Structural problems

Former Minister for Employment and Learning Stephen Farry tells David Whelan that Northern Ireland’s economic performance is being hindered by a legacy of structural problems which have yet to be addressed.

“There are a number of structural problems within the Northern Ireland economy which have always been with us and which have not been significantly addressed over the appreciating years, in particular, in the post-Good Friday Agreement period,” says Farry.

The former member of the Northern Ireland Executive and current deputy leader of the Alliance Party offers the assessment in the context that key economic indicators highlight that Northern Ireland is performing worse than the UK average and also worse relative to the performance of the Republic of Ireland’s economy.

The structural problems Farry refers to are aligned to challenges which faced the previously large industrial economies over the course of the 20th Century. He adds: “Where Northern Ireland has suffered is that some of those industrial economies, which were globally important a century ago, have had the opportunity to restructure and rebalance their economies. Northern Ireland missed that opportunity because of the effect of violence and division.

“We’ve had to start from a lower base. Many of those structural problems have grown up over 50 or 60 years and haven’t really been addressed due to missed political opportunities and a lack of will to get to grips with them.”

“Whenever people are celebrating the unemployment figures they are missing the problem that the productivity gap with the rest of the UK is widening.”

Farry outlines that even prior to the Brexit referendum, Northern Ireland faced challenges in three key areas.

The first is around productivity. GVA (Gross Value Added) is a key way to assess the performance and strength of an economy and currently Northern Ireland’s productivity levels are comparatively low in relation to the UK, which is itself comparatively low in an overall EU context. “If anything, that gap has widened in recent years rather than being narrowed,” says Farry.

Secondly, levels of economic growth in Northern Ireland are much lower than the UK’s as a whole. Farry highlights that indications for the first quarter of 2018 show negative growth in Northern Ireland (-0.3 per cent). A consecutive negative quarter would signal a recession. “This is in contrast to the UK (0.2 per cent), which is itself sluggish in a European Union context, but at least it is growing. Northern Ireland’s large public sector previously created a stabiliser for the economy from the ups and downs of the business cycle but today we have a situation whereby when the UK as a whole catches the cold, Northern Ireland gets the flu. We are potentially that bit more exposed.”

Thirdly he points to Northern Ireland having the highest economic inactivity rate of any region of the UK. Farry believes that those who point to the recent record-low unemployment rate of 3.1 per cent for the first three months of 2018 are being “over celebratory” and failing to recognise the implications of an economic inactivity rate of almost 30 per cent in Northern Ireland. Also, inactivity is far from uniform across Northern Ireland with some areas, such as the North West, suffering from significantly high levels, comparative to the likes of Belfast.

“These figures highlight that there are structural problems in the economy and reflect that we haven’t moved far enough in terms of developing a high-skilled economy. Whenever people are celebrating the unemployment figures they are missing the problem that the productivity gap with the rest of the UK is widening,” he explains.

Skills

Farry is quick to point out that while addressing Northern Ireland’s skills gap, in the context of creating an overarching government framework for supporting the economy, would go some way to helping restore growth to the economy, the negative implications of both political instability in Northern Ireland and Brexit cannot be underestimated as drags on the overall economy. In particularly around investment, he argues that not only are the investment levels by new companies being hindered but existing companies are also stalling on investment decisions while uncertainty exists.

He advocates a rebalancing of the economy in terms of skills, focussing on the overall skill level of the population and the distribution, but also on ensuring that the correct skills are being created to meet the demand within the labour market.

“We have to get away from a situation where there is too much inefficiency in the economy between where people are educated and trained and where the opportunities are going to be.”

Less than 10 per cent of employment opportunities in Northern Ireland are currently available to people with low or no skills and the latest figures from the Northern Ireland Skills Barometer highlight an oversupply in the highest and lowest brackets of the National Qualification Framework, but a significant undersupply in mid-level skills.

