Category Archives: Economy

Google, Apple, and tax…

Apple last year announced the creation of 1000 jobs in Cork.

This was cause for rejoicing, of course. 1000 jobs means 1000 incomes in the area – created externally but spent internally. Contributions in income tax and social insurance will help the revenue, which will also benefit from VAT paid on items and services in local retail outlets, eateries, dry cleaners and all sorts of others – whose business will also itself be further boosted, potentially creating further jobs (even if part time) and so on.

There will even be indirect effects, such as house prices rising, not least because half of the jobs will be taken by foreigners coming into the area and spending locally who otherwise would not have been there to do so.

To repeat, all of this is created by an external company, at no cost to the Irish taxpayer beyond the investment made in the IDA, who try to encourage such job creation for the quite obvious reasons noted above.

Oh, one thing: Apple does not pay any tax in Ireland.

Is that a problem?

That question maybe is not quite so easy to answer in practice as it is in principle, eh?

Indeed, the Irish Government is quite determined that Apple not pay it any tax; precisely because if it was forced to, it may not operate in Ireland at all (thus depriving it of the income tax and VAT revenue its employees deliver and promote).

As a side point, Google’s owner “Alphabet” recently overtook Apple as the world’s most valuable company. It employs 3000 people in the UK, who contribute £150 million to UK revenue in income tax alone.

How is that principle versus practice coming along?

Transfer tests remnant of appalling political failure

Transfer tests have to end. They are a crude, nasty, unfair system of determining who goes to grammar school (and which). They pigeon-hole children and force parents (in  effect) to pay for coaching. The consequence is that many children end up in the wrong school and many parents run up debts (in both time and money) that would not be necessary in a fair system.

The outcome of it all, as we saw reported in the latest OECD report, is literacy and numeracy standards lower than the average in the developed world (that they are higher than England, whose standards are the worst, is nothing to write home about), while the cream of the crop leave school able to administer but not innovate. We churn out accountants, lawyers, civil servants and all kinds of other bureaucrats – but no entrepreneurs or general wealth creators. Meanwhile teachers continue to be pressurised with all kinds of administration of their own (and constantly live under threat of discipline if they look once at the wrong pupil or even the wrong parent the wrong way). The system has its good points, but fundamentally it doesn’t work for anyone.

The transfer tests represent the ultimate political failure – one side failed to realise the harshness of it all, the other failed to analyse the problem properly in order to solve it.

Firstly, as mentioned in the past on these pages, no one asks the obvious question: what is the education system for? Even lessons grouped by subject are a fundamentally Victorian method, designed for sending people off to govern 19th century India rather than to create wealth in a globalised 21st century economy. Without agreeing what we want from the system, we are never going to agree how to get it.

Secondly, what is the cause of the transfer test? It is that grammar schools are oversubscribed. Why is this? It is because they are perceived automatically to be better than other schools. Why is this? Generally, it is because they are, given the common (academic) curriculum. So no one then asks the other obvious question: why is there a common curriculum? If pupils are genuinely not academically minded and thus not desiring of a career as a civil servant, an accountant or a university lecturer, why give them the same curriculum as those who are? Maybe there is an answer to this – but I have never seen the question posed.

Thirdly, let us face a few home truths. Parents are going to want the best for their children; not all schools are going to be the same; so there will be and should be an element of choice.

So, never mind the daft sectarian games, let us face the fact that the current system is unfair on children, parents and teachers and answer the question: how do we enable that choice to be made in everyone’s best interests?

Household debt and general wellbeing

4%.

By my reckoning, that is the answer to the question in last week’s post about Household debt.

Excluding income from lucky inheritances (and noting I’m open to correction), that is the number of households in Northern Ireland which actually have an income of £100,000 or more; and that is thus the number who can actually afford the standard “middle-class” lifestyle we are supposed to aim at.

If “success” is attaining a “standard middle-class lifestyle”, 4% of us can attain it. The vast majority even of “middle-class” people cannot. (Small wonder “rich people” always seem to come from households earning £20k more than ours, no matter what ours earns…)

The problem is the further you go up the income scale, the more you are expected to spend. If you live in a detached house you are “supposed” to have foreign holidays (probably plural), you are “supposed” drive nice cars (probably plural), and you are “supposed” to have children in grammar school (while paying the “voluntary” fees, buying all the kit, and so on).

