Belfast Telegraph

Budget crisis is politically and economically divisive

By John Simpson

The business community must no longer be a passive observer of the political infighting that is making Stormont ineffective and is generating a continuing image of political instability. High on the priority list, but not alone, is the budget crisis linked to welfare reform.

There is a strong case for the reshaping of the structure of welfare benefits and services. That case is being obscured by emotive slogans and ill-considered attitudes. There is no constructive benefit in simply opposing austerity or obstructing a Conservative administration.

As the political debate has become more polarised, the social and economic issues are being hidden. While some aspects of welfare reform deserve critical attention and amelioration, unconstructive opposition does not offer a solution to what has become a budgetary nightmare.

Two key points should be registered to push the debate towards a constructive solution.

First, there are aspects of the welfare reform changes which are progressive (even if implementation must be scrutinised and sometimes modified). Second, from a Northern Ireland perspective, welfare reform comes with more than billions of pounds in financial guarantees (based on parity) which should not be rejected.

The opposition to welfare reform makes a plea that simply to implement the Great Britain arrangements will increase unacceptable hardship for some households. The sensible response to some increase in hardship is to objectively assess the reasons and devise efficient changes.

To oppose the welfare systems now developing in GB poses two problems. First, it creates a situation where the Northern Ireland administration faces serious financial penalties from the Treasury. Second, it puts at risk the inherited financial arrangements, where NI has a virtual guarantee of a major inflow of funds based on parity principles.

If there are proven needs left unmet by the GB changes, the best solution is to maintain the current financial arrangements and then add top-up payments where there are proven gaps.

The merits of the GB changes include the switch to a universal credit system which consolidates a range of benefits and, in the process, should improve the effectiveness and efficiency of the system. The GB system has made considerable progress in introducing a system of personal independence payments which are subject to objective assessments which replace (in a phased period) various forms of disability living allowances.

In GB a significant mistake lay behind the introduction of the (so-called) bedroom tax when calculating housing benefit.

The emerging escalation of the cost of housing benefit had become a serious issue, but the unsympathetic treatment of existing tenancies was flawed.

It will probably be changed and, if not, Northern Ireland has already negotiated an appropriate amendment.

Another change has been the introduction of a 'welfare cap' which limits the cumulative benefits in households eligible for a range of benefits.

Placing that 'cap' at the current GB totals should not be a serious unfair constraint. Again, if unusual circumstances point to hardship, a case for local amendments might be made.

The Stormont House Agreement was generally welcomed because it adopted a pragmatic approach to any question of hardship arising from welfare reform.

Existing beneficiaries who faced a transfer to new arrangements which created a disadvantage could be offered transitional protection.

If transitional protection did not open up a satisfactory continuing basis of support, then an evidence-based alternative might be considered.

Now, in mid-2015, the suspicion that welfare reform will leave some groups permanently disadvantaged has not been adequately evidenced.

Failure to implement welfare reform is proving both costly and politically divisive.

The opponents of reform would serve their interests better if they agreed to implement the changes, secured the benefits that are there for many people and then solved any remaining questions.

On that basis, current political differences might be reconciled (or reduced) and the economy allowed to recover and build on assured stability.

Belfast Telegraph