“This has been an interesting year for both bankers and politicians.  We've been engaged in quite a popularity contest. 

The economist, J K Galbraith once said, “A banker need not be popular. Indeed a good banker should probably be much disliked.”   -   My congratulations to all of you. 

However, in comparison to me at least you have the comfort of knowing that being popular is not a pre requisite to you keeping your job! 

I think at a global level there is a growing consensus that the worst of the economic downturn has passed, though as Lawrence Summers, the US National Economic Council Director has pointed out the process of convalescence is never completely smooth. 

Internationally the approach that Governments have taken has been to stimulate demand with higher public expenditure.  This appears to have avoided economic catastrophe though at a cost that will have to be paid for years to come.  The challenge now will be to know when it is safe for governments to turn off the tap.  Do it too soon and a fragile recovery could be snuffed out; wait too long and the bills falling due to future generations will mount. 

Though economic growth in a technical sense is likely to return to Northern Ireland either late this year or early next, lagging economic indicators such as unemployment may continue to rise for some time to come. Our rate of unemployment at 6.7% remains below the UK average and is the fourth lowest amongst UK regions but is up from only 4.2% a year ago and is once again over 50,000. I fear with depressed levels of economic growth unemployment will remain stubbornly high for some time to come.

To date the Northern Ireland economy has been less severely affected by the economic downturn than many other regions of the UK and locally the present recession is a far cry from the economic wasteland of the early 1980s when unemployment rose above 20%. 

Our relative performance compared to other regions of the UK is partly to do with the size of our public sector here and also partly because of the huge benefits cross-border shopping has had, arising from the strength of the Euro against the Pound.

At long last the housing crash appears to be bottoming out with hopeful signs of activity especially at the more affordable end of the market. But our large public sector which has cushioned us may also hinder our recovery. 

Northern Ireland has weathered the recession but our next challenge will be to weather the reductions in public expenditure that will be associated with recovery.  

Indeed our over-reliance on the public sector in Northern Ireland means that we could have significant challenges ahead as UK public expenditure cuts come after the next General Election.  This will be a reality whatever the outcome of the election and we must be prepared for it. However the problems we face in Northern Ireland are nothing compared to what Brian Cowen will have to face in the Republic in the months to come.  I take no pleasure or comfort in that.  In many ways Brian's difficulties will have an impact on us. 

I'm not going to engage in a political whinge but one of the greatest frustrations about being in government in Northern Ireland is how difficult it is to get things agreed. As a small economy we should be agile and swift in reacting to changing circumstances.  That should be one of our strengths as a small region.  Yet our system of government is not designed to deal with delivering expeditiously and there is no culture of a collective approach to dealing with issues.  I recognise we are immeasurably better off now than we were and, at least for now, it is all we have to work with, but I am impatient for changes that will bring better and more rapid delivery and decision making.  I hope we can convince colleagues to see such steps to improve our processes as a positive prospect and not a threat. 

As we move forward it is clear that cuts in Public Expenditure will not be a choice but will be an economic inevitability - though I’m not convinced all my Ministerial colleagues have yet faced up to that reality. You can be absolutely sure that the UK Government will - after the election - take the thorny decisions and unless the Executive is also prepared to make such choices Northern Ireland will fall behind in terms of service delivery to the public. This is not a position I am prepared to countenance.  

I have previously set out a radical agenda for cutting the size of the political bureaucracy in Northern Ireland.  In today’s economic environment I believe that while that was once necessary it is now unavoidable and inevitable. But given the size of cuts we are likely to face after the next election we must be prepared to look more fundamentally at the size and shape of the public sector in the years ahead.  

Though taking difficult decisions will be inescapable we must use this opportunity to revisit and reconsider the nature of government here.  There are leaders who believe they will be better thought of if they never ask people to do anything hard even if every enquiry to logic leads to the need for such a call to be made.  Politicians often underestimate the public’s willingness to do the right thing when it clear what the right thing is and what its benefits are and what the true cost of the alternatives really is.  

The time when difficult decisions could be avoided is at an end and I believe that the public are more prepared than many people imagine to consider fundamental questions about the areas in which government is involved. 

It is unrealistic and undesirable to expect the public sector to be run like a business but it cannot be immune from reform.  And this reform can not merely be cosmetic.  It must be real structural reform. I say that with an element of caution.  Every time politicians set out to reform government and make efficiencies it seems to cost more.  If the public sector fails to bring about this change internally I would have no hesitation in bringing in people from the private sector or from outside Northern Ireland to deliver it. 

I do not agree with the cynical senior civil servant who when challenged about reform replied, “Reform, reform, Aren’t things bad enough already.” 