4% can reasonably expect to do all of this on current income, without incurring debt.

An acquaintance posted a very brave article on depression just before Christmas (I will leave it up to him if he wishes to leave a link to it in the comments below). I hope I am doing him justice to pick out that broadly he noted the expectations of a grammar-school educated person in Greater Belfast – you are supposed to go to University (and probably get at least a 2.1), you are supposed to find a woman and get married, you are supposed to play club sport, and you are supposed to have children and support the standard middle-class lifestyle.

The lifestyle 4% of households can actually afford, leaving aside other grossly unfair social pressures around third-level education and marriage.

These totally unreasonable expectations of a “standard middle-class lifestyle” are leading to serious problems. They do lead to people buying things, not least around Christmas for children, which they cannot possibly afford. However, the problems are not just financial. They can lead to families pushing (and coaching) children into schools for which they are not really suited; they can lead to young people finding it impossible to cope as the rest of the world seems to attain a lifestyle which seems for them so far away; and they lead to social divisions, as people who are actually quite well up the income scale cling to what they have and indeed demand more rather than enabling any kind of wealth distribution. We should be honest enough to admit this is part of the reason we have such big lobbies for maintaining grammar schools (rather than enabling everyone to compete on the same basis); capping rates on mansions (meaning people living in houses valued at £1.2m pay only double what people living in a house valued at £200,000 pay), and keeping rates and taxes low (so we can keep the money to spend ourselves on winter holidays and new kitchens rather than have it redistributed potentially to aid those born into poorer circumstances who are left on below average incomes).

Unfortunately, this is intergenerational. Children of “middle-class” families (by which we really mean a small percentage of top earners) come to expect the latest of everything – not just the foreign holidays and so on, but the latest iPhone even pre-teens; a new car as soon as they have passed their test; and so on. This then trickles down so that all their classmates – regardless of parental income and wealth – expect the same. Remember: this is a facade! Almost nobody can actually afford this!

Many will not like reading this and will come to justify such expenses. What is wrong with wanting the best for ourselves and our children? Those on the political right would agree with the premise of that question, of course (but, by the way, those on the left should not). We should all at least admit what is going on, however.

A reader of this blog gave me the example (I trust he will forgive me if I misquote) that a test was done using the board game monopoly. Players were tested on their psychological reactions as the game progressed. There was a catch, however. One player was given £2,000 to start, and the other just £200. It is in fact impossible for the former player not to win in such circumstances [with apologies, I forget the precise figures, so let us just assume that is true]. What assessors found was that the former player began genuinely to believe he was winning on the basis of his own skill; furthermore, they in fact found that the latter player began genuinely to believe he was losing as a result of his own failures – despite the fact the outcome of the game was pre-determined by the amount given to each player at the start.

In other words, it is human instinct to believe good fortune is in fact our own brilliance; and indeed even to believe bad fortune is our own stupidity. I would posit the result is that those who have had good fortune come to believe they are entitled to the “standard middle-class lifestyle” given their own perceived brilliance; and perhaps also that those who have had bad fortune come to give up given their own perceived stupidity.

It is a facade. And it is not actually one we can afford. The impact is not just financial – it is educational and psychological. The pressure and expectation to attain a lifestyle which is in fact unaffordable even to very successful people is causing us serious harm.

Do we not all need to think again about what constitutes “success”?

 

 

Household debt a real crisis in NI

The Belfast Telegraph has not been having a great run recently in its choice of news priorities, but it did hit the mark on Friday with a piece on household debt in Northern Ireland. We need to have a much more practical discussion about this, as it may be the single biggest socio-economic problem we have.

I wish to return to the subject on this blog next week, but today I wish to establish two things – debt is a driver of poverty and we all have a role in overcoming it. I will look at these separately.

To be clear, this means debt is a driver of poverty as much if not more than the other way around. Thus it affects people of all income levels, and can do them serious harm in a number of ways (there is significant evidence, noted in the article, that in fact a higher percentage of people in work are affected by debt than those not it work).

This is an issue poorly served by quoting statistics, but we do need to look at some which have already appeared on this blog: Northern Ireland economic product per head is only 75% of the UK average; wages are only 89%; yet household spending is 96%. We need to be very clear about this means: we are not earning enough to spend the amount we wish to spend.

