We may have to ac­cept that some of our fund­ing is now gone for good

Belfast Telegraph - Business Telegraph - - News - By Dr Es­mond Birnie Dr Es­mond Birnie is se­nior econ­o­mist at the Ul­ster Univer­sity Eco­nomic Pol­icy Cen­tre

Be­fore we be­come too gloomy, economies can some­times grow in spite of chaotic pol­i­tics. Italy in the 1950s had many world-beat­ing com­pa­nies de­spite short-lived gov­ern­ments and cor­rup­tion.

South Korea has de­vel­oped lead­ing steel, car and elec­tron­ics com­pa­nies not­with­stand­ing a di­vided penin­sula.

Is­rael’s high tech­nol­ogy firms are renowned even given the con­stant threat of war.

Here in North­ern Ire­land the econ­omy has con­tin­ued to grow and last year em­ploy­ment growth was over 2%.

How­ever, the cost of about 600 days of “no gov­ern­ment” in North­ern Ire­land has been ac­cu­mu­lat­ing.

Two ar­eas may be par­tic­u­larly im­por­tant: bud­getary ques­tions and the in­abil­ity to de­velop poli­cies. Bud­getary ques­tions: The process of set­ting a Bud­get for North­ern Ire­land pub­lic ser­vices for 2019-20 should have started. The Depart­ment for Fi­nance Brief­ing in De­cem­ber 2017 demon­strated how stretched North­ern Ire­land pub­lic fi­nances now are. We have had two an­nual Bud­gets with­out the ben­e­fit of po­lit­i­cal scru­tiny.

It be­comes less and less cred­i­ble to me­chan­i­cally project for­ward pre­vi­ous spend­ing pat­terns. Can we con­tinue to “pro­tect” the real terms spend­ing go­ing into hos­pi­tals and schools? This has placed even more ex­treme pres­sure on the rest of the pub­lic ser­vices.

There are other anom­alies — schools are some­what pro­tected but col­leges and uni­ver­si­ties are not, hos­pi­tals have been pro­tected but not so­cial care. No gov­ern­ment means we can­not be more strate­gic about what gov­ern­ment should do or should stop do­ing. Given the sever­ity of the fis­cal chal­lenges there is a case for rad­i­cal po­lit­i­cal lead­er­ship which would re­verse some of the pre­vi­ous fis­cal give away poli­cies.

Lack of pol­icy de­vel­op­ment: The draft Pro­gramme for Gov­ern­ment ap­peared back in 2016. Sim­i­larly, the draft In­dus­trial Strat­egy, pub­lished back in Jan­uary 2017, re­quires up­dat­ing.

The ab­sence of po­lit­i­cal lead­er­ship has made it very dif­fi­cult to iden­tify a short­list of top pri­or­i­ties re­lat­ing to Brexit. Per­haps even more im­por­tantly for the very long run, given that rel­a­tive lev­els of liv­ing stan­dards have been de­clin­ing com­pared to the UK av­er­age, and the pro­duc­tiv­ity gap has shown lit­tle sign of nar­row­ing, it is im­por­tant to ask whether there is any­thing gov­ern­ment can do to kick start greater eco­nomic con­ver­gence. But it is very hard to see how such an as­sess­ment could oc­cur in the present po­lit­i­cal sit­u­a­tion and we now know the re­duc­tion in cor­po­ra­tion tax is not go­ing to hap­pen any time soon.

We may not be able to iden­tify a pre­cise cost fig­ure of no gov­ern­ment, but it could be con­sid­er­able. After all, sev­eral hun­dred mil­lion pounds worth of gov­ern­ment funded in­vest­ment have been de­layed (York Street In­ter­change, health re­struc­tur­ing, the North-south in­ter­con­nec­tor, broad­band). Some of that may hap­pen later but some of the fund­ing may be gone for good. An­other way to look at it would be to say that if the North­ern Ire­land econ­omy grows by 2% in a good year and if no gov­ern­ment de­presses that by, say, a tenth of 0.2% in each of years 2017, 2018 and 2019 that would be equiv­a­lent in to­day’s money to a “cost” of about £230m.

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