Belfast Telegraph

Monday 29 December 2014

The Economy: Hard choices for Finance Minister

The responsibilities of the Minister of Finance in the Northern Ireland Executive are serious and pose difficult choices. Peter Robinson can be portrayed as the Minister with the money and therefore in a powerful position.

Alternatively, he can be portrayed as the person who prevents other Ministers and departments from doing all the things that are needed.

The public sector purse strings are rarely slack and the message from Peter Robinson is that, for the next three years, the purse strings will be unusually tight.

The official language is that decisions 'this time round will take place within a more restrictive fiscal climate'.

Within the next six weeks a consultation on the Northern Ireland Draft Budget for the period 2008-11 will be launched.

Mr Robinson has issued a warning: most of his Ministerial colleagues cannot expect larger allocations. Most will be asked to manage their services as well as find financial efficiency savings.

The financial allocations will not only squeeze existing commitments, but there will be reallocations to priority areas that must be financed.

Mr Robinson has acknowledged that giving extra stimulus to the local economy is high on his agenda. Effective proposals that would reduce Northern Ireland's skills deficit, enhance the physical infrastructure, encourage innovation and R&D, as well as give incentives to new enterprises, will be encouraged.

Delivery of these priorities will create pressure for increased spending, particularly on skills training and a range of capital programmes, as well as calling for some policy changes that do not necessarily carry new spending commitments, such as the regional development strategy.

The Minister has an unusual feature with which to cope. For over 50 years all Ministers have needed to focus on reducing unemployment: more jobs were the priority. Today, more happily, the focus needs to be on better jobs, rather than simply more.

Whilst a reallocation through financial arrangements will not be popular for some Ministers and interest groups, a shift from social policy priorities (but not a big withdrawal) may be necessary, unless administrative efficiencies can be made across the board.

There is a temptation to point to the reducing law and order budget as a possible source of reallocated funds. This is a logical follow-on from the improving stability in the community.

If Northern Ireland had a law and order budget which per person was the same as Great Britain, then over £550m would be released. Even a move in that direction would take several years to become effective because of the continuing demands on these services.

However, the Northern Ireland Executive has no responsibility for that part of the Budget since it remains a Westminster/Northern Ireland Office responsibility. Claiming a reallocation in favour of the Executive would mean persuading a reluctant Treasury effectively to increase the Barnett allocation.

The public sector in Northern Ireland has spending levels that are 24% higher than the averages for Great Britain.

If Mr Robinson looks for indications of public services where spending is higher he will find that, in addition to law and order, the biggest margins are in:

1. Housing - 200% higher.

2. Agriculture - 165% higher.

3. Enterprise - 65% higher.

4. Environment - 60% higher.

Environmental spending includes water services in Northern Ireland but these are outside the public sector in England.

Surprisingly, the differences in education (+20%) and health (+3%) are proportionately smaller, and for one set of public commitments Northern Ireland is below the GB average: transport and roads (-21%).

If the current adverse economic performance is to be reduced, Mr Robinson, and his Executive colleagues, need to make radical changes. This will not be a short term route to popularity although, in time, it should pay dividends.

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