PEOPLE IN the North should be given an opportunity to vote on whether to accept spending cuts or pay higher taxes to save public services, according to a leading Northern Ireland economist.

Mike Smyth, president of an influential European Union economic think tank, believes the scale of proposed UK public expenditure cuts will result in a “severe decline in living standards” in the North. He predicts cuts could top £1.5 billion (€1.78 billion) between 2011 and 2015, which translates into public expenditure cuts of about £350 million a year.

Mr Smyth says the process, known as the Barnett formula, which dictates how much funding Northern Ireland receives from the UK each year, will not work to the North’s advantage. The economist, who is head of the school of economics and politics at the University of Ulster, says the formula previously delivered a steady growth in public expenditure, but it will now operate in reverse.

In the latest issue of the First Trust Bank Economic Outlook Business Review, Mr Smyth argues that the outlook could be bleak unless the private sector in Northern Ireland can fill the gap left by public expenditure cuts.

“In this context, it is time for the one-sided debate about public expenditure restraint – its impact on jobs, public services and to consider some local tax choices,” the economist states.

Mr Smyth, who is also president of the economic and monetary union section of the European Economic and Social Committee, says the North’s Executive urgently needs to consider new revenue-raising options. He suggested these could include the introduction of water charges, which would generate up to £200 million a year, and cancelling free prescriptions, which would save £12 million each year.

He believes Northern Ireland needs to continue to push ahead with its campaign to secure a more competitive rate of corporation tax. He says the North must “present a compelling investment proposition”, and a lower rate of corporation tax would help.