The role of the block grant in the constitutional debate

Writing in the News Letter yesterday, Owen Polley makes the case for winning over the centre ground to the Union in an article which is surely a classic of the genre. Airily dismissing his own contribution to the debate as a commentator, he spends most of his article heaping scorn upon NI’s centre ground for openly considering the idea of constitutional change, and then goes onto scold Unionist politicians for their failure to win support for the status quo.

Once you get past the swivel-eyed rants about “self styled liberals” having a “middle class strop” over brexit (can you tell he is a brexiteer?) and dismissing Ireland’s adoption of marriage equality as a passing fad of the Dublin 4 rugby set, Owen’s argument boils down to a restatement of a long-standing axiom : that Northern Ireland’s centrist middle class, irrespective of community background or voting patterns, won’t vote for reunification because Ireland can’t afford to meet NI’s subvention.

Taken in isolation, the facts typically referenced in support of this argument are beyond dispute. In the event of reunification, Ireland would struggle to come up with the £10-12bn required to match the annual subsistence paid out from London. Sure, you can debate the size of the subvention, in terms of where tax revenue is counted, or in terms of the effect that the Irish public finance framework would have on revenues if applied to NI. But while you might be able to argue away a few billion, you’re still left with a lot of red ink. As Owen highlights, the best that nationalists have come up with is an incongruously monetarist economic plan coupled with a request for ongoing UK funding (although this might not be as unrealistic as it sounds – a special grant or loan arrangement with an agreed tapering-off over time might be attractive to the UK as a way to permanently dispense with its obligation in the longer term).

But assessing properly the validity of this debating point requires going beyond numbers on a national balance sheet. The numerous flaws start with the assumption that voters in a border poll will act “rationally” over trade links and economic issues (setting aside for the moment the evidence from the brexit and US Presidential votes showing that this assumption is not safe), and are compounded by the notion that the only logical form of rationality is to plump for the option that pays out the most cash in the immediate term, ignoring all other factors.

I think it’s worth drilling down into these ideas about rationality, economics, and how much weight they hold. I’m not sure under Owen’s terms I qualify as the D4 rugby crowd; I’ve been to one match in my life, once lived in a shoebox apartment off Upper Baggot Street and had the odd pint in Searson’s. I am, on the other hand, very much part of the Northern Irish category that Owen describes in his article. My background isn’t wealthy, but thanks to  Northern Ireland’s publicly-funded educational and university system, and the good progress made by the two governments and political parties over the past two decades, I have a good career and stable home life. I don’t travel to England so much anymore, but I’m fond of the the place, its people and its history and I’m in no particular hurry to leave the UK.

Let’s look at this idea that when faced with a complicated choice you should pick the one that returns the best bottom line. One facet of this reminds me of a conversation I’ve overheard from time to time when a person explains why there’s no point in them getting a job, because they’d end up with less money than if they stayed on the dole. Most people, on the left and the right, agree that unemployment is bad; being in a fulfilling job, getting out of the house and interacting with people, and all those other aspects are much better for people in every sense than signing on every fortnight and collecting the payout, even though it might mean having less money. But – what qualifies as the rational or logical choice here ?

I imagine most of us have a friend or relative who, at some point, has found themselves in a relationship or marriage that isn’t working for whatever reason. So what should you do ? Stick with the misery knowing that it is stable and provides a roof your their head; or take the risk and get away from the misery and work on making something better happen ? Rationality and logic say we should put up with the misery.

These analogies are imperfect but I think there are parallels. When I hear someone saying “we have to stick with the UK to pay for our shortfall” I see an obvious moral hazard. If the overriding concern is to maintain the union – not by itself a problem – then are we in the place where we actively keeping Northern Ireland economically depressed so that it is permanently dependent on the block grant ?

Northern Ireland’s need for a subvention should not be something we are proud of, or a useful political get-out clause. Anyone with an ounce of self respect would agree that we should be working on ways to get that subvention down. We should honour the people in the UK into whose pockets we reach to fund that subvention by trying to work out ways to reduce it. Instead, we fleece them. Taxpayers elsewhere in the UK pay road tolls, water charges, prescription fees and higher council taxes, all of which go into the pot that funds Northern Ireland. Meanwhile, at home, politicians work vigorously to block the same level of taxation while refusing to do the serious work to address Northern Ireland’s structural economic deficiencies. Consequently, Northern Ireland’s middle classes enjoy a somewhat privileged existence.

There are other signs of a mentality that people here regard UK taxpayers as being there to be soaked for every penny we can take them for. Take the DUP confidence and supply deal with the Conservatives as a case in point. The DUP flaunt, without shame, their success at extracting cash from the Treasury above and beyond regular levels to pay for stuff that we could pay for ourselves, but won’t, because we’re afraid to make tough calls on our own public finances or to ask our own taxpayers to kick in. Let’s not mention the RHI inquiry, which as we speak is unveiling what appears to be an disgracefully brazen and cynical scheme to funnel the Treasury’s money into the pockets of NI’s business and agricultural sector, and which appears to have gone ahead only because politicians wrongly believed that the Treasury would foot the cost overrun.

