All lefties now.  Sammy Wilson.  (Photo credit: Wikipedia)

After my contribution to Good Morning Ulster this morning – discussing the need for continued austerity with the tax and spend MP Mark Durkan – several callers questioned my logic that the only contributor to wealth was the private sector.  One caller suggested that my Economics knowledge was deficient (no argument there, it’s not really a science and most Economists make it up as they go).  However, this caller suggested that my simplistic argument relating to the private sector – business – being the only source of growth was flawed.  The caller asked, incredulously, did I not know that 4 things contributed to growth: production, consumption, government spending and exports.

However, I think this caller may, with further investigation, come to the conclusion that without production (private sector) there would be no consumption, no government tax take  and no exports. I rest my case.

However, more worrying, was Mark Durkan’s clear lack of any economic understanding. It appears sometimes that the synapses of doctrinally motivated lefties (and Sammy Wilson is sounding more and more like one – he appeared later on the the programme) aren’t connected the same way as people who have to manage budgets or run businesses. Both Durkan and Wilson argue that it would be better that the government borrowed more to employ people to build infrastructure than to have them hanging around on the dole. The argument is so patently absurd that it barely merits a response, but here goes.

First argument against is that we can’t afford it. UK public spending is at absurdly high – grotesquely high – levels.  Public debt is now above £1 Trillion. To service that debt costs hundreds of billions – despite the UK’s relatively low bond yield levels. If bond yields creep up (and they will if debt increases) the cost of borrowing – and the required tax take – will go up too.

Second argument – it’s not clear what UK infrastructure is needed. For example, should we building roads when what we really need is better broadband infrastructure? And why should the UK government be getting involved in Internet provision when it can’t even run the NHS efficiently? Oh and if infrastructure is provided under PFI (like the grandiose new Invest NI building on Bedford Street) will we be, as taxpayers, paying through the nose to property developers in perpetuity?

Third argument – the unemployment reduction myth. Sammy Wilson on GMU this morning, argued that the government should be developing infrastructure to employ the unemployed. Last time I looked the majority of the unemployed were not highly skilled engineers, planners, legals – or the other types of people needed to undertake infrastructure work. Even construction workers these days need to have vast experience to undertake the types of infrastructure projects Sammy Wilson, no doubt, has in mind. And most of the firms capable of delivering big ticket infrastructure projects would probably be better off working in the high-growth (but infrastructure poor) BRIC economies than in the UK.  Plus such projects would yield valuable export revenue at a time when the UK needs it most.

Fourth argument against Keynesian interventionist spending is that it increases dependence on the state at a time we need increased dependence on commercial led growth. State spending is merely a prop – it’s not the real economy, stupid. What we need is proper demand led growth where businesses here develop good products and sell them – ideally overseas, resulting in expansion in wealth from overseas expenditure. Nothing creates employment faster.

Fifth argument. We need lasting jobs not interim, start-stop employment. Infrastructure projects take forever to plan and get off the ground and typically they have absurdly long pay-back periods (and low associated employment once they are complete).  Just look at the Titanic “signature project”. Years of planning, hordes of construction workers and a big launch.  Now a few ticket tellers and lots of people wondering how the thing will sustain itself.

And I could go on. But I have paying clients to support and work to complete.  But Durkan, Wilson and all the other lefties in Stormont need to get a grip. Austerity WILL get worse. The block grant will decline in real terms and possibly in actual terms. Therefore, for the Executive, there has to be a Plan B other than continued begging bowl politics. We need a focus on stimulating proper, export driven businesses here. We need more businesses moving here and creating the skills needed in this economy. We need a regionally focused economic policy – and we could start by reducing corporation tax quickly, biting the bullet in terms of block grant reduction, and focusing on building sustainable, commercially led employment – squeezing out the public sector.

Wilson and Durkan will not get their way. Things will get worse before they get better. But both need to start facing up to the fact that bitter pills will have to be swallowed.

Reblogged from PolicyNI:

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This splendid piece, by Newton Emerson, was featured on Hearts & Minds (and was kindly uploaded by Mick Fealty of SluggerO’Toole).

Emerson does a great job in outlining how Stormont has become a vast scare-story machine designed to extract as much money as possible from the Exchequer.  And the office of the First Minister does precisely nothing to do anything about it.  

Read more… 11 more words

Reblogged from PolicyNI:

The DVANI should be closed as soon as possible and its services transferred to DVLA in Swansea.

When the vehicle licensing office opened a new office in Belfast a few years ago – at the revitalised Gasworks Business Park – there was a wonderful irony about the choice of location. Presumably the powers that be had some inkling that hordes of motorists would come visiting – to renew their road vehicle licences.

Read more… 290 more words

Reblogged from PolicyNI:

Government spending (Photo credit: 401K)

We want to hear about blatant, flagrant waste of tax-payers’ money – and we’ll expose it here on PolicyNI.

