As austerity is set to continue whatever, it’s time for civil society to call for a halt in the game of chicken over the budget

The silence from local economists and business people has been deplorably deafening about the game of chicken being played out in the Assembly over the budget and the welfare Bill. Rather than mixing it with the politicians they can perhaps be forgiven for turning to bigger pictures and hoping that the Assembly will do likewise. But time is running out for  this passive attitude and a bolder line should be taken soon by those who keep the economic show on the road.

Meanwhile two reports are salutary if not exactly news. The UU’s Economic Policy Centre concludes that the private sector  will fail to make up for the loss of jobs created by the ongoing shrinkage of the public sector over the next three years. And Richard Ramsey of Ulster Bank has produced a mild corrective to the idea that Northern Ireland is the most deprived area in the western world. Try Birmingham. Manchester and Hull for worse off.

According to the reliable analysis by Neil Gibson and his colleagues at UU’s Economic Policy Centre the Spring 2015 forecast is one of austerity and its likely impact on growth. GVA ( local output measure) is projected to fall from 1.9 % this year to 1.1%, 1.0% and 1.3% respectively over the next three years.

In contrast to many other forecasts, UUEPC expect economic growth in the medium term to slow in Northern Ireland (a feature of our forecasts for some time) as the private sector moves to take up the slack created by lower Government spending

But will it?  Growth will be patchy and the Outlook often hints at   frustration at a lack of enterprise and grip. Time to talk straighter, guys?  

 Interestingly NI manufacturing is performing more strongly than in other parts of the UK. If NI manufacturing had only grown at average UK rates then 4,700 fewer jobs would have been created since 2012. Manufacturing also has the benefit of being one of the sectors least impacted by Government spending restraint.

Construction. Locally, a sustained increase in house prices continues to give confidence and activity levels are positive (NISRA reported an 8% rise in NI house prices in 2014 and a 24% jump in sales). However publicly funded construction activity is likely to come under continued pressure as austerity measures are implemented.

Private sector services. Northern Ireland has had an excellent record in attracting foreign direct investment, therefore it is disappointing that jobs growth in some of the targeted higher value added service sectors has not been higher. If the professional services and ICT sectors had grown at UK rates since 2012, then an additional 4,800 jobs would have been created. Looking forward, growth in areas such as professional services should be stronger as the jobs which have already been promoted/ announced are created.

Since 2012 Public Administration employment has increased by 1,300, however if we had followed the same path as the rest of the UK, employment in Public Administration would have fallen by 2,800. The forecast is for a loss of 8,400 jobs across the public sector over the next 4 years as headcount reductions, rather than changing pay and conditions, is the chosen response to reduced public funding. In this environment, workforce planning will be important to ensure internal capability continues to meet critical service delivery needs.

 Looking beyond 2015, the UUEPC forecasts a reduction in economic growth. Lower levels of government spending, an end to falling prices and rising interest rates (albeit modest) will all have a negative impact. Employment growth of approximately 12,400 net new jobs is forecast over the next four year period, which contrasts with over 27,000 jobs created between 2012 and 2014. The reduction in public sector employment explains the sharp fall in job creation, but encouragingly almost 21,000 private sector jobs are expected to be created over the forecast period, significantly more than the 14,000 created in the recovery period to date. This reflects a lag in recruitment following the impressive inward investment performance over the last 12 to 24 months.

At a national level the UUEPC forecast is more prudent than the Office of Budget Responsibility (OBR) outlook. A more optimistic scenario could be envisaged but this will require a number of factors to occur. These include:

  • A significant increase in wage growth;
  • Less severe government spending cuts; and
  • Lower inflation than projected allowing interest rates to remain low for longer.

If these factors materialise then stronger economic growth could be anticipated.

Don’t bet the house on much of the above happening.

Richard Ramsey, the chief economist of the Ulster Bank has popped his head above the parapet to qualify the  position so beloved of politicians of all parties really, but Sinn Fein especially,  as the most deprived region in the western world. The implication for SF’s stance on welfare is clear.

Disposable household income in Northern Ireland as a whole is higher in relation to the UK average than most of the midlands and north of England. That’s the message of a simple table produced  by  Ramsey. This is a part of an even handed analysis that is careful not to underplay the full context, including our poverty hotspots.

