Our econ­omy will lose out

Why neil gib­son is dis­ap­pointed that we’re fac­ing elec­tions again

Belfast Telegraph - Business Telegraph - - Front Page -

Oh dear. The last col­umn I wrote in this paper was a gen­er­ally up­beat end-of-year sum­mary. While recog­nis­ing some very sig­nif­i­cant risks I was con­vinced that things were inch­ing for­ward. There have been in­creased re­quests for us to re­search pol­icy is­sues, the new Pro­gramme for Gov­ern­ment, the pos­i­tive non-par­ti­san re­ac­tion to the Ben­goa re­port and the forth­com­ing suite of strate­gies as ex­am­ples. Though it is easy to crit­i­cise the Ex­ec­u­tive this felt like a ma­tur­ing to me and a fo­cus on what re­ally mat­ters to most peo­ple. There was pol­icy move­ment on cor­po­ra­tion tax, progress to­wards a So­cial Value Act, rate re­form and a host of other ar­eas.

Now we are back to elec­tions again and I am strug­gling to find any­one rel­ish­ing the prospect. As we head into an­other cam­paign can we ex­pect to see eco­nom­ics make much of an ap­pear­ance? The an­swer, sadly, is prob­a­bly not. As I walk the dog in the evenings, pass­ing schools, GP surg­eries and lo­cal shops, I can’t help think­ing there must be some things we could all agree on. Wouldn’t our politi­cians be bet­ter fo­cus­ing on tack­ling the chal­lenges fac­ing our ser­vices and our busi­nesses than get­ting pho­tographed to adorn more lamp-posts?

But what is more sur­pris­ing to me as an economist is the lack of con­sid­er­a­tion of the tax­payer in al­most all of the early elec­tion­eer­ing. We are quickly into dis­cussing fund­ing for the Ir­ish lan­guage, or Orange halls, or the im­pact on wel­fare pay­ments to off­set the bed­room tax or the re­place­ment of EU fund­ing to a range of ben­e­fi­cia­ries. This are all re-al­lo­ca­tions of tax­pay­ers’ money. Whether one sup­ports any or all of the choices surely the im­por­tant point to fo­cus on is whether we have the money to re­dis­tribute in the first place? Does this ap­proach high­light that we are rather ea­ger to spend other peo­ple’s money and ap­par­ently less con­cerned about how much we can gen­er­ate to pay for the things we be­lieve we need?

I am not sug­gest­ing the re­new­able heat in­cen­tive (RHI) de­ba­cle is not a cri­sis — it is — but I can­not imag­ine a world in which we will not have more of them in the fu­ture. That we un­cov­ered a po­ten­tial waste of pub­lic money is good, and credit to the in­ves­tiga­tive teams that un­earthed the in­for­ma­tion, but the fo­cus must be on solv­ing it, pre­vent­ing a fu­ture oc­cur­rence and see­ing if any of the er­rors in this scheme could ex­ist else­where. So we start 2017 in an un­de­sir­able place po­lit­i­cally and I for one am dis­ap­pointed. I did feel there was progress, we were look­ing at more in­clu­sive eco­nomic strate­gies, think­ing be­yond GDP and recog­nis­ing the chal­lenges fac­ing our health ser­vices, education sys­tem and, crit­i­cally, our tax gen­er­at­ing firms. Brexit shows us that re­gard­less of what ex­perts pre­dict, firms will keep do­ing busi­ness for so long as peo­ple want to buy their wares and are will­ing to pay the price they charge.

The Eco­nomic Pol­icy Cen­tre con­sid­ers the fol­low­ing five the big risks for 2017: 1) In­fla­tion: ris­ing prices, pos­si­bly even a move later in the year in in­ter­est rates to track the US, lead­ing to re­newed pres­sure on con­sumers. 2) Po­lit­i­cal in­sta­bil­ity: hold­ing back progress on is­sues such as cor­po­ra­tion tax and bud­get set­ting. 3) Hid­den labour mar­ket weak­nesses: al­though the job mar­ket looks strong look­ing be­neath the head­lines shows grow­ing de­pen­dence on tem­po­rary, part time and low wage jobs. 4) Per­sis­tent pro­duc­tiv­ity strug­gles: a sig­nif­i­cant part of the rea­son for NI’S over­all pro­duc­tiv­ity gap is due to the sec­toral struc­ture in the re­gion but even within sec­tors there are alarm­ing signs of weak and de­te­ri­o­rat­ing rel­a­tive pro­duc­tiv­ity lev­els. 5) Brexit: de­spite the fact that the early eco­nomic data shows many of the short term fore­casts were mis­guided and Trea­sury es­ti­mates of longer term eco­nomic im­pact are, in my view, based on very sus­pect anal­y­sis, there are un­doubt­edly chal­lenges ahead, some unique to North­ern Ire­land. The na­ture of the land border, de­vel­op­ment of a strat­egy to sup­port the agri-food sec­tor (per­haps through a quota sys­tem) and a pol­icy to deal with sec­tors and firms that are cur­rently de­pen­dent on mi­grant labour are just a few of the lo­cal pri­or­i­ties.

In other news the new in­dus­trial (or in old money, eco­nomic) strat­egy is out for con­sul­ta­tion and Q4 GDP for the UK came in at a re­spectable 0.6%. Again the UK re­lied on the ser­vice sec­tor to drive growth with man­u­fac­tur­ing ap­pear­ing to ben­e­fit only mod­estly from cur­rency move­ments and con­struc­tion re­main­ing in the dol­drums. Life goes on it seems in busi­ness, but did it re­ally have to come to this? I know not ev­ery­one shares the view, but things were get­ting bet­ter.

An­other impasse at Stor­mont will not help the lo­cal econ­omy says Neil Gib­son

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