“Déjà vu--- Economic policy in NI and dealing with the £ 4 bn reduction”

1. “Déjà vu--- Economic policy in NI and dealing with the £ 4 bn reduction” • “£ 4 bn of cuts” - £ 1.4 bn reduction in departmental spend by 2014/15 • Are options (of varying attractiveness): • Asset sales • Leverage from assets • Revenue raising • Improved service delivery • Make do with less capital spend (but….) NICVA Conference- Live Issues for the Economy

2. Spending Review- what really happened? NI’s allocation actually quite “average” Source: HM Treasury NICVA Conference

3. Where do we want to be by 2020? • The need to rebalance the economy is now essential • Focus on private/public sectors -- but there will be a role for a sustainable/re-structured voluntary sector • Rebalancing will take at least a decade to deliver real improvements • Our response to the current crisis will determine future prosperity • We must understand past mistakes –not repeat them • The Spending Review is the first test of our will to change NICVA Conference

4. Action • We do now have a draft Budget– for which credit due • But lack of detail about Departmental spending plans • Do the sums add up anyway e.g. re extent and methods of revenue raising? • Have the hard choices really been recognised and made? NICVA Conference s

5. Doing nothing is not a costless option • More of the same leads to more of the same… • GDP per capita (relative to UK average) flat for three decades • Public sector as a share of regional income- unsustainable • Proportional decline of manufacturing alongside growth if at allof (often) low productivity services • In the current UK/ROI and European climate doing nothing is a recipe for stagnation or catastrophe NICVA Conference

6. The status-quo offers no medium-term comfort Historic challenges and growth constraints amplified by new circumstances

7. Despite sustained public spending the prosperity gap remains Comparative GDP per capita,1921-2009 as a % of the UK average Source: Birnie & Hitchens (2001) Irish Political Studies, Vol 16 / ONS

8. Whilst the sum of 15 reviews in 50 years is little progress “…Northern Ireland has been unable to make progress on a convergence of living standards towards the UK average, with relatively poor labour productivity the main factor behind this”. (IREP, E.14) “…Northern Ireland should be in the vanguard of applying new scientific ideas to industry; and this, in turn, depends on a willingness on the part of the government and public alike to be venturesome in trying out new ideas…”(Isles and Cuthbert, p. 373) Issues raised in the mid 1950s – low productivity & lack of competitiveness – were repeated in every report since “From a study of aggregate income it will emerge that the average per head is much lower than in Great Britain”(Isles and Cuthbert, p. 5). “The promotion of Innovation and R & D – including business sophistication and, at the regional level, technology transfer – is the most important long term driver of productivity. This is essential for Northern Ireland to move up the value chain…” (IREP, E.17) NICVA Conference

9. The potential cost of the CSR • Possible employment implications of the CSR (equivalent jobs) • OBR forecast a possible 330,000 job loss across UK • NI’s share would be 14,000 • PwC modelling suggests a knock on to private sector of maybe 11,000 • All this worst case, i.e. no mitigating measures NICVA Conference

10. To an extent, the Irish crisis is our crisis • In good times our linkage to the ROI economy pulled us up, now it’s the other direction: • 2009-10 manufacturing exports to ROI 10 % of manufacturing output • Some sectors highly linked e.g. agric food • NI construction firms/workers • Impact of cross-border shopping • Exposure of banks NICVA Conference

11. And a decade of local growth has added little • The growth which was actually achieved during 1998-2008 added little to productivity • More than a quarter of the employment gain during 1998-2008 lost in the downturn NICVA Conference

12. The Crisis brings an opportunity • Begin to rebalance the economy • Once again, doing nothing is not without cost, • The past 50+ years has taught a hard lesson • If we don’t make radical adjustments, NI will rapidly stagnate • With consequent widespread social costs NICVA Conference

13. So, what do we do now? • It’s not just about cuts… • Modernise and re-design delivery of public services • Rebalance the economy and drive private sector growth • Demonstrate political leadership and unite citizens • A restructured/sustainable community and voluntary sector NICVA Conference s

14. CSR offers the chance to modernise public sector Challenge the cost and means of service delivery - but not ring-fencing cost NICVA Conference

15. Government offers tools to rebalance the economy Can we negotiate devolved tax-varying powers (wider than Corporation Tax)to drive FDI and investment? NICVA Conference

16. Political consensus is essential to deliver the outcomes The pain is shared but political consensus is essential to deliver change. Is it just possible that the severity of the challenge will provoke a sufficient response? NICVA Conference

17. A Brave New World for community and voluntary sector– the world you will have to work in • Proportionally smaller public/larger private sectors • EU funds continue to taper down • Rhetoric of (new) localism but (in NI) indefinitely postponed RPA etc • Big Society (?) • Responding to London-based welfare reform NICVA Conference s

18. How the Third Sector could respond? • Realism re. funding • Reduce fragmentation/duplication in order to build up the necessary economies of scale/capacities • No necessary contradiction between its ethos and (sometimes) either an efficient/effective deliverer of commissioned public sector services or a successful competitor in markets • Press for a joined up response from Executive BNICVA Conference