Farry advocates an update of the now outdated 2011 Skills Strategy, focussing on investment in these mid-level skills, something addressed in the draft Programme for Government, before the collapse of the Assembly.

“The second issue is ensuring that people are skilled in the right areas and that means good careers advice, people thinking carefully around where future job opportunities are going to lie and being encouraged to enter into those opportunities. We have to get away from a situation where there is too much inefficiency in the economy between where people are educated and trained and where the opportunities are going to be.”

Farry believes that two key levers lie in the areas of apprenticeships and youth training, both of which were the subject of strategies still in train when he finished his term in office in 2016.

Asked whether Northern Ireland’s strategy around apprenticeships had been a failure, Farry maintains that the strategy had merits but adds: “The problem we have is that the existing strategy goes back over 10 years. Its focus was around procuring organisations to provide apprenticeships, without much consideration for labour market demand specifics. By contrast, the system which we are trying to bring in is employer-led and so should be responsive to the gaps.

“To successfully bridge the skills gap we need to ensure that what the education system is producing is aligned to the needs of the employers.”

Stormont

Farry has been a strong advocate for the return of the Assembly, believing that the long-term structural problems can only be addressed through devolved government. His reasoning behind this is the Assembly’s role as a facilitator and enabler, bringing together business and various sectors to address concerns and develop strategies.

However, he admits to “not being terribly optimistic” about the return of the institutions in the short-term given the current deadlock. His party are keen for talks to resume and the institutions to be operational, but he admits that while they would be keen to get back into government, whether or not they would take a place at the Executive table (either through a potential justice role or if a fresh election saw them attain a seat) would centre on assurances around reform of the Petition of Concern.

Farry asserts that differences of opinion over Brexit should not be a hindrance to the return of the Executive, arguing that the benefit of work that can be done will outweigh no progress at all.

However, he appreciates that the return of the Executive will not be a silver bullet for fixing Northern Ireland’s economic problems, instead insisting that the uphill challenge will be even steeper now that the constitutional future of Northern Ireland will be central to decision-making for both Sinn Féin and the DUP.

“The Executive became essentially a transactional clearing house with departments often acting in silos.”

“Under the last Executive certain things in the economy were done pretty well but at the same time there were missed opportunities. The Executive didn’t do anywhere near as much as they should have in terms of reforming health, education and making sure we have a sustainable budget.

“The Executive became essentially a transactional clearing house with departments often acting in silos. Easy decisions were passed through quickly, but the more controversial ones, such as reform, were kicked to touch and left to the departments to work on, largely in isolation.

“Unfortunately, I don’t see that changing. The constitutional question is now on the table and the concern would be that those tactical decisions taken in the past will still exist, probably even more so, in the future. I don’t see how this allows for us to move from a transactional form of government to a strategic form, making deep, long-term commitments to the future of Northern Ireland.”

Farry states that despite his concerns, there is no viable alternative to Northern Ireland devolution, insisting that local decision-making will produce the best possible outcome for Northern Ireland.

Asked whether, given the deadlock, a conversation about a united Ireland would be helpful he stresses that the priority must be on restoring the Assembly and attaining a workable plan around Brexit. He believes that there now exists much more fluidity in people’s thinking around the future of Northern Ireland, including a diminished acceptance of the status quo within nationalism, as well as more open-mindedness from the ‘middle ground’.

Brexit

Farry contends that the manner in which Brexit unfolds will be major factor in people’s thinking around the future of Northern Ireland. He states: “For the economy as a whole Brexit is going to be damaging in all scenarios, with the exception of a special deal that builds on the backstop and puts us in a position to gain some comparative advantage in relation to other regions.

“The problem is that the debate around this has been dramatised so much through the lens of political and constitutional posturing that people have lost sight of the potential economic gains. There is a risk that we are throwing away a safety net for Northern Ireland on the grounds that it is viewed as being politically toxic by either part of the political spectrum here.”

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