Irish voted to do so. It is easy to see why. There is no advantage in a company paying more corporation tax and still not gain entry to EU markets. In particular, North American companies wishing access to those markets may simply head to the Republic, where there are historic ties. Brexit has caused business uncertainty, so attracting foreign inward investment is a continuing struggle. Retaining companies already in place also emerges as a factor, so other incentives must be available. These can include access to high quality talent pools, such as those to be found at universities, plus financial assistance to upskill older employees. Job losses from firms relocating elsewhere are bound to have adverse effects, and around one in four jobs are public sector roles already.

Brexit itself raises many questions for the Northern Ireland Assembly and the EU. The border between the north and the Republic is 310 miles long and porous. It will become the only UK/ EU land border. So how will trade tariffs between the two entities be implemented and overseen when moving goods from one to the other? Given the region’s recent 30-year conflict, no-one there is likely to wish a return to the use of border check points. The north is reliant upon trade of goods into the EU and 61% of its exports go there, with 35% of its economy coming from the food and beverage industry. This Common Travel Area between the two countries is a fairly informal arrangement and pre-dates the EU. Both countries wish it to continue, yet immigration now raises its head as requiring resolution.

All of this supposes the Northern Ireland Assembly is functioning properly. The DUP is predominantly a Protestant loyalist (to the idea of the UK) political party. Their main opposition is Sinn Fein, which is mainly a Catholic republican (to the idea of a united island of Ireland) one. These two parties are the largest in the Northern Irish political scene—an environment which has arguably become more polarised over time. Political stability is crucial to business to create conditions within which trade and industry can flourish. That, in turn, helps bring opportunities for the population to gain employment and enhance their financial wellbeing. Yet the Northern Ireland Assembly is suspended as the two parties cannot reach common ground on certain issues.

After a decade of joint rule, Sinn Fein withdrew from power-sharing by refusing to nominate a candidate after Deputy First Minister Martin McGuinness stepped down, and who shortly after passed away of natural causes. Sinn Fein did this to highlight the “cash for ash” scandal. In her role as Minister of Enterprise, Trade and Investment, the DUP leader and now Northern Ireland’s First Minister, Arlene Foster, oversaw a scheme known as the Renewable Heat Initiative. This scheme did not have effective cost controls, meaning that for every £ 1 spent on fuel, perversely a £ 1.60 refund was available. It cost the public purse £460 million. Foster refused to step down, with the DUP losing seats in the March 2017 Northern Ireland Assembly snap-election; they have just one seat more than Sinn Fein. Meanwhile, Northern Ireland slips toward an ill-needed economic downturn. Its 2017 growth is predicted at just 0.2%, the UK’s weakest performing region.

Does an extra £ 1 billion from Westminster help, as Northern Ireland was expected to receive 3.5 billion euro from the EU from 2014 to 2020? It certainly helps the Conservative Party shore up the DUP to an extent, as much as DUP support in Parliament shores up the minority UK government. The Confidence and Supply Agreement agrees support on the issues of the budget, Brexit, and legislation contained within the Queen’s Speech. Everything else is on a case-by-case basis. This neatly side-steps topics where there are opposing views, like Brexit itself, creationism, same-sex marriage and abortion. Westminster already transfers £9 billion annually to Northern Ireland before the DUP deal, making it the largest single contributor by far. But given the prevailing conditions within Northern Ireland, Westminster would do well to keep a strong eye on what is happening there, and facilitate a properly functioning Northern Ireland Assembly at the earliest opportunity. Peter Probert is Director of Spearhead Advisory Ltd. The stage is all set to welcome the new President Ram Nath Kovind to the Rashtrapati Bhawan on Tuesday after his resounding victory over the opposition nominee, Meira Kumar. However, it is also time to give a warm send-off to Pranab Mukherjee, perhaps the only Head of State who could have made a competent Prime Minister as well. During his nearly 50-year-long association with Indian Parliament, PranabDa performed varied duties, but the only position that eluded him was the prestigious office of the Prime Minister, even though the initials of his name and the august office are identical.

