Category Archives: Economy

Northern Ireland vastly better than 20 years ago

One correspondent joked that I should be “more definite” in my blog pieces, so here’s another one: the notion that Northern Ireland isn’t multi-fold better (and more cohesive) than it was 20 years ago is complete drivel!

In the Northern Ireland of 20 years ago, with freakish exceptions, you never saw a different coloured face and you never heard a foreign language. No one wanted to come and live here; actually, no one wanted to come and holiday here. You did see plenty of army (and other) checkpoints; you did take ages crossing the border; you did face restrictions to where you went and when. And murders were more common than road fatalities are now.

Host a major music awards ceremony, or the start of a Great Cycling Tour, or a major golf championship? The notion would have had you in hospital laughing! This is a better country.

Promote an Irish language job freely in East Antrim, or park a car with a ‘GB’ sticker in Andersonstown, stroll into a political event in the Felons Club to mention your dad was in the Army in open discussion? That would have been cause for genuine concern. This is a more cohesive country.

The Troubles. What were the Troubles? People who will soon be driving and voting actually ask that. My 11-year-old stepdaughter condemned sectarian slaughter in Iraq on the grounds that “I mean, we have Protestants and Catholics but we don’t go around doing that”. To grow up in, this is pretty much a normal country!

Find the second highest and fastest growing identity here is “Northern Irish”? You know what, this is actually a country!

I suspect those who forget the obvious, vast advances are those who were anticipating something different. The notion of “peace” had perhaps always been of a “peace” solely on our own terms. We find one which is a mushy compromise a bit disconcerting – yet it is the only one available. And it is one which has improved things so immeasurably, that sometimes we forget to try measuring.

Is it imperfect? Look around the world and tell me somewhere that isn’t.

NI Corporation Tax reduction can’t happen

I was astounded to see media reports suggesting the UK Prime Minister is about to reduce Corporation Tax in Northern Ireland. This shows a basic misunderstanding of devolution – and of politics.

The UK Government has never claimed to have the power to reduce Corporation Tax in Northern Ireland. What is being considered is the devolution of Corporation Tax to the Northern Ireland Assembly. It would be for the Northern Ireland Assembly (Executive, in practice) to reduce Corporation Tax, not the UK Government.

This is important because, of course, that couldn’t possibly currently happen. For all their talk of lower business taxes (DUP) and all-island tax harmonisation (SF), the fact is the DUP and SF have brought the Executive to the brink of collapse over immediate spending reductions (necessitated by maintaining the current broken Welfare system) and ongoing real-terms spending reductions (necessitated by the UK Government’s determination to reduce the deficit). The idea that they would double this burden by adding hundreds of millions to the “savings” already having to be made to take a punt on the long-term benefits of a Corporation Tax reduction is laughable. Reduction of Corporation Tax, even if it were devolved, would merely go into the pot with all the other issues upon which the DUP and Sinn Féin are gridlocked – from the single education authority to the Maze.

A Corporation Tax reduction can’t and won’t happen any time soon. Don’t trust anyone telling you otherwise.

A “United Ireland” won’t happen. Ever.

I am pleased to see, over on Slugger, at least the hint of a real debate about a “United Ireland”. Most of the basic sentiments – that we need some economic reality and that Northern Ireland has to work for all its citizens – are spot on and conveniently are necessary to any constitutional preference. This is why my own politics were always based on those sentiments.

I have put forward various thoughts on how a United Ireland could operate – most obviously, like Australia (a federation with the current Monarch as Head of State). However, I have done so primarily to demonstrate that “Nationalists” are either so biased that they find this unacceptable, or so disinterested that they find this irrelevant. It is no surprise to me that the only threat to the UK comes from Scotland, not Northern Ireland.

The truth is this: a Unitied Ireland is not going to happen.

Why not? Let us go back to the Covenant. One of the main aspects of that document in September 1912 was the economic argument that splitting Belfast – its shipbuilders, rope makers, linen weavers and so on – from the rest of the UK would see tariffs imposed and thus create costs to exporting to the UK which would render them unable to compete with the West of Scotland and the North West of England in those key industrial areas. The point here is that in an era where there were tariffs imposed on trade between any two countries, it made sense to belong to a large country. There were two prime reasons for this: first, it gave you the biggest possible free trading zone; and second, it gave you the clout of a powerful government to negotiate trade deals with other large countries on your behalf. That is why the map of Europe at the outbreak of World War One consisted of a unitary British Isles, a larger single Germany, a huge Austro-Hungarian realm, a newly united Italy and large Russian and Ottoman Empires – alongside France. Spain and not much else (even Sweden and Norway had broken apart only in the previous decade).