This is where we all have a role in overcoming it comes in. We are allowing public policy to be developed and public debate to take place towards a society in which retail and leisure constitute our “economy”, and the focus is solely on “spending”. In functioning economies, the “economy” clearly means the creation of valuable products and services, not least for export, and the focus is thus on productivity and value.

Let us put more bluntly what this means: Northern Ireland residents do not produce or contribute enough economically to enjoy the standard of living to which they believe they are entitled. The issue is not that they do not get enough to spend what they do, but that they do not earn enough to spend as they do. If they wish to maintain a standard of living at around the Western European average, they will have to produce and contribute as much to the global economy as other Western Europeans do.

This is not remotely a condemnation of people who have run up vast household debt. It is a condemnation of public policy and public debate which is predicated on presenting as an optimum a certain level of expenditure rather than a certain level of productivity or value. We are all guilty, at least up to a point – even those who are not actually in debt – for allowing policy and debate (and frankly social norms) to be skewed in this way.

For the week between now and the next post on the subject, I will leave just one question hanging (I would be grateful for any informed answers), but I would be grateful if readers let me know if they disagree with the premise (not for the first time, I may be wrong).

The standard “middle-class” lifestyle is seen to be a detached house (ideally in the suburbs); two cars on the driveway (one probably a premium brand); children in grammar school (and ideally the odd sports team); two holidays a year (probably both international); and frequent leisure (eating out etc) – this is the one presented in the car, insurance and holiday adverts, after all.

Yet I reckon to live such a life, particularly if there are no grandparents or other family to assist with the children, you need a household income of at least £100,000 or very close to it.

What percentage of Northern Ireland households have such an income?

 

Do York St and Sydenham at once…

There is a lot of truth in the contention that the Irish spend so much time demanding the precise change they want, that they are incapable of delivering any change at all. The plans for the York Street interchange (where the M2 Shore Motorway, M3 Lagan Bridge and A12 Westlink Expressway meet) are an example. I personally am keen on the project to proceed, and am not going to let my preference for closing the Clifton Street northbound on-ramp (nor indeed for the name “Yorkgate” rather than “York Street”) to get in the way of that.

However, I am beginning to question whether I am a hypocrite…

One of the problems here is that the Westlink Expressway was not completed properly in 2009 (when two roundabouts and some lights were removed) despite three years of traffic chaos – something which bugs the engineers and is one of the reasons Yorkgate (sorry, “York Street”) is such a priority.

However, the York Street lights are not just the end of the Westlink Expressway, but also the beginning in effect of the M3/A2 Sydenham Bypass leading, within a mile, to further lights at Dee Street. We have to bear in mind that the specific advantage of the project will be on divergent traffic flows (i.e. countrybound), but if there are lights almost immediately the queue is barely moved (coming to affect even traffic back on the Westlink not travelling in the direction of the lights).

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There are plans to widen the Sydenham Bypass and remove the Dee Street lights, which have already been on public display. Asked what the York Street engineers planned to do about the inevitability of queues resulting at and from Dee Street even once the new interchange is completed, the response was “There is a plan for that” – but not, notably, “Don’t worry about it”!

This tells me that in fact the two projects are co-dependent – actually as much the same project as removing the Broadway and Grosvenor Road roundabouts were.

I am increasingly therefore of the view, if it is possible, that they (Sydenham Bypass and York Street) should form a single project – maximising the impact of each while limiting the impact during construction on traffic to one period of roadworks. Therefore, of I were the Regional Development Minister, I would move on with the A6 Randalstown-Castledawson expressway project, while taking a joint “North/East Belfast Gateway” project through planning.

I think…

Tackle China to tackle Climate Change

I do not write much about environmental issues for the simple reason that I am not an environmental scientist and, thus, know very little about them. That does not mean I do not think them important; it is simply that I prefer to choose subjects about which I am at least halfway informed.

However, there is one straightforward statistic about the share of global greenhouse emissions accounted for by each of the world’s three largest economies:

  • China 24%
  • United States 13%
  • European Union 9%

Of course, there are more people in China than in the United States and Europe combined – the United States in particular still emits more greenhouse gases per person than China does (although that is no longer true of the European Union). However, China’s economy is roughly the same size as the United States’ alone, or as Europe’s alone (i.e. all three are about equal size with each other), and yet China accounts for more harmful releases into our atmosphere than the United States and Europe combined. In other words, if China’s exponential economic growth continues and its (car-driving, factory-building, plane-flying middle class grows as expected by hundreds of millions), even its per capita emissions will come vastly to outstrip even those of the United States.

