09012024 - Flipbook - Page 26
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BUSINESS INSIGHT
TUESDAY JANUARY 9 2024
It’s the economy, stupid!
ANALYSIS
GARETH HETHERINGTON
E
VERY
economic
commenta-
tor over the last few years
has spent at least some time
lamenting the parlous state
of our public nances and the impact this is having on the quality of
public services delivered.
However
very
few
seem
to
be
asking more fundamental questions
about how we have ended up in this
situation.
Since
2010,
there
has
been
downward pressure on government
spending and over the same period,
the tax burden has increased to its
highest level since the 1940s.
The old trade-off between lower
taxes and lower government spending on the one hand, and higher taxes
but
more
government
spending
on the other, no longer applies. We
have the worst of both worlds, higher taxes and poorer public services.
Those with strong political ideologies on the ‘left’ and the ‘right’
could both argue that their position
holds true. The ‘left’ would contend
that Governments can spend money
more
strategically
than
individuals
and therefore best placed to make
the large-scale investments needed
to
support
longer
term
economic
growth.
Equally,
those
on
the
‘right’
would argue that raising taxes sties
business activity and disincentives
people from working more hours (or
even at all).
Irrespective
of
your
ideologi-
cal position, the fundamental issue
with our economy, like many other
economies across Europe, has been
an extended period of low economic
growth.
Since 2010 there has been downward pressure on government spending and over the same period the tax burden has increased to its highest level since the 1940s
This stretches back to the global
nancial crisis in 2008. If our econ-
which has been such an important
ple
omy
economic policy lever in Ireland.
ployment because they have low or
had
maintained
its
pre-nan-
cial crisis long-term growth trend, it
would now be approximately 15% to
20% larger.
That
‘lost’
growth
would
have
generated signicant additional tax
revenues
and,
at
a
stroke,
would
have solved the Government’s current budget problems.
The causes of our current quandary
are
complex
but
come
down
to one simple fact, for over 20 years
economic growth has not been the
number one priority for successive
Governments, both in
Westminster
and Stormont.
Taking the UK rst, Tony Blair’s
focus was on public sector reform
“
Whilst
Irrespective of your ideological position,
the fundamental issue with our economy,
like many other economies across
Europe, has been an extended period of
low economic growth. This stretches back
to the global financial crisis in 2008.
If our economy had maintained its
pre-financial crisis long-term growth
trend, it would now be approximately
15% to 20% larger
get
back
into
em-
rea-
no qualications, reform the welfare
system so those seeking to get back
prevailing
into education are not penalised, im-
priorities at that point in time, it is
plement long overdue reform to our
no surprise that if economic growth
health service to get the sick back to
is
work, stop funding a divided society,
argue
decisions
not
that
reected
the
focus
of
could
cannot
policy
sonably
governments
who
their
the
attention,
the
economy will suffer.
and
So what can be done? It is essential that a returning Executive recog-
consider
appropriate
revenue
raising measures.
There
no
short
xes
bear
fruit beyond the period of a single
other policy aims.
electoral cycle, so it is time for ma-
a
‘what
works’
ideology
could provide some basis to identify
policy priorities moving forward.
There are several measures a re-
ture
political
will
only
economy to the achievement of its
adopting
policies
term
and
Setting aside ‘left’ and ‘right’ and
many
are
nises the importance of a growing
decision-making
and
also importantly a mature response
from the electorate.
The
public
politicians
for
criticise
taking
turning Executive could implement,
decisions
premiership
was
including
unpopular but necessary decisions
the
crisis,
nancial
David
by
Camer-
on actively supported the “Beyond
GDP”
agenda
promoted
long-term
decline in infrastructure investment,
It is only very recently that both
economies only thrive during peri-
over-hauling the planning system to
EU
Rishi Sunak and Keir Starmer have
ods of political stability which is at
facilitate increased business invest-
recognised that long term growth is
odds with the Executive’s part-time
ment also needed to help meet our
amongst
the only sustainable solution to the
approach to devolution.
net zero commitments, focus on giv-
Theresa
the
the
which included wellbeing measures
others,
by
reversing
May
fo-
cused on Brexit and Boris Johnston
focused initially on Brexit and then
the COVID pandemic.
economic challenges we face.
then
its
difcult
and foreign policy, Gordon Brown’s
dominated
and
cannot
not
object
are taken.
Gareth Hetherington
Even when the Executive was in
ing our young people the skills they
record
place, they refused the opportunity
will need for the jobs of tomorrow,
University Economic
also falls painfully short. Typically,
to take control of Corporation Tax,
put skills interventions around peo-
Policy Centre
Stormont’s
economic
is director at the Ulster
when