Block grant brings benefits – but has become a fiscal crutch – By Independent Financial Expert

 

During one of my summer vacations as a student I drove a van around Northern Ireland for my uncle – it involved loading and unloading heavy goods and working long hours. When I relayed these facts to my uncle he told me that in life there were two paths – the hard way and the harder way! His message was short, sharp and to the point and spurred me on to get my university degree.

Whilst my uncle’s words are as true today as they were 30 years ago, they somehow don’t seem to apply to our part of the world in the same way as they do elsewhere. In countries around the globe, the choices that people, communities and governments make have social, political and most noticeably economic consequences. For example, in the US, the election of ‘the Donald’ has had a profound impact on the life of most Americans and this has been very noticeable in the recent results from the US economy. Whilst I do not intend to offer an opinion on the merits or otherwise of what Team Trump are doing (and I am thus in a minority of one in that respect), the point is that there was a clear impact of the choices made in last November’s presidential election. In the same way, earlier this year the people of France voted for Emmanuel Macron, a virtual newcomer, to be their president and he is currently making significant waves in the French economy and beyond. Once again proving there are clear effects from choices made.

However, despite the northern electorate having several opportunities to have their say over the last few years, there appears to have been little consequence or effect to our economy from the subsequent downing of tools by our politicians. Despite dire warnings from all quarters that this political inertia will have a catastrophic impact on both our society and economy , not only has the roof not caved in, it appears that there is hardly a tile missing! An almost unprecedented state of catatonic reality suspension has been created.

Let’s take a step back. If the US, French or indeed any other government in the world just stopped for over a year (which in reality is what has happened given that the whole RHI shenanigans kicked off about this time last year) there would be massive consequences. If there were no finance bills or budgets, no ministerial direction on public services, no legislative body to set or amend laws and no executive office overseeing the whole process then the US and French economies would be in a nose dive. There would be dire economic consequences as national and international business would be seriously considering whether that country was stable enough to continue to operate in. This would lead to falling levels of economic output, job insecurity and indeed job losses and it would significantly hamper economic growth. There would be mass protests, calls for political resignations and, inevitably, the incumbent government would be ousted and replaced.

Yet here in Northern Ireland there has hardly been a murmur. Yes there has been a lot of shoulder shrugging and sighing and declarations of exasperation. That is the sort of thing you expect to see if your satellite TV service goes on the blink. There has been annoyance at an inconvenience as opposed to outrage and mass public discord. Don’t get me wrong, I do not want a return to mass public discord in Northern Ireland – there has been too much of that in the past for all the wrong reasons – however the question has to be asked, why has there been such a soporific response to the events, or to be more precise lack of events, of the last year and why has this appeared to have had little or no obvious effect on our economy?

One could argue that the NI economy is in such a poor state of health that the lack of political involvement is unlikely to make matters much worse than they are. I think that this would be unfair to the state of the economy which despite being far too small, is both robust and dynamic. A fairer observation would be that the Northern business community has learned over the years that it can survive without political support, and in some cases even thrive. Nevertheless this state of affairs must be sub optimal and our economy would clearly be on a stronger footing if there was a thriving interaction between the business community and a forward thinking and engaged political class. Indeed, it is apparent that the political classes believe that they can operate just fine without the input of the business community (unless it is to help fill party coffers with donations). Once again this is clearly sub optimal when compared to the dynamic interaction that can and does take place in other small countries throughout the world.

One of the key reasons why our political stagnation has not lead to the anticipated economic disaster is the never ending generosity of the NI Block grant. Whilst we hear nothing but criticism from our politicians of any cut to this grant from central government, it is rarely acknowledged that it is the most generous subvention to any of the regions in the UK. The block grant has clearly brought countless benefits to our economy and society over the last 50 years, but along the way it has become so woven into the fabric of our psyche that it has in effect become a fiscal crutch which inhibits economic progression and facilitates political inertia. As our local elected representatives do not have to raise the funds to pay for the grant nor indeed do they even have to enter into government for the funds to be made available, they can effectively put their collective feet up and not experience the socioeconomic effects that would occur in any other country that tried the same thing. Indeed taken one step further by not entering government, the local representatives can effectively pass tough issues along the line to either be sorted out by or blamed on the UK government.

As long as the block grant still flows and is not dependent on a working assembly and executive, the economic impact of a non-functioning devolved government is extremely limited when compared to what would happen elsewhere in the world.

I can already hear the well-worn battle cry of “But Northern Ireland/ the North is a special case and we deserve extra funding to get over our issues”. This mantra is now starting to sound very hollow in the corridors of Westminster and further afield. Indeed sooner or later ( and I think it will be sooner) out local politicians are going to find out that in fiscal and economic terms there are two paths – the hard way and the harder way.

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