Invest locally: grow globally
ICTU Assistant General Secretary Peter Bunting outlines the trade union movement’s economic policy proposals and restates the case for a Green New Deal.
The most depressingly easy task in Northern Ireland is to list the problems with our economy. On so many indicators of wealth and activity, we are consistently in the guard’s van rather than the vanguard, especially on output, youth unemployment, green technology, skills, wage levels and developing indigenous businesses.
This article will make proposals aimed at directly addressing the above problems.
According to the novel and extremely useful Northern Ireland Composite Economic Index (NICEI), Northern Ireland’s output is 11.0 per cent below its peak in 2007 while UK GDP is only
2.6 per cent below its peak in 2008. We are the UK’s third worst region for youth unemployment (21.1 per cent) and of NEETs (21.7 per cent).
Manufacturing has been in long-term decline for half-a-century, and the promised replacement jobs in the service and construction sectors have been the main casualties of the recession. The NICEI service index has decreased 0.9 per cent since this time in 2009, while construction has barely moved from its lowest recorded value in Q3 2012. Ironically, manufacturing has bucked the trend, at least in the short term, as the production index has increased by 3.5 per cent over the same period.
Nonetheless, there is an air of stagnation about the economy. Things have been bumping along for the past four years after the initial carnage in the private sector when the property bubble burst. For many credulous business leaders and politicians who should know better, the campaign for cutting corporation tax acted as a substitute for hard thinking and long-term planning.
Now, with Dublin’s political class squirming and desperately denying the charges of being a tax haven, and the G8 under global pressure to reign in such fiscal parasites as Bermuda and the Channel Islands, tax competition is no solution to the structural problems of the Northern Ireland economy.
Building on manufacturing
We have a tradition of manufacturing that ought to be built upon and the Green New Deal (GND) is the perfect vehicle. Key areas of infrastructure like energy and water will require significant investment in order for Northern Ireland to realise its full economic potential.
A safe and secure water supply will be needed to attract investment in areas like pharmaceuticals and agri-business. A new EU target for renewable energy for 2030 will require significant reform and expansion of the existing networks and grids. Additionally this investment can provide a much needed stimulus to the local economy, boosting both employment and output.
Instead of breaking up the Northern Ireland Housing Executive, the Nevin Economic Research Institute recommends using its stock of 90,000 homes to provide collateral for a massive retrofit programme. There is the capacity to create 33 jobs for every £1 million we invest in Green New Deal.
A GND programme could also be used to upskill the existing workforce and address the skills deficits afflicting NEETs. Youth unemployment costs Northern Ireland £300 million per year in benefits and lost taxes and consumer spending, not to mention ever-increasing social costs to society in an environment which always finds work for idle hands.
Related to this, the unspoken factors crowding out investment are the continued perception and reality of sectarian strife and the wider blemish to our attractiveness by making threats to leave the European Union.
We need a private sector which rewards getting off benefits with carrots rather than sticks. Pay so low that people will not apply for vacancies? How about a living wage?
At a UK level, low to medium earners will still be 15 per cent worse off in 2020 than they were in 2007. Between 2003 and 2008 the UK’s economy grew on average by 1.4 per cent, while low to middle wages only increased by 0.3 per cent. In Northern Ireland, the average private sector wage is worth four-fifths of their equivalent in the rest of the UK.
Squeezed middle
A living wage is only the start of the fightback against the erosion of living standards. The squeezed middle is more than a modern cliché. It is a grim fact which afflicts an increasing number of middle income earners, precisely the cohort of people who modern politicians are ‘supposed’ to pander to.
Nothing shows the skewing of the debate on inequality more than the attention given to the mild inconvenience to higher band taxpayers by the withdrawal of child benefit, compared to the substantially larger number of people whose lives are being ‘reformed’ by Iain Duncan Smith.
Short-sighted ministers like the Welfare Secretary only see a budgetary problem when they look at relatively high levels of welfare spending. A more holistic view of the situation would examine the structural causes of the problem, not just the symptoms of it. For instance, the massive increase in housing benefit over the past three decades has been due to an over-inflated property market, not welfare claimants demanding mansions.
Building more homes and social housing would drastically reduce the welfare budget in that respect. However, this kind of solution requires an honest diagnosis of the problem, not the type of knee-jerk response to tabloid frenzies that this Tory coalition thrives upon.
There are places in the UK where government is determined that the public is not frozen out of the public realm. Rather than outsource public services and government contracts to the cheapest bidder, the devolved government of Wales has shown the confidence to defy the cuts consensus coming from London
The Cardiff administration is using public procurement to stimulate the local economy. For construction, the proportion of contracts going to Welsh-located firms went up from one-third to two-thirds.
Of their total procurement budget of £4 billion, 79 per cent of spending went to Welsh firms. Northern Ireland spends an estimated £3.2 billion each year. It should not be beyond the imagination of our MLAs to emulate their success.