Being an astute and perceptive follower of politics and current affairs, Pranab was able to anticipate in 2010 itself, that he would have to carve out his own place in history as the Congress party to which he belonged would never permit him to ascend further than where he was at that point of time—a significant member of the Manmohan Singh led UPA government. In an interview to Priya Sahgal, then with the India Today, he took everyone by surprise when he stated that he would not be a part of a government led by Rahul Gandhi.

The majority of people in the political class thought that since P. Chidambaram appeared to be the preferred choice of Sonia Gandhi for key positions in the Cabinet, PranabDa had made the decision to withdraw from public life and thus had opted out from any future government. However, intricately interpreting the comments and observations made by him in the interview, it was evident that Pranab was either convinced that the Congress was not returning to power, and so there was no question of Rahul Gandhi becoming Prime Minister, or he had already made up his mind to throw his hat in the ring for the Presidentship of the Republic.

The Congress high command was unwilling to give him his due and Sonia Gandhi took the decision to promote VicePresident Hamid Ansari to the top post. It was at this stage in 2012 that Pranab stupefied his opponents and supporters by emerging as the candidate for the President’s post. Sonia Gandhi was dumbfounded, but could do nothing other than extending him her support and also declaring him as the official nominee of the party. A seasoned politician, Pranab Mukherjee had won this particular battle. He not only became the 13th President, but also carved out a place for himself as being a constitutionally correct people’s Head of State, who threw open the gates of Rashtrapati Bhawan for the common man and facilitated in restoring its prestige and majestic aura.

It was not astonishing that Pranab had within the party outwitted his rivals since he had the distinction of being groomed by the late Indira Gandhi, whom, till this date, he continues to admire immensely. He was also a favourite of the late Sanjay Gandhi, who in fact, put him on the fast-track by convincing his mother in the mid-1970s to name him as a minister of state, with independent charge of revenue and banking after bi-furcating the Finance Ministry. Pranab had his ups and downs and despite an electoral setback in the 1980 Lok Sabha polls in West Bengal, he was appointed a Cabinet minister during Indira Gandhi’s fresh tenure as the Prime Minister.

It was due to his comprehensive understanding of issues that Indira Gandhi virtually chose him as her number two in the Cabinet, which was packed with stalwarts such as R. Venkataraman, P.V. Narasimha Rao, Giani Zail Singh, P.C. Sethi and Narayan Dutt Tiwari, among others.

Pranab became a victim of circumstances following Indira’s horrific assassination and fell out of favour with her son, Rajiv, who succeeded her. He moved away from the Congress to form his own party and waited for better days, which returned in the early 1990s. After that there was no looking back. An interesting anecdote in the book by Indira’s former political adviser, Makhan Lal Fotedar recounts how after the fall of the V.P. Singh government in November 1990, the then President, R. Venkataraman was oddly reluctant to administer the oath of office to Rajiv Gandhi. However, Venkataraman informed Fotedar that if Pranab was elected as the leader, he would, that very evening, swear him in.

After the formation of the UPA government, of which Pranab was a pivotal as well as the most consummate player, an attempt by his supporters was made to get him re-designated as the Deputy Prime Minister. The proposal was gaining momentum, but Sonia Gandhi shot it down while answering a query posed to Dr Manmohan Singh by me during a press conference in 2006 at the Nainital Conclave of senior Congress leaders. She had apparently figured that if Pranab would be elevated, Manmohan Singh’s relevance would be diluted in the same manner as L.K. Advani’s positioning as the Deputy PM had affected Atal Behari Vajpayee’s supremacy while the NDA was in power.

Pranab would be settling down in New Delhi which has been his home for a long time. He is certainly not the kind who would remain inactive and spend the rest of his years in retirement. He still has much to offer and his words of wisdom would be reflected in his writings, speeches and actions after he lays down the supreme office. Pranab Mukherjee would go down in history, as a promising Prime Minister India never had. Between us.