Mr. Paul Mac Flynn:

I thank the Chair and the members and staff of the committee for the invitation to appear before them. I am joined by my colleague Dr. Tom McDonnell. We are the co-directors of the Nevin Economic Research Institute, NERI. The NERI is a think tank based in Dublin and Belfast carrying out research on both economies on the island of Ireland. We are supported in that by trade unions that operate in both parts of the island of Ireland and many that operate outside the Republic of Ireland. Our mission is to produce research that will guide and inform policies that lead to the creation of sustainable and inclusive economies in both jurisdictions.

As an institute, when planning programmes of research or research projects, the NERI tries to include both economies in the island of Ireland within that. However, that is not always possible because we are dealing with two very different economies, North and South. When we have done research like that we have noticed a tendency for outcomes to be evaluated in a very binary way. By this we mean that, too often, research is used to feed a narrative that one region is economically superior or more productive than the other and that it follows that we should either extend or replicate policy from one region to another. The reality is that both economies have strengths and weaknesses and while Northern Ireland’s current underperformance is quite prominent, it does not naturally follow that simply emulating the policies of the Republic of Ireland in Northern Ireland would remedy that situation.

The differences between both economies have obviously been exacerbated by the UK’s decision to leave the European Union, but the truth is that both economies have been on a different trajectory for quite some time. For example, during the financial crash between 2008 and 2010, the Republic of Ireland experienced a much larger shock to output and to employment and unemployment than was the case in Northern Ireland. The austerity policies pursued in the Republic were far deeper and more immediate. In contrast, Northern Ireland had less of an immediate shock from the crash, but the austerity policies pursued by the UK Government over the following years meant that no significant recovery was possible and indeed stagnation took hold afterwards. In no scenario would we have recommended the policies of the Republic of Ireland for Northern Ireland or vice versa.For both economies, there were alternatives. Strategies that prioritised sustainable investment and economic security would have provided much more equitable and resilient outcomes.

In the same vein there has been much discussion recently about the very different budgetary situations in which Northern Ireland and the Republic of Ireland find themselves. The most recent Republic of Ireland budget is cast in a much better light when we look at the situation Northern Ireland finds itself in with regard to budgets. Again, this is very reductive and could be quite misleading. We should not focus inwards on relative performance between these two economies. We should instead be focused on driving both economies towards something different and better. Rather than seeking to vindicate the approach of one region over the other, we should instead look beyond this island and to many of the available academic research for models that are worthy of emulation. For example, our colleague Lisa Wilson sat on the Northern Ireland Fiscal Commission, which delivered a very valuable report on devolving taxes to Northern Ireland. Among the many recommendations the commission made, it advised an incoming Executive against devolving corporation tax. Devolving corporation tax to Northern Ireland with the intention of matching the rate in the Republic of Ireland has been a fixation of previous Northern Ireland Executives. It has been a distraction from real policies - industrial, innovation and enterprise policies - which would have had a chance of achieving or delivering sustainable growth in the North's economy over that time. This is not to say that there are not many important lessons from the Republic of Ireland that could be applied in Northern Ireland. The point is that for both economies we should look to further afield for inspiration.

On many key policy measures, the UK and the Republic of Ireland fall behind our European peers. One example is taxation. Both countries consistently raise much less revenue per person than comparator economies. This is particularly the case on taxes such as employer social insurance contributions. It should be the goal for both economies to seek a future in a new economic model which avoids the pitfalls of both approaches. It should be one which avoids the volatility and boom-bust nature of the Republic of Ireland and the stagnation and productivity slowdown of the UK.

At the NERI, we are currently developing such an economic model and policy framework for both economies on the island of Ireland. We need a new economic model that will allow us to thrive and also deal with the oncoming megatrends of the ageing society, climate change, deglobalisation and technological disruption. We would be delighted to discuss our work on this and answer any questions the committee may have.