Belfast Telegraph

Monday 20 October 2014

DebateNI home of Northern Ireland politics

It's simple, Simon Hamilton, you have to slash spending

Water dilemma: Simon Hamilton may be the Stormont minister who will have to swallow hard and look at introducing water rates
Water dilemma: Simon Hamilton may be the Stormont minister who will have to swallow hard and look at introducing water rates
Water dilemma: Simon Hamilton may be the Stormont minister who will have to swallow hard and look at introducing water rates
Water dilemma: Simon Hamilton may be the Stormont minister who will have to swallow hard and look at introducing water rates

When Simon Hamilton is takes over as Finance Minister later this summer, probably within a matter of days, he will face tough choices.

Sammy Wilson has held the post since June 2009. That is a long run for a DUP minister and he has performed well.

But he leaves a challenging time when our Budget is likely be reduced as a result of decisions taken in London.

Our annual subvention from Britain currently runs at £10.5bn and is worked out as a proportion of British public spending under the Barnett formula.

It has, up to now, been shielded from the worst of the austerities, because areas of high spending, like health, which accounts for nearly half our Budget, are ring-fenced by the chancellor.

Careful management has enabled us to deliver benefits here that are not available in England. As the Chancellor cuts deeper, all this will inevitably become harder to sustain.

A first taste came with Mr Wilson's proposals to cut rates relief to 40,000 low-income households in order to save £6m out of an £18m reduction in our Budget as a knock-on effect of housing-benefit reductions in England.

The elephant in the room is water charges, which we, alone in Britain or Ireland, don't charge to households.

As a result, £278m a year must be found – cut that is – from other budgets to make up the shortfall. The amount is rising fast – it was only £200m in 2009 – but the Executive is committed to meeting it until the next Assembly election.

Mr Wilson has warned that it is hard to sustain this subsidy indefinitely, but Mr Hamilton is the one who may have to bite the bullet and phase-in charging and find a way of selling it to the voters.

Universal free prescriptions is another popular giveaway.

In England, only specified groups, including those aged over 60, or below 16, those on low incomes and those suffering from chronic diseases, like diabetes, get this benefit.

If we applied the same rules here and charged the rest £3 a prescription, we would save £5m-£6m a year. If the charge went up to £6.85, the revenue would be £12m-£13m. That would more or less cover Mr Wilson's cut to rates relief for the poor.

Mr Hamilton could also take another look at who gets rates exemption now. In 2006, the DUP exempted 'community halls' from rates, a measure which has cost the Budget £1,025,155 a year. The Orange Order gets the lion's share. It has saved £4.5m in rates since 2006 and £720,478 this year alone. The Freemasons are the only other group with a six-figure annual saving (£231,301), but the Ancient Order of Hibernians (324,625), the Royal Black Institution (£9,051), the Apprentice Boys (£12,456) and the Independent Orange Order (£5,731) also benefit.

All these giveaways were popular vote-winners when they were announced.

Now, as the Executive struggles to cope with a reduced Budget and, perhaps, to meet the bill for reducing corporation tax at a cost of up to £700m a year, they may be harder to justify on their merits.

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