 In 2013, the typical disposable income available for Northern Ireland individuals to spend or save was £14,347. This was the lowest of all UK regions and was 81.7% of the UK average (£17,559) – the widest income gap since 2002. The equivalent figures for England, Scotland, Wales and the North East of England were £17,842, £17,039, £15,413 and £14,927 respectively.

Northern Ireland’s average disposable incomes fell in real terms, when adjusted for CPI inflation, for six consecutive years up to 2013. Northern Ireland’s GDHI per capita fell by 11.3% cumulatively over this period, which compares unfavourably with a decline of 4.2% for the UK. Furthermore, Northern Ireland’s decline was greater than that of any of the 12 statistical regions within the UK (the so-called ‘NUTS 1′ classification).

These headlines of the ONS data are likely to be seized upon by those arguing that the local economy cannot take more austerity or implement welfare reform measures.  However, it is important to note that headline averages can conceal significant variations at a sub-regional level.

Politicians in parts of England, Scotland and Wales could be quick to point out that, according to the ONS figures, Northern Ireland, on average, fares relatively better than many of their constituencies. And that their constituents have also had the full range of welfare reforms imposed on them, with no mitigating measures to alleviate the impact.

Comparing Northern Ireland with the 40 regions that make up the so-called ‘NUTS 2′ statistical classification reveals that South Yorkshire and the West Midlands have marginally lower disposable incomes per head than Northern Ireland.

Going down to the next statistical level – the NUTS 3 classification of 174 regions in the UK – reveals that there are an increasing number of sub-regions in Great Britain that, from a disposable income perspective, are worse off relative to Northern Ireland.

Last month’s statistical release confirms that Northern Ireland has experienced something of a lost decade when it comes to closing the income per head gap with the rest of the UK. However, a recovery has been in train since 2014 and this should lead to some improvement that will be reflected in future ONS data releases. Disposable incomes have been boosted by the record falls in food and petrol prices over the last year or so, which are not reflected in the 2013 figures. (Although in recent months petrol prices have started to rise again.)

The headlines from last month’s statistical release could encourage Northern Ireland to wallow in its low levels of Gross Disposable Household Incomes and by extension encourage us to continue to plead special status and apply for exemptions from austerity and welfare reforms.  However, it is clear that there are plenty of politicians the length and breadth of Great Britain who can claim that their constituents are worse off than the Northern Ireland average.

 

 

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  • Kevin Breslin

    So what do you want Civil Society to do, stop complaining and start up manufacturing companies? Form locally based co-operatives?
    Or abandon those on welfare because it’s not as if they’ll ever find work again anyway?

    I mean even journalism and punditry are declining industries economically these days. Steven Nolan takes a job once did by six political pundits four years before his TV show, while they are forced into freelancing and semi-retirement these days e.g. Noel Thompson.

  • AndyB

    This local economist isn’t known for being an economist, for good reason (something to do with never learning how to study and therefore failing final year – I learn better by practical application than theoretical studying) but I do believe my analysis at http://sluggerotoole.com/2015/05/12/the-voice-at-the-parlour-door/ about how we got to where we are is fairly accurate.

    I could have told UUEPC that the private sector wouldn’t plug the gap – and nor would I blame lack of inward investment entirely. I’d go as far as to say that things will get worse before they get better, because if those who leave the public sector cannot find new jobs, there will be less money to sustain retailers, for example.

    I’ve argued elsewhere and should really turn it into a post that we need indigenous entrepreneurship – but that in turn requires resources, and low wage economies are not very good for giving people resources to do other than stick at the day job.

  • Brian Walker

    Kevin, I’,m complaining that civil society aren’t complaining enough, probably because so many of them find politics so distasteful they don’t know where to start, Am I wrong?

  • Kevin Breslin

    If complaining is the solution, I sure as hell don’t want to know what the problem is.

  • Dan

    No one is suffering from this mythical ‘austerity’, so there’s no reason to complain. The goings on at Stormont can be ignored.

  • murdockp

    indigenous entrepreneurs wont happen if the elitist schools continue to promote the professions above any other option for a school leaver.

