As Brexit approaches, the development of Ireland’s regions will come into even sharper focus. Exporting sectors, such as agri-food, tourism and traditional manufacturing drive our regional economies. Unfortunately, these are also the sectors that are most exposed to a loss of trade with the UK. A recent Ibec analysis showed that when it comes to Brexit, the regional divide is stark. Many rural counties have more than five times higher employment in Brexit-exposed sectors than Dublin. Rural Ireland’s engine of prosperity is under severe threat.
Irish towns and rural areas are already undergoing a radical transformation. The growth of ecommerce, urbanisation and changing age profiles are impacting how people work, shop and live. For example, recent years have witnessed a transformation of how we consume services such as books, music, films, clothing, travel, insurance and banking. It is estimated that about €1 out of every €5 spent by Irish households (excluding housing costs) will be spent online over the coming years. This will pose a serious challenge to the business model of traditional Irish “market” towns in particular.
This transformation will no doubt lead to calls for more help for the regions over the coming years. We should heed them. Ireland is not immune to trends seen in the US, UK and elsewhere. Social problems and regional decline can easily spill over into political uncertainty and polarisation.
Long-term view
Efforts to improve spatial development and help regions thrive in the 21st century, however, must take a long-term view. It is difficult to argue Ireland has had any cohesive policy for regional development in this century or, indeed, the last. Germany, by contrast, introduced its current federal spatial planning act in 1965. Our record in regional development has been blighted by ignored plans and that vacuum has tended to be filled by well-intentioned but ineffective "quick fixes".
Rural areas and market towns will have to reinvent their offering as places to work and live. They will need to offer something different to compete in a world which is getting smaller
Recently, in this newspaper, Patsy McGarry reminded us of one of the worst examples of our quick-fix approach to raising living standards in the regions. The Upper Shannon rural renewal scheme was introduced in Budget 1998 in order to "reinvigorate certain areas of rural Ireland". It gave incredibly generous tax breaks for building in Leitrim and Longford as well as west Cavan, north Roscommon and parts of Sligo, at a time of excessive construction everywhere.
The scheme remains a stunning example of how not to help a region. Between 2001 and 2007 the counties under the scheme built more houses than they had built in the previous 30 years. In 2006 and 2007 Longford alone built more houses than any of our regional cities. The scheme crowded out crucial exporting sectors and, after the crash, it left the region with some of the largest vacancy rates in the country. It scarred towns with high long-term unemployment and the country’s highest rates of mortgage arrears. If regional areas are to thrive in Ireland, lessons must be learned from the failure of this scheme.
We must beware of quick fixes. The economist John Maynard Keynes wrote that "life and history are made up of short runs". There is no doubt that regional economies will need immediate assistance to survive Brexit, but building a higher standard of living in the regions will require patience and years of doing the small things right. This includes – providing certainty to business, increasing productivity, boosting exports and investing to make better places to live and work.
Planning framework
To deliver this, national policy in areas such as research and development, education and industrial strategy must be coherent with regional objectives. It will mean getting local and regional policymakers to take a leading role in making sure policy decisions are evidenced-based and avoid distorting local economies. The new National Planning Framework will be central to this process.
The framework, if developed correctly, could drive confidence and have the potential to improve investment inflows. But its real test will be how it supports our indigenous exporting base by making sure national policy works for the regions. While the new plan will be placed on a statutory footing, this alone does not guarantee its success. It must receive adequate governance structures at a regional level along with agency support to deliver on its promise.
The new plan must also be underpinned by increased State investment in broadband, water services and health and education infrastructure. Ibec and the CBI Northern Ireland set out in their Connected document how enhancing transport infrastructure will be crucial to connecting not only the regions but also the all-island economy.
For all of this to happen, we will need a cultural change in the way we do planning. It will mean recognising that cities will be the drivers of regional growth over the next century. Rural areas and market towns will have to reinvent their offering as places to work and live. They will need to offer something different to compete in a world which is getting smaller. This means working to increase flows of skills, investment and collaboration with the cities in sectors where they have a competitive advantage. It will mean avoiding the temptation of the quick fix.
Gerard Brady is head head of tax and fiscal policy at Ibec