Belfast Telegraph

Saturday 23 August 2014

Foster hopes her EAGs will come up with cracking ideas

Arlene Foster has announced the membership of a specialist Economic Advisory Group that will work with ministers who currently hold economic policy responsibilities.

They are Kate Barker, Frances Ruane, Lorraine Hall, Michael Ryan, Mark Nodder, Stephen Kingon, Alan Armstrong, Gerry Mallon, and Bill McGinnis.

When the recent Independent Report on Economic Policy, chaired by Professor Richard Barnett, published its heavyweight conclusions, there was a persuasive proposal that a more focused effort should be made to rationalise the decision-making on economic policy by the Executive.

Ministers were invited to reshape the local administration to create a Department for the Economy to bring together, in one structure, the main instruments and participants in economic policy. That was never likely to be either easily agreed or swiftly implemented.

To the credit of the Executive, taking a proposal from the Minister for Enterprise, Trade and Investment, there was an alternative agreement that a special sub-committee of Executive ministers would be convened to consider recommendations to help to build a stronger economy. That sub-committee held its first meeting just over a week ago.

In an extension of the remit of that special group, the Executive also agreed to assemble a highly-qualified Economic Advisory Group (EAG) to ‘provide advice and strategic direction in relation to the development of an over-arching Economic Strategy’.

The minister, Arlene Foster, held a first meeting with the EAG on Friday last, when they were given an extensive briefing which had earlier been approved by the ministerial sub-committee, on the key characteristics and shortcomings of the NI economy.

The challenge to the EAG is to understand why Northern Ireland continues to under-perform in comparison to other regions, and to consider whether there are actions or policies which would result in an enduring and sustainable catch-up.

The arrival of the EAG is an opportunity to ‘start with a fresh sheet’. There has been a continuing cycle of inadequate performance, special analyses, and further refining of official policies to the point where there is a sense of inevitability and frustration.

If Northern Ireland is to have a self-sustaining and more prosperous regional economy, a key pre-requisite is that the commercial base should be sufficiently competitive to trade successfully, both nationally and internationally.

A regional economy sustained simply through fiscal transfers on the current scale is neither satisfactory nor acceptable nor sustainable.

The reciprocal of that ambition is that the productivity gap should be reduced, eliminated and then reversed.

Arguably, whatever other features are studied, ultimately the failure to improve the comparative competitive situation or, in different words, improve productivity, has been the continuing source of economic weakness.

Assessing why is a much more difficult question. The characteristics contributing to lower performance for the NI economy include:

Too many employees in sectors with low value-added per employee: a structural handicap

Too many employees working with lower value added than comparable employees elsewhere: an efficiency handicap

Too many people not in economically active roles: a participation handicap

Lower business profitability

The consequences that follow are:

Incentives for business investment are muted

Average earnings below other regions

Household incomes below elsewhere, higher proportion in poverty

Too few jobs

The existence of relatively lower wage costs is insufficient to generate stronger incentives to business investment, with the apparent exception being the generation of an inflow of projects which rely on lower labour costs.

This contrasts with the wish to generate investment in projects where value-added per employee is well above the average of the rest of the private sector. From this analysis, where can the EAG be expected to turn for policy initiatives?

The official briefing paper offers up four different themes.

Expect a focus on enhancing innovation and innovators, encouraging enterprise expansion and more new enterprise, consider how to reduce the deficiencies in the number of skilled and trained people, and build an infrastructure to meet modern advancing demands.

The challenge to the Economic Advisory Group is not just to build an appropriate analysis. It is also to inject a dynamic into the change programme needed.

Now, over to them!

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