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Northern Ireland has the lowest disposable incomes in the UK, 19% below the national average and falling further behind, with Derry City and Strabane 27% below and Belfast in steep relative decline. This short paper, by MCC Economics & Finance, argues those statistics strengthen the case for stronger energy policy and more effective implementation of existing protections.
Because affordability duties are written into the framework. The Utility Regulator operates under duties set out in the Energy (Northern Ireland) Order 2003, whose Article 12 requires regard to the interests of, in the Order's exact words, "individuals who are disabled or chronically sick", "individuals of pensionable age" and "individuals with low incomes", and energy suppliers carry licence conditions protecting vulnerable customers. The importance of those duties depends in part on how many households are likely to need their protection, which is what disposable income statistics help measure. If Northern Ireland's households have materially less to spend than households elsewhere in the UK, the case for stronger energy policy, and stronger enforcement of existing obligations, strengthens with them. This paper reads the official income statistics with that question in mind. It also connects to MCC's other work: the paper on Northern Ireland's electricity cost puzzle examined what households pay, and MCC's report for the UK Government on inequality examined why incomes diverge; this paper supplies the regional income evidence that links the two.
Nineteen per cent, and drifting further. Dividing the UK into 12 regions, ONS estimates that GDHI per head is lower in Northern Ireland, jointly with North East England, than in any other UK region, at 81% of the UK average in 2017. ONS data published on 22 May 2019 shows a worsening position since 2006 relative to other regions, and confirms Northern Ireland's residents have had the lowest GDHI for most of the ten-year period ending 2017 (Figure 1).
Two decades of data rule out the comfortable readings. Northern Ireland's line is not merely low in one bad year, it holds the bottom for most of the decade to 2017 and drifts downward relative to the average from 2006, which makes the gap structural rather than cyclical, and means waiting for it to close on its own is not a plan. The chart also shows relative decline is a choice of comparison, not destiny: Scotland started nearby and climbed.
Two further readings stand out from Figure 1. London's improvement is huge and drives the overall income gap between regions, consistent with MCC's report on inequality worldwide, which found top-end growth driving divergence. And Scotland, in contrast to Northern Ireland, has improved considerably since 1997, showing that a region's relative position is not fixed.
The spread is the story: a Londoner has 40% more disposable income than the UK average, a Northern Ireland resident 19% less, meaning the average Londoner has roughly three quarters more to spend or save than the average person in Northern Ireland. Regional statistics rarely put the two ends of the UK that far apart on a single, well-defined measure.
Its three cities. Belfast, Derry and Newry, home to about 35% of Northern Ireland's population, have lower GDHI per head than the other eight council areas (Figure 2).
The chart is built around one line: Belfast's dashed track starts above every other council area in 1997 and ends below all but two in 2017, crossing the entire pack on the way down. The 2017 spread inside Northern Ireland is also worth registering, twenty points between Lisburn and Castlereagh at 93% and Derry City and Strabane at 73%, meaning the gap between Northern Ireland's own best and worst council areas is as wide as the gap between Northern Ireland and the UK average.
The most startling observation is the rapid decline in Belfast, which now has the third lowest GDHI per head in Northern Ireland, a notable fall from 1997, when it had the highest. Derry City and Strabane had the lowest GDHI per head of all 179 UK areas in 2001, and although the position has slightly improved by 2017, ONS estimates individuals there have almost 30% less disposable income than the UK average. Belfast's trajectory matters for policy because the report predicts it will soon rank in the lowest 15% of the UK for GDHI per head. On this basis, there would be justifiable grounds for policies that target these three areas, and potentially those cities, in particular.
The table makes the paper's targeting case at a glance: the three city areas occupy three of the four bottom rows, and the only non-city area among them, Armagh City, Banbridge and Craigavon, sits a single point above Belfast. Belfast's annotation carries the paper's sharpest fact, a twelve-point relative fall from first to third-from-last inside two decades.
Three of them sit among the UK's 30 poorest areas. Comparing the decline in Belfast, Derry and Newry with GDHI per head elsewhere, Figure 3 presents the 30 worst regions for GDHI per head of the 179 areas ONS reports.
The comparison set is what gives this chart its force: these are already the UK's thirty poorest areas, places where incomes are low and largely stay low, and even within this group Belfast's dashed line is the one that falls from near the top of the range to the bottom cluster. Declining relative to the national average is common; declining relative to the poorest thirtieth of the country is the basis for the paper's claim that Belfast's fall appears greater than any other UK region's.
On this basis, the decline in Belfast appears greater than in any other UK region: among the 30 poorest areas, no other line falls as far or as consistently across the period.
Energy policy and its implementation should be strengthened to better address affordability pressures across Northern Ireland. This conclusion is based on evidence that disposable incomes were 19% below the UK average for Northern Ireland as a whole and 27% below in Derry City and Strabane.
These disparities strengthen the case for a reassessment by policymakers, including the Department for the Economy, regulators such as the Utility Regulator, and other stakeholders, including energy retailers, Power NI and SSE Airtricity in particular, within their respective responsibilities.
The Utility Regulator should be particularly motivated, and justified, in tackling this: see its duty as specified at paragraph 12(3) of the Energy (Northern Ireland) Order 2003, which deserves exact quotation on the page:
Similarly, energy retailers should be under increased scrutiny to comply with existing obligations: see SSE's licence conditions as specified at condition 31 of its electricity supply licence and condition 2.11 of its gas supply licence. Condition 31 is the Code of Practice on Provision of Services for persons who are of Pensionable Age or Disabled or Chronically Sick, and in March 2019, months before this paper was published, the Utility Regulator opened an investigation into SSE Airtricity's compliance with conditions including condition 31, which gives the paper's closing questions a direct real-world counterpart.
Table 1: Electricity supply licence conditions 30 to 33, the Codes of Practice protecting billing, vulnerable, efficiency and complaints matters, as summarised by the Utility Regulator (March 2019)
The table grounds the two closing questions in the licence text. Condition 31 is the specific protection whose reach depends on the number of customers who qualify, which is what the disposable income statistics above measure. A region with disposable incomes 19% below the UK average, and council areas reaching 27% below, is one where these protections may carry greater importance.
On this basis, we conclude by asking:
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