A century later and we live in a vastly different Europe, where tariffs and many other trade restrictions between countries have been abolished. This makes it no longer necessary or even beneficial to belong to a large country. With the benefit of free trade, countries such as France and Germany are the exception in Europe – which contains a raft of countries at around 7-11 million (Belgium, Portugal, Switzerland, Austria, Hungary, Czech Republic. Serbia, Bulgaria, Greece, Sweden etc), another set at around 4-5 million (Ireland, Denmark, Norway, Finland. Slovakia, Croatia etc) and another lot at around 2 million (Slovenia, Latvia and Estonia). This is vastly different from what went before, but it is enabled by free and peaceful trade, and thus the pressure is for more break-up – perhaps in Catalonia, Venice or Scotland to give some obvious examples. After all, if Brussels is already handling everything from foreign trade to social regulations; and you are already handling domestic policies and laws, what role precisely do Madrid, Rome or London play?

Therefore it is no coincidence that, aside from Germany, there really is no precedent for uniting a country in modern Europe – the movement is all the other way.

Germany itself is not a useful precedent either. It consisted, legally and practically, of the dissolution of the German Democratic Republic (what the English-speaking world but not the German-speaking world referred to as “East Germany”) and the expansion of the Federal Republic of Germany (“West Germany”) to incorporate its territory. The equivalent would be the dissolution of Northern Ireland and the expansion of the current Republic of Ireland to include 32 counties not 26. Overnight, the Northern (NHS-style) Health system would be abolished, its laws would be replaced (e.g. the Rules of the Road would change) or repealed (e.g. laws on equality or animal cruelty, which are often markedly lacking in the Republic), and rafts of people would be out of work (most civil servants would be unnecessary; all lawyers now unqualified; and so on). This would be much more dramatic in fact than it was in Germany, where some “Eastern” systems were maintained by the new States (in their own policies and laws; unlike Ireland, Germany is a federation) and “Easterners” gladly underwent training in new “Western” systems accepting from the outset that they were inherently better. This is why no one seriously advocates such a method of unification for Ireland.

So there is no precedent. In fact, most Nationalists who think about it come to suggest that Northern Ireland would continue to exist, with its own separate laws, education system, accounting methods and so on. But that takes us back to the above question – if Belfast continues to manage the domestic policies and laws, and Brussels does the foreign stuff, what exactly would Dublin be doing? The answer to that, hypothetically, is it would be working out what to do with its new security headache and how it was to manage a mammoth subvention to Northern Ireland – a subvention to a place with half the population but the same number of public servants, for some reason. Hypothetically… it wouldn’t be daft enough to do it in reality, of course.

Even without that headache, the simple fact is the “United Ireland” thus created would consist of a legally separate unit, with its own laws, institutions, heritage and identities. That has been tried, of course – in 1707, when the Kingdom of Scotland was united with the Kingdom of England. How’s that one working out in the modern context explained above?!

So no, a United Ireland is not “closer than it’s ever been”. There was one chance of it ever happening outside the UK, and it was wasted at Easter 1916. Towards 2016, all the trends across Europe tell us there was more chance of a sovereign Northern Ireland than a sovereign United Ireland some time this century. What was that about making Northern Ireland economically viable and a fair home to all, Irish, British and neither…?!

Being “against austerity” is nonsense

I was linked in to a graph at the weekend showing another version of a point I have made for a long time on this blog. The graph noted that UK GDP is 16% lower than it would have been if 1990-2008 growth rates had been maintained during the 2008-13 period.

