Jeff Peel's Diary

Only the Treasury can Decide…

Governments remove wealth creating money from the economy (through taxing) and then give it back (through spending).  They do nothing to create wealth.  They can borrow, of course, but borrowing costs so that ultimately requires more tax being taken out of the economy.  Or they can spend reserves – but UK borrowing is now vast at around £1 Trillion and precious little reserves are left.

The NI Executive can’t tax (apart from through rates) and can’t borrow – except to the extent it receives money from the Treasury that is borrowed.  It also can’t really influence the block grant. If it reduces tax (such as Corporation Tax) the block grant will reduce accordingly.

Therefore when it makes statements – as it did earlier in the week – about a £200m boost to the economy it’s not really talking about new money – it’s only packaging or repackaging money that would have been spent anyway.

• The first initiative mentioned – “Delivering Social Change Signature Projects” – is not really an economic stimulation package at all it’s more a hotchpotch of social programmes and welfare-to-work-light programmes and social enterprise.  It’s not a programme designed to see the creation of long term sustainable business or employment – it’s more about removing community eye-sores.
• Then we have a series of statements about short term pseudo employment programmes for young people.  Possibly providing job experience but not creating jobs.  More creating short term public employment or work in the voluntary sector.  More activity for dole type initiatives and some announcements about new undergraduate and graduate places.
• We then have a few grant schemes for training, an extension of rates support for some businesses and faster decision-making by InvestNI.  None of this will matter much to many employers who are scrapping to stay afloat.
• Then there are a few mentions of capital spending projects that would have been allocated – few new schools, few co-ownership projects etc.  Nothing new apart from robbing Peter to pay Paul in terms of bringing forward some capital spends allocated for future years.

That’s pretty much it.  No commitment to reduce the rates burden in any material way. No plans to reduce public sector pay. No plans to free up more spend through introduction of water charges. No vision in terms of reallocating spend in the direction of SMEs and away from public sector departments. No radical ideas for reducing grotesque state dependency.  In short, just more of the same. And spin.