Building Prosperity - Leader’s Speech to NI Chamber of Commerce

 

Margaret Ritchie Leader of the SDLP

 

 

Northern Ireland Chamber of Commerce – 15 April 2011

 

 

Ladies and Gentlemen, it is a pleasure to be here to participate in the Northern Ireland Chamber’s series of economic briefings - and may I extend my thanks also to our hosts McGrigors.

 

I think it is helpful at a time when, lets face it, the noble profession of politics ranks low in the public estimation, that organisations such as the Chambers of Commerce and McGrigors are ready to support the political process by providing a useful platform for politicians.

 

Particularly on such an important issue as the future development of our economy.

 

So I intend to give you value for money today.

 

*****

 

 

We all know about the economic problems facing Northern Ireland: They are deep seated.

 

 

So whatever about the current global economic downturn, and the £4billion of cuts we are now facing in the Executive Budget – both of which present additional challenges at this time – we have to deal with structural underlying problems in our economy.

 

We have to ask why is productivity lower in Northern Ireland than in other comparable regions and what can we do about it? Why do we have such a low participation rate in the workforce?

 

And above all, are we happy to continue as a sick regional economy dependent on an annual subsidy of some £8billion from the rest of the UK – equivalent to more than £11,000 pounds per household every year.

 

 

We do of course have good things going for us as well. A young, educated English-speaking workforce, decent infrastructure, 100% broadband, good universities etc. and we are getting a flow of foreign direct investment. So it’s not all bad.

 

But if we are to move this economy forward we have to deal with all of the challenges - not just the immediate problems, or medium term issues, but also the long-term structural problems, some of which I have already referred to.

 

And what levers are at our disposal? Undeniably the most important is public expenditure. We can evolve economy-friendly policies across different sectors and try to rationalise red-tape and the burden of regulation, but the most immediate impact on our economy is how we allocate and manage public spending.

 

So let me say a little about our experience to date as an Executive, and how we have operated our principle economic lever of public expenditure.

 

When the downturn hit us in 2008 and many of the assumptions underpinning the Executive budget – particularly in relation to forecast capital receipts - went out the window, my Party put forward the case to reprioritise spending to take account of the change. We produced “New Priorities in Difficult Times” which showed where we needed to spend more to keep programmes on course, and uniquely, where we would find the additional resources.

 

The Executive did not endorse “New Priorities in Difficult Times” although it later implemented some of the proposals contained in it. Many of the other proposals have since crept into the manifestos of other political Parties, and that is of course to be welcomed.

 

The bit that got me at the time though, was the repeated assertion by some of my senior Executive colleagues that the economy was the number one priority – yet they were not prepared to change anything when our plans got knocked off-course.

 

So in effect the downturn itself ended up deciding which programmes were able to proceed unscathed and which got hit with shortfalls.

 

We also argued that we needed to be certain that capital expenditure was being directed at those areas which would deliver best bang for the buck for the economy. But that exercise was never done.

 

So we invested large but finite amounts of capital without really understanding its economic impact. And that is being honest about it. 

 

Let me fast-forward to the Budget process just completed, which has resulted in the much heralded £4billion of cuts. Again we in the SDLP produced a detailed 70 page finance paper, unlike other Parties, full of costed figures and tables highlighting how we could mitigate much of the £4billion through new revenue streams and additional capital receipts.

 

Our paper “Partnership and Economic Renewal” not only showed where the extra resources should be found. It was also full of proposals, many quite radical, for rebalancing the economy. We have no irritating ideology here. We are not afraid to say the word ‘privatisation’

 

The various debates that followed in the Assembly were based on SDLP amendments and SDLP ideas, although the DUP/Sinn Fein Budget which I have described as ‘Lazy and Unimaginative’ and which I would still describe that way, still prevailed.

 

I want to make one political point here and it is this.

 

The media reported the budget exchanges largely in terms of a party political tussle rather than in terms of different economic and financial ideas.

