Category Archives: Commentary

Where we might be, or not. Who knows?

 

 

 

 

Brexit, of course.

First of all, a summary of the potential benefits of the Prime Minister’s Draft Withdrawal Agreement:

  • Provides comprehensive “legal cover” for leaving EU, e.g. keep the Eurostar running, UK drivers’ licenses in EU, over-flights by planes etc. etc.
  • Allows for a transition period- 30 March 2018-31 Dec. 2019- in effect UK remains under all the EU rules for a bit longer and so more time for the business community etc. to prepare for the exit.
  • In transition and, indeed, in the period of the operation of the back-stop NI +GB remain in the EU’s customs arrangements and NI remains in the Single Market. Thus ensuring whatever advantages flow from continuity of trading terms and arrangements.

However, there is a range of potential drawbacks:

  • UK continues to pay dues to EU until transition period is over, i.e. at least £39bn, and more if that period gets extended beyond 2020.
  • Could the UK ever exit from the customs union type arrangements?
  • And if the UK, i.e. GB, could leave EU might oblige it to “leave behind” NI (so NI-GB tariff barriers).
  • Checks on GB-to-NI “exports” to ensure compliance with EU Single Market regulations. Could that mean higher costs for grocery imports, for example?
  • NI could become a passive rule-taker, especially in terms of having to apply all EU regulations.
  • UK in general, and NI in particular, would be unable to use Brexit as springboard for global free trade agreements.

In economics and politics, as in life in general, the harsh reality is that we must live with trade offs. We can get more of one good thing only by having less of another good thing. So it is with Brexit and the content of the 580+ pages withdrawal agreement between the PM and the EU.

If, “the deal” can get through Parliament, a big IF, for many people the good news will be the continuity after March 2019 in terms of the UK’s customs and regulatory position relative to the EU. In reality, even if not in name, we carry on being part of both the customs union and Single Market. There are some advantages in this in terms of certainty for businesses at least in the short to medium term.

Unfortunately, the effort to keep NI within both Single Market and EU Customs Union entails multiple costs in economic terms (quite apart from a range of political issues). At some point in the future GB might choose to diverge from EU regulations. Northern Ireland would remain tied to those EU standards and hence a widening gap would open up across the North Channel.

Importantly, Northern Ireland’s total product “imports” from GB are vastly greater than the level of imports from the Republic of Ireland (or RoI/rEU combined).  In 2016, NI imported £11bn of goods from GB but only £2bn from RoI and a further £2bn from rest of EU ie the imports flow from GB three times that of entire EU27. For all the talk of best of both worlds the backstop arrangement increases the cost of doing business with NI for GB based business, and a potential barrier has been set in place that may impact on supply chains and the very significant investment into NI from GB. That may have consequences for consumer choice and consumer costs also.

It seems (and this is the EU’s own interpretation of what they are offering) the whole of the UK would be bound up with the EU’s custom arrangements for as long as the EU wishes that to be so. In these circumstances there would be little opportunity for the UK, including Northern Ireland, to forge new free trade deals with the wider world economy. This is very significant since the EU (excluding the UK) represents less than 15% of the world economy and that share has been shrinking over time.

It is also hard to see how the PM’s proposed deal would allow Brexit to become the decisive moment when there was a re-set of policy making in the UK including Northern Ireland; be that in terms of a global trading policy or a new approach to farming support.

Then there is the threat that a confused and badly managed set of Brexit arrangements will create the set of circumstances which can be used as the all-purpose excuse for every mistake in public policy over the next five or more years.  As if another excuse were needed.

 

Dr Esmond Birnie, Economist

 

Legacy – a series of essays

 

 

 

 

 

 

The News Letter has sent an email to registered readers providing a summary of its recent series of essays on the Legacy proposals currently the subject of “consultation”.

The premise in publishing the series has been simple: has been a scandal the way in which the whole weight of the British state has, at great expense to UK taxpayers, turned in on its own security forces who prevented civil war here in Northern Ireland (the introductory stories to the series list the current imbalance against security forces).

It is “Time to stop the terror legacy scandal” (August 20th). The series was backed with a strong Morning View editorial.

DITCH THE DOGMA – DO THE DEAL

 

 

 

 

 

In the imagination of remainers, the Tory European Research Group is a cadre of irreconcilable Brexit ultras, determined to wrench the UK from the EU in chaotic fashion. It’s ironic then, that the ERG’s latest paper is one of the calmest contributions to the Irish border debate, delivering low-key, rather technical solutions to practical problems raised by the frontier, rather than overheated rhetoric. 

Foundering on the Rocks of Reality

 

 

 

 

 

 

Republicans and nationalists call for a United Ireland, yet the thinking on what that might look like has to date seems crude, naïve, or non-existent. Irish mist-ical aspiration is preferred to the harsh realities of rational thinking. Philip Larkin asks some uncomfortable questions.

A crude reality

With increased discussion in social and political circles on the topic of the inevitability or otherwise of a united Ireland, the central object of this article is to examine what the true ramifications of creating a new state of Ireland will be, specifically from the viewpoints of northern nationalism and the population of the Republic of Ireland.

