Belfast Telegraph

Why the costs of division to our society keep adding up

By John Simpson

Divided, we are still standing ... but wobbly. The refreshed Stormont House Agreement asked the Northern Ireland Executive to report on the cost of division to Northern Ireland society. That task was then passed to the Ulster University Economic Policy Centre. Their task was primarily an examination of the extra costs in providing public services in a divided society.

Mervyn Storey, Minister of Finance, announced the headline figures which, at first sight, were lower than expected. The UU report quotes a range of costs for 'division' which, at the lower end, were £400m pa and, at the upper end, might be as much as £800m pa.

Within annual public sector spending, the largest element of extra spending is the costs of division in the budget for policing, prisons and justice. Compared to the next most expensive region, Northern Ireland was spending £312m more each year: compared to a lower-cost comparator, Northern Ireland was spending £550m more each year.

The rest of public spending, excluding policing and justice, ranged from a lower estimate of an extra £91m to a higher estimate of £178m (when an unusual total of £107m for sport and leisure is excluded).

The frequently quoted argument that education spending is higher because of the various separate educational institutions did not figure as highly as might have been expected, accounting for £95m of the remaining £178m. Not a trivial amount, but dwarfed by the policing elements.

The day-to-day costs of public services in Northern Ireland are best compared with the average spending, per person, across the rest of the UK, and that is better represented by the extra annual spending of more than £800m each year.

This narrower definition of 'division' examines various forms of public service spending and seeks to identify public spending that is higher, or lower, because of the way public services are organised in Northern Ireland as a consequence of different or separate community needs.

The term 'cost of division' is arguably a misleading concept if the task is to assess the degree to which the standard and quality of living has been changed because of the years of community tensions. The term, costs of division, merits more careful understanding.

There are other possible interpretations of the meaning of 'cost of division'. If the cost of division is interpreted as including the extent to which people's lives have been damaged and their lifestyles have been affected by domestic disruption, a greater need for health and welfare support, and loss of employment opportunities, this becomes a much wider ranging series of consequences of living in a divided society.

The cost of division could, therefore, be seen as having much larger and more far reaching social, economic and welfare consequences.

An even wider interpretation might ask the question whether the cost of division should include an attempt to assess the loss to the regional economy, in terms of public service costs, but also the impact of jobs lost (or not created) and careers disadvantaged, whether through less ambitious employment or emigration.

This wider analysis of the consequences and cost of division ask questions about the cumulative impact of more than 45 years of political instability. On this wider societal impact of the consequences and cost of division, or instability, answers become difficult to quantify. Every family, to differing degrees, can make its own subjective statement of the price of lives lost or less fulfilled than could have been hoped. There is no easy all-embracing answer.

The report from the UU Economic Policy Centre gives some suggestions on what it terms 'the lost economic opportunity'.

The key indicators of 'cost' for Northern Ireland, when compared to the UK averages, include:

  • 60,000 fewer jobs
  • 75,000 people with fewer skills
  • 3,745 fewer new businesses.

The costs of division are many and pervasive.

Company report: Manderley Food Group Ltd

Manderley Food Group produces and distributes potato crisps and snack foods. It is registered in England and headquartered in Corby. However, the main shareholders are the Hutchinson family in Tandragee, who have built the group from an earlier Northern Ireland company, Tayto. 

The larger group is the result of the addition of extensive acquisitions by the original shareholders, who bought a number of other production units in England.

The financial results for 2014-15 demonstrate a further improvement on the results over the last three years.  In 2014-15, annual turnover fell slightly, by 3%, but remained buoyant at £174m.

The trading results have recovered steadily after an operating loss in 2010-11 of £12.3m.  Since then, operating profits have improved.  Pre-tax profits in 2012-13 have been stated excluding an unusual additional adjustment of £10m as a consequence of a surplus on an insurance settlement, which was followed by a further surplus of £160k in 2013-14. No exceptional adjustment is registered in 2014-15 and pre-tax profit exceeded £7.2m.

The directors say that the crisps and snacks market continues to be challenging because of competition in the retail sector. They also draw attention to the continuing risk of volatility of raw material prices. The Group manages exposure to commodity price risks by contracting forward on certain key raw material purchases or by buying at spot prices.

Shareholders’ funds at the year-end were just over £65m: a 21% increase on a year earlier, but still below the £79m estimate in mid-2010. Bank borrowing has fallen from more than £35m in mid-2011 to less than £15m in mid-2015. Employment fell slightly to an average of 1,378 last year, a decrease of 3% on a year earlier.

Belfast Telegraph


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