    Entrepreneurs will struggle to get going if the civil service continue to throw endless red tape and bureaucracy at entrepreneur.

    It is now impossible to start a business that needs premises as the business rates are too expensive and NI planning and building control literally want to shut you down.

    The public sector needs to learn to love the private sector, not detest it because of their low wages.

  • JohnTheOptimist

    If you economically detach a relatively small territory (N. Ireland) from the natural geographic unit to which it belongs (island of Ireland) and have it run by a country that cares very little for it and would like to be shot of it (England), then relative economic decline is to be expected. In 1920 N. Ireland was the wealthiest part of this island. By 2020 it will be the poorest. In terms of wealth per capita, the Republic of Ireland overtook Northern Ireland in the 1990s and this gap hit a high by 2007. The gap then narrowed somewhat as the Republic had a more severe recession. However, that ended in 2011 and the gap between the Republic and Northern Ireland has been widening since. It appears likely to widen rapidly in coming years and should hit a new high in the next couple of years. From the point of view of the economy of the north-east part of the island of Ireland, partition has been a total failure (as the late great Andrew Boyd used to say ad nauseum). Of course, the abominable PIRA campaign exacerbated the decline, but that ended 20 years ago, A look at Wales would indicate that absence of violence doesn’t guarantee that outlying countries in the United Kingdom won’t fall behind.

    All this argues for the economic integration of the island of Ireland. It doesn’t follow automatically from this that there should be political integration as well (although it makes it more likely). I accept that there are other factors besides economics and if unionists have an emotional attachment to a political link with England, that should be respected. But, it should be clearly understood that detaching N. Ireland from the economy of the rest of this island results inevitably in it falling further and further behind economically. If people think that is a price worth paying, so be it (not putting economics as the be-all and end-all is in some ways quite admirable), but it should be clearly understood that it is the case.

  • Chris Jones

    “the natural geographic unit to which it belongs (island of Ireland) ”

    On that basis the US should just invade Mexico and Germany take over France Belgium and the low countries

    “run by a country that cares very little for it”

    But we are supposed to have devolved Government”

    “In 1920 N. Ireland was the wealthiest part of this island. By 2020 it will be the poorest”

    Thirty years bombing and murdering sort of affected that.

    Your argument cuts both ways and giving the Irish economy’s huge dependence on the UK as a customer there must be a compelling case for them to be re unified into the UK

  • Chris Jones

    “abandon those on welfare because it’s not as if they’ll ever find work again anyway?”

    Those who need welfare should get it, those who have simply abandoned work should not

  • Chris Jones

    Kevin

    The problem is old son that NI Productivity is far too low in comparison to the UK which is low in International terms. We need to boost productivity

  • Chris Jones

    In politics here you have a choice.

    The economic madness and whiff of cordite of SF

    The sleaziness and homophobia of the flat eathers in the DUPs

    Business depends upon reputation – would you associate with either?

  • Kevin Breslin

    Well the people who can go straight off benefits or disability support straight onto being the captains of industry should get public infrastructure named in their honour, honorary doctorates and lecture the PPE graduates in Oxbridge and Trinity who have never worked a real job in their lives but yet become the next generation of MPs and TDs about solving the welfare trap, because they are among the most intelligent people who have ever lived.

  • Kevin Breslin

    The thing about SF is, when it comes to their own internal finances they are usually good at procurement.

  • barnshee

    “accept that there are other factors besides economics and if unionists have an emotional attachment to a political link with England, that should be respected.”

    Less an attachment to GB more a total antipathy and rejection of “ireland”

  • Kevin Breslin

    Sooner or later people will need to realize that profit motive is gone when there are no real jobs. It’s a death or serfdom economy for many here.

  • Chris Jones

    There are lots of real jobs. There is a shortage of willing workers and , in some cases, skills

  • Chris Jones

    That’s just a stupid comment. I suggests that many can run their own small business from selling sandwiches to courier work, to contracting to wherever their skills and ambition tak them. It is hard and challenging but worth it in the long run

  • Old Mortality

    …and don’t forget Portugal. What’s it doing stuck in a corner of the Iberian peninsula?

  • Old Mortality

    ‘…because if those who leave the public sector cannot find new jobs, there will be less money to sustain retailers, for example.’

