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Brexit debate must not distract us from the many challenges facing Northern Ireland

Economy Watch

By Neil Gibson

Published 29/03/2016

Iain Duncan Smith’s ministerial resignation has been linked to his pro-Brexit stance
Iain Duncan Smith’s ministerial resignation has been linked to his pro-Brexit stance

The Brexit debate remains the current 'hot topic' - and quite rightly so. It represents a once in a lifetime choice for the British public that could radically change the business environment and arguably the social fabric. The surprise resignation last week of the then UK Work and Pensions Minister Iain Duncan Smith, a confirmed Eurosceptic, supposedly over changes imposed on welfare, has quickly been reinterpreted by many as a statement on the Brexit vote.

But in truth, who knows? Everything Duncan Smith has said related to the big issue of welfare reform but yet the focus is being drawn away from that crucial topic back onto Brexit. Is this the collateral damage of the debate? Are we losing focus on some critical challenges that exist in or out of Europe?

Perhaps I am alone in saying that despite the importance of the issue I am already tiring of the Brexit debate, mostly because it remains 'facts light'. Or perhaps more accurately any 'facts' are undercut by huge levels of uncertainty.

There is precious little in the way of empirical assessment of what the world will look like in an exit scenario.

Recent reports from PwC and from Oxford Economics are built on a set of assumptions about future trade levels being diminished in some way, using the examples of other countries outside the EU.

This is a reasonable approach to try to model potential impact but it starts from the premise that the trade positions will be weaker, the potential for better deals with parts of the world economy that are growing faster than the EU is not fully considered.

That may be likely but cannot be known for certain and hence the debate remains one based on very limited information. Equally, proponents of an exit often focus on the simple cost calculation - the UK puts more in than it gets out and therefore it must be better off out of Europe.

That makes the gross simplification that there is no other effect on the UK tax base other than this simple saving. No firms leave the city of London and UK tax receipts do not diminish as a result of any slowing of trade. This seems a highly unlikely scenario but again it is impossible to say.

The debate the business community is having is very different to the one the public is having, for whom the emotive subject of migration is critical. Migrant labour is hugely beneficial to businesses, not just because it helps ease pressure on wages but it also helps firms secure the skills they need. It is therefore unsurprising that the vast majority of businesses want the free movement of labour to continue.

The data for Northern Ireland shows the highest proportion of EU workers (excluding from Ireland) in volume terms to be in manufacturing followed by retail, administration and public services (largely health). In manufacturing just under a fifth of the total workforce was born in the EU outside Ireland (based on country of birth from the Q3 2015 labour force survey analysis).

However, looking at Northern Ireland's long term unemployment and inactivity statistics it is clear that there are fundamental structural problems that are not being addressed under the current model.

Perhaps higher wages would not fix the problem, it may be more to do with skills for example, but one thing is for sure the status quo is not effectively tackling the problem.

In this very basic assessment of the labour market we come to the real reason for my Brexit fatigue. It is distracting from some of the very serious problems that need to be resolved regardless of the outcome of the vote.

The welfare state is hugely expensive, as is the health service and the education system. So hard choices are needed, is it time for more tax to pay for these critical services or do we need to find ways of reducing cost?

This is a political social and economic minefield and one must tread carefully when quoting any statistics least the reader take the wrong inference. But if Northern Ireland's welfare cost is in the order of £5.7bn (Northern Ireland Executive, Budget 2015-16) and the estimated income tax and Vat receipts total £5.8bn when combined (Disaggregation of HMRC tax receipts, HM Revenue and Customs 2015) then there needs to be a serious conversation about how we get the tax take up, or the welfare costs down.

We still have too many young people coming out of schools with less than five GCSEs at A to C including English and maths. To the list of issues we could add funding of the health service and the higher education sector. Clearly there is work to be done, in Europe or not.

Brexit, important as it is, does not impact directly on many of these fundamental challenges that have been with Northern Ireland for, sadly, its entire time as a devolved region (and long before that).

So whilst a healthy Brexit debate is welcome we should not allow ourselves to get distracted from the hard work that needs done to set Northern Ireland on the trajectory it deserves and has the potential to achieve. It is important to try and give the public as much information to help them make up their mind on how to vote and try, if at all possible, not to make this single issue dominate the forthcoming elections. Hopefully political parties will not unduly focus on getting supporters to follow their designated 'line', there are other policy issues we need to debate. So if anyone else is tiring of the wall to wall coverage, what is the answer?

Consider your view on trade, on migration, on regulation, on border controls, on EU funding and decide how to vote. Quickly then turn your attention back to the fundamental challenges facing our society that it is in our gift to do something about and look to see what the prospective candidates propose to do about them.

In next week's Economy Watch, we hear from Ulster Bank chief economist Richard Ramsey

Belfast Telegraph

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