It would be hard to argue that the economy is currently the number one priority of the Northern Ireland Executive or for that matter the UK government or many administrations around the world. That’s because governments are having to contend with a myriad of other problems and challenges from geopolitics and disruption related to elections, to aging populations and crises in health and housing.
Geopolitics in particular continues to dominate with tensions in the Middle East and the conflict in Ukraine, which is currently getting the same media attention but isn’t going away.
This in contrast to the years that followed 2010, when Stormont made the economy its clearly stated number one priority and set about trying to stimulate our private sector through job creation and attracting inward investment, with the goal of achieving a lower rate of corporation tax much talked about at the time.
Today, there are many other competing priorities, and a greater focus for instance on health due to our aging population and post-Covid issues. The pressure on NHS waiting lists today is vastly greater than it was back in 2010. Similarly, booking a GP or MOT appointment was much more straightforward 14 years ago. But despite all of this, the economy still needs to be high on the Executive’s agenda. How this looks though needs to be very different as much has changed since 2010.
Back in 2010, creating jobs was a priority because our unemployment rate was over 8%. Today, the unemployment rate is just 2.2%, so there isn’t the same onus on generating numbers of jobs. Since Q3 2007, private sector employment has increased by about 90,000 jobs, yet despite this growth, output is largely the same as it was.
Rather than growing the prosperity cake, the cake has stayed the same size, with more mouths to feed. Given the stagnation in real wages over the last 15 years, the focus now needs to be on productivity rather than just creating jobs.
Many of the things we took for granted also now need urgent attention. The economy’s ‘to do list’ is getting longer by the month with issues we thought we had fixed being added. In 2010, there was a ready supply of workers from home or abroad, such as from Eastern Europe. Interest rates were also at record lows and there was a sufficient supply of housing with rental accommodation being plentiful and relatively affordable.
Fast-forward to 2024, the surge in private sector rents and the slump in supply has been one of the crises brewing since the pandemic. Meanwhile, the number of new houses built last year was the lowest since 1959. On the labour supply front, Northern Ireland’s working-age population has fallen in the three years to December 2022, a feat not achieved since the early 1970s. This is contributing to the recruitment difficulties the length and breadth of the economy.
None of these issues around labour and housing supply would have been on the radar of those talking about the economy being the number one priority in 2010 but need to be front and centre today. Despite what would have been the view in the past in the corridors of government, housing is an economic issue as it affects your ability to attract labour.
Back in 2010, there was quite a narrow view of what the economy was. It was quite focused on job creation, support for businesses, and attracting inward investment. And there was more of a consensus around this because the health service, labour supply and housing supply weren’t the same challenges than they are today. The economy being the number one priority was a slogan that everyone could get behind and meant all things to all people.
There is much less consensus today around what needs to be done to improve the economy. What you want prioritised will vary greatly depending on your age, whether you have children, whether you own or rent a home and so on. It’s noted that at the start of the pandemic, less than half of 25-24-year-olds were in rented accommodation. In 2023 that figure had risen to 60%.
One of the big challenges for Stormont is determining what the economic priorities are. This will depend on who you talk to. Making the economy a priority today is going to be much less about direct support for businesses and more about addressing wider economic challenges that will indirectly benefit companies and people.
Part of this will be dealing with capacity constraints around housing, labour, childcare and public finances. Because if we were to do things like lower corporation tax, the ability of firms to grow and expand their workforce would be limited by these constraints, so dealing with them is necessary to enable growth.
As we await a budget, it’s inevitable we will see significant compromise. What that looks like remains to be seen. More economic potholes are going to appear. The issue is prioritising which ones need to be filled in now, which ones will be fixed in the longer-term, and which ones we just have to live with.
But in all likelihood, the priorities chosen by the Executive won’t tick all of the boxes in the corporate boardroom’s economy ‘to do’ list. Rather than ‘it’s the economy, stupid’, the mantra is more likely to be ‘it’s the electorate, stupid’. And the electorate of today is going to more vocal on issues like childcare, sufficient supply of housing, and health. While these might not be what businesses are shouting for, fixing them will be in businesses’s longer-term interests.
- Richard Ramsey is NI chief economist at Ulster Bank