Executive’s stance on recession is “economic madness”

Some words of cheer and others of warning from Mike Smyth the plain-speaking University of Ulster economist whose presentation to the Intertrade Ireland conference, Ive dipped into, after being alerted by Liam Clarke in the Newsletter. Nothing too surprising in it, but the cumulative effect is salutary. (BTW, like me you can view the speech and download the powerpoint but it would have been great if video services at the event had loosened the camera shot on Smyth to include both the speaker and his illustrations. Elementary, Mr De Mille). Anyway…

Compared to the Republic, the effects of the recession in NI have been mild.

This recession is “ a walk in the park” compared to the “policy induced” recession of 1981-82 (the Thatcher squeeze), after which unemployment peaked in March 1985 at 125,000 or 24% with the collapse of the synthetic fibre industry. Today’s problem of 48,000 rising perhaps to 60,000 jobless is regrettable but the idea being put about that it will quadruple is “simply daft”

In retail, a complete meltdown was averted by the scale of cross border shopping, 350m to 550m euros in 2008, rising to 450m to 600m euros in 2009, a windfall which amounted to 2.5% to 3.5% of all consumer spending.

Smyth’s brickbats are reserved for the Executive.
The Executive “ haven’t even togged out for the match”. The budget hasn’t changed at all although events have overtaken it. £200m p.a. has been lopped off in Treasury cuts and another £100m for unforeseen public sector back pay. It might be “good politics” to defer water charges for another three years but it is “economic madness.” If charges haven’t been levied by April 2010, the Treasury will impose 3.5% p.a. interest charges of the £6.5 billion assets of NI Water – another £200m p.a. Talks on the huge costs of financing the devolution of justice and policing ( and a £200m p.a. estimated shortfall) seem to have stalled. As has help to the construction industry and mixed housing development, due to problems with EU procurement rules.

Smyth points to the “variable geometry” of the Executive as a “ recipe for inaction.

On North south cooperation, Intertrade Ireland’s development criteria are sound. Intervention should happen if market failure is caused by the border and if the two sides working together is more effective than working separately. And there is scope for greater cooperation in the public services. After the Agreements there is now “ a non-threatening rationale “ for economic integration. “ If not now, when should we seek these efficiencies?” Amen to that . The comparative analysis in Ernst and Young’s Economic Eye forecasts a worse recession in the Republic but a slower bounce back in Northern Ireland.

I ask: what if a whole new round of Treasury cuts are imposed after 2011?

  • Scamallach

    The executive’s inability/unwillingness to make tough decisions in respect of the budget is indicative of northern ireland’s public sector in general: ignorantly sticking their heads in the sand, ever confident that the British will bail them out as they have done so many times in the past because they are scared of the Unionists kicking up a fuss. Those times are gone and Robinson and his cohorts need to realise that before the pain really hits. And it will.

  • George

    From Clarke:

    “It was disappointing that no unionist politicians or senior advisers were at the forum, because there were obvious lessons for them.”

    It says it all really and there not much more you can add to that when the island of Ireland is going through the worst recession in decades. Heads in sand indeed.

    Moving on; considering the UK budget deficit is going to be even larger than Ireland’s (Republic of) in 2009, Brian Walker is bang on the money to ask about further budget cuts in 2011.

    The pain hasn’t even begun yet for many in the UK because of the 2010 general election.

  • aquifer

    Rates holidays, free clean water, free buses & houses, public jobs for life, dole for ever after.

    Buying people’s votes with their own borrowed money is a neat trick. And with no opposition who will call them on it?