Esmond Birnie: It far exaggerates things to say that the 1998 Belfast Agreement caused the Northern Ireland economy to double

The report represents an interesting compilation of statistics about the NI economy in the 20-25 years since 1998. Such considerations can be worthwhile worthwhile but the OCO report (unintentionally) far exaggerates the scale of improvement, notably in terms of saying the size of NI’s GDP has more than doubled since 1998. This claim about a doubling in size of the NI economy featured on the front page of Monday’s Belfast Telegraph.

The only way in which that statement is true is if GDP is measured to include growth through inflation – the standard way of comparing economic growth rates between countries, or across time, is to take out the effect of inflation. To measure the volume of GDP in constant prices. In constant prices, according to the most recent ONS (Office for National Statistics) data (ONS 30 May 2022, ‘Regional GDP: ALL ITL Regions Dataset’) NI’s GDP grew by about 28% during 1998-2020. The UK economy, overall, grew by about 33%.

So, yes, some growth but far from doubling and NI’s performance (Good Friday Agreement or any other factors notwithstanding) is not that different from the UK average over the 22 years.

‘Bliss it was in that dawn to be alive. But to be young was very heaven.’ It might be an exaggeration to apply Wordsworth’s description of his disillusionment with the French Revolution to describe how some of us feel about 1998 and subsequent events, but not entirely so. There were opportunities then which were not realised. Twenty-five years on, that agreement was obviously important in political terms but how much difference did it make to Northern Ireland’s economic life?

A number of points can be made:

• Economic life and well-being have improved for most people

One indicator of this is that Northern Ireland’s population has grown considerably adding over 200,000 people during the period (the 2001 Census records a population of 1.685m and the most recent census, in 2021, records 1.903m). The previous historical trend of being a net exporter of people was reversed. A much higher percentage of the population now comes from outside Northern Ireland; positive net in-migration added 35,000 people during 1998-2015. Not only are there more of us but on average we live longer. Those of us who are of working age are now less likely to be unemployed. A higher percentage are in work and wages and incomes are higher comparing today with 20-25 years ago. Moreover the participation rate in university education is now higher than it was back in 1998.

• But was the year 1998 really a significant economic milestone?

If one looks at indicators such as population growth or employment or tourist numbers it looks as though the turning points in performance came before 1998. Even if political agreement helped to improve things, they were already on an upwards path. It may be that one broader impact of the agreement was to help fuel the rise in house prices which reached its peak in 2007– that may have been a very mixed blessing! The big spike in inward migration came in the mid 2000s after the central European countries joined the EU. Consideration of economic performance over the 1998-2017 period suggests other factors were more important than the political agreement – the very rapid growth in public expenditure during the Blair-Brown years and the impact of the banking crisis during 2007-8.

• Economic performance much the same in relative terms

Twenty-five years on from 1998 significant performance gaps relative to UK average and, more latterly, the Republic of Ireland persist. Some of these – notably with respect to Gross Value Added (GVA) or output per head – are about the same now as in 1998.

• Did the 1998 Agreement produce greater political stability?

Such stability may matter to business but it is far from obvious the answer to this question is ‘yes’. Devolution did not operate continuously throughout the 25 years. It was stop-start during December 1999-October 2002. The mid 2007-Jan 2017 period of operation was marked by three lengthy periods of political crisis/negotiations. And, and then we’ve had the pauses in 2017-20 and then 2022-23 (to date).

• Did the new political arrangements produce better policy and performance?

As to the ‘quality’ of ‘devolved policy’, we have already noted that performance did not improve much (if at all) in comparative terms. In theory devolution provided opportunities to do things in a manner which was appropriately different from the rest of the UK but these opportunities were rarely taken.

What the devolved Executive did choose to do post 2007 was to allow the development of ‘super parity’. That is, a relatively low level of taxes and charges compared to GB. There were many fiscal give aways some of which now look unsustainable. Similarly, the Renewable Heat Incentive (RHI) was an example of something of a solo-run in policy terms. Has Northern Ireland benefitted from such policies? Corporation Tax devolution has been billed as a significant policy innovation. However, actual implementation of this policy at this time remains rather doubtful, conditional as it would be on a restoration of Stormont together with sustainability in the Budget (especially given that with the continued primacy of EU law in Northern Ireland the UK government would be obliged to deduct a sum of money from the NI block grant equivalent to the reduction in tax receipts).

So, in conclusion, there is a distinct lack of evidence that the 1998 Agreement produced a marked improvement in economic performance.

• Dr Esmond Birnie Senior Economist Ulster University Economic Policy Centre