It reminded me of a phrase I see frequently – people claiming to be “against austerity”. This is nonsense to start with – all successful countries are austere; one man’s austerity is another man’s efficiency, after all. It is particularly ludicrous for those on the “left” to oppose austerity – the opposite of austerity is rampant consumerism inevitably dominated by a few big multi-nationals. Austerity is a good thing – indeed, it is absolutely necessary if we aspire to live in a country where people prioritise the interests of society as a whole and not just the crazed individualism which has seen the English-speaking world become ever more selfish, ever more unequal and ever more bust. You’d think those on the “left” would care about this, but apparently we should not seek to be austere and should just continue spending stacks of money we don’t have and never earned on things no one needs and few really want…

As it happens, austerity is also necessary when it turns out you are 16% worse off than you thought – for that is what the above figure really means. It is not our current economic position which is false; the false one was the 2008 one fuelled (particularly in the British Isles) by a mad property binge which was obviously unsustainable at the time only no one thought to admit it.

So you can’t be “against austerity” any more than you can be against the grass being green. It is time we stopped this completely false argument otherwise.

Belfast Pride needs proper status

Honestly, going on parades of any kind just isn’t my thing – in the same way rock concerts or road racing aren’t. However, the Twelfth is clearly a significant event and television coverage reflects this; events such as Tennents Vital are well trailed; and the just past North West 200 and upcoming Ulster GP are given appropriate “major event” status by the Tourist Board.

This weekend another well-established and huge gathering takes place in Northern Ireland – a day of fun and frolics to be attended by thousands. Indeed, there is potential in future for it to grow, one year, into Europe’s showpiece event in a not dissimilar way to the MTV Awards or Giro Grande Partenza. I speak, of course, of Belfast Pride.

Much is made of this politically, and rightly so; but much could also be made of it socially and economically. It attracts people to Belfast. It brings people into shops, leisure facilities and cafés they would not otherwise frequent. Hotels can be booked out. In short, it is a significant boost to the city centre and its traders.

So you are left to wonder – why no “major event” status? Why so little trailing well in advance by the mainstream? I trust an evening’s coverage is being planned by BBC NI as I write? I ask these questions genuinely – but they do need answers. I wouldn’t like to think a Pride event would not be treated even-handedly…

Labour wisely accepts ‘anti-cuts’ rhetoric nonsensical

British Labour’s biggest problem going into the next election is that its own Leader looks as weird and out-of-touch as the incumbent Prime Minister. Perhaps his most awkward intervention before the bacon sandwich debacle was his appearance at an ‘anti-cuts’ Union rally when he tried to pretend he was with the crowd. His party confirmed at the weekend that he really isn’t – and rightly not.

 

Labour now accepts it was talking nonsense about the ‘Squeezed Middle’ and would in fact tax those on middle incomes more; and it also now accepts opposition to the Coalition’s spending plans (which see public spending rising in absolute terms but falling in real terms) is nonsense. This makes Labour a vaguely credible government – and it marginalises the ‘anti-cuts’ brigade who are, quite simply, wrong.

They are wrong because public spending isn’t actually falling in absolute terms; they are wrong because public spending reductions are not the same as ‘cuts’ (they may simply mean doing things more efficiently – to be supported, surely); and they are wrong because, as everyone now accepts, you cannot simply keep public spending ballooning when revenues are vastly lower than expected. Be very clear – anyone opposed to this is denying reality and not to be trusted.

It is worth repeating why revenues (at least over this parliament) have been so much lower than they were and, more relevantly, than they were projected to be. It is quite simply that the UK is a significantly poorer country than it was or, more accurately, than we thought it was in about 2007. Within three years of the run on Northern Rock, the UK Treasury’s revenues had fallen to 14% below where they were projected to be three years previously – the equivalent figure almost everywhere else in the West (aside from Southern Europe and Ireland, understandably) was around 5-6%.

In other words, the UK is 14% poorer than we reckoned. To sort that, we need to invest in skills, technology and innovation particularly where export-focused – as, in many cases, we are. But let’s be very clear, we cannot just spend money no one’s actually gone out and earned.

Real German lesson: say yes to austerity!

It is an incredible thing – and indicative of how it has become entirely confused – that the “Left” repeatedly used the word “austerity” and does so with the supposedly automatic contention that it is a bad thing.

This is the same “Left” of course, which rightly argues against “excess”. It is indeed an outrage that City Execs get paid 180 times the average wage; that entertainers get such ludicrous recompense on the licence payer or the commercial viewer; or even in some cases that senior quangocrats get so much. Here’s the thing – the opposite of “excess” is, er, “austerity”.

