Stratagem Policy Panel: Economy

Fascinating conversation with John Simpson and Jamie Delargy kicking around some of the most pressing issues facing any new devolved administration. Simpson makes the point that what we are voting for is less a government, than a political opposition to the real seat of power, 11 Downing Street. We go on to talk about some of the risks attached to one of the few issues there seems some degree of consensus on, the lowering of corporation tax, and assess the risk of a strategy that could fail as well as allow the two island economies harmonise. We also dissect the variable performances of Northern Ireland in comparison to the Republic and discuss whether we need to embrace the kind of creative distruction of old industries that has created a lot of the wealth there. Is it because we are too risk averse, so that our portion of entreprenuers as a mere fraction of that of the Republic? How are we going to get any substantial increase in Foreign direct investment, at a time when productivity levels are falling, particularly in such companies. And how can we expect politicians to take risks when unemployment is at historically low levels?

Three recommendations:

1 Taxes are good for you! Explain that a hypothcated water tax (and rates) are locally raised and will be locally spent on crucial infrastructure. Jamie noted in particular how strange it is for left wing parties to be so opposed to tax.

2 We now have the means to inject major investment into our infrastructure. But we don’t have any strategic investment plan. Simpson, “we have a shopping list”. Turn the parties’ shopping list into a list of priorities, and tell us what should be done first then start working down through them.

3 Vocational education is a glaring deficit particularly in comparison with the Republic. There should be a merger between education, employment and learning into one ministry and then the Minister should inject a local dynamic into the provision of vocational education.

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  • kensei

    “1 Taxes are good for you! Explain that a hypothcated water tax (and rates) are locally raised and will be locally spent on crucial infrastructure. Jamie noted in particular how strange it is for left wing parties to be so opposed to tax.”

    Because it is a major tax hike, quite obviously a prelude to privatisation, not sold as a tax raise for infrastructure using the existing system but a whole new tax that is double taxation and cack handedly introduced. Oh and it is imposed without consent.

  • Mick Fealty

    ken,

    It is only a prelude if our politicos can’t do the necessary. It may be a tax hike, and that is a perfectly respectable position to take. But, and this is one reason why that conversation is worth following for the detail, taxation is also a perfectly respectable to common or garden left of centre party. Why are their no advocates in the competing line up?

  • Aaron McDaid

    “Jamie noted in particular how strange it is for left wing parties to be so opposed to tax.”

    It seems pretty strange to me that anybody would want higher taxes, no matter what their background.
    Surely everybody wants lower taxes, higher expenditure and balanced budgets. The problem of course is that we can’t have all these and therefore we need taxes.

    Even the looniest left should not want taxes for their own sake – what they want is expenditure and take the reasonable position that we need to tax some people to be able spend on other people. Unfortunately, of course, some of the daft lefties can’t remember this at times.

    And with the poorest paying far too much tax as it is (VAT for example), surely any party should look at cutting tax for the poorest.

  • Greenflag

    Interesting debate . John Simpson hit the proverbial nail on the head several times . Seems to me having listened to the ‘experts’s that what the NI needs is some ‘shock therapy’. But where would it come from ?

    NI would appear to be in a catch 22 (catch 26 ?) situation . The economy can’t really progress without a reduction in the public sector and none of the local politicians can get elected if they promise to do just that .

    And so the local NI economy is condemned to continue on it’s present course. Low productivity -low investment – low level of entrepreneurship etc etc. As long as HMG’s Exchequer comes up with the annual subvention and as long as the local NI politicians can blame Westminster for not giving them ‘more ‘ money the great game of pretence will continue !

  • Crataegus

    Greenflag

    I think there is a case for a one off investment specifically to upgrade some of the infra structure, but at the same time there needs to be some serious attempt to reduce the administration here. We could cut the number of ministries, the place is over governed and fragmented, and we could do something about the cost of segregation. I think a lot of the cuts could be relatively easy to make in a sane society but this isn’t a sane society.

    This place needs to ditch the begging bowl mentality, but how do you stop that if the local politicians do not control tax raising? By default they will be asking for money. A few weeks ago I came across a computer programme meant for Community groups to specifically help them to track grants!!! Says it all.

    I don’t think NI politicians will receive much of a hearing in Westminster, unless they can put the case that any money provided is an investment aimed at reducing future liability.

  • kensei

    “It is only a prelude if our politicos can’t do the necessary. It may be a tax hike, and that is a perfectly respectable position to take. But, and this is one reason why that conversation is worth following for the detail, taxation is also a perfectly respectable to common or garden left of centre party.”

