Northern Ireland needs to confront its inner ‘subsidy junkie’

Malcolm links to a particularly sharp leader in the Economist last week, which noted that:

Over the 40 years of the troubles, the place has become a subsidy junkie that receives from Westminster £5 billion ($10 billion) more than is raised locally by taxation. More than a third of the 770,000 people in jobs are directly employed by the public sector (which accounts for nearly two-thirds of economic output), while half a million are officially classified as inactive. Part of the problem is the scarcity of private-sector investment, which is crowded out both by the omnipresent state and the large black economy that “peaceful” paramilitaries on both sides of the religious divide hold sway over.

Malcolm’s piece was written before the Ministerial jobs were divvied up, but he correctly guessed that Sinn Fein would retake the spending departments whilst the DUP would grab the means to control that spending. Now that should be a battle a day worth watching, especially as the cream is slowly withdrawn by a newly prudent Number 10.

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  • mnob

    Here we go again – lazy journalism and pseudo facts. Where to start …

    “Over the 40 years of the troubles, the place has become a subsidy junkie that receives from Westminster £5 billion ($10 billion) more than is raised locally by taxation. ”

    Keyword *locally*.

    Our collective pensions pay a lot of bonuses in the city of London.
    NI money is spent on educating a lot of people who go and live and pay tax in London.
    Bureacrats who administer NI work and play in London.
    Our soldiers go off and fight in Iraq and pay their taxes centrally.
    We shop in shops who report profits centrally.
    We buy things made by companies who report profits centrally.
    We pay for media based in London…..


    In other words we subsidise the general economy to a degree that cant be measured.

    “More than a third of the 770,000 people in jobs are directly employed by the public sector (which accounts for nearly two-thirds of economic output), while half a million are officially classed as inactive.”

    … erm inactive because they have retired or because we have a greater proportion of young people and students than the rest of the UK.

    The public sector here is growing more slowly than anywhere else in the UK, and the private sector growing faster – and we have had 40 years of instability where no private company in their right mind would set up – this is coupled with the tax and spend double act of Tony & Gordon.

    “Part of the problem is the scarcity of private-sector investment, which is crowded out both by the omnipresent state and the large black economy that “peaceful’ paramilitaries on both sides of the religious divide hold sway over.”

    agreed that is part of the problem but its not the whole problem. You cant turn around problems that have taken 40 years to create overnight.

    Most of the £1Bn ‘divorce settlement’ and the £5Bn ‘subvention’ is caused by using the same allocation rules in NI as the rest of the UK. If you use the same allocation rules then you must have the same collection rules. i.e. central government ruled out differential corporation taxation so they ruled out differential allocation as well.

    All this crowing from the sidelines about the state of the NI economy – is just that – its from the sidelines. For the rest of the UK to reduce the ‘subvention’ it would have to rip up the rulebook for the whole of the UK. Northern Ireland does not get any special funding – its funded by the same rules as the rest of the UK.
    Did it pass everyone by that Hain announced £1Bn for Wales at the same time as for NI ? (and thats because the funding rules changed for England)

    For example if NI got differential allocation, differential taxation would have to follow. The Scots would want the same because with oil money they would be better off. Therefore in just 2 moves you’re in a position where Gordon is worse off.

    Move along – nothing to see here just another journo wanting a nice story.

  • jaffa

    247,600 people are classed as public sector employees in the Republic (CSO 2007), 219,000 in Northern Ireland (National Statistics 2005). The Northern Irish numbers don’t include HM forces.

    It isn’t that Northern Ireland has too small a private sector relative to the public sector.

    It simply has too large a public sector.

    NI public sector employment is 30% of all employment. The South East of England has 18%, the UK average is 20.4% and the next worst is Scotland with 24%.

  • jaffa

    I lied! I forgot the Irish health sector. Irish public sector employment is 353,300.

    To even things up let’s assume Northern Ireland would warrant armed forces of 8000 if we were independent (about a 30th of UK) bringing the total to 227,000

    NI population is 1,710,000 which means we have a civil servant to look after 7.5 of us.

    ROI population is 4,240,000 so the poor old south only have 1 civil servant for every 12 people.

    Point still stands. We have way too many civil servants.

  • mnob

    Jaffa – dont really disagree with you, i *do* disagree to the political slant that is quite often (and in this case by the blogger) applied to the facts.

    This gets in the way of a proper discussion.

