End of Soviet Unionism?

It seems Northern Ireland’s economic prophets of doom are out and about again with First Trust Bank’s latest Economic Outlook and Business Review saying the current economic situation could be as good as it gets. Meanwhile, the Sunday Times has described the growth in public spending in parts of the UK as so rampant that it is resulting in the “sovietisation” of swathes of the country. Northern Ireland is leading the way in the reliance on the public sector stakes, rising to 71.3% of gross domestic product from 65.2% just four years ago.

Citing the same figures from the Centre for Economics and Business Research, the Telegraph points out that public spending has risen as a share of UK economic output from 38.9pc in 2001-02 to 43pc in the last financial year.

“The regional breakdown shows that Northern Ireland now relies for 71.3pc of its economic output on the public sector. Public spending in Wales is equal to 62.4pc of its economic output, while in London public spending is only 33.4pc of economic output,” it writes.

“In cash terms, the divide is equally apparent. The state spent £9,084 for each member of Northern Ireland’s population last year. The corresponding amount in Scotland is £8,265, and in London £8,037. In the east of the UK, public spending per capita was only £5,864.”

According to the Sunday Times, what it calls the “sovietisation of parts of Britain” is a result of Chancellor Gordon Brown’s huge increases in public spending. Things look even worse when the figures are adjusted for comparison with other countries.

“On this basis, public spending is equivalent to 76.2% of the size of the Northern Ireland economy this year, 66.2% in Wales, 64.9% in the northeast, 57.7% in Scotland and 56.1% in the northwest.

“This compares with 56.1% in high-spending Sweden, 54.1% in France, 51.9% in former communist Hungary, 51.5% in Denmark, 46% in Germany, 42.6% in the Czech Republic, 41.2% in Poland and 36.3% in Slovakia.”

The figures showing a growing reliance on the public sector purse coincide with the worrying assessment of the state of Northern Ireland’s economy made by Michael Smyth, senior lecturer in economics at the University of Ulster, who believes that while public expenditure in Northern Ireland is set to expand over the next 18 months, it is difficult to envisage significant rises in spending thereafter.

“The Northern Ireland economy has reached something of a tipping point,” said Mr Smyth.

“Direct rule ministers have reminded us how much the Northern Ireland economy depends upon the public purse and that local taxpayers will bear an increasing burden to support improvements in local services and infrastructure.”

He added that “personal incomes and spending will continue to grow, but will also be hit by the introduction of water charges and higher domestic rates – something business owners in particular will need to bear in mind”.

Throw in the strong possibility that the Irish Republic’s economy, which is a major market for northern goods, is also heading for choppy waters tougher times could lie ahead for all on this island.