We need to take tough decisions, not engage fantasy economics

Chancellor of the Exchequer George Osborne delivers his Budget statement in July 2015. Photo: PA Wire
Chancellor of the Exchequer George Osborne delivers his Budget statement in July 2015. Photo: PA Wire

Whatever we might think of George Osborne’s recent Budget, the fact is that he made decisions.

Whatever the debate about the ‘living wage’ he introduced – a surprise to many commentators and politicians – it signals a big shift in Conservative thinking.

John McCallister, Independent Unionist MLA, South Down

John McCallister, Independent Unionist MLA, South Down

It’s not that long ago that opposition to a national minimum wage was part of the Tory creed, with the insistence that this socialist innovation would cost millions of jobs. Now a Conservative chancellor is replacing the national minimum wage of £7.20 per hour with a ‘living wage ‘ of £9 (by 2020).

In Northern Ireland the introduction of the ‘living wage’ will benefit many, however, with our low-wage, retail dominated, private sector, it may have a disproportionate impact on jobs and in no way diminishes the pressing need to boost productivity.

Other aspects of the Budget are not a surprise from a Conservative budget. Corporation tax reduced, inheritance tax reduced, welfare spending reduced by over £34bn.

The reduction in corporation tax has been broadly welcomed, allowing businesses to expand and invest. (It’s also worth noting that any further UK-wide reductions could end up making academic any debates about reducing corporation tax in Northern Ireland – making the need to boost skills and deliver stable government all the more pressing for increasing productivity and attracting inward investment.)

The reduction in inheritance tax, especially alongside the cut in the welfare budget, will make many of us uneasy.

It’s difficult to see how reducing inheritance tax makes any significant contribution to economic renewal or expanding opportunity.

There was, however, one other surprise in the Budget. The Institute of Fiscal Studies described it as “overall a tax-raising budget”. This Conservative government will raise an extra £42billion through various tax rises.

It’s basic economics – if the government wants to spend more on health and defence, as it has said, it needs to raise more money. Following traditional Conservative preferences, it is doing this through indirect taxation rather than taxing income. Your take-home pay won’t be hit but there will be pain when you come to tax your car.

Now contrast all this with how our politics works in Northern Ireland. We have a system that encourages fantasy-land politics. We oppose cuts – but won’t raise local taxes. We talk about cutting corporation tax, but not about how we would then have to cut spending or increase other taxes.

It used to be the case that unionism was accused of saying ‘no’ to anything and everything. Now, it seems, this is the default political position in Northern Ireland when it comes economic and fiscal policy. And, somewhat ironically, the nationalist political parties are particularly prone to this.

It’s difficult to see how we break this log-jam without fundamental reform to the structures of government in Stormont. Without the dynamic of government and opposition, and the challenge and accountability which this brings, there is little hope of encouraging the sort of thinking which allows for difficult and innovative budgetary decisions.

So, whether we cheered Osborne’s budget or shouted abuse at the television, wouldn’t it make our politics here a lot more interesting and engaging if we had a political system that encouraged the tough decisions and allowed for real change?

• John McCallister is an MLA for South Down