Of all the labels attached to Northern Ireland over its century of existence, the “world’s most exciting economic zone” is surely the most unlikely, that description coming from British prime minister Rishi Sunak in Belfast on Tuesday.
As an “economic zone” the Northern Irish economy has more often been an unloved and distinctly unexciting one, but it has certainly always been different. Historian Paul Bew noted that in 1939, the year after Britain undertook to subsidise the social services in the North, and when Northern Ireland’s unemployment rate was 20 per cent compared to 7½ per cent in Britain, British treasury official Richard Hopkins expressed unease about the extent of the North’s financial dependence on Britain.
It had been anticipated that the North’s government’s revenues would be sufficient to both “meet their expenses and to provide a substantial contribution to imperial services”. This was initially realised but from 1931 Northern Ireland had been “in effect a depressed area. So, far from receiving any large imperial contribution, we have invented a series of dodges and devices to give them gifts and subventions…so as to save NI Ireland from coming openly on the dole.”
The key Northern industries of linen, shipbuilding and agriculture contracted during the inter-war years. Protestants occupied a privileged economic position, and housing and employment discrimination was systematic. Nonetheless, the North benefited significantly from the British connection and this sometimes worried nationalists seeking Irish unity, concerned that welfare benefits applied to the North were not available to the same extent in southern Ireland.
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The growth of the North’s economy due to shipbuilding and other second World War demands and the expansion of the welfare state in the postwar years further underlined that. Parity of services and taxation between the North and the rest of the UK, formally agreed in 1946, also allowed unionists to taunt the South about its unaffordable unity dreams.
Economist Kieran Kennedy later concluded living standards in the North were better during that period due to a 20 per cent per capita higher disposable income but problems were apparent by the 1950s as the old economic strains re-emerged. The response included grants, tax concessions and the luring of investment to the North.
Industrial production grew in the 1960s, and while traditional manufacturing was still in decline there was a rapid expansion in public sector employment. Poverty endured, however, as did the gap between the Protestant and Catholic experience.
The Troubles meant the UK subvention had to increase substantially and by the 1970s the North was, in the words of Cambridge economist Bob Rowthorn, “gripped by a severe industrial crisis” and doing poorly compared to the Republic. There were new jobs in the state sector and security services arising form the Troubles and employment growth in the wider services sector but the North had a large trade deficit with the rest of the world, requiring ever larger subsidies, and by 1981, according to Rowthorn, it was “in the unenviable position of being a client economy of a country which itself is in decline”.
Of course the North’s economy remained unusual and the assessment of University of Ulster economists in the early 1990s was that “its public sector finances are distinctly arcane and unique” as it continued to be the poorest region of the UK in terms of standard of living.
The economic dividend after 1998 was much less than hoped for; Northern Ireland looked increasingly stagnant compared to the Republic, the public sector remained a very dominant part of the economy, poverty levels were still high and the subvention remained essential (amounting to £9.4 billion by 2020). It was no wonder a decade a go Sinn Féin and the DUP made common cause by going to Downing Street to unsuccessfully demand that the North be able to set its own lower rate of corporation tax.
Sunak’s robust declarations and sunny disposition in Belfast as he focused on the economic “prize” now on offer were about flipping the idea of peripherality and exaggerating the potential for transformation, but they were also about other things, principally taking the political heat out of this issue in Britain (“Let’s also remember that the last thing the public want is another Westminster drama”, he told his London audience as soon as he returned from Belfast).
There is also the obvious plight of a DUP running out of political road and facing isolation. This may not bother some militant unionists who want to position themselves as unrelenting under siege, fulfilling their contemporary and historic duty, on the back of a still significant support base. But what will be interesting is the extent to which, for all Sunak’s bluster, the economic message and the updated version of Hopkin’s “dodges and devices” can sufficiently weaken the DUP’s political opposition, especially given that Northern business and economic interests are largely supportive.
We are hardly at the stage where economic pragmatism will trump politics in the North, but it may well carry considerable weight.
