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Why Stormont savings are needed to balance books

By John Simpson

Published 25/08/2015

John Simpson
John Simpson

The Stormont budget is over stretched, partly because there are new pressures and partly because the Executive has over-committed its funds. To make way for corporation tax changes and rebalance the books, the Stormont budget will need to be tightened.

The scope for budget re-alignment is illustrated by comparing the functions where Northern Ireland spends more than might be justified by 'parity'.

The assessment of the degree to which Northern Ireland is favourably treated can be made in different ways. Comparisons of public sector spending, whether in total or per head, do not necessarily allow for differences in demographic factors, social differences or inherited differences in economic or environmental influences. However, simple comparisons do point to the need for differences to be explained and, possibly, adjusted.

Two 'broad brush' yardsticks are a starting point. First, an assessment can be made of the main difference in domestic taxation, as collected through domestic rates. Second, a mathematical comparison of the different pattern of public sector spending in NI compared to what it would be if spending was compared to an English average.

In summary, people in NI pay nearly £150m less in domestic rates than if they paid the average council tax rate in England and industry pays about £50m less due to partial industrial de-rating. And, people in NI benefit from public sector spending £4,200m higher than would be the per head average across England. This comparison includes water charges as an expenditure item rather than a form of lower taxation.

The higher public sector spending occurs in different proportions for different functional groups. The Treasury has published an annual guide to these figures in the Public Expenditure Survey Analysis which compares NI with identified functional spending in England, Wales or Scotland. To simplify this review, in this comment, a comparison is made with the figures for England although comparisons with Scotland or Wales are also of interest.

In most functional areas, spending in NI is higher in terms of spending per person. The largest differences on a per head basis are listed above.

Some groupings merit additional explanations. For example, public order spending is increased by the higher scale of police and prisons activity here.

The spending on housing and community amenities includes spending on water services, accounting for £265m of the additional £530m spent in NI.

Spending on education brings together the proportionately lower spending per person on primary and secondary education offset by other spending in separate aspects of this responsibility.

Spending on housing benefit is £205m lower on a population basis. However, this combines the lower rate of benefit offset by a proportionately larger number of claimants. The £680m on economic affairs includes nearly £420m spent on agriculture, including EU single farm payments.

The details of where there is extra spending becomes important when Stormont is asked to make more savings or to make room for the budget consequences of reduced revenue when corporation tax is expected to be reduced in 2017-18.

There are no easy options to identify where, given this existing budget framework, Stormont might reduce spending commitments or increase revenue possibilities. Superficially the choice may first fall to reduce housing and community spending, reduce spending on economic affairs, or reduce spending recreation related services.

There is no queue of 'soft targets'. A three to five year phased adjustment programme would be commended.

Company report: Randox Holdings Ltd

The Randox group of companies has grown significantly in recent years and gained an international market for an increasing range of over 2,000 products.

Their products are increasingly important in laboratory applications to aid medical assessment and treatment.

A number of individual subsidiary companies have their results consolidated in Randox Holdings. 

The main production unit is at Crumlin, Co Antrim. The group is currently developing a large new site at Massereene in Antrim.

Turnover has nearly trebled in the last 10 years, from £31m in 2003 to more than  £92m in 2014.

Profits in 2014 were held at the higher levels reached in 2013.  The ratios of operating and pre-tax profits to turnover have recovered after a fall in 2010 and 2011.

A feature of the business has been the significant sums spent each year on the development of new products.  The report states that the company brings more new products to market in a single year than any other diagnostic company. Large amounts have been invested in fixed assets in recent years along with large additions to intangible assets linked to R&D activity.

Randox reports that its products are sold in 145 different countries.

Employment in the company has increased to an average of 1,081 people last year, an increase of 9% over 2013 and well above the average of 700 people 10 years ago.

The balance sheet value of shareholders’ funds reached £48.5m at the end of 2014.

Belfast Telegraph

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