    There are two distinct threads to this discussion. The so called ‘subvention’ which is caused by the application of spending rules applied equally over the UK, and the bloating of the public sector started by the Tories to prop up the economy and continued by Labour who are ill equipped (even if they wanted to) to thin it out.

  • jaffa’s statistical superstore

    Last stat. In a united ireland, if we didn’t sack one civil servant there’d be 580,000 altogether for a population of 5,950,000. Working back from the published claim that NI public sector employment is 30% of total employment we must have total employment of around 760,000. The CSO published total employment of 2017,000 for 2006. The ROI % public / total is 17.5% (same as South East of England). All Ireland % with no change would be 580,000 / 2,777,000 or 21%, just a tad higher than GB’s 20.4%.

    So we can afford the merger if the republic wants to pay UK tax levels.

  • jaffa

    Sorry, missed your post while I was playing with my calculator.

    Totally agree that smug English buggers who have a far higher proportion of employed bureaucrats and money men should not criticize hard working N.Irish people for taking the best jobs available. Can’t wait to get this place going and show ’em.

  • Nice sleight-of-hand, Jaffa: chuck in health employment for RoI whether it’s public sector or nay. You’ll go far.

    It’s late and I’m knackered, so this post is not my best effort. Shoot the messenger if you like. Then go out and compare the gritty realities.

    Here’s a practical experiment with the small stuff:
    Stand overlooking the M1 at (say) Watford: count the vehicles, calculate the taxes paid, subtract the “benefit”. Now fly to (say) Aldergrove. Stand over the other M1 at (say) Portadown. Do the same calculation. Who is getting the better deal?

    Now attempt similar snap-shot observations for any of the public services: housing (perhaps especially housing, including water charges), education, social care and welfare, health, arts and culture …

    Do the same for public employees. What are the differentials in (a) London weighting versus the NI salary and (b) the costs of living in/near London versus NI? Don’t believe me (or The Economist): try this one: http://firstrung.co.uk/articles.asp?pageid=NEWS&articlekey=4657&cat=44-0-0. Meanwhile muse on the proportion of minimum wage earners in the “prosperous” South East.

    After all that, deny that there is a significant bonus afforded to the population of Northern Ireland.

    Meanwhile, back at the ranch, and the big picture:
    Have a look at the poverty and employment indices for South East England, in the inner-city housing estates or seaside towns like Margate or (further out) Great Yarmouth. The figures should shock: they shock me. These are not butterball city slickers. Will somebody disprove to me that expenditure on the deprived underclass of the South East, per capita, is one third less than their opposite numbers in NI? The SSAs, the local government settlements (see http://www.local.odpm.gov.uk/ and elsewhere) need line-by-line scrutiny, but they imply a similar story.

    Furthermore, it is not as simple as “central government ruled out differential corporation taxation so they ruled out differential allocation as well”. Corporation Tax falleth not alike on the just and unjust fella, ‘cos Murdoch and Co have their tax umbrella. Which, on the basis of some arguments above, is a further loss to the South East balance-of-trade. Add in business rates: they are differential in the sense that Oxford Street pays one heck of a lot more than anywhere else (and which is why the one-branch shop is an endangered species in London). The only way to balance that up would be (Heaven help us) to have a flat-rate sales impost, perhaps, on top of VAT. Yeah, load it on the Poor Bloody Infantry.

    Either one believes in equality across the UK & NI, as I do, or one promotes some kind of Gotta-be-in-my backyard-ism. And, yes, that is a “political slant”.

    And here’s another one. We have had a benign decade for the UK&NI economy: check your local house-prices if you don’t believe it. Anyone betting on that persisting into an indefinite future? Did I not hear, a day or so ago, a minor economic pundit ruminating that “The next Election might be a good one to lose”?

    So, to rehearse a point from the blog: it is pretty common ground that further devolution is coming (the Scottish Elections may speed that). The Tories are already going for an English Parliament in some form or other. I am entitled to speculate: then what for Northern Ireland’s privileged position in the Union?

  • The Pict

    It is for Scotland that the point being raised about centrally taxation works not NI.

  • At the risk of sharing Albert Ramsbottom’s leonine fate, may I be allowed another poke, and from the same direction?

    mnob (@ 1.27 p.m.) asks, reasonably: “Did it pass everyone by that Hain announced £1Bn for Wales at the same time as for NI?” In my case, yes it did.

