Economist warns North must expect expenditure cuts

NORTHERN IRELAND needs to prepare for the impact of potentially wide-ranging public expenditure cuts after the next general election, one of the North’s senior economists has warned.

Michael Smyth, head of the school of economics at the University of Ulster, says politicians in the North also urgently need to review the Northern Ireland budget in the light of increased pressures at this time.

He says it is clear the local administration has been “much less proactive” than some of its counterparts in other devolved administrations in its response to the global economic crisis.

By contrast, he says, Scotland’s Executive produced a national recovery plan last August, which has since been revised. The North’s Programme for Government and its budget remain largely unchanged since their publication last January.

In the latest First Trust Bank Economic Outlook and Business Review, published today, he recommends it is time for the North’s Executive to “start the ball rolling”.

“Depending upon the outcome of next year’s general election, Northern Ireland faces a period of public expenditure austerity. This means that the Northern Ireland Executive will finally have to make some difficult decisions about public services, about the investment strategy and about public sector employment.”

The “contrast in conditions between the two economies on the island of Ireland could not be starker”. Policy-makers in the Republic are facing up to some very “unpopular decisions about public expenditure”.

Mr Smyth believes that, although the North’s economy has been “less severely affected” than many other UK regions by the downturn, it has also taken its toll.

“Unemployment has risen sharply, employment has dipped, consumer demand has weakened and confidence among households and businesses has not been as low for more than a generation.”

He expects the North’s economy to remain flat during the second half of 2009, and unemployment to rise to more than 60,000 next year. However, he predicts business confidence will pick up slowly. “Labour market conditions will remain very difficult until the middle of next year, when some stability may return as the recovery consolidates.”