Northern Ireland Economy

Debate between Owen Smith and Laurence Robertson

Thursday 1st March 2012 Westminster Hall

[Owen Smith (Pontypridd) (Lab)]

It is a pleasure to serve for the first time under your chairmanship, Mr Scott. I hope that Members here today and, perhaps more importantly, my constituents will forgive me, a Welshman, for speaking on St David’s day in a debate on Northern Ireland. I have seen colleagues speaking in the other Chamber, but I am delighted to be here speaking about Northern Ireland. Perhaps it will be recalled that I worked in Northern Ireland for several years as an adviser to the previous Government in a period when we did not have devolution in place in Northern Ireland, but when we were working towards delivering that.

Today’s debate has in many ways given us an insight into the radical changes that have taken place in Northern Ireland in the few short years between the period when I was working there and today. Of course, changes have taken place over a long period. The excellent, timely and passionate debate that we have had today on the economy of Northern Ireland is precisely the sort of debate we ought to be holding in this place and in the Stormont Assembly. It is not about security, policing or the latest atrocity, but about the things that are the bread and butter of any society in any body politic: the economy. The crucial issues are about how people earn their living, and the standard of living that they are able to enjoy because of that economy.

The Labour party played a tremendous role—I played a small part—and successive Governments have played a role in supporting the people of Northern Ireland to make the decisions that have allowed normalisation, as it is called, and allowed changes to come about. The Opposition will continue to play their part in standing shoulder to shoulder, as it were, with the people and the parties of Northern Ireland to try to further the cause of peace and normalisation, as well as the economic development of Northern Ireland. I know that Government Ministers will also want to do that, alongside—he ought to be right hon.—my hon. Friend the Member for Gedling (Vernon Coaker), who is the shadow Secretary of State for Northern Ireland, and my hon. Friend the Member for Ealing North (Stephen Pound), who is a shadow Minister. They will play their part in trying to take matters forward.

It is a disappointment and a surprise—I feel I must mention it, given that hon. Members from Northern Ireland have mentioned it—that we do not have with us today either the Secretary of State for Northern Ireland or his deputy. That will surprise people in Northern Ireland. Although this is a Treasury debate, it is a Northern Ireland debate, too. It is disappointing that they are not here today. It is a feather in the cap of my hon. Friend the Member for Gedling, the shadow Secretary of State, that he is present. [Interruption.] The Minister may laugh, but in Northern Ireland people will not necessarily be laughing: I think they might be slightly concerned that the Secretary of State did not see fit to have someone here today.

There are many areas in which there is much agreement between the Government and ourselves, not just on policing and security and constitutional developments in Northern Ireland, but on the economy. We agree that there is, for all sorts of understandable and historical reasons, over-dependence on the public sector in Northern Ireland, and that too great a proportion of gross domestic product is spent by and in the public sector. We accept that the economy must be rebalanced over the long period and that we should build a robust, vibrant and wealth-generating private sector in Northern Ireland, as we must do in the rest of the UK. That means both building the indigenous, domestic private sector and attracting foreign direct investment from across the world. However, on some aspects of the economy, there are disagreements on what a Labour Government would do if we were in power and what the current Government are doing.

Let me first address the base line for the economy in Northern Ireland. As we have heard in today’s debate, it is a complex picture—one cannot take a simple snapshot of Northern Ireland. The Northern Ireland economy has many great strengths, many of which were highlighted today by hon. Members. The right hon. Member for Belfast North (Mr Dodds), the hon. Member for Belfast East (Naomi Long) and my hon. Friend the Member for Belfast South (Dr McDonnell) all drew attention to the great strengths of the Northern Ireland economy. Northern Ireland attracted the second highest proportion of FDI out of all the regions in the UK.

I do not think anyone mentioned education. In my experience, Northern Ireland has a hugely educated work force, a hugely educated part of society and a young part of society. The transport and broadband infrastructure are crucial advantages. Lastly, the beauty and natural attractions of Northern Ireland—its people and topography—are wholly underexploited. We must do more to exploit the potential of tourism in Northern Ireland.

