Belfast Telegraph

Monday 28 July 2014

Executive needs to take a different approach to recession: report

The Northern Ireland Executive could be doing more to help reduce the effects of the recession, according to a new report.

The Economic Research Institute NI (ERINI), a public research body sponsored by the OFMDFM, has produced the report ‘Mitigating the Recession: Options for the NI Executive’, to be presented to the finance and expenditure committee this week.

In a draft of the report, seen by the Belfast Telegraph, ERINI said the actions taken by the Executive to lower the cost of public services — such as freezing domestic rates, waiving water charges and free prescription charges — will keep down the cost of living only in the short term.

But it added that they “carry very high levels of dead weight and are quite indiscriminate” and should be replaced with more targeted subsidies. ERINI also said that while not all companies can be saved from the threat of recession, the Executive should take action to protect firms vital to the strategic development of the economy in the longer term, rather than risk losing this capacity.

“It would be sensible, therefore, for DETI and Invest NI to apply a triage to their client base, identifying those companies that, although not in the first rank, deserve additional protection and those companies that are of less importance for the future,” it said.

“This is not a process that can be done transparently, but it is, nevertheless, essential that public resources are concentrated on those activities that have the greatest importance for the long-term survival of the economy.”

To address rising unemployment it advises implementing measures such as the re-training of ex-construction sector workers, enhanced assistance for those who want to set up a business and mobilising the further education sector to provide an intense training course for those entering unemployment.

The report also cautions the |Executive against relying on departmental underspends to meet multi-million pound expenditure pressures for 2010 and 2011, identified by departments in December's strategic stocktake.

“Not all of these pressures are unavoidable and Ministers hope to use underspends from year to year to cover these, but it must be remembered that the original budget figure work was based on assumed over-commitment of £80m and £60m in these years and these shortfalls have to be covered by carry forward before any new pressures are addressed,” added ERINI.

On capital budget pressures it said that after the sale of DARD's Crossnacreevy site falling through and Housing executive sales collapsing, further shortfalls in asset sale receipts “cannot be ruled out”.

Among the other pressures noted are a £100m bill for civil service back pay which will have to be repaid and the |delayed introduction of water charges.

“In the financial package agreed in November, the Prime Minister agreed to waive these charges for 2009/10 and 2010/11, but not beyond,” it said. “The message is thus clear, water charges have not gone away and the Executive have, at most, two years to sort this out.”

ERINI said that with public finances under considerable strain the Executive “needs to generate additional resources or make better use of the many it has”, for example by re-allocating funds among programmes and departments.

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