So the problem is not really ours, right? It is up to China to put its house in order?

Sort of. There is no doubt that China, and the Far East generally, will be much more dangerous to the environment than North America or Europe in decades to come. Any direct action taken by the West to limit climate change could be rendered almost irrelevant by Chinese growth. Yet it may still be decades before a burgeoning Chinese professional class is in a strong enough position both to recognise the problem and persuade compatriots to do something about it.

However, on what basis is the Chinese economy (and thus potential to damage the environment) growing? Well, by selling “stuff” to the West, in large part.

So, there is something quite obvious we in the West could do to protect the environment. We could stop buying this “stuff”. By doing so, we would limit the growth of the Chinese economy (thus giving more time to find a means to grow it without rapidly rising emissions from a country accounting for more people than North America and Europe combined), and we would even reduce transport costs.

That is a “win-win”, surely? Well, of course, it would mean the “stuff” we did buy would be made in Western countries with employee rights, health services and welfare systems as opposed to one where these basics do not exist. We would be doing our bit not just for the environment but also for human rights, but that “stuff” would, therefore, be considerably more expensive.

So, what about it…?

 

Perils of über-British/Irishness

An SDLP Councillor has a proposal for a civic dinner to be hosted by Belfast City Council for both Irish soccer teams upon qualification for the European Championship. Leaving aside the practicalities of running a £30/head dinner for lots of footballers during the season, this proposal, though dressed up as “inclusive” and “equal”, is actually bizarre.

This is the problem we run into with these two words. In fact, every single player in France next summer who is from the Belfast area and/or played for a youth team in the Belfast area will be playing for Northern Ireland. Belfast has a direct role – through funding and facilitating clubs and general development – in the success of probably more than half the Northern Ireland team, but only the Northern Ireland team. It is usual and practical for civic receptions to focus in an “inclusive” way on the area of the Council’s influence, and such a civic reception has already been held.

Even leaving that aside, the simple fact is that qualification (top of the group) by a team representing an area of 1.8 million people is a considerably more noteworthy accomplishment than qualification (through the playoff) by a team representing 4.5 million plus a significant diaspora (and much of whose team, unlike Northern Ireland’s, is actually drawn from that diaspora). Comparable countries to the Republic of Ireland, such as Croatia and Albania, qualified too – whereas only one of Northern Ireland’s size or smaller did so. So, for Northern Ireland, merely qualifying is an accomplishment of similar standing to winning the tournament would be for Germany, reaching the semis would be for England, or reaching the knock-out stages would be for the Republic of Ireland. The accomplishments, therefore, are not “equal” – and the Belfast proposal in terms of the Republic of Ireland team is vastly more lavish than any likely to be bestowed upon it by any council within the FAI’s jurisdiction.

(To be clear, because believe it or not there are politicians out there who like to misrepresent things, there would be no harm in some sort of joint event, nor in being creative about such things – a joint homecoming reception for both teams after a day’s joint training at the new Windsor Park next autumn would be a great message and befitting of the support both teams have within the city. The session could even be ticketed with proceeds allocated to a local charity. No such strong message would be sent out by a lavish dinner at ratepayers’ expense.)

What is the point here? The point is that the wrong “inclusive” and “equal” comparison is being made. The comparison, at best, has to be with what other Irish City Councils are doing for the Republic of Ireland team. To do otherwise is to embark on an adventure in über-Irishness, where Northern Nationalists spend far more ratepayers’ money on celebrating Irish achievements than their compatriots in the Republic.

Über-Irishness and über-Britishness (putting flags everywhere, singing anthems inappropriately, moaning about how “Team GB” isn’t “Team UK” etc etc etc) are what define Northern Ireland. From across the border and across the Irish Sea they look on bewildered, knowing fine rightly there are better things to spend money on than lavish expressions of national identity. Perhaps it is time we worked that out too?

See you at the Homecoming Reception…

 

 

 

Let’s end this Black Friday madness

Black Friday was something I only became aware of in the UK last year. I had some notion of the tradition in the United States around Thanksgiving, but since Thanksgiving does not exist on this side of the Atlantic I, like most here, gave no more thought to it.

