Defining theme of the Conservatives' next five years in power will be choices, and hard ones at that
The UK's electorate has spoken and we now have a clear view of what direction economic policy will take over the next five years. The Conservatives have pledged to balance the books by reducing spending and this means more austerity.
A heated economic debate rages about how damaging the forthcoming cuts will be and whether they are the most sensible policy at this time.
On one side of the debate are the market economists who say the UK has reached record job levels, is growing steadily and cuts will not cause undue damage, such is the power of the private sector.
The opposing view suggests cuts will slow growth and damage the level of public services provided.
Will Northern Ireland be able to cope with cuts? Economists are divided. Our own Economic Policy Centre forecasts - and those produced by fellow Economy Watch columnist Richard Ramsey of the Ulster Bank - suggest tough conditions ahead. Another of our columnists, Angela McGowan of Danske Bank, as well as Oxford Economics and the EY Economic Eye, have all made more positive predictions, with no major slowdown in growth forecast.
The more positive outlook is based on confidence in both consumers and the private sector. This is a healthy position to be in - no-one can say for sure what will happen and lively debate is a much needed component of fostering better understanding.
Unlike many parts of the UK, Northern Ireland is in the fortunate position of having the ability to choose how it spends its public money and has some (albeit limited) revenue raising powers. However, it is not immediately obvious that the concept of choice is always at the forefront of people's minds when they suggest the 'way forward'. Any form of tax increase, or removal of subsidy is portrayed as potentially devastating, every tax cut a potential 'game changer'. Equally cuts to any budget will 'cripple' the local economy in the eyes of critics. And only the bravest of the brave will even suggest the welfare state needs examined.
We see endless policy wish lists. Northern Ireland needs 'more skills', 'more infrastructure spending', 'more school and college investment', 'more innovation', 'lower taxes', 'continued subsidy to everyone from start-ups to some of the most profitable firms in the country'. Where will the money come from to pay to make these wishes come true? Sadly the lists are less forthcoming on this point. This makes the job of economist rather more challenging - they cannot simply say 'more good things, less bad'. They have to look at the implications for other parts of the economy, explore where the money might come from and what the knock-on effects of the decisions might be.
It is rare to see narrative around what we need less of, or who should fund a tax cut. This is at the heart of the challenge over the next five years. The Conservatives, like it or loathe it, have a mandate to determine the national policy on tax and spending. Northern Ireland could go its own way and plough a unique furrow that sets us apart from other parts of the UK. Already this looks likely with a corporation tax cut (though who pays for that is a subject for a future column) but where else might Northern Ireland choose to be different? Politically there is strong opposition to welfare reform, but who is under-taxed that we could look to raise money from, to top up the welfare pot? It seems rather misguided to simply object to national policy and ask for more, surely the democratic process suggests this choice has been made? It is Northern Ireland's time to decide how much it wants to spend, on what and from whom it wishes to take the money.
Many readers will be quick to point out that Northern Ireland's tax raising powers are limited. But we have pioneered innovative taxes before - the plastic bag tax, for example. Is it time for 'fat' taxes on unhealthy foods, or a Northern Ireland mansion tax, or increases in domestic or business rates?
Perhaps can we save money on spending - we seem to be telling everyone that a major contraction in public sector workers is on the cards, but maybe we could just pay less to the existing workers? Maybe we could look to others to deliver certain elements of our public services if savings can be made? Maybe our biggest and most profitable companies (as listed in this paper a few weeks ago) are making so much profit that they no longer need large pots of public money, or various forms of rate relief?
This is what makes economics so challenging. It is unlikely that any reader will not have found something in the preceding paragraphs to make them uncomfortable, or indeed angry, but this is the reality of choices. What do we want to spend money on and whose money will it be?
In future columns, fellow commentators and I will look at all aspects of the economy (I promise more numbers) but the results of the UK General Election mean that the defining theme of the next five years will be choices, and hard choices at that.
Professor Neil Gibson is director of the Ulster University Economic Policy Centre In next week's Economy Watch, we hear from Angela McGowan, chief economist of Danske Bank