Following hot on the heels of its victory in the Eurovision song contest, Azerbaijan will next week celebrate its 93rd anniversary of independence from the Russian Empire. Countries from Cuba to Israel and from East Timor to Ecuador are also commemorating independence during May. In the economic and financial world, independence is also highly prized, particularly in central banking. Without this kind of independence, economies generally fall victim to what has been termed the political business cycle, whereby interest rates are set for political advantage. This contributed to the boom and bust (or so called ‘stop go’ policies) which blighted the UK economy since the 1950s.
Through rose tinted spectacles
In May last year, independence of the fiscal variety reared its head in the shape of the Office for Budget Responsibility (OBR). The OBR’s main functions include analysing and forecasting the public finances, including their long-term sustainability, which relieves this responsibility from the HM Treasury. This removes the temptation of Governments to present economic and fiscal forecasts through rose-tinted spectacles and for the Chancellor of the Exchequer to fiddle the figures. In the words of George Osborne “this will create a rod for my back down the line, and for the backs of future chancellors”.
What about Northern Ireland? Last month, the Northern Ireland government departments marked 13 years of ‘independence’ from direct rule and we are approaching four years since the economy was made ‘the Executive’s number one priority’. In Northern Ireland, unpopular policies have been conspicuous by their absence. This is because there is no incentive for politicians to deliver what the economy needs as it conflicts with what the electorate will vote for. It is estimated that Northern Ireland’s economic transformation will take around 25 years. The problem is that this period is punctuated with assembly and Westminster elections, leaving the economy more prone to the ‘stop go’ nature of the political cycle.
Embracing independent advice
The NI Executive should embrace independent advice and make it a permanent feature of its administration with a view to basing its policies on sound economic and financial logic rather than political rationale. Announcing unpopular but necessary policies does not necessarily make ‘good Press’ but they will have a more positive impact in the long-term. Greater economic independence needs to be an aspiration of the NI executive as this will enhance the credibility that the economy is the top priority. The credibility of the economy being the priority will be judged in the next four to five years and the separation of economic and political decisions are crucial if NI’s long-term aim to rebalance the economy over the next 25 years is realised and ‘stop go’ reform avoided. Let’s hope in Northern Ireland’s rebalancing the economy contest, the economic jury will be awarding the executive douze rather than the dreaded nul points in four years time.