Then the terror started.

Jostling on Black Friday turned into worse in shops like Asda last year, leading the store to stop marking it.

Jostling on Black Friday turned into worse in shops like US-owned Asda last year, leading the store to stop marking it in the UK. 

There are two reasons I was appalled.

The first is economic. All this grabbing, barging, jostling and outright fighting was a mad consumerist binge for “stuff”, which has no rational justification whatsoever. It does not buy children’s love, it does not buy family happiness, it does not buy general social wellbeing. In fact, fuelled by debt as it inevitably is, it leads to certain economic disaster, financial anxiety and in some cases genuine poverty. Just such a calamity befell us in 2007/8, and for some reason, within easy memory of that, we wanted to repeat the lunacy. For what, precisely?

The second is arguably less serious but also noteworthy: it shows not only that we have no sense of value but also that we have no self-respect. Black Friday is clearly, without dispute, an American tradition. It has nothing whatsoever to do with the UK. So why on earth would we meekly import it? For all the criticism of Tony Blair being “America’s poodle”, now we are all at it! Is that not pretty pathetic?

(Americans have many fine traditions, by the way – but they are theirs, not ours. They have no meaning here and should not be imported just so multinationals can make a quick buck from the hard-pressed worker.)

Self-respect is perhaps what this is all about. We need to have more self-respect than to think we can buy love or happiness; we need to have more self-respect than to think retail binges constitute a serious economic plan; and we need to have more self-respect than to copy cultural traditions from elsewhere without any rational justification.

Americans can keep Black Friday. At least until they import Boxing Day…

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Another day, another SF fantasy…

Sinn Fein activists got excited last week at a report from academics which suggested that Irish unification could boost the Irish economy by €35.6 billion. Of course, that was the headline – like any headline, it was not a totally fair representation of what the report said. It also failed to mention exactly who was behind it.

The report says that if Northern Ireland were to be incorporated into the Republic of Ireland – taxes, benefits and all – it could find its productivity increase to a similar level (i.e. from roughly 90% of the EU average to 130% – taking GDP figures from Eurostat) in 15 years. I am doing it a slight disservice there by slightly overstating and simplifying the figures, but that is the basic premise of the report and the subsequent commentary.

To be clear, the report is not without merit. If Northern Ireland became more like the Republic – considerably less reliant on welfare and public spending, in other words – it would indeed become more entrepreneurial and, in all likelihood, its GDP would rise. This is indisputable, and has been argued frequently on these pages. There are three pretty hefty problems here, however.

The first problem is that, far from being “independent” and “academic”, the report was in fact commissioned by friends of Sinn Féin in California and has not been peer-reviewed. Put simply, it is therefore neither independent nor academic.

The second problem – one raised frequently on these pages – is that neither Sinn Fein nor the SDLP actually offer the favourable scenario it purports to offer! In fact, since they first attained Ministerial office, they have very specifically sought to make Northern Ireland more reliant on public spending on welfare (and so it has become). Only the other day, an SDLP Minister specifically opened a grant programme to include only not-for-profit organisations; Sinn Fein is busily trying to deny it is decreasing the size of Northern Ireland’s public sector and introducing a lower level of corporation (ahem, profits) tax. This is the precise opposite of the route recommended in the report to generate this extra “unification” bonus they were getting so excited about.

The third problem is that we cannot know what the outcome of the adoption of the Republic’s economic and financial policies in Northern Ireland would be, but we can say with reasonable certainty it would not be as pretty as the report suggests (and indeed, even the authors say “could”, not “would”). The report is remarkably reliant on the suggestion that Northern Ireland would gain from adopting the apparently weaker (and actually less stable) euro currency, when in practice we have no idea what the medium-term exchange rates would be or how useful they are. We should also not forget that the tax regime it proposes this would actually mean:

  • abolition of a Health Service free at point of access (as it would no longer be affordable from the lower tax take);
  • additional to that, introduction of various other charges to align with the Republic (for roads, bins, fire call outs, etc);
  • lower income tax bands (thus the average earner and average professional would pay more income tax);
  • higher VAT (by three points, on current levels);
  • 100,000 public sector job losses…

Hold on, 100,000…?!

