Why I'm disappointed that we're facing elections again
Economy Watch by Neil Gibson of the NI economic policy centre @ulsteruni
Oh dear. The last column I wrote in this paper was a generally upbeat end-of-year summary. While recognising some very significant risks I was convinced that things were inching forward.
There have been increased requests for us to research policy issues, the new Programme for Government, the positive non-partisan reaction to the Bengoa report and the forthcoming suite of strategies as examples. Though it is easy to criticise the Executive this felt like a maturing to me and a focus on what really matters to most people. There was policy movement on corporation tax, progress towards a Social Value Act, rate reform and a host of other areas.
Now we are back to elections again and I am struggling to find anyone relishing the prospect. As we head into another campaign can we expect to see economics make much of an appearance? The answer, sadly, is probably not. As I walk the dog in the evenings, passing schools, GP surgeries and local shops, I can't help thinking there must be some things we could all agree on. Wouldn't our politicians be better focusing on tackling the challenges facing our services and our businesses than getting photographed to adorn more lamp-posts?
But what is more surprising to me as an economist is the lack of consideration of the taxpayer in almost all of the early electioneering. We are quickly into discussing funding for the Irish language, or Orange halls, or the impact on welfare payments to offset the bedroom tax or the replacement of EU funding to a range of beneficiaries. This are all re-allocations of taxpayers' money. Whether one supports any or all of the choices surely the important point to focus on is whether we have the money to redistribute in the first place? Does this approach highlight that we are rather eager to spend other people's money and apparently less concerned about how much we can generate to pay for the things we believe we need?
I am not suggesting the renewable heat incentive (RHI) debacle is not a crisis - it is - but I cannot imagine a world in which we will not have more of them in the future. That we uncovered a potential waste of public money is good, and credit to the investigative teams that unearthed the information, but the focus must be on solving it, preventing a future occurrence and seeing if any of the errors in this scheme could exist elsewhere. So we start 2017 in an undesirable place politically and I for one am disappointed. I did feel there was progress, we were looking at more inclusive economic strategies, thinking beyond GDP and recognising the challenges facing our health services, education system and, critically, our tax generating firms. Brexit shows us that regardless of what experts predict, firms will keep doing business for so long as people want to buy their wares and are willing to pay the price they charge.
The Economic Policy Centre considers the following five the big risks for 2017:
1) Inflation: rising prices, possibly even a move later in the year in interest rates to track the US, leading to renewed pressure on consumers.
2) Political instability: holding back progress on issues such as corporation tax and budget setting.
3) Hidden labour market weaknesses: although the job market looks strong looking beneath the headlines shows growing dependence on temporary, part time and low wage jobs.
4) Persistent productivity struggles: a significant part of the reason for NI's overall productivity gap is due to the sectoral structure in the region but even within sectors there are alarming signs of weak and deteriorating relative productivity levels.
5) Brexit: despite the fact that the early economic data shows many of the short term forecasts were misguided and Treasury estimates of longer term economic impact are, in my view, based on very suspect analysis, there are undoubtedly challenges ahead, some unique to Northern Ireland. The nature of the land border, development of a strategy to support the agri-food sector (perhaps through a quota system) and a policy to deal with sectors and firms that are currently dependent on migrant labour are just a few of the local priorities.
In other news the new industrial (or in old money, economic) strategy is out for consultation and Q4 GDP for the UK came in at a respectable 0.6%. Again the UK relied on the service sector to drive growth with manufacturing appearing to benefit only modestly from currency movements and construction remaining in the doldrums. Life goes on it seems in business, but did it really have to come to this? I know not everyone shares the view, but things were getting better.
In next week's Economy Watch, we hear from Andrew Webb of Webb Advisory