    Yesterday’s “Economist” has an article, “A rumbling in the valleys”, essentially about the impending Assembly election (yes, there are other Assemblies). This has a relevance to mnob’s argument, and to my original thesis:
    “The poorest part of Britain, Wales has grown less rapidly than the rest…”
    What is immediately relevant is the side-map inserted at that point. It identifies the dozen economic regions of the UK&NI, and suggests the “Gross value added” per head of population and its growth over the decade 1996-2005. A footnote helpfully adds that “Gross value added is similar to GDP”, so that’s fine and dandy.

    For the sake of contributing evidence, here are those figures (region; GVA per head £’000, 2005; % increase in GVA 1996-2005):
    London; 24.1; 64.2
    South-East; 20.4; 58.7
    Eastern; 18.9; 53.4
    Scotland; 16.9; 48.7
    South-West; 16.7; 56.2
    East Midlands; 16.5; 51.8
    West Midlands; 15.8; 48.4
    North-West; 15.5; 50.2
    Yorks/Humberside; 15.4; 49.7
    Northern Ireland; 14.2; 52.6
    North-East; 14.0; 48.6
    Wales; 13.8; 45.7

    In short, Northern Ireland is growing faster than any region north of the line from the Severn to the Wash. Norn Ironers are better off than the Welsh and the North-Easterners.

    While those figures are not new to me, they are nicely presented by the “Economist”, as one might expect at £3.60 a throw.

    On this basis, yes — there is an argument for some continuing transfer of investment to NI. But, no — this is not a higher priority than the poorer regions.

    Does that go any way to satisfying all parties? There’s also a first time, even in Sluggerdom.

    In passing, could The Pict (@ 1.18 p.m.) expand on the point made there?

  • slug

    “So, to rehearse a point from the blog: it is pretty common ground that further devolution is coming (the Scottish Elections may speed that). The Tories are already going for an English Parliament in some form or other. I am entitled to speculate: then what for Northern Ireland’s privileged position in the Union?”

    I think that the immediate future in NI is to get power devolved, then maybe policing devolved, and when that is bedded in for four years, have a review and maybe devolve some more, e.g. more fiscal control.

  • Thank you, slug: that seems entirely reasonable, except I doubt things could move that slowly.

    Here’s my logic:

    [1] Scotland will be going substantially SNP next month. On current form the Nats will be the largest single party, though well short (say high 30s, low 40s) of the 65 seats for an absolute majority. The SNP won’t get its referendum; but the voters will have to be assuaged by additional powers to the Scottish Parliament.

    [2] Wales will be getting additional powers. Here’s that same “Economist” article (mnob may not like it, but it’s more succinct than my style):
    “… three-fifths call themselves Welsh rather than British, not so far off the three-quarters of Scots who reject the broader classification.
    “… Expect Wales, under whatever coalition emerges, to play a more independent hand.”

    [3] There’s that curious “Sunday Telegraph” poll, on line at http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2006/11/26/nunion26.xml
    This shows Scottish Independence is more popular in England than in Scotland, by a significant factor.
    Quite what Diddy David Cameron’s next manifesto will say (on anything) is beyond my imaginings. His speech in Glasgow closed no doors: see http://www.conservatives.com/tile.do?def=news.story.page&obj_id=132019&speeches=1 However, he does say:
    ” … we opposed devolution – but the world is very different now and the Conservatives are determined to make a success of Holyrood. Yes, we centralised too much in the past – but today we’re serious about giving decision-making power to local people and local communities.”
    Meanwhile David Davis is more explicit: see “Davis wants England-only voting”, http://news.bbc.co.uk/1/hi/uk_politics/4424370.stm

    If the above holds water, a 2009 General Election implies all major Parties must have a continued-devolution agenda by then. Factor in a worsening economic climate and/or tightening constraints on central Government expenditure (and neither are going to be as benign as the last decade).

    Meanwhile, let’s keep our eye on the RoI inflation rate. I see it’s up to 5.1%: see http://www.rte.ie/news/2007/0412/inflation.html :
    [The RoI employers federation] “has said that Ireland faces a downturn in prosperity if we do not take firm action on inflation and get back to trading successfully … the business representative organisation said that Irish inflation has been running at more than double that of our main trading partners.”

    Conclusion: Northern Ireland gets greater Assembly powers, but loses out on hand-outs from any direction.

    All agreed?

  • The Pict

    “In other words we subsidise the general economy to a degree that cant be measured.”

    It was a deliberate error on the part of newspapers that Taxation which is collected in London (but raised elsewhere)is counted as being English in origin.

    Hope that clears it up.

  • Apologies to The Pict, but I’m being particularly opaque on this one.

