Belfast Telegraph

Esmond Birnie: Devolution not guaranteed to boost Northern Ireland economy


In terms of the growth of the Northern Ireland economy in 2020 and the rest of the decade, there are some things we can say with a fair degree of confidence. (stock photo)
In terms of the growth of the Northern Ireland economy in 2020 and the rest of the decade, there are some things we can say with a fair degree of confidence. (stock photo)
Esmond Birnie

Esmond Birnie

In terms of the growth of the Northern Ireland economy in 2020 and the rest of the decade, there are some things we can say with a fair degree of confidence.

If recession is avoided in 2020 any growth will be modest - around 1%, as indicated by the Ulster University Economic Policy Centre and other forecasters.

The experience of the last two decades is that the local economy has failed to narrow the living standards/productivity gap relative to the UK. The likelihood is that gap will persist in 2020 and throughout the rest of the 2020s.

It is noteworthy that the 1998-2018 experience suggests little evidence that devolution produced any sustained narrowing of the GDP per capita gap between Northern Ireland and the UK average.

This is one reason why it is not enough to hope that the current inter-party talks lead to a restoration of devolution - what we need is devolution plus appropriate policies. Unfortunately, during the last period of devolution (2007 to 2017) the policies adopted did not necessarily promote economic growth.

So, in the absence of something radical from either the UK Government or a restored devolution, I expect the Northern Ireland economy to continue to lag behind the UK average during 2020 and the rest of the 2020s. Of course, it doesn't have to turn out that way. Although the various devolved Executives did say that the economy was the priority - for example, in terms of statements within Programmes for Government - actual behaviour in terms of budget allocations belied this.

Instead of prioritising investment in, say, physical infrastructure or higher education, both of which would probably boost economic growth in the longer run, spending was weighted towards more 'popular' outcomes.

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The budget for healthcare was increased and domestic water charges or higher domestic rates avoided.

In shorthand, the economic policy of previous Stormont administrations has been biased towards keeping up consumption levels here as opposed to raising investment. In considering what might happen over the next year or decade, we should not restrict comparisons to the rest of the UK. Using once again one of the most useful summary indicators in economics - the level of output per head of the population - Northern Ireland will continue to experience relative decline.

NI was overtaken by the Czech Republic, Estonia, Slovenia, South Korea and Spain between 1998 and 2020. During the next five years we will probably also be overtaken by Poland, Malaysia and Hungary.

Of course, restored devolution could start a transformational process, but the record during 2007 to 2017 suggests a lot will have to be done to up the game.

Esmond Birnie is an economist with Ulster University

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