 

Similarly, the larger Parties tried to characterise those of us who had different ideas for the economy - as somehow disloyal or not team players.

 

I utterly reject this characterisation – as no Party has done more to bring fresh thinking into the economic debate and to share ideas than the SDLP.

 

And whatever the idiosyncrasies of our unusual governmental arrangements, we will never accept the suggestion that we should not promote our thinking, when perhaps at times, we are the only Party actually doing any thinking.

 

So that is the story on public expenditure. It is our principal economic lever in the short-term and if we want to make changes that will rebalance the economy in the short – term then we will simply have to re-visit the Budget.  So what would we do, now, immediately in the short term?

 

(Short-Term)

 

We would refocus spending in the short-term on job creation:

 

Firstly, an unashamed initiative of public works with a large scale programme of home insulation. I’m prepared to call this Green New Deal if that makes everyone happy, but to be quite honest its purpose is to provide large scale employment opportunities for relatively unskilled workers, particularly young unemployed and former construction workers.

 

Secondly we can put more into well established jobs rich sectors such as tourism.

 

There is something of a potential sleeping giant in tourism.

 

Thirdly we need to reprioritise capital expenditure into the areas that provide more jobs.

 

£100million more spend on new trains is a £100million injection into the Spanish economy and doesn’t create a job in Northern Ireland. I don’t have all the answers on this, but I am prepared to follow the evidence and do what gives us the jobs boost.

 

So that is the immediate short-term spending priority – jobs – yet it throws up one of the biggest conundrums facing us into the medium and long term.

 

Think about this: Every time we take someone out of unemployment and give them a job that is undoubtedly a good thing. Yet nearly all the benefit accrues to the London Exchequer.

 

London saves the unemployment benefit they would otherwise be paying, and London scoops the extra income tax from the new member of the workforce. Look at it the other way round every time someone becomes unemployed London loses their previous income tax receipts and picks up the tab for the new benefit claimant.

 

So in terms of benefits to the Northern Ireland exchequer it nearly doesn’t matter whether people are employed or unemployed - and that is crazy!

 

We must be the only modern economy where there is no real incentive to get people into work. And yet when you actually think about it we spend hundreds of millions on helping people into work.

 

We will not fix this problem in the short-term but we do have to fix it.

 

We can also do a lot in the short-term to rebalance the economy and to commence a massive programme of public sector reform.

 

Government must start to move functions and services across to the private sector where this makes sense. There is massive scope for outsourcing. There is also scope for the disposal of assets and, again where it makes sense, the privatisation of certain undertakings.

 

 

And we have to change the culture of the civil service particularly in the senior ranks so that there is room for an entrepreneurial can-do approach.

 

Its hard to mention public sector reform without referring to the Planning system. What we are seeing now is piecemeal reform of a failing system.

 

We need instead a complete redesign of planning system, sitting down with a clean sheet of paper and asking the question - What kind of planning system would suit a small, beautiful region of 2 million people who want a fast growing dynamic economy but also care about the environment?

 

Incidentally the SDLP’s “Partnership and Economic Recovery” already includes the Chamber’s proposal for a fast-track planning system for investors – except we go further. We charge more for this service – and there you are - another new receipt for the Department of Finance.

 

And then there is education. We have to ensure that all school leavers have passable literacy and numeracy. We are currently failing our young people. We have a moral duty to equip them with the skills required by the modern economy.

 

 

I’m realistic enough to know that much needed public sector reform will take us into the medium term although there are things that could also be done quite quickly.

For example, in addition to the populist proposal to cut the number of MLAs, which the SDLP supports, we really don’t need three economic policy units in central government and we certainly don’t need the bloated Government Information Service at its current size.

 

And there was no need for the stalemate on the proposed reform of Local government which was largely designed and could be delivered in the short-term.

 

 

(Medium Term)

 

But obviously a lot of change will overlap into the medium term. A streamlined public service, with fewer Departments and Quangos providing better public services with fewer people and freeing up resources for other priority areas.

