Belfast Telegraph

Tuesday 30 September 2014

£70m budget reallocation is constrained first response

At a summit last week between politicians and local bank leaders are (from left) Bank of Ireland chief executive Stephen Kirkpatrick, First Minister Peter Robinson, Northern Bank chief executive Gerry Mallon, Ulster Bank chief executive Cormac McCarthy and deputy First Minister Martin McGuinness at Stormont Castle. They met to discuss the economic downturn

The Northern Ireland executive has launched a first stage response to the pressures of the economic downturn on the local economy. Nigel Dodds, as Finance Minister, has presented a £70m spending package.

This mini-budget does not mean that there is any extra money to spend. Spending has been reallocated by calling in funds that were not going to be spent or which could be clawed back. It redistributes less than 1% of the regional budget. However, the impact is significant.

The Finance Minister outlined decisions that have three overlapping strands. First, with an eye to social needs, he has allocated £15m to ease fuel poverty for 100,000 lower income households and also noted a further £5m for social housing.

Second, with an eye to the worsening state of the economy, particularly as it affects the construction industry, he has reallocated nearly £30m of capital spending so that total Government capital spending in this financial year to be £270m higher than in 2007-8.

In addition, there is an £8m concession on the rates bill for businesses through a freeze on charges in 2009-10 and the promise, for 2010, of a small business rate relief scheme. Third, he has allocated over £20m to items of current spending where commitments exceed the original budgets.

The key feature of this mini-budget is the assurance that an expanding capital programme will be maintained broadly as approved for this year’s budget.

Originally, gross capital spending was planned to be £1.8bn and would be offset by capital receipts of nearly £0.5bn.

The Minister did not dwell on the significance of a near collapse in capital receipts, particularly because of the delay in the Workplace 2010 project.

This means that there must be a considerable cut-back in new work which will help to balance his books even though it will disappoint the construction industry.

The construction industry would like evidence of an effort by the Executive to accelerate the implementation of projects that are planned for 2009-10-11.

There is some small consolation from timetable improvements in getting decisions on planning applications. Government placing of several major building contracts has, during 2008, been delayed as a result of judicial reviews that criticised the procurement procedures in two key framework contracting schedules.

In a response the Minister acknowledges the delay and has reverted to the existing tendering procedures on a project by project basis.

For the economy in general, his plans to freeze the level of business rates and introduce a small business rate relief scheme in 2010 is attractive but the incentive effect to expansion will be small.

Perhaps the biggest surprises in this mini-budget are (a) the low key reference to the housing market and (b) the relative silence on the worrying developments affecting the wider economy particularly jobs.

Housing policies might have been developed to alleviate social concerns and give an economic boost.

There was no explicit support for the Mortgage Rescue scheme which has been under consultation.

Also, although the Executive heard proposals for an extra £60m to build more Social Housing and other proposals for Warm Homes (insulation schemes), these proposals were not accepted as priorities within the current financial year. Some £5m was earmarked for housing budgets.

Although the Minister has not made the point, one of the important caveats about the mini-budget is its modest remit.

The £70m reallocation is only an in-year adjustment to an existing budget allocation. This is not a major review of all policies.

Of course, the implications for the Executive of the worsening economy will call for longer-term responses where the whole programme for Government must be refined.

For Nigel Dodds and his colleagues, this mini-budget is only a constrained first response.

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