Owen Polley: Unions and supporters of the Northern Ireland Protocol oppose ideas that would help alleviate cost of living

Much of Britain was at a standstill last week, as transport workers went on strike, causing train services to be interrupted.

By Owen Polley
Monday, 27th June 2022, 1:29 am
Updated Monday, 27th June 2022, 1:48 am
Allison Miller at Saturday's NIC-ICTU rally on cost of living at Stormont. But it's an economic rule that higher wages lead to inflation. And NI was insulated from lockdown not due to the sea border but the large public sector
Allison Miller at Saturday's NIC-ICTU rally on cost of living at Stormont. But it's an economic rule that higher wages lead to inflation. And NI was insulated from lockdown not due to the sea border but the large public sector

As the cost of living continues to increase, more industrial action is expected over the summer, but so far Northern Ireland has remained relatively unaffected.

That may change soon. The teaching union, the NASUWT, is already engaged in industrial action and various other pay negotiations are ongoing. A transport walkout was avoided only narrowly, earlier this year.

On Saturday, trade unions demonstrated at Stormont in an attempt to insinuate that a working executive would ease the pain of rising prices. That’s an unconvincing argument, but it’s easy to make and it levels blame at the DUP, which is never an unpopular tactic among left-wing activists.

It’s clear that many people, particularly those on lower wages, are struggling as the costs of fuel, groceries and other essentials get steadily higher.

There are several layers of irony, though, in the protests being led by powerful public sector unions and parties that support the Northern Ireland Protocol.

Firstly, our economy remained relatively insulated from the effects of lockdown, not thanks to the Irish Sea border, as some disingenuous commentators like to insinuate, but because so many people here are directly in the pay of the state.

The cost of living ‘crisis’ was caused by the pandemic response, which led to a global shortage of goods and difficulties getting them to consumers, as well as the war in Ukraine, which made oil, gas and grain harder to come by. But its main symptom is inflation, in the shape of steadily rising prices.

The quickest way to put inflation on steroids, particularly in somewhere like Northern Ireland that is disproportionately dependent on the public sector, is for the government to start giving out generous pay awards.

When there’s more money in the economy, economists tell us, it pushes prices higher.

The people who will suffer most, if this happens, are unlikely to be teachers, transport employees or other workers from heavily unionised sectors. Instead, it will most gravely affect those on zero hours contracts, or freelancers, or casual workers. Many of them will be unskilled, on low wages and their employment will be precarious. In other words, industrial action in Northern Ireland could create more poverty and a more unequal society.

It’s an unchangeable economic rule that higher wages lead to inflation, but another inescapable fact is that prices rise when there is less competition in the marketplace.

That’s where the protocol comes in, because it has increased the cost of sending goods from Great Britain to Northern Ireland and many companies have stopped doing business here altogether. In last Thursday’s News Letter, the Cambridge University economist, Dr Graham Gudgin, comprehensively pulled apart claims that the Irish Sea border has insulated this province from economic damage caused by Brexit. He exposed these theories as little more than propaganda, based on misinterpreting cherry-picked figures.

The few sectors of our economy that seem genuinely to have done well out of the protocol, like the food and drink industry, have benefitted from a decrease in competition. In other words, companies from England, Scotland and Wales supply fewer products to Northern Ireland, so some Ulster firms replaced their goods in the local market.

That might seem like a positive development, but it’s only good if you take a very short-term view. Practically every expert is clear that an economy is damaged by disruptions or displacements to the supply of goods.

The most obvious and immediate effect is that customers have less choice, so the price of food and other products rises even further. Ultimately though, less competition for local companies also causes the quality of their products to drop and drives productivity lower. Importantly, the most serious long-term economic problem for the UK as a whole, but particularly for Northern Ireland, is that the average amount of ‘value’ each worker produces is too low. In NI’s case, this difficulty is made much worse by our bloated public sector, which is paralysed by over-mighty unions that defend outdated working practices.

Thanks in large part to the Troubles, there is a longstanding culture of using government money to keep people in jobs, rather than delivering the best services for the lowest possible cost to taxpayers. This weakness has been exacerbated by the devolved executive at Stormont and the vast industry of lobbyists, third-sector organisations and campaigners that surrounds it.

Ironically, the quickest way to raise average wages in Northern Ireland without worsening inflation is probably to make the public sector more efficient and productive. And the fastest way to ensure that the supply of goods is not disrupted or displaced would be to remove the NI Protocol.

These are, you will have noted, the very things that the trade unions and the biggest political advocates of an early return for Stormont will fight hardest against.