Belfast Telegraph

Austerity may break our fragile economy

There is general acceptance that cuts in public expenditure are necessary to bring down the huge national debt in the UK.

The real argument is whether the Conservative-Lib Dem coalition government is going to implement cuts which are too draconian. Many respected economists argue that the austerity measures planned for this autumn could kill any growth in the economy and plunge the UK back into recession.

That fear is greatest in Northern Ireland, chiefly because the public sector accounts for about 67% of the economy, the highest dependency in the UK on the public purse. We accept that there has to be a root and branch reform of the local economy to bring it into a more natural balance between the public and private sectors, but that certainly cannot happen during a period of economic crisis. The already small private sector is contracting further at the moment for a variety of reasons - including the reluctance of the banks to lend to small businesses - and global economic conditions mean that substantial inward investment is unlikely in the near future.

There is much merit in the argument put forward by internationally renowned economist, Professor David Blanchflower, that the planned austerity measures will impact hardest on Northern Ireland and that Prime Minister, David Cameron and Chancellor, George Osborne, should take note of the province's especial economic fragility. There has long been a belief that Mr Cameron, for all his promises, does not really realise or accept the potentially disastrous consequences for the province of his economic policies.

The government may point to its promises to consider lowering the rate of corporation tax and to make the province an enterprise zone and therefore more attractive to inward investors, but these are vague promises which may or may not come to fruition and which, anyway, are long-term remedies which could be undermined by the imminent slashing of the public sector budget.

There are clear indicators that Northern Ireland's economy is teetering on the edge of the abyss - there has been no growth for three years and business confidence is low - and it would not take much to send it tumbling down.

It is a case which has not been put forcibly enough by our politicians. They need to draw up a detailed position paper on public spending cuts. There are measures they can implement to increase revenue such as introducing water charges and unfreezing the regional rate, but they must also present the Treasury with a coherent analysis of the impact of the planned cuts.

We may have few, if any, friends at Westminster, but that should not stop us pressing our case at every opportunity. Otherwise we could find ourselves as literally the poor relations of the rest of the UK.


From Belfast Telegraph