To date it has been difficult to build a political consensus for reform but as the public expenditure environment changes the luxury of indecision will disappear.  I believe it is far better that we take the initiative than be left to catch-up when the consequences of failing to act earlier are being felt.   

While many of the fiscal levers remain outside our control the Executive has played its part in helping the economy through the recession. The Northern Ireland Executive delivered a record £1.7 billion of capital investment last year and is set to achieve it again this year. This represents an increase of 20.1% on the previous year and a remarkable 67.7% increase on the last CSR period. At a time when private sector construction is badly hit this has been a vital cushion for our economy. 

There are some who believe that the introduction of water charges and an increase in the Regional Rate will solve our problems.  I fundamentally disagree. 

Our public sector is already too large when compared to the private sector. It is no solution to take still more money from householders to make it larger still. What we need to do is to bring about fundamental reform of our administration. 

Unfortunately delivering reform in the Northern Ireland public sector is undermined by the extent of its over-governance.  At the Executive we have ministers who take decisions (or don’t!) on the sole basis of their departmental interests.  They seek to maintain departmental budgets as if it were a virility test.  They treat increasing their budgets as a symbol of their relative importance.  What is in the wider public interest or the greater good is subordinate to what is in their department's interest. 

If the Executive is to maximise its potential it is essential that a more collective approach is taken to dealing with these difficult issues and doing more for less becomes the target for Ministers.  

One area where this departmental competitiveness has worked to our advantage has been in cutting the overall rate of underspend.  Every year hundreds of millions of pounds have been returned to the Treasury by Northern Ireland departments that did not spend all their allocated funds.  Under this administration this has fallen from 3.5% in 2006-07 to 0.2% in 2008-09.  This translates into £300 million in additional funding for local public services last year solely due to the reduction in the rate of underspend.  That is equal to the total amount we collected from the Domestic Regional Rate last year. I hope I make my point.  It's not about increasing the tax burden on the public it is about making the best use of the resources we already have. 

There are those who are critical of the performance of the Assembly and Executive – politics isn’t easy when the operation of government is played out in public because of the 4-party coalition we have, but I believe that despite all of the difficulties that we have faced we have taken a new and better direction than was the case under Direct Rule.  

·         We have frozen the Regional Rate for three years and deferred water charges - saving the average household over £1300 compared to what would have been the case under Direct Rule over this Assembly term.

·         We have extended free travel on public transport to all those over 60 – the most generous scheme in the whole of the UK.

·         We have provided an additional 20% discount off their Rates for pensioners over 70 living alone.

·         We are ending prescription charges for everyone.

·         We have demonstrated our ability to respond to a crisis with hardship payments for those affected by flooding.

·         We have helped the poorest in our society over and above UK-wide assistance with an additional £150 payment to deal with higher fuel prices.

·         We have frozen business rates and capped manufacturing rates and are introducing a small business rate relief scheme.

·         We have assisted rural dwellers by relaxing planning restrictions in the countryside.

·         We have provided more money than ever before to victims.

·         And we have spent more than ever before on infrastructure investment on schools, roads and hospitals.

·         This administration has reached 50% more agreements in the Executive than its predecessor in a shorter period of time and,

·         If your neighbour has a high hedge Edwin Poots is going to cut it down.  Come to think about it - if you have a high hedge Edwin is going to cut it down. 

We put the economy as our top priority but the road hump of the economic downturn inevitably lost us momentum.  I believe we are now emerging from that period and we are ready to pick up where we left off before we were rudely interrupted by the recession.  

For me there is no doubt that whatever the problems we face in the political process we should never forget how far we have come or ignore the fact that devolution underpins the peace and prosperity that we enjoy.

If during these difficult times we are prepared to take the tough decisions I am sure that we can reap the harvest in the years to come. 

The banking sector will have an important part to play in helping build the recovery. Several weeks ago I attended the Joint Ministerial Committee at Westminster where the heads of the devolved administration met with the Prime Minister to discuss the present economic situation.  

It was clear at that meeting that there is a common experience across all parts of the UK of the significant disconnect between the statistics produced by the banking sector and the experience of businesses. You will be familiar with the survey conducted by the Institute of Directors locally which raised issues about the role of our banks.  More than anyone you will understand the importance to local business of being able to access finance on reasonable terms. 

Thomas Jefferson once said he believed that banking institutions were more dangerous to our liberties than standing armies. I don’t believe that's true but I do know that unless Government and the banking institutions work together our recovery will be slower than need be the case. 

While the Executive does not have the legal responsibility I have appreciated the time and respect the banking sector has given to its dealings with the Executive and the Assembly. I greatly welcome the willingness of our banks to come and brief us about the industry and the role they are playing on the Cross Sector Advisory Forum.  I hope that we can build on this relationship as we emerge from the present difficulties and build for the future.”