Belfast Telegraph

How Stormont failure will hit your household budget

Northern Ireland's devolved Government's has failed to approve a budget for 2017-18. It was scheduled for early December but was overtaken by events. There may be no approved budget until well into the new financial year and an early casualty is likely to be a delay in sending out rates bills.

The outgoing Executive had agreed that, rather than a four-year plan, only a one-year budget for 2017-18 would be prepared.

Our budget arrangements contrast sharply with Scotland. In December, Scotland published its budget for 2017-18, reflecting the impact of a much wider range of budgetary powers.

Within the last year the Scottish Government has agreed a series of changes to the scope of the Scottish budget, including devolution of responsibility for the setting of income tax rates for the first time.

Northern Ireland still operates what is essentially an expenditure model with most tax revenue determined by Westminster. The Scottish Government's ambition is to demonstrate that Scotland might be self-financing which, in turn, links to the debate about possible Scottish independence. That motivation of the Scottish Government is heavily influenced by the allocation to Scotland of tax revenue from North Sea oil and gas supplies. More recently lower international oil prices have dented that expectation.

The Scottish Budget statement for 2017-18 is an impressive document. However, there is evidence of an ambitious administration mixing the support of the UK fiscal systems with an impressive degree of local discretion. In the areas of education, health and housing, larger Scottish spending differences are well documented - particularly with the rejection of university fees for Scottish undergraduate students.

Using the agreement on the devolution of responsibility for critical parts of personal taxation, for the first time the Scottish Government has set slightly more onerous income tax rules for higher income earners in Scotland. Well-paid Scots will pay slightly more income tax than elsewhere. Scottish devolution now extends to Land and Buildings Transactions Tax (often called stamp duty), Scottish landfill tax and (potentially) air passenger duty. In total, devolved taxation may account for nearly 40% of Scottish government spending.

The widening of budgetary discretion in Scotland has largely passed unnoticed in Northern Ireland. There has been little local public debate about the merits of parallel local income tax changes. In contrast to the Northern Ireland debate on setting lower rates of corporation tax, there seems little demand for that change in Scotland.

For the next Northern Ireland budget much of the scope for local discretion has already been earmarked. The absence of direct charges for water to domestic customers, the comparatively much lower charges for local rates, combined with the special treatment of aspects of welfare reform (including the deferral of housing benefit changes), all involve spending that might otherwise be available for other public services.

Northern Ireland is in a weak position to ask the Treasury for extra funding. That issue stands completely separately from the unfinished business of funds for the flawed RHI (renewable heat initiative). We now face a new budget year 2017-18, with no agreed Stormont budget in place and doubt about the ability to issue of rates bills which would be due from April 2017. The prospect of ratepayers is of having no bills to pay for some months, and then a catch-up demand later in the year is, at best, an unwelcome hazard.

Belfast Telegraph

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