Something strange and remarkable is happening to Northern Ireland’s economy: the private sector is thriving while the public sector falls apart. One should not be moving in the opposite direction to the other. For the past half-century, the private sector was small, weak and dependent on public wages, contracts, subsidies and other investments. Now it is powering ahead – not just without the public sector, but in spite of it.
Dysfunctional government is a growing obstruction to business activity in a number of ways. Sclerotic planning and overloaded sewers are prominent examples. Underinvestment in infrastructure and education are less discussed but almost certainly more damaging. Spineless politics underlies every disaster. Stormont refuses to raise household charges, shifting the tax burden on to businesses. It will not cut populist giveaways, even as services are starved of funds. Hence universities cannot expand because tuition fees are subsidised. Essential reforms get stuck in deadlocked arguments for decades, a failing that appears endemic to powersharing. A quarter of children leave school without minimum qualifications, because it has proved impossible to abolish academic selection, which segregates schools by social class. Vocational training has fallen between the cracks. Similar indecision has brought the health service to the point of collapse, sparking a boom in private healthcare but stoking up incalculable costs to business behind the scenes. Sickness absence rates have risen sharply across the workforce and a third of the population has a long-term illness. Health insurance is becoming a standard employee perk.
Against all these headwinds, the private sector is delivering unprecedented growth, wages and employment, lifting the economy as a whole into record-breaking territory. Last month’s seasonally-adjusted unemployment figure was 1.9 per cent, the lowest in history. Northern Ireland is becoming a mid-ranking UK region by several economic indicators, having long competed for last place with Wales and the northeast of England.
Special arrangements for Brexit cannot be responsible. The Windsor Framework covers only manufacturing, a weak spot within the private sector. Most growth is concentrated in services. Northern Ireland’s success is very much a “despite Brexit” story, and even more a “despite Stormont” story. When devolution is not actively getting in the way, it is passively useless or simply absent: there has been no executive for five of the past nine years.
This is a politically orphaned phenomenon, unsurprisingly. No Stormont party acknowledges it, let alone claims ownership of it. An attractive space is available on the centre right for any party that would like to try, by advocating for smaller government as a virtue, through serious reform of public services and getting out of the private sector’s way.
Such a position might suit the UUP under new leadership and would once have been the natural stance of the DUP, at least as a posture. It is now deeply unfashionable across the political spectrum, in Northern Ireland as around the world. The four-party Stormont executive is supposedly preparing a programme for government – the first it will have produced since 2011. This is expected to include an industrial strategy, or “picking winners”, as it was bravely called it in the 1970s. It will join strategies for everything else, most of which will inevitably come to nothing. Business groups are pleading for a programme for government, not because they think it will be enacted, but because it helps them to know the direction in which Stormont is not moving.
The DUP destroyed its reputation for economic management through Brexit and the renewable heat incentive. Shrinking to second-largest party has since drained it of the will to stand on the classic centre right. It seems to see little point portraying itself as a responsible leader taking difficult decisions when it is no longer Stormont’s leading party. Meanwhile, Sinn Féin is trying to build its reputation for economic management from the left, pushing for the industrial strategy and a separate policy on workers’ rights, including abolition of zero-hours contracts. However, the logic of essential public sector reform, a booming private sector and becoming the largest party points to it exploring a pro-businesses, smaller government stance. This would not be unprecedented. In the 2015 Fresh Start agreement, which revived devolution after a three-year crisis over welfare reform, Sinn Féin signed up to a DUP-led package to “rebalance the economy”. This involved a 10 per cent reduction in public sector employment, merging public bodies and devolving corporation tax to cut it to the same level as the Republic. Much of this was achieved, although its success was debatable. Left-wing rivals, North and South, attacked Sinn Féin, but the sky did not fall in. The renewable heat incentive caused the executive to fall instead and its experiment was largely forgotten.
If Sinn Féin was prepared to follow such a policy, why not lead on something like it when the economy is rebalancing anyway?