Programme for Timidity
John O’Farrell finds the Executive’s plans falling short.
You wait months for some news of government action on the economy and then three arrive almost at once. The Northern Ireland Executive finally issued their draft Programme for Government, with a free gift of an Economic Strategy, both exuding a soft Keynesianism to soften the sharp edges of the Chancellor’s austerity mania, known as Plan A.
Then the Chancellor knocked out his Autumn Statement. If the PfG represents Plan B-minus, the latest bad news from Gideon Osborne was Plan A-plus, and the promise that this will take at least six years rather than four. Plan A is not working, apart from the first part, about shrinking the state. The rest, that the deficit would be addressed and that a rejuvenated private sector would transform social workers into skilled exporters of hi-tech trinkets and thus ‘rebalance’ the economy, is actually heading for zero growth and debt reaching 95 per cent of GDP. This was the response from Fitch Ratings: “The capacity of UK public finances to absorb adverse economic and financial shocks that would result in yet higher public debt while retaining its ‘AAA’ status has largely been exhausted.”
In order to evaluate the worth of the PfG and the Economic Strategy, we must understand the context in which it will operate and the political fact that we as a region are as sovereign as Greece or Italy. All we can do is tinker with the details. We are under the diktat of the Treasury, and the only real manner in which the Northern Ireland Assembly can challenge that is with the combined moral force of a coalition of all three devolved administrations and as many English councils as we can muster.
For example, promises to ‘promote’ 25,000 new jobs should take into account the 80,000 young people who will leave school over the four-year period of the PfG. Plans to ‘achieve’ £300 million in new foreign direct investment and a further £300 million in research and development are actually quite close to what was achieved since the last PfG.
In fact, most of the few solid commitments with dates and numbers are actually very modest. The rest is worthy but vague, and would actually be almost radical if implemented, such as the direct connection between public health and infrastructure, the emphasis on improving and evolving skills, and supporting social clauses on public procurement. Privatisation or PFI goes unmentioned and the public sector is seen as the clear driver to rejuvenate the private sector, the precise strategic opposite to Plan A.
The Keynesianism is, however, to be paid for through neoliberal methods: cutting corporation tax and business rates and scrapping air taxes. How this will work in practice is anyone’s guess. It certainly doesn’t work like any theory I’ve ever heard of.
As a response to Plan A, it lacks more than ideological coherence. It requires a political strategy, as outlined above. The severity of the Autumn Statement makes this clear. Take the tiny sliver of capital spending announced (mostly for Tory districts). This is to be paid by cutting the value of working family tax credits, Gordon Brown’s great legacy to the working poor. The Tories hate this, and most middle-class liberals don’t notice its importance, but it has helped lift over two million children out of poverty.
Meanwhile, Cameron and Osborne are off batting for Britain at EU summits, ensuring that the UK’s worst employers will be freed of the shackles of the Working Time Directive and the unreformed, unregulated and unpunished investment bankers can be unworried by an EU-wide financial transaction tax.
The new threat to Northern Ireland is regional pay for the public sector. The only way is down and a 10 per cent cut in the public sector pay bill would mean over £500 million less demand for the local private sector. Add to that another
£500 million from welfare ‘reform’, £50 million from state pensions changing from RPI to CPI, a de facto 15 per cent cut in public sector pay through freezes and a 1 per cent increase, stagnant private sector pay, plus another 30,000 unemployed on top of the 110,000 already looking for work in Northern Ireland and you have the frame in which the PfG must operate. It is not, to put it mildly, an adequate response.