Of course, there are problems, just as there are in all parts of our economy. Gross value added per capita is lower in Northern Ireland than just about anywhere else in the UK—£15,000 or thereabouts per person versus £20,000 in England. Unemployment is a mixed picture. It is lower in Northern Ireland than in the UK—7.2% versus 8.2%. That is a legacy of the increase in employment in Northern Ireland, especially in retail and construction, which was part of the legacy of the ending of the troubles in the past decade. However, retail and construction are some areas that have suffered most in the economic downturn. Young people have also suffered in that period. My hon. Friend the Member for South Down (Ms Ritchie) highlighted that 18% of young people in Northern Ireland are unemployed, which is a price we should not be paying.

Of the people in work, we heard that around 30% of people working in Northern Ireland are in the public sector, versus 21% in the rest of the UK. We need to address that at some point. There is also a mixed picture for business in Northern Ireland, where indigenous, domestic start-up rates are low. FDI is, as we have heard, high, but its relative value is low, including the innovativeness of that FDI. On another metric—business expenditure on research and development—unfortunately the Province still does not fare well compared with the rest of the UK.

Many economic levers now sit with the Northern Ireland Executive, and that is absolutely right. Many of those levers are being pulled extremely effectively by the Northern Ireland Executive, but Westminster is still key. Under the current settlement, the Government in Westminster, whatever their complexion, still have to make critical decisions. What have the Government done since they took power in May 2010? The rhetoric has been extremely strong, and the volume of words produced about the Northern Ireland economy has been considerable. Notable, of course, is the document that many have referred to today, “Rebalancing the Northern Ireland economy”. The document talks about the need to reduce the deficit fairly while building enterprise.

Only this week, the Secretary of State for Northern Ireland returned to the theme and gave an interesting speech at Queen’s university Belfast. He said:

“I’ve said many times that re-balancing the economy here could take up to 25 years. But it has to be our priority…not by taking an axe to the public sector…but by creating the conditions that enable the private sector to grow.”

We would agree with him about that, but we would also suggest that he looks at the facts that pertain to Northern Ireland and what has happened to the economy on his watch. Crucially, as we have heard again today, overall spending in Northern Ireland is being reduced by £4 billion over the spending period. We are seeing a 40% reduction in capital expenditure. Regarding public sector jobs—the ones I presume the Secretary of State did not want to take an axe to—he should read the report by the Office for National Statistics that came out today, which shows that 9,000 public sector jobs have been lost in Northern Ireland since the second quarter of 2010, when his Government came to power. There are now 218,000 public sector jobs in Northern Ireland, compared with 227,000 when the Labour Government left office.

I have a question for the Exchequer Secretary. We now know that 710,000 public sector jobs will be lost on this Government’s watch over the spending review. We do not have regional breakdowns for that figure, but the Irish congress of trade unions suggests that job losses in Northern Ireland could be as much as 26,000. Would the Minister care to offer his view as to how many public sector jobs will be lost in Northern Ireland on his watch? If he cannot answer that, will he go away and look at the issue? It is crucial that we have a clear understanding of the impact of the changes.

Another set of changes that is at the forefront of many people’s minds in Northern Ireland as we approach the Budget and the start of a financial year is welfare cuts. They will affect thousands of families across this country, including in Northern Ireland. I suggest that Ministers look at what the impact will be for ordinary families. The Library suggests that in Northern Ireland 5,000 families with young children, in which the parents are in part-time work, may lose as much as £4,000 a year as a result of the changes to the welfare thresholds. That is a huge amount of money for relatively low-paid families to lose. That is a measure of the impact of the Government’s changes. Those facts do not reconcile terribly well with the statement made in “Rebalancing the Northern Ireland Economy” that the Government want their changes to be fair; they show that the Government are not being fair.

[Mr Laurence Robertson]

The hon. Gentleman will be aware that one of the indicators in Northern Ireland that is not as good as in the rest of the UK is the figure regarding the economically active. Given that the welfare cap will be £26,000, which one would have to earn £35,000 to bring home, is he aware that the median wage in the private sector in Northern Ireland is £20,000? That is a lot less than £35,000. What would be the incentive for people to go out to work if the cap were not to be there?

[Owen Smith]

We need to make work pay—there is no doubt about that—and we need to make work attractive. However, the hon. Gentleman will know that while the unemployment rate may be relatively better than that of the rest of the UK, one of the blacker marks of the Northern Ireland economy is that the economic inactivity rate is worse—27% versus 23%. Such things are neither simple nor straightforward, and they will prove to be difficult. However, we need to ensure that we apply changes fairly and proportionately.