SDLP fills North South economic gap with sound policy?

Economic unification of the island is the fond ambition of individuals as diverse as Peter Hain, David McWilliams, Cecilia Keaveney and Gerry Adams. Yet there has been little evidence of a practical any proposals to help bring it about. The SDLP document released yesterday found favour with the Irish Times (subs needed)at least: though it points to the risk for the UK in allowing separate corporate tax rates in order to level the local gap between north and south.

Update: Whilst Beano is critical of initial Unionist responses to what he considers a welcome development, he argues there should be more focus on an ‘islands [plural] based’ solutions to a range of economic and social problems. Marc Coleman lays out the context for seriously considering north south policy issues:

The North faces unique economic challenges: its small market is a barrier to business growth; only two of its companies are publicly quoted.

Whereas Luxembourg – the EU’s only smaller entity – draws body heat from neighbouring Belgium, Germany and France, Northern Ireland shivers on the North Sea, far from Europe’s core markets.

Scotland, which shares this disadvantage, has North Sea oil to compensate, a market of over five million people and a dense belt of economic activity along the Glasgow-Edinburgh axis. The Republic of Ireland also shares this disadvantage, but can use tax and regulatory policies to overcome it.

And unlike Wales, Northern Ireland is separated from the rest of the UK by a surmountable, but irritating, sea barrier. Economic decline has led to massive subvention from London.

“We seem to be trapped in a public-sector economy. The retail sector is the fastest-growing sector of our economy and we look with envy at developments such as the creation of hundreds of graduate jobs in Cork by Amgen,” says SDLP leader Mark Durkan.

The public sector accounts for two-thirds of Northern Ireland’s economy, and as Durkan says, the retail sector – with some help from the construction sector – is the only real driver of growth in the private sector. High-technology manufacturing is thin on the ground in Northern Ireland.

But Northern Ireland has one huge advantage – it sits right next to one of the world’s most successful economies. Its currency links with the UK and higher corporation tax rates divide it from that market. Invest Northern Ireland and PricewaterhouseCoopers also acknowledge them as factors affecting foreign investment there.

He goes on to cover a range of innovative policy intiatives in the SDLP document. However, he highlights one major political hook. And it’s not the likelihood of Unionist resistence to all island planning, which he notes could be overcome if the economic benefits were overwhelming enough. It is the knotty problem of differential tax and currency regimes. Until either or both of these problems are unblocked, there is, Coleman argues, a danger that “these policies could bias industrial and commercial interests to locate just south of the Border”.