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We need political stability to stop being seen as burden

By Angela McGowan

Published 30/06/2015

A divided society costs a lot of money and robs future generations of opportunity
A divided society costs a lot of money and robs future generations of opportunity

You may recall that last Tuesday night, Northern Ireland was bathed in sunshine - the thermometer in my car registered 25 degrees as I sat on the Stranmillis Road. I was therefore amazed when I arrived at Queen's University's Riddel Hall that evening that 200 people had shunned the idea of a barbecue and chosen to join an economics debate.

Amazingly, there was probably more consensus during the evening than discord. I was joined by Dr Graham Brownlow, an economics lecturer at Queen's University, Eamonn Donaghy, head of tax at KPMG, Richard Ramsey, chief economist at Ulster Bank, and John Simpson, former economics lecturer and commentator. Wendy Austin compered the discussion and fired out pertinent questions to panel members. For those of you who opted for the barbecue, here is quick summary of a couple of the questions and general discussion.

Please bear in mind, you are going to hear more of my contribution to the debate - it's my column after all.

What is the economic value of political stability?

Panel members generally agreed that the economic value of political stability was enormous. There were comments around the impact of peace to foreign direct investment, local investment, stopping the deluge of well-qualified young people from fleeing our shores, and generally allowing us to concentrate on issues that really matter - creating jobs, providing an economic future and having sufficient funds to provide public services.

At this point, I introduced a bit of negativity to the debate. I quoted a report by Deloitte in 2007 that estimated the cost of division in our society amounts to approximately £1.5bn a year. I pointed out the ugly reality that we direct public funds into keeping our society divided - segregated schools, segregated teacher training colleges, segregated housing and policing negative events.

This creates inefficiencies in public services and skews money away from health, further education colleges and updating our education system.

A divided society costs a lot of money and robs future generations of opportunity.

What is the impact of UK policy on Northern Ireland?

Again, there was relative consensus that, as a regional economy, Northern Ireland is painfully dependent upon the UK Treasury to make up for the shortfall when our revenue streams do not match our spending habits. I pointed out that ultimately, we live in a democracy and in the UK, the electorate has spoken. The people have voted in a Conservative party that advocates welfare reform and intends to dogmatically follow a political ideology that favours minimal state intervention.

The current Government aims to shrink the public sector as a proportion of GDP back to levels last seen in the 1970. Indeed, the Institute of Fiscal Studies has pointed out that if public sector wages in the UK rise in line with the Office of Budgetary Responsibility's forecasts, the UK will see more than 500,000 public sector workers lose their jobs during this parliament. Northern Ireland will not remain immune to the Conservatives' philosophy on welfare and the size of the state.

While the Government's economic strategy is not one I favour, we have to live with what the electorate has chosen. Richard Ramsey rightly compared Northern Ireland's relationship with UK Treasury to Stockholm Syndrome, where the hostage loses sight of reality and myopically falls in love with the captor. It is my view that we are currently perceived as a wasteful burden on the rest of the UK, and we drastically need to reduce our dependency by becoming more economically self-sufficient.

I pointed out to the audience Westminster's argument that Northern Ireland receives more funding per head relative to the rest of the UK was true. But where is all this money going? It is not going into things that drive long-term economic growth and jobs, such as transport, infrastructure, universities or further education.

The most recent public expenditure statistical analysis publications tells us where all this extra money is flowing. In 2012/13, we spent around £765 per person on public order and safety, relative to £462 in England.

We spent £1,282 per person on sickness and disability, relative to £661 in England. And we spent £1,141 on incapacity and injury benefits relative to £527 in England.

We also had a good discussion on Corporation Tax and the impact of EU membership on the local economy, but that will have to wait for another day. As Eamonn Donaghy concluded: "We all know the issues. It's time to implement solutions".

My thanks to the Chief Executive's Club at Queen's for helping to raise the level of public discussion around these important issues.

Angela McGowan is chief economist, Danske Bankthat

Belfast Telegraph

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