Is Northern Ireland an economic basket case, like Richard Madeley said?
'Running at a loss'
Clearly Northern Ireland is not in that league so "basket case" is instead seemingly being used as a rhetorical shortcut to describe a persistently underperforming regional economy with structural weaknesses.Speaking on Good Morning Britain, Madeley said the UK state "pays in a huge amount of subsidies" to Northern Ireland, meaning the place is "running at a loss".That is correct but the same analysis applies equally to all regions of the UK outside London and the south east of England.Every year the Office for National Statistics produces an analysis of "net fiscal balance for the countries and regions of the UK".This estimates how much each region pays in through taxes and how much it receives in public spending.In 2024, London and the south east paid in £63bn more than they got back. The deficits in all other regions ranged from £34bn for the north west of England to £2bn for the east of England with Northern Ireland's at £14bn.This is characteristic of what is known as a "transfer union" - an arrangement where economically strong parts of a country subsidise, or make transfers, to weaker parts.Conceivably, critics of UK regional economic policy could argue that it shows that a situation has developed where the UK economy everywhere outside the south of England is a basket case.This subvention need not necessarily be a problem for Northern Ireland as no one is suggesting it will become a standalone state.It does however feature prominently in the debate about the economics of Irish unification.The economists John Fitzgerald and Edgar Morgenroth suggest it means that absorbing Northern Ireland into the Republic of Ireland would put "huge financial pressure" on the citizens of the state.
A recent study by Eoin Magennis and John Doyle has suggested the impact would be more manageable than it first appears. On some recent short term measures, Northern Ireland looks to be far from a basket case. For example, the business services sector, which includes things like finance and consultancy, has grown strongly since the pandemic. But there are long term problems where the basket case charge could be levelled at Northern Ireland, most notably on productivity.
Productivity levels
Productivity measures the amount of economic output generated by each worker.In the long term, rising living standards are dependent on rising productivity.Northern Ireland is consistently one of the least productive regions of the UK and also compares badly to the Republic of Ireland.In 2022, productivity in Northern Ireland was 13% below the UK average, widening from 11% in 2021. This led to Northern Ireland falling back to 10th place among the UK's 12 regions, ahead of only the East Midlands and Wales. The issue has been studied extensively by academics at Queens University Belfast who suggest the structure of Northern Ireland's economy, low levels of public and private investment and a poorly performing skills system have all been important factors.They also suggest that there is little proof that government policies have done much to improve Northern Ireland's productivity.That nods to one area where Northern Ireland does share characteristics with those true basket case countries - the standard of governance.Since the re-establishment of devolution in 1999, a series of resignations, suspensions and stand-offs mean that government has not been operating for about a third of that time period.
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