Justice ministry could create finance squeeze at Stormont
The devolution of policing and justice transfers annual budget costs of £1.2bn each year into the budget of the Executive.
However, the deal goes much further.
First, there are capital budget arrangements for special big capital items. Second, there are a number of allowances for interim adjustments in the next two to three years. Third, there are the arrangements to fix an annual budget for all future years.
The Executive has secured arrangements so that, initially, spending on policing and justice does not immediately affect the current budget and, over a four to five year period will add an extra £800m to local spending.
The first part of the deal relates to the capital budget particularly for the police college and new prison units. These are earmarked commitments for the Treasury to finance. Northern Ireland ministers will expect to be given an approved capital programme for the next three-year period to 2013.
The second part has several complex components:
Police pensions, possibly costing £101m, will be reclassified and will not fall on the Executive annual budget.
An extra £37.4m for security is available this year, if there are exceptional pressures.
An extra £20m a year is to be allocated for the legal aid scheme until 2012-13 and is then to reduce to £14m a year.
A further one-off £12m is earmarked for the court service over the next two years.
If court service pressures exceed these allowances, then Treasury will provide up to a maximum of £39m from its reserves.
A ‘long list’ of potential financial pressures for policing, prisons and probation of up to £15m can be met in 2010-11 and then about £10m a year in the following three years.
If PSNI hearing loss claims exceed £12m in any one year, the excess will be met from the Treasury reserve. To pay the first £12m per annum the Treasury will buy |sellable assets from the Executive for up to £12m each year for five years.
An estimated £100m (or more) comes from the gift of four former military bases to the Executive. The base at Omagh is earmarked for an educational campus but the other three will be sold to raise funds to meet other exceptional spending needs, including the cost of potential equal pay claims. The Treasury will, if necessary, help to raise some of this money before the property market improves.
No earmarked sum has been factored into the deal for the police reserve. The Secretary of State and the head of the PSNI will ‘agree on how front-line policing is protected while ensuring the greatest efficiency’. That problem is therefore passed back to the PSNI.
The third part covers long-term questions. If the annual budget of £1.2bn for policing and justice is added to the Executive budget, there is an obvious tension between the Treasury and the Executive. Will the annual policing and justice budget become an additional part of the allocation through the Barnett formula?
A Barnett formula approach would effectively be a financial squeeze. Alternatively, will policing and justice be an earmarked budget, negotiated annually?
The Treasury will want to fully devolve the budget and pass the spending tensions to local ministers. However, that brings |major problems.
First, the policing and justice budget is well above what might be expected in a ‘peace-time’ setting. Will the Treasury want to plan a phasing down of the extra spending?
Should the incentives to reduce the policing budget be arranged to benefit the Executive or the Treasury?
Sammy Wilson, as Minister of Finance, might prefer an arrangement that kept him out of this political dilemma.
The proposed policing and justice budget still leaves a series of difficult detailed negotiations to take place between the Treasury and Sammy Wilson’s department. A cash strapped Executive could certainly do without an extra squeeze.