    It is a prelude whether the politicians do the necessary or not. When the water company is all set up and running, it’ll be far too tempting to privatise it and take the cash. The only thing that may save us is the paralysis the system in Assembly engenders.

    And I argued that it was fairly major tax rise – rare enough for a left wing party especially these days -, not sold correctly and imposed (rather than consensus built for it). None of which contradicts the point that sometimes left wing parties like to increase taxes. To that I could also add it disproportionately hits the worse off, which left wing parties also tend not to like and that it is deeply, deeply unpopular and parties of whatever stripe don’t like that. There are plenty of good reasons if you get past simplistic statements like the above.

    Left wing parties like tax, but they have to be the right taxes.

  • Mick

    ken,

    There is nothing in the current situation that makes any of that inevitable. There are cogent arguments each way on privatisation, but I don’t see a consensus in favour (at the moment).

    The hypothecation allows for many things other than that: individual water metering which could be a useful measure to reduce the domestic consumption of water, for instance. Given the overloading of our infrastructure that has to be a good thing, surely?

  • kensei

    “There is nothing in the current situation that makes any of that inevitable. There are cogent arguments each way on privatisation, but I don’t see a consensus in favour (at the moment).”

    It is a hell of a lot easier to make something private that looks a lot like a private company than it is to rip out a section of the DoE. Call me cynical but it’s the thin edge of the wedge in the long run.

    “The hypothecation allows for many things other than that: individual water metering which could be a useful measure to reduce the domestic consumption of water, for instance. Given the overloading of our infrastructure that has to be a good thing, surely? ”

    Sure. It can be done and remain revenue neutral, though.

  • Greenflag

    Crataegus,

    ‘I think there is a case for a one off investment specifically to upgrade some of the infra structure,’

    Can’t disagree on that . The legacy of the troubles and DR neglect should make much at least mandatory regardless of whether devolution takes place or not.

    ‘This place needs to ditch the begging bowl mentality, but how do you stop that if the local politicians do not control tax raising? By default they will be asking for money.’

    Your point here goes to the very heart of ‘devolution’. Is devolution just giving the ‘children’ a bag of sweets of limited size and allowing them to distribute the goodies in whatever way they want? Or is it about giving them real political accountability ?

    Scotland is I believe working it’s way through the flaws inherent in the above ‘devolution’ conundrum. . It is not yet clear whether or no the Scots may decide that full economic policy independence will be a direct follow on from ‘devolution’ if the promise of real local democracy supposedly ‘devolution’ is to become aa reality ?. The Welsh don’t seem to be bothered as much ? The English regions are simply not interested. Perhaps the latter having less of the ‘fringe mentality’ or not possessing enough historical hang ups from London rule -thought the ‘devolution’ idea through, and found it at least in the way it was to be practically implemented in Scotland and Wales — deficient ? Meanwhile Northern Ireland gets to be the next political ‘guinea pig’ in constitutional experimentation . My general point is that NI has wasted so much time trying/not trying? to overcome it’s eternal self replicating internal political hurdles that it’s economy has been allowed to ‘degrade’ to it’s present unsustainable very high level of public sector dependence.

    Is NI overgoverned and fragmented ? Of course . If NI were just a part of England there would be no more than 20 MP’s . As part of a UI , NI would have 68 TD’s .Under devolution NI gets 108 . Reducing that number while financially desirable may not be politically practical. It takes at least that number of representatives to provide any kind of Government and opposition in any modern democracy .

    Too much overhead kills businesses . Yet there comes a point in every business whereby if it is to grow an increase in overhead expenditure becomes necessary . This usually has to be borrowed . The next step is to ensure that sufficient growth in revenues and gross profits are attained , in order that the increased overhead pays for itself . The problem with the NI economy and this problem predates the latest troubles (1969 to present) is that the annual increases in ‘overhead’ since the foundation of the State were never absorbed by sufficient growth in the State’s revenue /tax base .

  • Greenflag

    ‘I don’t think NI politicians will receive much of a hearing in Westminster,’

    You might think that but I actually believe they will . For all the wrong reasons of course 🙁
    Gordon Brown is so fixated on becoming Prime Minister and steering the ship of State so as to maintain the Union of England and Scotland that he will not want to jeopardise his political future . What would suit the great Gordo best would be if Paisley’s election fails and Tony Blair has to pull the plug on NI devolution. But as Chancellor he will not want to be seen to cause NI Devolution to collapse because he’s short a few billion . Neither would he want to imperil his succession or for it to be marred by any ‘unpleasantness’. Once installed as PM however ? Que sera .