 

And then we come to the whole area of taxation and the possibility of Northern Ireland being granted new tax-varying powers. Let me say that the SDLP is totally in favour of further devolution of tax-varying powers, most notably the ability to lower the headline rate of corporation tax.

 

 

 

I understand the concerns about the cost of this proposal and I know Francis Martin has said that it is no ‘silver bullet’. But I really do believe it could be a game-changer for us.

 

I have already heard some quite persuasive arguments around how we negotiate the cost to the block and I am convinced that since it has worked well elsewhere and as we are doing quite well on FDI even without a highly attractive tax environment, it could make a real difference to our fortunes.

 

And clearly the Chamber envisages other tax-varying powers, presumably in relation to some of its own proposals around VAT on home repairs and national Insurance contributions etc. We are ready to press ahead with all of that.

 

And then there is North South economic cooperation. We have got to take the stupid politics out of this proposition and stop walking on eggshells around it.

 

Never mind any more minimal interpretation of the Good Friday or St Andrews agreements if it makes sense, as it does, in terms of transport, energy, health, tourism, environment and spatial planning then we must do it.

Not to capture the opportunities to eliminate costly duplication and improve services is not clever. Nor is it clever to try and contrive North south solutions where they don’t exist. Again, SDLP philosophy – lets drop the baggage and ideology and do what makes sense.

 

 

(Long Term)

 

Which brings me to the longer term economic vision. We want – or at least the SDLP wants - us to be a strong regional economy that can stand on its own feet. But we will need more economic levers at our disposal and we will need to be prepared to take some big decisions.

 

We will also need to be spending money in the right areas in order to harvest the long term benefits. It is too facile to say just invest more in innovation, skills and research and development.

 

You cannot just throw money at universities and researchers unless you are confident that there will be a flow of bankable propositions coming to market. And as for skills, teaching thousands of youngsters how to prepare cvs and do job interviews when there are few actual jobs is not that productive.

 

We rightly talk about the STEM subjects in education – but how many young people, or older people for that matter, are learning Chinese?

 

I said more economic levers and that principally means control of our tax environment. But we cannot duck taking responsibility, ultimately for our own social security system. That is the only thing that restores the rational incentive, present in most developed economies, that it benefits us all to get people off benefits and into work.

 

*****

 

But this isn’t easy, so here is my big idea.

 

Let us have a 25 year framework economic and ‘financial compact’ with the Treasury which maps out the future in terms of tax-varying powers, the creation of our own social security system and the long-term delivery of the Block. Where we undertake to very gradually reduce the subvention in the long-term, but with a guaranteed level of Treasury support – even if the constitutional position of the North should change in the meantime.

 

This is the only way we can truly take control of our own future.

 

*****

 

 

I cannot let the opportunity pass without a quick comment about what you have already heard from Peter and Martin in earlier presentations to the Chamber.

 

Peter has said that his economic policies are better suited to many Catholics than the left of centre policies of the nationalists Parties. All I can say is that the SDLP does not do economic policies for Catholics or for Protestants. We need to unite people if we are going to build prosperity in this region. We seek to serve everyone equally and we invite DUP voters as well as everyone else, to consider our proposals.

 

 

As for Martin, his big idea is another levy on the local banks - £400 million over the budget period. Does he not realise that while it might be populist and an apparently clever stroke to have a pop at the banks – our 4 local banks are in no position to pay.

 

Two of the local banks are effectively publicly owned and all of them are laying off staff and struggling to extend credit to business.

 

The Sinn Fein levy would put thousands of ordinary bank workers – who are not to blame for the financial mess - on the dole, and make it even harder for businesses to borrow.

 

*****

 

I cannot get across all of the SDLP economic thinking in a 20 minute speech. I invite you to look at our proposals, in particular “Partnership and Economic Recovery”. There you will find a Party brimming with ideas and not tied down by ideology.

 

I tell you, SDLP ideas, combined with the natural SDLP instinct for partnership, can unite people and build prosperity in Northern Ireland.

  

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