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Years since Agreement's signing show the need for bolder policy on economy

Economy Watch


Former Prime Minister Tony Blair (left) and Taoiseach Bertie Ahern signing the Good Friday Agreement

Former Prime Minister Tony Blair (left) and Taoiseach Bertie Ahern signing the Good Friday Agreement

Level of output (gross value added) per head of the population: Northern Ireland as % of the UK average, 1998-2016

Level of output (gross value added) per head of the population: Northern Ireland as % of the UK average, 1998-2016


Former Prime Minister Tony Blair (left) and Taoiseach Bertie Ahern signing the Good Friday Agreement

Bliss it was in that dawn to be alive. But to be young was very heaven. I do not think many would use those words by Wordsworth about the French Revolution to describe how they felt back in 1998. However, the Belfast Agreement may have produced a certain level of optimism about the future prospects for the economy. And 20 years on, the agreement has obviously been very important in political terms - but how much difference has it made to Northern Ireland's economic life? A number of points can be made:

Economic life and well-being have improved for most people.

One indicator of this is that Northern Ireland's population has grown considerably, adding 174,000 to the total between 1998 and 2015. Moreover, for a time, the previous historical trend of being a net exporter of people was reversed. A much higher percentage of the population now comes from outside Northern Ireland; positive net immigration added 35,000 people during 1998-2015. Not only are there more of us, but on average we are living longer.

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 are also higher than in 1998.

This all leads to higher wages and incomes compared to 20 years ago. However, higher earnings were 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 across Northern Ireland is now underway.

But is 1998 the best year to benchmark performance?

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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 commenced after the end of the early 1990s recession and given a significant boost by the calling of the 1994 ceasefires.

Other factors will also have played a very significant economic role, including the very rapid growth in public expenditure during the Blair-Brown years and the impact of the banking crisis during 2007-8.

The late 2000s were also shaped by the bulge in immigration and the house price bubble.

Our relative economic performance is broadly similar.

Two decades on and significant performance gaps relative to both the UK and Republic of Ireland averages still persist. Notably, relative GVA, or economic output, per head is largely similar to 1998 levels (see graph).

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

It is also important to recognise that the process of rebalancing the economy to be less public sector reliant has also occurred and would not be reflected in the headline economic indicators.

Has greater political stability emerged?

Such stability may matter to business, but it is far from obvious the answer to the question is "yes". (However, it would also be reasonable to ask if the period from 1969-98 delivered political stability). Devolution did not operate continuously throughout the 20 years. It was stop-start during December 1999 to 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".

Did the new political arrangements produce better policy and performance?

Given the many persistent economic challenges locally, it is reasonable to ask if the Executive took full advantage of its devolved powers. In the post 2007 period, it developed 'super parity', which is a relatively low level of taxes and charges compared to GB. There were many fiscal 'giveaways', which in the current environment may no longer be sustainable. But have many of these policies really helped the economy?

Another discussion point could be the devolution of corporation tax, but the implementation of this policy at this time remains highly uncertain and conditional on a restoration of Stormont along with budget sustainability.

In conclusion, the economy and individual prosperity has improved since 1998, but the evidence would suggest devolution may have been more important at a political level than an economic level. That is not to deny a counterfactual of 'no agreement plus violence' could have produced worse economic outcomes, but any future local administration must be more bold in the economic policies it should pursue.