Professor John FitzGerald:

I thank the committee for the opportunity to present to it. Like Professor Doyle, I will talk about the economy as a whole rather than getting sucked into too much discussion on the subvention.

We are agreed that Northern Ireland's structural economic problem is low productivity, making it dependent on the goodwill of central government in London to maintain a reasonable standard of living. This involves a major transfer of resources to Northern Ireland from central government. It will continue to necessitate such a transfer from outside unless and until the productivity gap is substantially closed. Northern Ireland needs to recognise its economic weaknesses and solve them. The Northern Ireland Fiscal Commission has shown that the North's economic future is in its own hands to a significant extent. However, to date, the very hard choices needed to deal with its structural problems have been ducked. If the structural problems of Northern Ireland were immediately addressed in a successful manner, it would make possible a long-term successful future for the North's regional economy, either within the UK or in a united Ireland.

Why is productivity so low? The most important factor is the low human capital of the workforce. There is a series of important studies on this issue. One, from 2015, is by Vani Borooah of the University of Ulster, who is one of Northern Ireland's top economists, and Colin Knox. Another recent study is by Emer Smyth and colleagues at the Economic and Social Research Institute, ESRI. I published a paper on the topic in 2019. All this research shows that the human capital problem is really big. Northern Ireland continues to have an exceptionally high share of early school leavers who are destined for very low productivity and low-paid employment, if they find employment. While a high proportion of Northern Ireland's children progress to third-level education, many choose to work outside Northern Ireland. This is a social and political choice much more than an economic one, as shown by a recent study by Pivotal. In the past, migration was an economic issue in the Republic.

Addressing the early school leaver problem would take decades before the full benefits mature. That is a reason for starting immediately to tackle the problem. However, a quicker win would be to transform the society into one in which Northern Ireland's children who are graduates choose to return and make their lives there. That is the obstacle to be overcome. I am publishing an article tomorrow in The Irish Timeson the Intel experience. The big constraint on Intel's moving here in 1990 was that there were not enough engineers anywhere in Ireland. The company was convinced by IDA Ireland that if it located here, enough Irish engineers would come back from abroad to work for it, which they did. That approach can work.

The second major factor in the poor productivity performance is the low level of investment, especially in infrastructure.

As regards solutions, Northern Ireland needs to develop an inclusive educational system. The current system particularly excludes children from a disadvantaged background. The North needs to move immediately to a mixed ability intake into second level, abolishing the grammar-secondary division. The benefits of such a reform would take decades to mature, but that is why it is urgent to start now.

Northern Ireland must change to become a society where its graduates choose to live instead of preferring to live in Great Britain. A return of graduates would make a huge difference in terms of productivity. The case of Intel is just one example of how that works. Resources need to be shifted from current expenditure to capital expenditure to improve infrastructure, but of course that is going to be very painful. Northern Ireland should exploit the advantages of simultaneously being part of the UK economy and of the Single Market for goods.

There are two possible outcomes. One, Northern Ireland remains indefinitely part of the United Kingdom. The weakness of the UK economy means the resources for goods and services for poor regions are severely stretched. Long-term success for Northern Ireland within the United Kingdom depends on growing a successful regional economy that can largely stand on its own feet. It would give significant insulation against possible policy failures within the wider UK. An example of a reasonably successful regional economy within the UK is of course Scotland, and London is of course the powerhouse.

The alternative is for Northern Ireland to be eventually in a united Ireland. Unification would need substantial prior convergence of living standards between North and South, with Northern Ireland dealing with its domestic problems successfully and raising productivity. A Northern Ireland that had to rely on charity within a united Ireland would be very painful financially for the existing Republic of Ireland. This would be likely to result in major tensions in terms of access to resources in subsequent years.

What next for Northern Ireland? It goes without saying that it needs to get the show back on the road with the Executive and to quickly make the really hard economic choices to raise its level of productivity. If Northern Ireland starts immediately to reform its economy, in about 20 years it could hope to have closed a substantial part of the gap in living standards between Northern Ireland, the rest of the United Kingdom and Ireland. That would leave it with the choice of being either a successful regional economy within the UK or an economy that could join in a united Ireland without major economic disruption of the island.

I have also given members an appendix, which I actually gave to this committee before, on the subvention. I disagree with Professor Doyle, but if he wants to go into that, we can fight it out and have a shoot-out here.