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Last Updated: Monday, 28 January 2008, 17:36 GMT
Economy priority in ambitious plan
By James Kerr
BBC NI business editor

The executive has come with an ambitious programme for government
Making the programme for government financially viable will be similar to completing a complex jigsaw.

It relies on all the pieces being in place for the full picture to be revealed; any missing pieces will detract significantly from the value of the whole.

It is an ambitious programme, coming as it does at a time of growing constraint on public finances, combined with the most difficult circumstance that have been experienced economically for several years.

The executive makes it clear that its first priority is to build a prosperous economy.

It is an over-used mantra that the local economy is over-dependent on the public sector, but it is also true.

Sixty per cent of wealth is currently generated in the public sector, the executive is aware that this proportion needs to fall, and many of its policies set out in the PFG, and endorsed by the assembly, aim to make that happen.

The primary means to deliver increased wealth from the private sector is to deliver not just more jobs, but more better paid jobs.

This requires higher levels of skills among workers, more innovation from local companies and increased inward investment from overseas.

The plan is to support this with better infrastructure supplied through the new Investment Strategy.

With unemployment at record lows, one of the main ways to deliver new jobs has to be to increase the participation rate in the workforce and reduce the level of 'economic inactivity' where a higher than average proportion of the population is without a job, but is not registered as unemployed.

In the short-term at least one difficulty in delivering the improved private sector performance will be the weak international business climate.

Ministers will find themselves with some unpalatable choices to make good on their promises of better services for all.

In the past the local economy was shielded to a degree from the full force of international competition; ironically as the economy becomes more robust and outward-looking, so it is more prone to such economic shocks.

Lower international demand, higher costs, and increased competition mean that the private sector may face its most difficult trading period since the economic slowdown post-9/11.

The hope must be that any such slowdown does not become a prolonged recession; were that to happen it would undermine the aspiration to catch up with better performing UK regions in the medium term - targets that have been clearly set out in the programme for government.

The squeeze on public sector spending across the UK is no less a challenge.

After a decade when public spending has risen repeatedly by well above inflation, the Treasury is imposing some of the tightest spending curbs seen since the current Labour government came to power - and this is reflected in the increase in the NI block grant.

Ministers have also committed themselves to stalling the introduction of business rates on manufacturing, and to limiting the increases in the regional rate, further limiting revenue increases.

While some funds may be raised through the disposal of properties, the property market is weak and this will have to be carefully handled.

The result of these financial constraints is that ministers are looking to cost-cutting within government as a way of making the savings needed to fund their spending plans.

However, the biggest cost for any government department is wages, and while some savings can be made through the reorganisation of government back-office functions, known as shared services, the bottom line is that cutting costs will mean cutting jobs.

Ministers will find themselves with some unpalatable choices to make good on their promises of better services for all.

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