The Executive argues that it hasn’t enough money. But that’s hardly surprising when we have 12 central government departments and 26 councils – all to run a place with a population less than Greater Manchester. Never mind the myriad quangos, job creation agencies, community groups – all paid for by the public purse.

Read more… 242 more words

Reblogged from PolicyNI:

It's handy to have HM Treasury if the economy is like a cork bobbing in an ocean of debt.

The Deputy First Minister yesterday compared the Northern Ireland economy to a cork bobbing about in a raging ocean. He conjured this analogy as part of his announcement of £580m of public expenditure on public infrastructure – roads and hospitals. He indicated that rather than just “lie down” the Executive was committed to spend money to save the economy.

Read more… 312 more words

Northern Ireland is in the Red. Image via Wikipedia

Last year the Treasury published a consultation document seeking ideas as to how Northern Ireland’s economy should be rebalanced.

The document pulled no punches in defining the endemic problems of Northern Ireland’s economy and its massive over-dependence on the British public purse. It stopped short at pointing fingers at some of the underlying causes of this dependency culture – such as a stunted Party-political system and successive British governments that preferred to throw money at a problem rather than deal with the systemic disease. The troubles were part of the reason for the creation of a Potemkin economy – but not the whole reason.

However, the document at least details, in its ghastliness, just how sick our economy really is:

• Productivity remains low, with productivity per filled job being 85.3 per cent of the UK average, lower than all other regions other than Wales
• Low productivity is largely due to under-representation of high productivity sectors in Northern Ireland
• Levels of venture capital funding are lower in Northern Ireland than in all other UK regions – and the few VC firms that are ‘active’ are largely dependent on state funding
• Over the past five years business expenditure on R&D in Northern Ireland has averaged 0.69 per cent of GVA compared to 1.23 per cent for the UK as a whole. In addition, business expenditure on R&D in Northern Ireland is heavily focused on a small number of companies, with just 10 companies accounting for some 57 per cent of all business R&D investment in 2009.
• Over 30 per cent of all Northern Ireland jobs are in the public sector compared to a UK average of around 21 per cent
• Northern Ireland’s economic inactivity rate remains high at 28.4 per cent compared to the UK average of 23.3 per cent, and is the highest rate in all of the 12 UK regions.

The long and short of all of this is that Northern Ireland’s fiscal deficit is vast: equating to over £5,000 per person – which is some three times larger than the UK average.

And nothing, substantial, seems to be being done to address this. Yes, the consultation resulted in lots of submissions, but radical action needs to be taken to address the endemic problem.

In terms of addressing the problem the Executive at Stormont is not fit for purpose – nor are the Departments responsible for economic development. The political parties all define their effectiveness based on how much cash they can wrestle from the Treasury – thereby perpetuating the economics of hand-out.  And there are no strong lobby groups arguing the case for the following:

• Active reduction of the size of the State’s involvement in the economy
• Intolerance for absurd State-funded hand-outs to people and groups who don’t deserve them
• Reduction in ludicrous and crippling local taxes – especially taxes on business and commerce
• Accountability of political Parties based on hard, tangible economic related outcomes

So I’m proposing creating such a Think-Tank, Lobby Group – whatever you think it should be called.

If you would like to get involved in this initiative please contact me by completing the little form below. I’d be keen to hear from you if you’d like to join a steering committee, write some blog posts, undertake some research or just lend your support.

I’ll let you guess which of the stars is my daughter.

Over 1,000 kids, staff and supporters were involved in the making of this and it shows the wonderful sense of community at a wonderful Grammar School.

(I should make a disclaimer that I also attended the school – although rather a long time ago).

The Conservative Party Chairman has written to the UUP recommending the winding-up of the UUP next year.

I was today forwarded a letter that has been sent to all members of the Conservative Party in Northern Ireland.  The letter suggests that the Conservative Party chairman, Lord Feldman of Elstree, has addressed a letter to the Ulster Unionist leader, Tom Elliott, outlining an offer to “move Conservatism forward in Northern Ireland.”

The letter to local Conservative Party members continues, “This offer will involve the dissolution of the UUP early next year and the formation of a new Conservative led party, under the constitution of the national Conservative party, which will operate along the lines of the parties in Scotland and Wales.

“This offer is being made with the express approval of the Prime Minister, the Board of the Conservative Party, as well as the Chairman of the Northern Ireland Conservative Party, Irwin Armstrong.

“It proposes a Northern Ireland Conservative party which can reach out to everyone in Northern Ireland, irrespective of background and tradition, unencumbered by the conflict and divisions which mark our past.”

If this move truly means the winding-up of the Ulster Unionist Party – then this is a move to be welcomed.  However, I look forward to hearing the response from the UUP leadership.

The move almost certainly means that a large cohort of UUP members has broken ranks with the UUP leadership and now wants to do business with the Conservative Party – while building a new local, non-sectarian identity.  That, also, is to be welcomed.

Read coverage inspired by this post…

Dale & Co

Slugger O’Toole

BBC Northern Ireland