Belfast Telegraph

Productivity is key to the drive for greater growth

By John Simpson

Sammy Wilson, Minister for Finance and Personnel, has kick-started a serious discussion on what needs to be done by the Executive to make economic growth the top priority.

In his words the Executive has not done enough to advance long term economic growth.

He added: “When you look at the progress we have made the outcome might be judged rather disappointing.” As minister, Mr Wilson, acknowledged that there have been a number of short-term demand-side focused initiatives. However, he cautions against losing sight of the importance of improving the supply-side of our economy.

The change of emphasis is well merited and even overdue. Now there must be a better identification of the supply-side priorities backed by ideas that will make resources available.

This is a much more fundamental shift in the application of real economic policies than cosmetic changes from a variation in company taxation.

The real target must be enhanced productivity and competitiveness that would underpin long term progress. The agenda must be a combination of rethinking policies, setting priorities, adjusting funding methods and sources to make a bigger impact and — less precisely but equally important — incentivising business expansion.

The strategic investment programme merits a reappraisal. The capital programme must be protected as the Stormont budget is tightened.

The existing programme has been more of a list of projects rather than a statement of priorities based on value for money or effective economic benefits. The strategic investment programme must also be a derivative of departmental plans. Decisions on the matrix of departmental priorities and diverse financing mechanisms will make the programme a meaningful weapon.

A further dimension to the strategic investment programme must be an agreement to take some of the financial cost away from the Executive capital budget. If an investment scheme contributes to revenue earning, then Public Private Partnership (PPP) funding could be linked to a repayment formula.

Water and sewerage projects are an example. The extension of the electricity grid, because of the structure of the industry, will fall to additional private sector funding and extra tariff costs. Water investment is similar.

If a scheme can be converted into a revenue generator, then charges for the use of public sector assets is a possibility. Some forms of road charging might be appropriate. Extra capital spending on public transport through Translink, once the basic public service obligation is set, should be funded by fares and charges. New buses should not be a gift from taxpayers to subsidise bus travel.

Rationalising the debate about scale and financing of physical investments is easier than parallel questions about human capital in education, skills and training.

The Executive shows no signs of planning a significant uplift in preparing for a more prosperous economy through people development and an appreciation that the present provision is inadequately targeted.

The gaps in educational achievements and vocational training are more serious than is acknowledged in the Department of Employment and Learning. The Department of Education |is inadequately guided to build |up student numbers in STEM subjects.

The price of setting economic priorities is a stricter assessment of social spending. Steps to reduce unnecessary duplication in calls on the schools capital budget are overdue. Rationalising excessive duplication in the schools estate is more than overdue.

More effective use of private sector funds for affordable and social housing would make sense. The Housing Associations have the capacity to play a larger part in meeting housing needs drawing on supplementary sources of finance. The building industry has unused capacity. A piece of clear thinking to get better results with less public funding is needed.

Even a simple review of the tasks facing each government department points to gaps in provision and lethargy in application in critical places.

Sammy Wilson has given momentum to overdue changes. Are the others ready to play a more ambitious role?

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