Well, of course. The Republic of Ireland employs around 280,000 public sector workers for a population of 4.5 million; Northern Ireland currently has 210,000 for 1.8 million. Proportionately, therefore, Northern Ireland has almost twice as many as it would have when matching the Republic’s policies as the scenario presented in the report suggests it would – and that is before you get to potential additional job losses or transfers to Dublin (the capital, presumably) and of course the alleged efficiency savings of doing things on an all-island basis (if those exist at all and are to be realised, they must involve the removal of bureaucracy and, thus, of bureaucrats – public sector workers, in other words).

On top of this, we have the obvious problem with the assumption that adoption of the same policies purely on the financial/economic side would immediately have the same outcome despite differing educational systems and training priorities (and historical government structures, and legacy of conflict, and infrastructure…). Even if it magically did, we then have to ask where the global companies are which are going to invest in Northern Ireland because it has adopted the same policies as the Republic of Ireland, but have not already invested in the Republic of Ireland. And then we have to recognise that if Northern Ireland wished to reach the same GDP/head levels as the Republic of Ireland, from the date of unification it would not just need a fair share of that investment on to the island, but in fact the comfortable majority (to make up the gap with the likes of Google, Intel and Apple already safely ensconced in the Republic). So for “could”, we should probably read “could theoretically in miraculous circumstances”…

That is not to say Sinn Fein activists should ignore what is, in effect, their own think tank’s report. On the contrary, they should read it carefully. It says what I have always said – the practical case for a United Ireland can only be made from the economic Right, not the Left.

But Sinn Fein, of course, isn’t really serious about a United Ireland. Indeed, the very first thing Sinn Fein said after the “Fresh Start” deal was that it did not commit them to supporting lower corporation tax. The very first thing the report says is that the generation of extra wealth for Northern Ireland depends on, er, lowering corporation tax. I don’t quite buy that myself. But then, I wasn’t the one commissioning a report and then getting excited about it on the pretence it was independent…

Subvention denial (and why GDP is a terrible metric)

The Nevin Economic Research Institute (NERI), not known for its right-wing leanings by any means, recently put forward this very helpful piece.

It is particularly helpful in taking on subvention denial, which is the latest game being undertaken by the Nationalist Left, most obviously Sinn Fein. It is odd how they are obsessed by numbers around £700 million. Having previously had their figure of “£750 million out of the economy due to welfare reform” demolished (no one mentions it any more, and it would be good to hear people apologise for having put it about so carelessly), they are now trying to suggest Northern Ireland’s subvention is less than that, at only around £700 million. This is garbage.

This does, of course, lead us on to a real issue of what the “subvention” actually is. There, NERI is particularly useful, by defining something different but very relevant – the “net fiscal transfer”. It is in fact this which most people are calculating when they refer to the “subvention”, namely the gap (broadly) between what Northern Ireland raises in tax revenue and what Northern Ireland spends on public services and welfare – a gap which would have to be covered in extra expenditure by the rest of Ireland in the event of Irish unity, in order for Ireland to maintain a budget surplus (as the Republic currently does).

It is worth adding, however, one area where NERI is a little careless (although not strictly inaccurate). It bands around words like “poorer” based solely on GDP. It is far from unique in this – the European Union does likewise. To be fair, NERI itself warns that it is focusing on figures only.

Based on GDP, Northern Ireland is indeed considerably “poorer” than the Republic of Ireland. Northern Ireland’s GDP per head is around 10% below the European Union average; the Republic’s, on the other hand, is around 35% above. It is equally dodgy to equate the term “living standards” to GDP levels, as many do.

However, here is a pecular thing: despite GDP levels, household spending in the Republic of Ireland is in fact below the European Union average; whereas household spending in Northern Ireland is nearly 20% above the European Union average. This would explain why visitors to both parts of Ireland – on one side of the border there are more BMWs (and indeed cars generally) sold, more money spent on eating out and more money spent on household goods, and yet it is not the side of the border you would expect according to the GDP figures. So the word “poorer” requires care – it would be better to specify “lower GDP per capita”.

