Business

All change at the top - and new dispensation for Northern Ireland

A new door opened yesterday for Arlene Foster as she formally took up the role of First Minister. Photo Colm Lenaghan/Pacemaker Press
A new door opened yesterday for Arlene Foster as she formally took up the role of First Minister. Photo Colm Lenaghan/Pacemaker Press A new door opened yesterday for Arlene Foster as she formally took up the role of First Minister. Photo Colm Lenaghan/Pacemaker Press

THIS new year is already heralding the changes in Northern Ireland. By the time you are reading this we will have a new team heading up the Office of First Minister and Deputy First Minister; Arlene Foster is the first female First Minister and Martin McGuinness’ third partner in that joint role. That means we will have a new Minister of Finance too and unless Simon Hamilton is moved back into that role, which seems unlikely, then we will have a newcomer to that office too.

Those changes in personnel are interesting but probably minor in significance when we consider that after the May elections the most notable change to the administration of power in Northern Ireland since 1998 comes into effect with 12 central Government Departments being reduced to nine. Party politicking is also likely to lead to the creation of a more solidified yet unofficial opposition at Stormont when the minor parties decide whether to join the 'Big Two' or remain away from the Executive table. Interesting times ahead for 2016.

One of the Arlene Foster’s last acts as Finance Minister was to strike a one-year budget covering spending by Government Departments in 2016/17. Given the prevailing political circumstances - chiefly the imminent structural changes outlined above - a one-year budget was all that was practical to set out.

But is it not ideal, and by its very nature it does not allow for longer term planning of key departmental priorities and budgets. It was noticeable also that a number of business representative bodies were less than fulsome in their praise for the budget. The Northern Ireland Chamber of Commerce singled out the lack of support for higher education places as a fault, along with the proposed underfunding of the to be established Department of the Economy.

The Chamber reasonably points out that if the imminent reduction in corporation tax does lead to the level of foreign direct investment we are hoping for, then we will need a supply of skilled employees to take up those jobs. The 2016/17 budget does not adequately support the retention of graduate numbers.

However, our political leaders are nothing if they are not pragmatic. The Assembly and Executive have shown over recent years that money can be found in-year, and the quarterly monitoring rounds, whereby unspent departmental money is returned to DFP and re-allocated to departments based on bids made by ministers - have become an important financial tool.

There has already been additional UK funding allocated to the Executive through the Barnett Formula in relation to flood relief and this is another source of financial flexibility which the Finance Minister can use between now and the setting of a longer term budget after the May election. So issues like student numbers, along with ongoing health pressures, can be accommodated in-year. In those circumstances, the budget should be seen not as a straitjacket but as a starting point.

MLAs will now consider that budget. Given that the budget arises from and forms part of the Fresh Start political agreement announced before Christmas, it will be voted through the Assembly, but MLAs will have the opportunity to scrutinise the content.

The Assembly has published a research paper designed to assist MLAs as they go about that scrutiny. It does not make for positive reading and shows how far off the UK average Northern Ireland is when it comes to economic recovery. UK-wide growth is for 2015 is estimated to be 2.4 per cent, but in Northern Ireland we are stuck on 1.6 per cent, the lowest of 12 UK regions.

Along with Wales, Northern Ireland is the only region to have growth levels below the 2012 period. We also have the lowest average wage in the UK, which the London Treasury judges to be a result of an economy dependent on food processing and agriculture and an under representation of business and financial services.

In fact the paper summarises the Northern Ireland position in these stark terms: “NI can be viewed as having a low growth, low productivity, and low wage economy, with the additional problem of high levels of economic inactivity that are apparently resistant to positive changes in the economic cycle.”

Such is the challenge faced by the new Stormont management team immediately, and for whoever takes up ministerial roles following the election.

But, it is a new year and not the time for doom and gloom. The fact that a deal was done, a budget has been struck and political commitments to stability have been renewed all offer some encouragement that the economy can be centre stage in 2016, and not just on paper but in political reality.

Arlene Foster brings to her new office more than seven years experience of selling Northern Ireland plc on an international stage in her role as DETI Minister, and doing so effectively. Good luck to her.