POLITICIANS IN NORTHERN IRELAND are intrigued by many things. Sure we have flags, marches and protests. But when it comes to the economy they have a particular fascination with the Irish Republic’s economic success during the Celtic Tiger era.
So impressed are the best and the brightest in Belfast with how the Republic managed to achieve such rapid growth in a relatively short period of time, that a new political consensus has developed within the province that Northern Ireland should pursue the same strategy.
In fact, this consensus is so powerful that it has not just created some odd political bed fellows but also seen policy positions developing that are confusing – to say the least. We have on the one side Sinn Fein and the SDLP. Both are parties of the left and are committed to give tax breaks to large multi-national firms to settle in Northern Ireland… not typically what you expect parties on that side of politics to be advocating.
Then we have parties on the Unionist side of politics; the UUP and DUP. Both of whom are committed to maintaining everything that is British in the province, and yet they are advocating policies that would see more fiscal powers transferred back from London and a break in the taxation harmonisation that has existed within the United Kingdom for decades.
Corporation tax and foreign direct investment
So what has led to this perversion of traditional party principles? In my view it is a misguided notion that Northern Ireland can essentially repeat the same economic strategy that brought the Irish Republic success in the early nineties. Let’s take a look at the issues of corporation tax and foreign direct investment to prove why this is such a flawed approach.
At the moment it is the policy of all the main parties at Stormont to achieve the devolution of corporation tax powers from Westminster. The belief that lower corporation tax can be the silver bullet that could help Northern Ireland catch up with the Irish Republic is a widely shared belief among political leaders here. This policy, we need to remember, would cost the province £400 million per year.
Yet, despite the huge cost, we constantly see a huge emphasis placed on this missing piece of the jigsaw as being all we need to improve our economic position. However, I feel that politicians in Northern Ireland are being incredibly selective in viewing this policy as the only thing that has brought the Irish economy success. They ignore the strategic use of EU funds to improve infrastructure, while in Northern Ireland we hand millions back due to petty infighting. They also ignore the painful restructuring of the Irish economy that took place between 1987 and 1990, and I have not seen any concrete plans to reform Northern Ireland’s bloated public sector which accounts for nearly two-thirds of all of the province’s economic activity.
Success stories of the Celtic Tiger era
Then we have foreign direct investment which again was another success story of the Celtic Tiger era. Our politicians have gone around the world trying to sell brand Northern Ireland to foreign investors. This is very much in the mould of their Irish counterparts who regularly do the same thing. However, while the Irish Republic has succeeded in luring some big firms to their shores, the results in Northern Ireland are mixed; a recent Community Relations Council report found around 60 per cent of Invest Northern Ireland’s job creation has been in contact centres.
It is precisely this type of job creation that has led to Northern Ireland’s average private sector wage being 17 per cent lower than the UK average. When compared to the Irish Republic, some sectors see their workers earning up to 60 per cent more than their Northern counterparts.
How do we solve this problem? Last weekend we had a major investment conference. If this gathering of business leaders and politicians was to serve any useful purpose then it should be this; shift your focus from the number of jobs you are creating to the quality of them. The statistics I quoted earlier illustrates that the last thing Northern Ireland needs is another call centre. We need good-paying jobs that can help actually to grow our economy and give our people some sense of hope and aspiration.
Supporting local small businesses
Another policy the Executive could pursue would be giving more support to our local small businesses. Northern Ireland actually has a thriving sector in this areas, the only problem is it’s not big enough. Instead of giving £3 million grants to big firms to simply re-create jobs that they cut just two years before, how about allocating that money for some more rate relief for struggling businesses?
The bottom line is we need to move away from the Celtic Tiger model. While it worked for a time in the Republic of Ireland, it is patently not working in Northern Ireland. The world has changed a lot over the past 20 years and we are never going to win this race against a sovereign government with more powers than Stormont will ever have. We need to believe in our own capacity to create our own model for success and hopefully raise the living standards of all our people.
David McCann is a PhD researcher in Irish politics at the University of Ulster.
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