Northern Ireland – the most affluent part of the British Isles?

A recent report from the All-Island Research Observatory reached the surprising conclusion (to its authors at least) that Northern Ireland is “significantly more affluent” than the Republic. There is a note of caution on that, as it focuses partly on employment levels which happened to be particularly bad in the Republic when the research was carried out. Nevertheless, it reflects an obvious point to visitors and locals alike that the wealth gap between the two jurisdictions does not seem to match some of the statistics (which would appear to give the Republic a marked advantage).

Obviously, despite this, Northern Ireland could not possibly be more affluent than England, Scotland or Wales. Or could it…?

Let us, for the sake of this comparison, just use the crude numbers.

Output

The EU likes to use GDP per capita as its usual determinant of output (often taken to mean income or even wealth) in any given country or region. This does cause a problem within countries, however, as often GDP is assigned only to a company or agency headquarters (frequently in that country’s capital city). Internally, the UK uses GVA per capita, effectively taking out taxes and subsidies.

Either way, it’s much the same. The ONS has GVA figures for 2013 and Eurostat GDP figures for 2010 showing Northern Ireland at around 77-78% of the UK average (around €21,000 against €27,000) – a long way behind Ireland, whose GDP/capita is actually 16-19% ahead of the UK’s even post-crash (although we’ll come back to that).

Northern Ireland's economic output (versus UK average)

Northern Ireland’s economic output (versus UK average, 2013)

So how could Northern Ireland even conceivably be the most affluent part of the UK?

Wages

GDP is not necessarily a great measurement, as it assesses only output within the region – for example it includes profits repatriated elsewhere or activity involved in clearing up disasters, but excludes unpaid (but highly valuable) care work.

So what about wages? The Department of Enterprise, Trade and Investment tells us about these every month (here is last month’s summary), showing that weekly earnings in Northern Ireland in 2014 are £367, versus £417 in the UK overall (thus 88%); full-time earnings are £460 versus £518 (89%).

Northern Ireland's average wage (versus UK average)

Northern Ireland’s average wage (versus UK average, Nov 2014)

That puts Northern Ireland in line with most of the northern UK, but it still hardly equates to the “most affluent part of the British Isles”, surely?

Household income

The measure of income and affluence preferred in the United States is Median Household Income, which reflects all the income brought into the median household before tax (though housing costs may or may not be included, as explained below).

The most recent NI Poverty Bulletin from the Department of Social Development (for 2013, summarised here) shows that the Median Household Income in Northern Ireland is £395/week before housing costs, which is 89% of the UK average – in other words, what we would probably expect from wage levels.

However, after housing costs this figure becomes £358 – which is suddenly 96% of the UK average. Compulsory housing costs are of course much higher in the rest of the UK (for a start, the combination of Council Tax plus Water Charges sets the average household back nearly £2000 per year in England, versus the average Domestic Rate of £713 in Northern Ireland).

Northern Ireland's average (median) household income after housing costs (versus UK average)

Northern Ireland’s median household income (versus UK average, 2013)

This is remarkable – the median household in Northern Ireland is in fact, after housing costs, only 4% worse off than the UK average despite economic output being more than 20% lower. That still hardly justifies the term “most affluent”, surely?

Consumption

These figures from 2012, again from Eurostat, tell a rather different story about living standards, because they demonstrate how different “output” is from “consumption”.

Countries with high outputs sometimes have quite low consumption (not least those like Ireland, the profit of whose “output” is often based on foreign investment and thus repatriated). Countries with relatively low outputs can have quite high consumption (not least those like the UK, where there is significant old wealth). Thus, Ireland ranks third in the EU for output but falls right down below the EU average for consumption; the UK, on the other hand, ranks third for consumption but only tenth for output.

Within the UK, the Office for National Statistics has published household spending figures for 2013 – it is worth opening the table rather than relying on the headline figures. They show that, excluding taxes, insurance (of any kind) and savings/pensions, average weekly household spending by UK country (with percentage of UK average in brackets) is:

  • England £505.40 (102%)
  • Northern Ireland £484.70 (98%)
  • Scotland £449.00 (90%)
  • Wales £438.00 (88%)

This may be what we expect from the weekly household income figures, but here is the thing: they include household taxes/costs, which are either effectively taxes or are dependent upon property prices (you cannot live in wealthy London and the South East, after all, without paying that premium).

Once we exclude household taxes and net rent/mortgage, we arrive at:

  • Northern Ireland £440.50 (104%)
  • England £427.30 (101%)
  • Scotland £388.60 (92%)
  • Wales £383.10 (91%)

Suddenly Northern Ireland’s higher take-up rates for pay TV, or higher ownership of tablets, or higher spending on beauty products and clothes begin to make sense…

Northern Ireland's average household consumption (versus UK average)

Northern Ireland’s household consumption (versus UK average, 2013)

So there you have it – once they have paid their taxes and their shelter, households in Northern Ireland actually spend (or “consume”) 4% more than the UK average, and more than in any other country of the UK.

Disposable income

Almost anyone who lives in Northern Ireland has heard it – “I enjoyed London, but you know, even on two thirds of the salary you can live a better life here because of the cost of living“. It turns out there is a large degree of truth to that! Once they have sorted their tax and their mortgage/rent – the necessaries, in other words – households in Northern Ireland do actually spend more than in any other UK country.

There is an obvious health warning here, of course, beyond the normal “lies, damned lies and statistics”. In the same way GDP is not a perfect of real wealth and quality of life, nor is “consumption”. In fact, there is increasing evidence that Northern Ireland households are spending more but also becoming indebted more.

Nevertheless, the figures do present us with a fascinating story. Despite significantly lower economic output, a combination of UK-level public sector pay, low property prices and low household taxes leaves the average Northern Ireland household with a disposable income effectively higher than much of the rest of the UK.

But, whatever you do, don’t tell anyone…

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6 thoughts on “Northern Ireland – the most affluent part of the British Isles?

  1. Michael watts says:

    And as if to illustrat e your point I only need to work 4 Days a week to maintain my cosy existence!

  2. bob Wilson says:

    Very interesting Ian. Chimes with my personal experience and knowledge
    Within that of course the difference between ‘the wealthy’ and ‘the poor’ in NI is large and huge in the Republic

  3. Downshire says:

    Ian, Major problem NI has a younger population than the rest of the UK – young families consume more than pensioners. Standardise for age and the figures change……

    • It’s a really interesting point, that.

      However, do we know that is true? Presumably we have charts from elsewhere? The EU figures I link to suggest, if anything, the contrary.

      And actually the gap has closed drastically. The average age in the UK is 39 and in NI is 37. Unless we can find a truly exceptional difference in consumption by age, I’m not sure it’s enough to be statistically significant.

      But I’m prepared to be assured, one way or t’other! Send some links if you have any.

  4. […] Start from wages rather than productivity and then take into account housing costs, and suddenly the picture can differ remarkably. Apparently “poorer” Northerners in fact spend 20% more – on everything from […]

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