The path from lockdown to recovery . . .
Stormont finance minister Conor Murphy, writing exclusively for Business Insight, looks at how the north's economy can emerge from the current coronavirus pandemic
THE Executive has announced its first step in easing the restrictions it imposed to save lives and prevent the health service from being overwhelmed. Protecting people’s health continues to be the paramount concern as we enter the recovery phase.
The challenge is to reopen the economy without risking a resurgence of the virus and a return to lockdown. In managing this transition the Department of Finance’s key responsibilities include the budget, rates, procurement, and construction.
My department has £1.2 billion to allocate to the Covid-19 response. Departments submit proposals and then the Executive agrees how to distribute the funding. Supporting business has been a focus of our allocations alongside supporting the health service and protecting the vulnerable.
Some £410m has been provided for business grants, £25m for farmers and horticulture, and £1.5m for the fishing industry. Another £95m has been set aside for transport, £5.5m of which has been used to sustain ports and airports. £30m has gone to Translink in addition to the £20m allocated in the Budget.
Covid has disrupted the spending plans of all departments, creating new pressures at the same time as meaning that many projects won’t go ahead as planned. It’s crucial that departments identify where expenditure won’t be required as originally intended. I have therefore initiated a reprioritisation exercise across all departments to enable us to redirect resources to the recovery.
Rates are the Executive’s main tax lever. When the pandemic emerged our immediate response was to give all businesses a three-month rates holiday. This helped ease the immediate cash flow crisis.
I then commissioned the Ulster University Economic Policy Centre to identify the sectors hardest hit by the pandemic, in order to develop a more targeted rates relief scheme. The report advised that trade will be slow to resume across all sectors. I have therefore extended the rates holiday by a further month.
The report also identified hospitality, tourism, leisure, childcare, airports, and retail as the sectors with greatest need. With the exception of larger food stores and off-licences, these sectors will pay no rates for the entire financial year. My officials are developing the regulations which will include a detailed list of the businesses included in these sectors. In total this amounts to £310m in rates relief for businesses, on top of the overall 18 per cent rates reduction announced in the budget.
When the economy went into lockdown my department issued new guidance to ensure that government contractors and sub-contractors continued to be paid so that the cash flow could be maintained and jobs could be preserved.
Further procurement guidance will be issued to ensure that government contracts are flexible enough adapt to the uncertainties and new challenges we face. For example the disruption to air and sea transport increases the value on security of supply and this should be reflected in tender processes. A heightened emphasis on security of supply will benefit businesses on this island, many of which have already repurposed their operations, for example to produce PPE.
The construction industry, which comes within my department’s remit, is key to our economic recovery. In conjunction with industry representatives, guidance has been produced on safe working in the construction sector. The use of PPE, social distancing, staff self-isolating, and increased cleaning will be key aspects of this and other sectors for the foreseeable future.
I have asked Executive colleagues to bring forward their capital plans for the year so that a strong pipeline of projects are ready to restart the construction industry.
I have also secured Executive agreement to match-fund City/Growth Deals and the Inclusive future fund, providing £1.2bn of capital investment for longer-term infrastructure, innovation, and tourism projects. My department is also exploring options to make greater use of financial transaction capital.
In conclusion, safely exiting lockdown is not the only economic challenge we face. The historic issues of slow growth, poverty, low pay and productivity, and regional imbalances remain. The implementation period for Brexit is coming to an end, triggering the operation of the Irish Protocol. And we face the existential threat of global warming, which requires a transition to a zero carbon economy.
A return to the pre-pandemic economy cannot be the limit of our aspirations. A safe recovery must go hand in hand with building a productive, inclusive, regionally balanced, zero-carbon economy.