Belfast Telegraph

Social welfare stalemate not good for finances

By John Simpson

Stormont seems unwilling to manage the devolved budget in line with the key parity based policy decisions that are made in Westminster. This makes for a flaw in the devolution arrangements.

Northern Ireland may be told, by a UK government, that if there is no shared understanding of the parity principle where welfare legislation is concerned, then the choice is either to cut Northern Ireland out of the framework set for GB or to amend the devolution legislation to make the social welfare budget a centrally administered responsibility.

That would mean direct rule being restored where parity of spending is a preferred outcome.

The alternative is that Northern Ireland might be cut out of the framework for social welfare set in GB.

Potentially this would be an administrative nightmare and, more importantly, put a major strain on the operation of the Barnett formula by which Stormont's budget is determined.

Realistically, a serious break from a policy of parity of benefits would erode the overall financial position of Stormont.

The London government would not allow such a change to enhance the dependence of Northern Ireland on the UK Exchequer.

In the current UK budget, there is an effort to further reduce the overall UK budget deficit.

In the recent past, whilst Northern Ireland has been affected by many of the austerity measures introduced at Westminster, Northern Ireland has continued to be a major beneficiary of the UK deficit.

The scale of the net fiscal transfer from Westminster to Stormont is acknowledged to add several billion to that deficit and, in the present impasse on social welfare spending, Northern Ireland has not implemented its expected share parity changes.

The current log jam in the Assembly and Executive on the merits of the reform of social welfare spending, with some local concessions in response to Stormont lobbying with London ministers, is neither edifying nor sustainable.

Westminster can hold back and simply deny significant money to Stormont to adjust the local budget to reflect how the Barnett formula would be expected to operate.

Ultimately, then the Executive will need either to take other steps to balance its local budget or to default.

A default is presumably not an option. Either the Executive will take painful decisions to cut spending or the Treasury would challenge the devolved administration with the ultimate sanction being that HMG might, in extremis, introduce some aspects of Direct Rule.

A more stable option would be a decision to amend the current devolution legislation to convert social security and welfare spending into reserved topics (reserved in the sense that decisions at Westminster would apply to Northern Ireland, as in Scotland).

Such a possible decision would create a serious debate among the political parties and would redefine the overall vision of effective devolution.

As Scotland moves more to either independence, or devo-max, there would be an irony in Northern Ireland moving to devo-minimum.

The current stalemate is a consequence of the arrangements for compulsory power sharing at Stormont. The inability to allow legislative decision making to function without such a high level of cross-party political support, when a petition of concern is tabled, was not fully appreciated when the Good Friday agreement was originally accepted.

The search for such a high degree of consensus in decision making may have been a laudable ambition but, when it frustrates normal decision making, something must change.

Stormont ministers are holding the status quo in a situation that will deteriorate, become expensive and weaken the ability of a devolved administration. It also is testing the patience of Westminster ministers. If the situation remains unchanged, the results will be painful and difficult.

Then, try to persuade Westminster that, despite a log jam on social welfare spending, Westminster should do Northern Ireland a favour and allow the introduction in Northern Ireland of a lower rate of corporation tax.

Belfast Telegraph