    I thought that my “subsidy” figures (which largely fomented this and another thread) were based on attributable government expenditure on services in the dozen regions. The basis is table 8.2 (page 81) of the Public Expenditure Statistical Analyses, 2004 (the most recent to my hand). With a index of 100 as the total UK&NI figure, expenditure is 96 across England, 115 in Wales, 116 in Scotland but 129 in NI. Hence my trolling “headline” of a third extra per skull.

    I had not attempted to evaluate the government tax-take per region, indeed I doubt that is possible.

    So, on that detail, is The Pict with me, or agin me?

  • mnob

    Malcom – lots of fluff there but you havent actually talked about the central premise, which is the rules are the same across the whole of the UK.

    Inefficiencies in being such a small geographically isolated part of the UK result in more momey being spent per capita for the individuals therin (herein ?) to get the same benefit. Other demographic reasons such as a higher proportion of young people & students, coupled with our brightest and best moving to where they can have the most impact economically (for themselves and the UK economy) as is only right and proper mean a proportionally higher spend for Northern Ireland. The people of the South East (rich and poor) receive the same benefit as those of Northern Ireland.

    Its a neat sidestep that you have declared that you are not interested in the other side of the coin – the benefit that economic migration makes to the London and SE economy.

    Look at any similar region (Highlands & islands ?) and you’ll see the same thing.

    Thats the rules – we’re taxed the same and get the same benefit from the state.

    The argument you make is inherently political (in the NI sense) – it comes down to whether you see NI as a region of the UK with the same rules or a seperate entity which should have different ones.

    Its a shame you cant see that.

  • jaffa

    Malcolm,

    “Nice sleight-of-hand, Jaffa: chuck in health employment for RoI whether it’s public sector or nay. You’ll go far.”

    2006Q3 figures directly from the CSO interactive database. Go to http://www.cso.ie, then click “database”, then “CSO main data dissemination service”, then the folder thingy for public sector under the branchy thing for labour force. Go through the highlighted link and you get a pivot table wizard. Just sort the pivot for;

    “Type of public sector employment – “public sector”

    “Quarter” – 2006 Q3

    “Statistic” – number of people employed in the public sector.

    Ta-da – 353.5K is your answer

    Nothing fishy there.

    Can’t quite see why you made the point anyway. I though the numbers illustrated the disproportionate part the public sector plays in NI employment in absolute terms. Are you saying the difference between NI and ROI public sector efficiency is even greater that I suggested?

    Thanks for your touching faith in my future though. How d’ya know I havn’t started it yet?

  • mnob (@ 9.54 a.m.):

    Believe me, I’m not totally out of sympathy with your bottom line. I happen to believe that:

    1. A dependency culture is bad for NI and its place in the UK&NI and the EU.

    2. I fear there is a seismic shift coming in the remaining structure of the Union.

    So, to your points:

    1. “Inefficiencies in being such a small geographically isolated part of the UK result in more money being spent per capita for the individuals therein (herein?) to get the same benefit.”

    (a) Let me start with the “fluff”. Constitutionally the “Act to Provide for the Better Government of Ireland”, 10 & 11 Geo. 5 c. 67 dissolved the link between the three thrones. That’s what the cabal around Craig, Carson, and Wilson wanted. That’s what happened. So “and” in the “United Kingdom and Northern Ireland” is significant. If it’s not politically-correct to confuse Ulster and NI, I demand some recompense. Ha! Trivial, but enjoyed that.
    (b) “Geographically-isolated”? A few sea-miles? Come off it: that means Kent is isolated from Essex. Anyway, it doesn’t seem insuperable to Tesco or M&S.
    (c) “Small” is a value judgment. NI is smaller in population that any other economic region of the UK&NI by a significant factor (2/3rd of the North-East; somewhat more than ½ of Wales). Standing alone (which seems increasingly a good idea), NI would be fifth smallest nation in the EU. NI has about 1/6 of the land-mass of the island of Ireland, but 1/3 of the population: which, on your crude reasoning, suggests it ought to be more efficient to administer than the RoI. It isn’t.
    (d) None of that amounts, per se, to being grounds for “inefficiencies”.

    2. “Other demographic reasons such as a higher proportion of young people & students”.

    (a) There’s a case here, but not the one you seem to argue: it is usually considered an economic benefit to have a younger (rather than an ageing) population.

    (b) NI is good at participation in Higher Education [HE] (and the last time I looked, NI students got better financing than their UK counterparts).