Gerry Adams twirling around the Northern Ireland public spending numbers

 

 

 

 

 

The former Sinn Fein leader, Mr Gerry Adams was recently arguing how Irish unity had become more an issue of “when” rather than “if”.

A critical plank of his argument was that Northern Ireland is not in fact as heavily subsidised by the UK Exchequer as many of us think: he believes the actual level of spending here is lower and as a result the gap or deficit between public monies spent and revenues raised by taxes in Northern Ireland is smaller than we are often told.

Amongst other things, if he is right, Irish unity could become more affordable. Mr Adams’s argument becomes something of a fiscal dance of the seven veils. With each sentence a few more billions come off!

Bold statements, bald facts

 

 

 

 

According to Brian Feeney: “Reality is that a century of partition has left the north much poorer than the south.” (£)

No one can deny Brian Feeney loves a sweeping statement: “Irish unity will be beneficial to all on the island” – everyone’s a winner  – he says, based supposedly on a report by Paul Gosling and Pat McArt. This may be the same as the report reviewed earlier on This Union, as the claims are as strange as ever. Or it could be from A New Union: A New Society – Ireland 2050 which does credit Pat McArt and appears on Gosling’s website in June, using the earlier report for economic points.

In fact, that The economic impact of an all-island economy published earlier this year assumed unity would be accompanied by quite a major reduction in public sector jobs and spending in Northern Ireland – despite the significant impact that could be expected on the NI economy from this cut, there was no accompanying indication on how the private sector might be able to compensate as local spending power diminishes, significantly. Besides…

Blue sky thinking?

 

 

 

 

 

 

 

In a recent report, The Economic Impact of an All Island Economy, the journalist Paul Gosling argues the case for unity. He summarised his point of view in an article in the Belfast Telegraph; 22 February, “Unionists are facing a perfect storm of Brexit and demographic shift”.

His arguments are in some ways strange.

The DUP prioritised The Union. Unionists do that.

 

 

 

 

 

The whole point of the DUP is to safeguard Northern Ireland’s position within the UK. As unionists, they believe in the nation state and see the UK as the rock on which our prosperity, security and identity is built.

It is unsurprising that these views have lead them into a strongly pro-Brexit stance, though even then there is a pragmatism to their politics that is sometimes missed. The government would have known what the DUP’s red lines were before the latest round of talks hit the buffers.

The Irish government denies the charge that it asked that Monday’s Brexit paper be kept from the DUP, but the reality is that the DUP had received only an emollient verbal briefing and had been asking for days to see a paper. It was passed to them only as Theresa May was going to lunch in Brussels; the frantic phone calls that followed stopped the deal in its tracks.

The issue of the Irish border is important, but not as challenging as the Irish government has made it.

The UK is trading just fine, together.

 

 

 

 

 

 

This is a brief response to Ed Conway “The UK is becoming a disunited Kingdom”writing in The Times (£) on 8th December. 

Mr Conway – Sky News Economics Editor – argues that the various UK regions do not constitute an “optimal currency area” and should not be sharing a single UK market and common currency.

Normally questions of single markets and currency areas would be the stuff of arcane economics – the sort of thing I’d be teaching to second and third year university students. However, it is pretty clear how commentary like Mr Conway’s could play into some current debates.

An intuitive presentation of what an optimal currency area might go something like this- because Newcastle-upon-Tyne and Newcastle-under-Lyme and Newcastle County Down do a lot of trade together it makes most sense that they share a currency: the pound sterling.

But imagine a town called Neuburg in Germany, the flow of trade between Germany and any of the UK Newcastles would be much smaller. Also, many other economic conditions would vary between the UK and Germany. Therefore, it makes sense for the UK to use the pound and Germany to use a different currency (the Euro, at the moment).

But, back to Mr Conway.

His argument that the UK-wide single market and currency area is breaking up is rather exaggerated.

He claims, for example:

 “…Northern Ireland is edging closer to its immediate neighbour”

However, the most recent data show that 86% of all of the sales of the Northern Ireland economy stay within the UK – 66% to Northern Ireland itself and the rest to GB – compared to only 5% to the Republic of Ireland.

Other UK regions are also trade dependent on the rest of the UK.

The UK optimal currency area/single market still has a strong economic rationale.

 

Dr Esmond Birnie – Economist

That was the deal that wasn’t.

 

 

 

 

 

What might have been the economic impact on Northern Ireland if the Prime Minister had in fact accepted the deal which was proposed by Brussels on the morning of Monday 4 December? Here are some key points:

  1. In order to ensure regulations continued to be aligned between Northern Ireland and the EU notwithstanding any changes in the rest of the UK, this deal implied a substantial increase in the extent of devolution to Northern Ireland.

That begs several questions. Even if we assume devolution can be restored, would it be sensible to give Stormont extra powers when we’ve seen just how erratic the progress of devolved government has been in its almost 20 years 1999-2017?

  1. If regulatory harmony between Northern Ireland and the Republic of Ireland (plus the other 26 EU members) is obtained at the price of opening up a regulatory gap between Northern Ireland and Great Britain that will imply a very large economic cost.