    Oh dear, Andy. That sounds very much like the Bumper Graham doctrine that you must have lots of civil servants and pay them lots so that they can support retail jobs. It’s nonsense, of course, unless they spend the money mostly on goods and services produced in NI.

  • Kevin Breslin

    It’s a silly comment not a stupid one, complete rags to riches really isn’t possible these days unless you are corrupt, stumble upon a treasured item, benefit from philanthropy or have the highest levels of intelligence in the land. We have politicians who if their logic applied to medicine would be able to practice open heart surgery with no other education or street smarts other than simply by being arrogant enough. Saying that complete rags to captain of industry by your own means requires a hell of a lot more work than it takes to be a cardiovascular surgeon by means of family funding and possible spousal support.

  • Chris Jones

    “Roll on reunification”

    …but what will Irish voters say when they realise the burden they taking on

  • Chris Jones

    …with other people’s money

  • Chris Jones

    Tell that to Kirk Kerkorian …well you cant as hes dead but you could have last week.

  • Kevin Breslin

    Kirk Kerkorian was a very intelligent man in my opinion, but old money has the upper hand over the niveau riche, he clearly was wise enough to exploit their weakness for gambling among other things.

  • james

    I’d say the biggest factor on the decline has been the determination og Sonn Fein and the IRA to destroy it economically with the bombing and ridiculous economic policies. Something which they continue to do despite the inevitable erosion it causes in the once fairly strong desire of the Irish for political union.

  • james

    Certainly the Troubles was a nice little earner for them. Perhaps that was the goal after all.

  • james

    Perhaps too much focus on learning redundant skills, like Irish language

  • barnshee

    Check out exactly where and who the spongers are.
    Removal of the spongers will solve most of the problems in society

  • submariner

    Or sectarian bigotry

  • onionist

    Wasn’t that already done with eliminating the part-time UDR/RUC junkets for unionists?

  • AndyB

    Think of it the other way. If civil servants don’t get replacement jobs, then there’ll be a lot less business going the way of the supermarkets, which will make them less viable, so they’ll cut jobs. Rinse and repeat (and not helped by the private sector paying uncompetitive minimum wage when it can get away with it so there is even less money in the pockets of ordinary people.)

    The true story is told of a small shop owner who was pleased to hear that a pile of public sector workers were being paid off. He piped down when he was reminded that said workers would have less money to spend in his shop, and indeed he closed within a year.

  • barnshee

    check out where the “welfare” cheques are going
    “Check” out
    Newry Armagh
    Foyle
    West Belfast
    Fermanagh/Tyrone
    Then report back

  • anne

    the late great Andrew Boyd was actually a qualified economist. He graduated from QUB, had experience in industry and was one of the first to warn about the changes automation would bring to industrial and agricultural work processes –

  • Old Mortality

    Andy
    Shopkeepers of whatever scale have little or no true economic value unless they’re able to attract shoppers from abroad which admittedly can happen in NI when exchange rates favour it.
    But just think this through. You employ, or quite possibly under-employ, civil servants who produce very little that consumers or investors are willing to buy. You remunerate them by taxing workers in the private sector whose disposable income is reduced and all this to protect the livelihoods of shop-owners and their employees. It’s pretty inefficient as well since you can’t stop civil servants buying foreign cars and taking holidays abroad.
    Of course, a private sector worker is likely to behave in exactly the same way but it is much more likely that he or she is producing something can be sold outside NI in order to pay for those foreign cars and holidays. Bombardier don’t sell many aircraft in NI.

  • james

    That too. But personally Im all for integrated education to throttle the indoctrination of bigotry at schools.

  • chrisjones2

    Is that less valid as a view? Though I would say its more an antipathy towards their fellow residents in de Nurth

  • chrisjones2

    Shopkeepers of whatever scale have little or no true economic value

    On occasions they stop people starving by selling them food

  • chrisjones2

    which is one way to grow business …he also traded film studios on a regular basis and made a fortune

  • Croiteir

    Check out were the investment from Invest NI goes to and then report back

  • Croiteir

    From where?

  • Croiteir

    Or welding

  • submariner

    Could you tell me which school’s offer the subject of bigotry I seemed to have missed that one when I was at school