Belfast Telegraph

'Deal proved more important to the politics of Northern Ireland than to the economics'

'Given the many persistent economic challenges, it is reasonable to ask if the Executive took full advantage of its devolved powers' (stock picture)
'Given the many persistent economic challenges, it is reasonable to ask if the Executive took full advantage of its devolved powers' (stock picture)

By Dr Esmond Birnie, senior economist, Ulster University

Although there are many signs that most people in Northern Ireland are better off than they were 20 years ago this does not prove that the Agreement itself caused greater prosperity.

It is more likely that the Agreement, at best, reinforced trends already in place, eg increasing tourist numbers and greater population growth.

More important in shaping the economy were the Blair-Brown boom in public spending (1999-2007) and the global recession (2008-9). The Agreement contributed a bit to the house price boom which began in the early 2000s and burst in 2007, but that was a very mixed blessing.

The Agreement created the potential to tailor devolved policies to the particular circumstances of NI. Amidst the stop-go record of devolution since 1999 or 2007 that potential has yet to be realised. In fact, the list of devolved policies which were both innovative and beneficial would probably be quite a short one.

At the political level the 1998 Agreement was an achievement but in its impact on the economy it had a design flaw - there was an imbalance between the great emphasis on the spending powers of the new Northern Ireland Executive/Assembly and the very small emphasis on provision of taxation/charging powers to match spending. This created a situation of "fiscal irresponsibility" which even before the collapse of devolution in January 2017 was chronic.

As to the economic impact of the Belfast Agreement, five points can be made:

Economic life and well-being have improved for most people

Sign In

One indicator of this is that Northern Ireland's population has grown considerably, adding 174,000 to the total between 1998 and 2015. Those of us of working age are more likely to be employed and more people are working in high productivity service and manufacturing sectors. Participation rates in university education are also higher than in 1998. This all leads to higher wages and incomes compared to 20 years ago - albeit earnings growth was concentrated in the 1998-2007 period and then interrupted by the banking crisis.

Northern Ireland is also a much more attractive place to visit, with tourism numbers rising almost uninterrupted and significant investment in the hotels sector now under way.

1998 is not the best year to benchmark performance - it was not a turning point If one looks at indicators such as population growth, employment or tourist numbers, the turning points in performance appear to come before 1998. The political Agreement may have consolidated an established trend, which would have started after the end of the early 1990s recession and been given a significant boost by the calling of the 1994 ceasefires.

Our relative economic performance has not improved and may have worsened

Significant performance gaps relative to both the UK and Republic of Ireland averages still persist. Notably relative GVA, or economic output, per head is a few percentage points less than the 1998 levels.

Conditions improved in the early years, but the financial crisis had a much greater impact locally than nationally.

The extent to which there is greater political stability is mixed

Devolution did not operate continuously throughout the 20 years. It was stop-start during December 1999-October 2002. The mid 2007-Jan 2017 period of operation was marked by three periods of political negotiations. And, for over 400+ days now we have really had "no government".

Lack of an obvious positive devolution difference in policy terms

Given the many persistent economic challenges, it is reasonable to ask if the Executive took full advantage of its devolved powers. Another discussion point could be the devolution of corporation tax, but the implementation of this policy at this time remains highly uncertain.

In conclusion, the economy and individual prosperity has improved since 1998, but the evidence would suggest that devolution may have been more important at a political level than an economic level.

Belfast Telegraph