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Stormont finances from the Treasury could face a big hit after Westminster election

By John Simpson

Published 21/04/2015

Big vote: Stormont awaits the election
Big vote: Stormont awaits the election

Many hours are being spent listening to arguments about the merits of the general election campaign. There is little doubt that the outcome is important for Northern Ireland but not in the same straightforward way as in England.

Interpreting the implications of the UK-wide debates as they may apply in Northern Ireland can be difficult. The biggest political parties in Great Britain have each made important statements about how, for example, they will balance the 'Treasury books' and reduce borrowing as well as show how the Government will allocate the reshaped budget to affect many critical public services, ranging from the NHS to high speed railway investment.

Because of the different political institutional arrangements across the UK, in Northern Ireland the outcome of the election campaign will only indirectly affect what happens to the local NHS or to the local non-high speed railways. Those questions are already in the hands of Stormont ministers.

That distinction is important and complicates the matrix of the political options facing our electorate.

To overstate the simplification, the main implications of the UK election for economic and social policy in Northern Ireland will be the consequences for the scale of financial resources allocated to Stormont. What result will give (a) a stable UK Government, (b) maximise the funds available to Stormont and (c) apply sensible controls (or limits) on Stormont's discretion?

Listening to the different statements on possible funding increases for the NHS in England makes for serious debates on allocation and management of NHS funds in England. That carries no assurance of what may happen in Northern Ireland, or Scotland.

The temptation to apply a population-based share, based on an English model, can be misleading. If, as currently speculated, an extra £8bn might be progressively found by 2020, Stormont ministers might hope to see they have a local impact through the Barnett Formula. It could mean about 3.5%, or £280m, extra in the Stormont budget but local ministers might decide otherwise.

A critical starting point for Northern Ireland is the assumption that Stormont will continue to be financed mainly using the rules of the Barnett formula. Voices have been raised by some English commentators saying that the Barnett formula should be reviewed, usually meaning that Scotland and Northern Ireland are too generously treated. No mainstream political party has said anything that immediately threatens the survival of Barnett. Two assumptions are critical for Northern Ireland.

First, neither of the two largest parties in Great Britain expects to see public sector spending entering a period of expansion. Public services can only expect larger budgets if the real economy is growing and, as a consequence of limited ring-fencing of health and education, most other budgets will be further squeezed.

Second, there is no suggestion that a new UK Government will be more favourably disposed to higher funding allocations either to Northern Ireland or Scotland. The (so-called) Block Grant will not become more generous.

In short, whatever the outcome of the election, the UK Government is expected to further reduce the overall UK deficit and, in consequence, managing the Stormont budget will remain squeezed and difficult.

Living within the parity allocation of welfare reform will not be any easier and the tension between Stormont and the Treasury on financial management will call for political compromises. There will be some voices which attribute blame to continuing austerity policies supported by both the largest political parties.

The riposte to this will focus on the parts of the Stormont budget that are seen, from an English perspective, to be unreasonably generous to local taxpayers whether in low rates, no water charges, housing subsidies or transport subsidies. The declared policies of both the Conservative and Labour parties mean there should be reduced borrowing and decreasing public spending. That election agenda offers no soft landing for Stormont finances.

Company report: Sangers NI

The share capital of Sangers (Northern Ireland) is owned by Alchem which, in turn, is owned by Irish-registered United Drug plc, trading within UDG Healthcare. 

The Northern Ireland business is organised in four divisions: wholesale, distribution, commercial (which exports ethical drugs to European countries) and Pemberton (selling health and beauty products to commercial outlets). 

The wholesale division deals with the drugs and over-the-counter products for pharmacies and hospitals.  

The separate distribution division sells bulk over-the-counter goods to large pharmacy chains and to hospitals and other wholesalers. 

The directors report that they intend to continue to develop the present activities with a strategy to grow the current portfolio of wholesale products.

Turnover in the year to September 2014 was lower than in the previous year with a 2% fall in value. The operating profit of Sangers (NI) in the recent year was £70.5m.

This very large increase is attributed to a one-off exceptional item contributed by the sale of the company’s equity interest in its joint venture with UDG.

The one-off exceptional item added £65.7m to the recorded operating and pre-tax profit.

In turn, this exceptional addition was offset by a dividend payment to the shareholding company of £76.2m compared to a more usual dividend of nearer to £6m.

Pre-tax profits in 2013-14 also reflected this one-off transaction and, when it is excluded, pre-tax profits of just under £12m remained.

Employment in the last year averaged 223 people which is a small fall from the previous year average of 227 people.

The defined benefit pension scheme, whose net assets or liabilities are reflected in the balance sheet, reported an increase in the value of its assets to more than £14m. However, the actuarial valuations have recorded a net liability of more than £2m at the end of September 2014. 

This net liability was nearly £0.8m higher than a year earlier.

Belfast Telegraph

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