Germany doesn’t get everything right by any means, but it is hard to dispute its recent sporting and economic success. Such success is not down to chance. One of the prime reasons for it is that Germany is a vastly more austere country and society than the UK, France or Spain.

Even in football this shows. The BBC and ITV both had a main presenter, a stadium presenter, a main commentator, a co-commentator, three studio pundits and usually also a stadium pundit – eight, in total. German TV tends to make do with one presenter, one pundit and one commentator – three!

Another obvious area is supermarkets. The big Tesco or Carrefour superstores of the UK and France are replaced in Germany by Lidl, Aldi and others very similar – based on the recognition that it is pointless to pay, in effect, to pay for the privilege of looking at products you’re not going to buy in the name of “choice”. It is the austere German version which is now coming to the fore in the UK and France, not he other way around.

The same applies to housing. While the social housing argument centres around the age at which children should not share a room in the UK, even the children of German professionals often share into their teens; thirtysomething Germans may still live in single-room flats; ownership in the exception in Germany, not the norm.

This austerity works, therefore. Underlying the German social model is the notion of what suffices, not what shows off. As a result, there’s rather more to go around – because, as a direct result of the promotion of austerity as a good thing, outrageous excess is frowned upon. Even successful businesses or indeed football clubs are absolutely expected to maintain community links and loyalty.

This is of course a consequence to a large degree of German history, particularly the lessons of the last War and its immediate aftermath, in which social and economic ruin was the prospect. Whatever about that, the simple fact remains in 2024 that all of these things are good and admirable – and austere. Austerity is a good thing. In this of all weeks, there is a German lesson we can all learn.

 

England needs thousands of miles of new motorway

England is an astonishing country for many reasons. One of those, it became obvious to me as I spent literally a full waking day in total of my holiday trapped between four particular junction of the M25, is that its M-designated motorway network has actually decreased in size this century.

Other than upgrades to stretches of already dualled A1, England has not built a meaningful stretch of motorway since the mid-’90s – the only addition this century was a small part of the M74 across the Scottish border which was already expressway. Scotland, meanwhile, has continued with the M74 extension and plans for other stretches; Ireland, of course, has built the most comprehensive motorway network in almost its entirety during that period.

In England, it is a particular grave concern because figures in late June showed it has the fastest growing population in the European Union bar Sweden. Much of that growth is concentrated in the south, within 100 miles of London. The road network there is not creaking – it has collapsed. On two separate days of my holiday it was taking people more than an hour to cover 10 miles of the M25 at more than one particular location. This is intolerable – for movement of goods and labour, and for the quality of life in general.

There is a peculiar reticence to mention the word “motorway” in England and Wales. The first toll motorway in the English Midlands was deemed a failure and plans for similar in South Wales thus abandoned. Otherwise, the very mention of the word “motorway” is avoided for fear, presumably, of sparking another “Swampy” protest.

It is nonsense of course. Few countries are more environmentally friendly than Denmark – only 20% of commuters into its capital city travel by car, and it leads the world in wind power technology. Yet it has built tens of kilometres of new motorway in a country whose population is a tenth of England’s this century – and even has plans for a new motorway bridge to Germany which it will fund wholly on its own. Denmark sees the benefit – yes, the environmental benefit – of ensuring long-distance traffic is not caught in endless jams with the fumes they create.

Motorways – specifically motorways, as they have to have limited access to focus on moving long-distance traffic quickly – are an absolute pre-requisite for a functioning economy and the UK is being left behind, with a network less than half as long as reasonable comparators (Germany, Spain, France etc). It is time not only to get over the reticence for using the word “motorway”, but to build lots of them quickly. They are, in fact, somewhat more important than high-speed rail links…

Northern Ireland’s economic day of reckoning is nigh

Last week, fresh from their various breaks over the election period and public holidays and with the ten-week summer recess looming, our beloved MLAs found nothing more important to talk about than a suspension motion against one of their own number which couldn’t possibly pass anyway. Such mediocrity really shouldn’t be tolerated, but it generally is of course.

Mediocrity

The problem is, there are real issues MLAs should be discussing – and openly. They have, in fairness, touched on health and education recently. However, a serious set of proposals to deal with the forthcoming economic and financial reality still eludes them. Yes, we have an economic strategy and some decent recent investment announcements, but that isn’t the thorough preparation for the new reality which is necessary. Indeed, we won’t notice the difference until it’s too late..

