Belfast Telegraph

John Simpson: Has austerity been taken off the election agenda?

Uncertain times: voters are set for the polls
Uncertain times: voters are set for the polls
John Simpson

By John Simpson

The British election comes at a time when the prospects for the NI economy are less optimistic than we would like. The uncertain Brexit decision-making, together with the postponed departure from the EU at least until the end of January 2020, is affecting inward investment and consumer spending.

Alongside the imperfect decision-making at Stormont, where the senior civil servants continue to fudge critical issues and tend to understate the damage of this inertia, the regional economy is (at best) paused and verging on contraction.

The paper published last week by the Department for the Economy, prepared by economists at Trinity College, shows in mathematical form the adverse impact of Brexit uncertainty on FDI in new jobs here.

Sadly, it shows that in the last two years NI has lost over 1,000 prospective jobs.

The prospects to debate during this election are, unhappily, less related to growing the economy but rather how to minimise the adverse impact of Brexit when the UK political debate will be focused on whether the main political programmes can realistically combine an increase in government spending, without the unwanted financial implications of an excessive government borrowing requirement.

Voting for persuasive politicians is more direct if their party is potentially going to form the government and can therefore be expected to deliver on its commitments.

Voting in Northern Ireland for local parties gives a less certain link with government decisions.

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Which NI party will ask for support because it, in turn, would support the policies of either the Labour or Conservative party?

NI-based parties will be likely to be more committed to policies to increase government spending, provided NI will be in line for a Barnett formula supplement.

Support for fiscal rectitude with possible tax increases will be avoided.

The choice in NI is even more tenuous. A theme of the election coming from the two larger parties will be the merits and demerits of the 'end of austerity' and the scale of a post-austerity increase in government spending.

In NI the implications of the policy choices can be tantalising.

Are promises of higher government spending persuasive whether on services such as health, education, housing or law and order, assuming that NI would have a proportionate budget increase for Stormont?

Are such promises persuasive even if the implications are a higher level of government borrowing and indirectly this puts pressure on higher interest rates and, looking further ahead, could mean that taxation in some form will eventually increase?

The UK budget has been postponed because of the election. That may be ominous since the Chancellor has already inherited a major increase in public sector spending and the expected levels of UK borrowing have already gone well ahead of those approved by the cautious mandarins in the Treasury.

The UK election is taking place when the Chancellor wants to demonstrate that austerity is dead, but the professional advice is that extra spending commitments are already too large.

No Chancellor enjoys the arrival of an election since his responsible accounting is likely to be less supportive of any tax giveaways.

For Northern Ireland the easy ambition is for an election where the more painful features of restrictions on government spending can be eased while at the same time avoiding increases in taxation.

Whichever party forms the next government there will be unwelcome advice that the government's budget policies must be sustainable: austerity may have officially ended but balancing the books will be the new mantra.

The Stormont budget is still living with the Fresh Start Agreement (of two years ago). The mitigation concessions to allow higher local social spending are due to end in March 2020.

If they end, there will be a very painful adjustment. What will replace the Confidence and Supply agreement if there is a new government? Is there a political assured connection?

Company Report: Huhtamaki Foodservice Delta

Huhtamaki Foodservice Delta was purchased by its new owners on May 19, 2016.

The business, based mainly at Kennedy Way in Belfast has been renamed. It was formerly known as Delta Print and Packaging. Because of the change of ownership and changed accounting year, results in 2016 are estimated using the annual equivalence from figures registered for an 18-month period.

The new owners are a subsidiary of a Finnish company, Huhtamaki Oyj, based in Espoo. Under the new owners, annual turnover has continued to increase. The company designs and makes printed carton packaging for a number of well-known retail fast food outlets and for a wider range of other consumer products.

In the first two years following the take-over, despite improved turnover, profit margins fell but they recovered in 2018. A particular extra cost of £1.9m related to the acquisition process was charged to the business in 2016.

No dividends have been paid to shareholders following the sale of the business in 2016. Post-tax profits have been retained and added to the balance sheet value of shareholders’ funds.

Employment numbers in the company have increased from an average of 164 nine years ago to an average of 354 people in 2018.

Looking to the future, the company reports that it has identified an opportunity to expand its current product range into new and innovative areas of packaging.

The EU is expected to ban single use plastic items such as plates, cutlery, straws, balloon sticks and cotton buds from 2021. The company plans to invest in more capacity to capture the paper straws and wraps market in the UK and the EU.

A facility is reported as having been secured in Antrim to make ready for production. In anticipation of Brexit, the company has secured additional warehousing space to facilitate holding raw material stock.

Belfast Telegraph

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