Every day we stand still, we fall further behind

Last week we saw the most recent efforts to kick-start talks to restore devolved government here in the North, and again the efforts seemed to have fallen at the first hurdle with the main parties fairly down on the session and chances of progress.

We are now over two years without an Executive, local minsters and various associated committees that form the basis of devolved government here.  Many on the street ask “what has changed?”, highlighting that “they didn’t do anything anyway.”  Political commentators point to a lack of appetite amongst both nationalists and unionist for a return to Stormont citing reasons from its ineffectiveness to Brexit to ‘them-uns’ approach to power sharing.

I’ll leave the political analysis on that to the experts – but from an economic perspective it does matter and for those who care about our economic performance, there is very much an appetite to see devolved government restored.  I recall a line from leading local economist Neil Gibson last year – “Don’t believe for a second that having no government makes no difference – every day we don’t have an executive, a functioning government, we fall behind” – and of course, he is right.  The wheels of government continue under civil servant stewardship, but it is just treading water.  Without elected representatives taking decisions we stand still and as others around us progress, that means we fall behind.

There are a number of factors to consider.  Firstly, Government expenditure is a key driver of our economy.  It impacts the economy directly and indirectly and induces a range of other economic activities to occur.   Secondly, much of this expenditure seeks to address market failures and create public goods (Roads, Education etc) which many citizens benefit from and are key to our economic performance.  Thirdly, government sets the policy which influences and guides our economy and dictates the regulatory environment in which the economy operates.  These three factors combined, along with other macro factors influence business and consumer confidence which translates into business investment and consumer spending.

While government departments continue to spend where they have authority, there is clear evidence the lack of government impacting on investment in public goods – The A5, York Street Interchange, the north south inter-connector, Casement Park are the high-profile examples of schemes which have been delayed due to no minister in place.  While the direct impact is felt today by both the construction sector, an industry which is dependent on government infrastructure investment, and industry and citizens who have no option but to endure our infrastructure deficit, over the long term a lack investment in these areas will have a knock-on effect on economic performance, impacting on business investment decisions and productivity.

But the largest impact, which will be felt the longest, is the lack of movement on policy and strategy.  The old adage that no decision is worse than a bad decision rings in my head.  Currently a range of local policies sit in draft or on the shelf and where momentum was in place, it has been lost.  Only a few years ago we were selling Northern Ireland as a place with a plan and a vision (and an impending reduction in corporation tax).  Now we don’t even have a government or an approved economic strategy.

Our business community have been vocal about the impact of a lack of functioning government and the longer it goes on it will impact business decision making, which in turn will influence economic performance.  While we continue to see economic growth, albeit modest at 1.7% for 2017, and strong labour market performance these business voices have been largely measured and courteous – but should the tide turn, as we have seen with Brexit, the tone will change and the volume will rise.

So, while the perception is that not having a government doesn’t matter, it actually really does.  It is impacting now but the longer it prevails the impact is likely to be compounded.  And regardless of political view, a functioning Northern Ireland which enables its economy to perform suits all agendas.  It is much easier to sell a car which is running well and with a good service history than one without – be your customer London or Dublin.

Photo by Public Domain Pictures is licensed under CC0

“Stormont” by stevelavo is licensed under CC BY-ND

John Lavery

John Lavery is an economist and policy advisor specialising in regional, sub-regional and local economic development and city and regional competitiveness. Recently returned to Belfast after five years in New Zealand, John is a Senior Manager with the Baker Tilly Mooney Moore Economic Advisory team.  Tweets at @jp_lavery