The new reality is the inevitable consequence of the Scottish referendum. This will see more powers, including financial powers, devolved to Scotland and quite possibly also to Wales, meaning that:

- the Barnett formula will be replaced by a public spending settlement much more advantageous to Wales and the North of England and much less advantageous to Northern Ireland, which will be expected to raise more of its own income;

- failure to reform welfare will see Northern Ireland have to fund an ever increasing welfare gap;

- corporation tax may be devolved, but not uniquely to Northern Ireland, rendering it much less advantageous than the existing figures (which assume lower corporation tax uniquely within the UK) suggest, to the extent that it will in fact almost certainly be a bad idea; and

- the implicit expectation by the Treasury (and in the rest of the UK, insofar as it thinks about it) will be that Northern Ireland introduces water charges, removes rates caps, reinstalls prescription fees, and doubles household rates.

The alternative will be actual cuts – i.e. not the odd public sector worker not moved up a scale and the occasional closure of a highly inefficient body here and there; but real job losses in the public sector, huge cuts in the number of quangos and oversight bodies, and mass close downs of public-funded voluntary sector organisations.

This is the choice which is coming, without any doubt at all. If we wish to maintain public spending at anything like current levels, we will have to raise far more of it ourselves in the new quasi-federal UK. Where are the preparations? Where is the demand for them? We won’t notice there weren’t any until it’s too late…

I’m no “economic conservative”

I was accused a few months ago of being an “economic conservative”. While it is true I generally find myself more in line with the economic policies of the Conservative Party than the Labour Party, I would dispute this description.

Simply, here’s why:

Warren

The above is for an American audience of course, but I agree with every word – whereas “economic conservatives” don’t.

No, I am an “economic realist”. Where economic conservatives argue automatically for low taxes, I argue that the culture of a civilized society determines the tax it pays – thus there are successful low-tax societies but also successful high-tax societies. If anything, I would argue that high-tax societies (most obviously the Nordics) tend to do better – hardly the position of an “economic conservative”!

Indeed, in Northern Ireland I have consistently argued for the implementation of water charges, the re-introduction of Prescription Charges and the removal of the Rates Cap – all tax rises. I am quite open about this. But again, it is hardly the position of an “economic conservative”!

However, I have argued countless times that the amount of tax we raise in Northern Ireland, and in the UK generally, is pretty much the maximum we possibly could raise without implementing taxes or charges which people simply wouldn’t accept. People in the UK simply expect the basic rate of income tax to be in the 20-25% range with another 10% of National Insurance on top (with the top rate about double that and corporation tax much the same); they expect VAT to be around 15-20%; they are used to TV licences but have an aversion to road tolls; and so on. No party enters elections in the UK advocating significant tax rises or tax cuts; indeed the highest rate of tax has been consistently higher under the current centre-right government than under the previous centre-left one; and it was the centre-left one which consistently nudged down the basic rate of income tax. I’m not sure, therefore, who is supposed to be “economically conservative”.

Ultimately, however, I am concerned at the unwillingness of the people of the UK to pay more tax openly, while at the same time demanding ever increasing public spending. This means inevitably that we get hit by stealth taxes; and it also enables some smaller parties to present “bogey men” at election time – such as the suggestion we could raise NHS funding “simply by stopping all tax evasion and avoidance” (leaving aside that in fact the UK has the best record of any comparable country at actually collecting its taxes and that tax avoidance is legal and actually almost everyone does it). There is an inherent dishonesty on both sides – the “right” pledges to protect public services which it cannot possibly afford; the “left” pledges not to raise taxes even though it has to in order to protect public services; thus both “sides” end up making the same basic, dishonest, offering to the electorate.

I think it would be helpful if, in the English-speaking world, we entirely re-assessed tax precisely along the lines Elizabeth Warren suggests. Tax is not a giveaway from our own income; rather, our own income is a product of our ability to earn which itself exists only because of taxes paid to support us. Once you look at it that way round, perhaps the case for a bit less consumption on random stuff and a bit more tax on targeted public services could begin to be made. Some “economic conservative”, huh?!

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