Selling a constitutional or political position – or anything else for that matter – on the basis that it comes with bottomless refills of someone else’s money doesn’t sit well with me. It shouldn’t sit well with anyone, least of all a a commentator with a personal history in the Conservative Party. Responsible politicians don’t sell free money; they sell compromises, occasionally tough, that when fulfilled will lead to something more durable and sustainable. The best politicians accomplish this while protecting the vulnerable in society.

There are other issues with this idea that immediate financial concerns are the first and only concern to NI’s middle classes. There’s no denying that they are important. But, certainly in my line of work, it is not unknown for people to switch jobs and take up posts earning less money, or indeed no money. Some people take a career break to go travelling, especially earlier in life, or to return to education. Sometimes pursing a career change, or a technology change, requires a financial sacrifice. Of course, and again I’m sure Owen and other Tories know this full well, many successful startups get off the ground when people quit their safe and well paid corporate jobs and take a leap into the unknown on their own. It can take many years and a lot of sweat to build up a business to the point where your income is back where it was. But if people stuck to this idea of “rational” or “logical” this would never happen.

I think there are a lot things in common between the idea of reunification and the attitude to life that leads to successful startups and thriving businesses. If you don’t try, you can’t win. The case is there to be made in Northern Ireland and Scotland that we have reached the limits of what we can do as part of the UK.

This brings me to Ireland and leads me to draw some comparisons with the UK. When the Conservatives returned to office in the 2010, they inherited what they described as deteriorating public finances that they called “worse than Greece”. The austerity programme, which was noticeable for its marked lack of tax increases, was initiated with the objective of bringing public finances under control. However, 8 years on, total government debt has jumped from 75.9% of GDP to 86.6% of GDP, and only this year has begun to show a slight fall. Increased public borrowing as a consequence of brexit is likely to send the trend back the wrong way again.

Did I mention brexit ? Whatever your view on Europe, it is a simple fact that brexit wasn’t, and isn’t, a plan, or even a government policy. It is, at best, an obligation. But moreso it is a farce, the unexpected consequence of a reckless  scheme to put to an end a schism withinin the Conservative Party. The schism was caused by what we can now clearly see are flaws in the UK two-party parliamentary system which, in order to work properly, requires that the large parties are internally coherent and stable. With both Labour and the Conservatives acting at various points to avoid correcting these deficiencies to protect themselves, the British parliamentary model is beginning to appear unstable and increasingly incapable of providing good government, especially now that the brexit schism has spread to Labour.

The contrasts with Ireland are easy to see. Faced with the same global economic crisis as the UK and reeling from debt obligations imposed by Europe, Ireland found itself in a much worse situation than the UK, with public debt reaching 120% of GDP. However, it chose not to do a Greece or a UK, instead cutting back on public spending while significantly increasing taxes and adding levies. As a consequence of this policy, debt levels have fallen to 68% of GDP (below the pre-austerity UK level) and are set to fall further, while the country is the fastest growing economy in Europe. If anything, Ireland’s problem is how to avoid overheating.

Ireland’s approach to solving its problems with debt was not without controversy and was certainly not without pain. But what I find preferable is that instead of selling a fantasy fuelled by borrowing, the government went in with the bad news. It told people that the country had to face the music; that things would get worse before they would get better. In the end, fiscal discipline did the trick, and Ireland has returned to the position where it is resuming sustainable infrastructural spending and boosting investment in public services. The Irish constitutional and political model has proven durable in one of the most serious economic crises since Independence, and the country is busy renewing its commitment to partnership within both the European model and the international order via its application for a seat on the UN Security Council. The country is earning an enviable reputation as a stable and reliable global partner which is very much open for business.

I don’t know about anyone else, but I’m starting to get really tired of listening to a government defending an austerity policy that is a failure, and at the same time listening to people telling me that we need to stay boring and unadventurous and should stick to living off someone else’s money because it is “logical” and “rational”.

In summary, to reduce the decision about Northern Ireland’s future into a simple question of which alternative is best able to pay the block grant is to significantly oversimplify the question that any future border poll will be expected to resolve. Appealing to the lazy side of Northern Ireland’s nature by assuring it that it doesn’t need to lift a finger because the UK Exchequer will pay for everything is to damn it to a future of banal economic mediocrity.

If a border poll happens, many of us will looking to a choice that faces the world; that opens up and expands Northern Ireland’s economy into something that we can be proud of, not something that is permanently stuck on life support, and which is prepared to face a little short term pain in the course of building a brighter future. If Owen and others who care about the union want to secure the support of the centre ground, I’d suggest they stop sneering and set about thinking about what they are prepared to do to bring this about.

 

 

Brexit” by “Brexit” is licensed under “Brexit

Software engineer living and working in greater Belfast. Pragmatic social democrat with the odd leaning towards capitalism. Political interests include economic policy, social and political reform.

Alliance Party member, but writing in a strictly personal capacity.