Irish News

While Ireland ponders the big issues we can barely afford to keep the lights on

Andrew Webb
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As the budget process in the south ramps up towards the autumn announcement of spending and tax measures, I have taken a bit of breather from looking at the public funding woes here to see how things are shaping up in Dublin.

It is probably no surprise to learn that compared to here it feels like economic night and day, particularly between our public finance woes and the embarrassment of riches the Finance Minister in Dublin has at his disposal. With a budget coming in the south, the decisions facing the government are more about how much extra to spend now and how much to hold back for the rainy day fund. Up here, as we know, those charged with managing our public finances are struggling with another ‘how we make ends meet’ conundrum.  

Within the budget planning process, Ireland has identified ‘4Ds’ that will have a major bearing on the evolution of Irish living standards in the years to come. These are equally applicable in the north. They are:

Demographics (an ageing population):

The number of elderly people in Northern Ireland could exceed the number of children by as soon as 2026. The 2021 Census revealed a continued fall in the birth rate and noted how the number of people aged over 65 rose by almost 25 per cent in the past 10 years.  The 326,500 people aged 65 or over in 2021 was 60,000 more than in 2011.

In contrast, the number of young children (aged 0-4) was down by nine per cent from the last census.

These changes in the population structure obviously have implications for service provision. Older people typically place a greater demand on health services and fewer young people creates potential labour market shortages.

Decarbonisation (the transition to net zero):

We are in a climate emergency. While there is climate legislation in Northern Ireland, we have been independently assessed as displaying limited evidence of delivery, and data gaps in key areas are unacceptably large. This is the conclusion of the Climate Change Committee in April this year when they assessed how we have progressed against our Climate Change Adaptation Plan. It also found limited or no action in areas such as health, energy, water supply and buildings. The Climate Change Committee does note that a new Adaptation Plan will be developed for 2024. It is essential, they note, that this plan goes much further than our previous efforts. Doing that is likely to require new legislation and significant funding. Finding money for anything new is going to prove exceptionally difficult and any new legislation surely requires a functioning Executive. 

Digitalisation (especially the opportunities and challenges associated with artificial intelligence):

Technology is a key driver of economic growth. We are now well into what is called the fourth industrial revolution’ with Artificial Intelligence, Robotics and automation all being embedded in our work lives at a greater pace. While I don’t expect mass redundancies and unemployment as robots take over, there will be winners and losers. Previous waves of technology adoption replaced manual and menial tasks. This latest wave of technology appears likely to impact on cognitive areas. Figures for Irish small and medium firms suggest that about 20% are highly digitalised. This is well below the EU average, and something that could hinder continued economic competitiveness if not addressed.  I haven’t seen comparable figures for Northern Ireland but it would be surprising if we aren’t broadly comparable to Irish levels of ‘highly digitalised’ when thinking about how consistently worse our productivity statistics compare to Ireland and the rest of the UK. Again, policy has a role to play in harnessing and supporting digital adoption and technological advances. 

De-globalisation (the threat posed to the economy from a ‘localisation’ of economic activity):

The final structural trend that is on Ireland’s radar is that the pandemic and then the Russian invasion of Ukraine have exposed significant ‘choke points’ in supply chains, with both Russian and Ukraine being important commodity exporters. This may result in a reshaping of supply chains in order to build resilience and boost economic security and see a growth in reshoring of production or diversification. The concern in all this is that significant shifts in global trade flows could result in permanently higher prices for products and commodities.

Responding to these and other challenges will be a key focus of the Irish Government in the years ahead. Ireland has the luxury of having their finances in order and that affords them the space to look at these bigger strategic issues. These same issues will bear down on us and should be a key focus of the Northern Ireland government but we all know the story there – with no sign of an Executive and a seemingly relentless public finance crisis, our focus doesn’t seem to stretch beyond keeping the (street) lights on.