Northern Ireland’s ‘extraordinary’ economic potential significantly threatened by political instability

Northern Ireland’s economic potential over the next decade is ‘extraordinary’ but political instability threatens to hamper its development, according to a report by business advisory firm Deloitte and think tank Reform.

The UK-wide report – The State of the State 2015 – is Deloitte and Reform’s fourth annual report collating data on government spending, economic figures and interviews with public sector leaders.

The State of the State 2015 shows that the UK public sector now faces a ten year period of recalibration to adjust to lower spending levels.

Jackie Henry, Deloitte’s senior partner in Northern Ireland, said: “The last financial year has seen a record £1.4 billion of investment in Northern Ireland. A young educated workforce, strong infrastructure and relatively low costs all make Northern Ireland a compelling prospect for global companies, however delivering continuous improvement will require investment in people and a different approach to managing talent. The major challenge for this region is to secure political stability as this will provide the strongest basis for growth over the next decade.”

Productivity

Deloitte calculates that boosting productivity and freeing up just one hour of public sector workers’ time each year can deliver savings of £72 million across the UK. Broken down across the devolved governments of the UK savings could stand at £57.7 million in England, £7.2 million in Scotland, £4.3 million Wales and £2.9 million in Northern Ireland.

Ms Henry said: “Productivity is a challenge for the whole economy but little attention is given to its role in mending the public finances. Public sector staff work hard, but helping them work smarter could see considerable savings. Embracing technology, avoiding repetition of efforts and making evidence-based reforms can all help ensure staff time is spent as productively as possible delivering front-line services. Improving productivity should not be a one-off, it should be a continuous process for the future.”

Debt

Deloitte’s report calculates that government debt currently equals £23,428 for every UK resident and, if debt interest kept rising at its current rate, the Government would be spending more on servicing debt than on public services by 2034.

Ms Henry said: “Such a high level of debt exposes the UK to risk from further financial crises and interest rate changes. The level of debt is also a burden on the taxpayer, debt interest this year alone is more than the government spends on policing and justice, and for future generations, a child born at the height of the financial crisis might still see this debt legacy on the Government balance sheet into their adulthood.”

Financial distress

Aggregating the warnings from various central and local government watchdogs, Deloitte’s report estimates that over 200 frontline public sector organisations could be at risk of financial distress and require intervention in the course of this Parliament. Half of these are NHS trusts but distress signals are also evident in local government, police and further education organisations.

Ms Henry said: “The financial distress signals from public sector watchdogs suggest a turbulent time ahead for public services. Some will require either support from others in their sector or financial support from central government. Each of the UK’s central and devolved administrations need to be clear on the risk of financial failure in the public sector and plan for intervention.”

The mood in local public services

The State of the State 2015 also included interviews with over 40 local public sector leaders, collectively responsible for over £16 billion of public spending, on the challenges their organisations face and how they have adapted. The responses find:

Having dealt with cost reduction in the last Parliament, local public service leaders expect the redesigning of their services to dominate the coming five years. While recognising this will be a challenge, most are optimistic about the years to come.

Morale among staff has suffered as a result of redundancies, pay freezes and limited promotion opportunities. Local public service leaders say the need to keep talented, skilled staff is greater than ever.
Local public service leaders expect their organisations will have retrenched into core, statutory activities by 2020. Many expect to see more cross-sector working, a broader mix of public service providers and leaner public sector organisation more clearly focused on their mission.

Ms Henry said: “The next five years will see challenges in redesigning and refocusing local public services and those leading them are optimistic about managing this. But it will require strong political leadership and honest conversations with the public about what the public sector can, and cannot, continue to provide.”