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?

Former BBC journalist and manager in Belfast, Manchester and London, Editor Spolight; Political Editor BBC NI; Current Affairs Commissioning editor BBC Radio 4; Editor Political and Parliamentary Programmes, BBC Westminster; former London Editor Belfast Telegraph. Hon Senior Research Fellow, The Constitution Unit, Univ Coll. London