    (c) There are two problems here:
    • (These figures may be out-of-date, but the general thrust is relevant) NI contributes about 3.5 % of UK&NI entrants to HE, but the two NI universities provide only 2% of the places. That means that for every HE applicant, there is only 0.6 of a place in NI HE.
    • The employment structure for absorbing graduates fails them. There are 30,000 companies across NI, but only about 100 employ more than 200 people. Those 200 are often branches of firms, so decisions are taken elsewhere. Small firms outside hi-tech are less likely to employ expensive talent. Which links to your point:

    3. “Our brightest and best mov[e] to where they can have the most impact economically (for themselves and the UK economy) as is only right and proper”

    (a) Hear, hear (as a TCD graduate from a time when 70% of Trinity’s output were obliged to emigrate).
    (b) However, it was ever thus. Since the “Eagle Wing” upped anchor from Groomsport in September 1636, the export of talent from the North has been on a commercial scale.
    (c) The remedies are for more owner-managers themselves educated to degree level, and for better liaison between HE and small business.

    4. “The people of the South East (rich and poor) receive the same benefit as those of Northern Ireland”.
    My whole point (and that of the original “Economist” article) is, overall, they don’t.

    5. “It’s a neat sidestep that you have declared that you are not interested in
    the other side of the coin – the benefit that economic migration makes to
    the London and SE economy”.
    On the contrary, it interests me greatly and over a long time. When the SE economy overheats (as with the property market at present), the measures taken deflate demand and growth across the whole UK&NI. The problem is generated in the SE, but the pain historically has been felt across the regions.

    6. It needs sweat to make valid comparison between NI and the Highlands and Islands: population 400,000, 60+% in communities of >5,000, @ 9 per sq. km. (EU average 116), over an area nearly three times that of NI. However, direction of the H&I economy seems more successful than that of NI. Skilling (including HE levels) is improving, and the population rising. Let’s have some of that for the North.

  • Jaffa (@ 10.59 a.m.)

    Nice one: was it Jerry or his nephew who declaimed: “Touché, monsieur pussy-cat”?

    Though, to muck around with the terms of the debate:

    1. It’s a long time since I needed the attention of the RoI Health “Service”. However, Steinbeck’s comment on the lines of “Whenever I hear the word ‘service”, I wonder who’s getting screwed” seems vaguely relevant.

    2. Unless things have changed, I’ll go with Diarmaid Ferriter http://www.amazon.co.uk/Transformation-Ireland-1900-2000-Diarmaid-Ferriter/dp/1861974434

    “By 1998, 25 per cent of public expenditure went to the health services (a massive increase on past figures) … More doctors and nurses and administrative staff were employed (by 2001 the public health service workforce was 93,000), but public patients were still waiting nearly twice as long … as private patients. … There was a need, it seemed, not only to concentrate services in centres of excellence, but also to employ more consultants on lower salaries (similar to the UK), and phase out subsidies to private care and ensure public-salaried doctors worked solely for the public system.”

    It must have be an adept manipulator of figures to decide the RoI’s distinction between public and private health employment. As Dorothy Parker said of dead Cal Coolidge: “How could they tell?”

  • jaffa

    Good point Malcolm. How do we know where the public stops and the private starts if we don’t have big juicy public delivery organisations. In a society of 100% taxation and 100% PPI delivery is everyone public or everyone private? Bloody tricky these new-fangled social market contraptions.

  • Malcolm Redfellow wote (11): “Scotland will be going substantially SNP next month. On current form the Nats will be the largest single party, though well short (say high 30s, low 40s) of the 65 seats for an absolute majority. The SNP won’t get its referendum; but the voters will have to be assuaged by additional powers to the Scottish Parliament.”

    I think that you’ll find that the nationalists are now running away with this election as the Labour vote collapses. I’m not saying that they’ll get the full 65 seats for an outright majority but i don’t think they’ll be far off it.

    When Lord Lavy goes to trial next week (‘allegedly’) I can see the Labour vote collapsing more. I think they can win high 50s seats.

    It will dramatically change the dynamic of UK politics and potentially have consequences across the water. For the British State the consequences are primarily military. Scotland has long been used as a weapons research base and military playground.

    Remember also that for the English everyones a subsidy junkie. Economically this may be as difficult case to sustain as a) the Olympics goes into further financial meltdown and Whitehall goes into protracted and unseemly negotiations about North Sea Oil revenue.

    Gus http://1820.org.uk