The problem with GDP is threefold. Firstly, it only measures product, not outcome – for example, it is surely beneficial if you have a neighbour who fixes your pipe (rather than a plumber) or a family member who looks after your kids (rather than a paid child minder), and yet these “benefits” will reduce GDP because they do not contribute towards an overall product in any calculable way (whereas an expensive plumber or child minder would increase GDP because they do). Secondly, albeit linked to this, it only measures product within the country at point of production, which is why the Republic of Ireland has such a marked differential between GDP (measured at point of production, a figure which for the past decade or so has been typically around 20% higher than the UK’s) and GNI (measured effectively at end of production – a figure which in recent years has typically been almost identical to the UK’s) – for example, if Apple produces lots of value in Cork this goes on to Irish GDP, but the profits in terms both of research value and straightforward money gained will still make their way back to the California where the company is based and thus be added to GNI in the United States, not Ireland). Thirdly, GDP is designed to be used at a national rather than a regional level – in fact, the UK’s Office of National Statistics does not even assess GDP at a regional level because it is too complex and almost redundant (for example, if someone buys something from Tesco in Northern Ireland, it is arguable whether that should be assessed as beneficial in Northern Ireland or where Tesco is based in London; if it is the latter, regions with lots of nominal company headquarters within them, not least national capitals, will almost always gain ludicrously on the statistics charts). The simple fact is also that most countries have a system of internal transfers designed roughly to equalise the actual living standards experienced across the country (although whether they do this perfectly is contested, of course); indeed, the nonsense of regional GDP is that it at once suggests Northern Ireland is the “poorest” region of the UK, but Belfast is the third “richest” city – neither of those can seriously be right, and as ever the truth in terms of the actual living standards experienced is somewhere in between.

None of this, however, makes life any easier for people trying to wish away Northern Ireland’s fiscal imbalance, evened up as it is each year by the UK Treasury to the tune of (now) nearly £10 billion – the “net fiscal transfer”. This is made up of current public spending by the devolved departments (health, education, justice etc. – currently typically just over £10 billion), current infrastructure spending by the devolved departments (construction and upkeep of roads, hospitals, schools etc – just over £1 billion), social welfare spending (pensions, housing benefit, jobseeker’s allowance, etc.; in theory devolved by in practice from the UK Government – currently nearly £8 billion although by nature in varies from year to year), and UK-wide “non-regional” spending (defence, diplomacy, debt repayments, some Treasury spending such as tax credits, etc. – over £4 billion to Northern Ireland if assigned roughly equally across the UK) minus the tax revenue received from Northern Ireland (around £10 billion directly plus roughly another £3 billion in UK-wide tax take – this latter figure in particular is tricky to assign given individuals/companies operating across the UK, the nature of online purchases and even tax payments, etc.). This gives around £23 billion minus around £13 billion as a best guess (including £19 billion minus £10 billion in clearly regionally assigned expenditure and revenue).

It should be noted this is not all strictly “subvention” – despite “austerity” (or because, unlike in the Republic of Ireland, “austerity” has not been implemented anything like fully in Northern Ireland), the UK Government still spends more on public services and welfare than it receives in tax revenue, to the extent that all four countries of the UK actually receive a “net fiscal transfer” and thus the whole of the UK has a “subvention” from borrowed money. Welfare is also tricky because it is not budgeted, and is spent on the basis of need rather than prior calculation (the crux of the Conservatives’ current problems having specifically pledged to reduce it).

The truth around GDP only makes matters worse for Northern Ireland were it to leave the UK, because its low GDP figure is converted into a relatively high public consumption (household spending) figure by that net fiscal transfer – most obviously in the form of lots of extra public-funded jobs (not just in the civil service but also including the likes of most construction workers, most professional consultants, half of the voluntary/community sector) which would simply not exist without it, and thus whose salaries would not exist either. Even community grants, sports sponsorship and other types of aid are sought almost entirely in Northern Ireland from “the government” (or “the council”, or whatever) rather than from the private corporate sector as would be the norm elsewhere in the UK and (notably for the purposes of this comparison) Ireland. Thus Northern Ireland’s whole financial culture is abnormal and dependent on the net fiscal transfer which is itself dependent on remaining in the UK.

Northern Ireland is nowhere near paying its way, and that is what defines it economically and socially. Plainly, it is that which has to be resolved before any serious debate about its constitutional status can ensue. Subvention denial is not going to cut it.

And by the way, quite frankly, Northern Ireland needs more public spending the same way an alcoholic needs more drink. Those who seek to change its status should be the first to see that…

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