Belfast Telegraph

£160m squeeze on block grant the thin end of the wedge: Executive told to cut £1.3bn from expenditure by 2019

By Noel McAdam

A £160m hit to Stormont's budget next year will be dwarfed by a further £1.3bn of cuts looming on the horizon.

On top of next year's budget squeeze - proposals for which are now out for public consultation - a further 13% is to come out of departmental expenditure by 2019. The total over the three years from 2016 has been estimated at £1.3bn.

The extent of the austerity facing public services and jobs emerged as Finance Minister Simon Hamilton presented the draft budget for 2015/16 to the Assembly.

The figures for the three years beyond that are based on projections by the UK Office for Budget Responsibility. But a lot of confusion surrounded the figures provided by officials.

Mr Hamilton said: "So in this year and beyond we will have a wide range of increasing demands placed upon our public services while we have fewer and fewer resources with which to meet that growing demand."

He told MLAs it was a situation in which not only tough, but "sometimes even undesirable" choices will have to be made.

The unremitting gloom is in part the result of a UK policy switch, agreed in 2012, which will see a shift away from current day-to-day spending towards an emphasis on capital projects in an attempt to revitalise the economy and boost the private sector.

Ministers' plans also include the development of a Northern Ireland Investment Fund, designed to roll out over time to a total of £1bn to invest in large-scale projects including social housing, renewable energy and urban regeneration.

And for the first time the Organisation for Economic Co-operation and Development (OECD) is being brought in to undertake a regional examination of the public sector.

Describing the initiative as "ground-breaking", Mr Hamilton said it will help the Executive identify significant reform opportunities "to enhance the delivery of public services".

"This draft budget has been constructed in the most challenging financial circumstances to face any administration in the history of Northern Ireland," Mr Hamilton said. "At the start of the budget process, cuts of 15% were on the cards for the vast majority of departments.

"Instead, we have worked hard to stave off the worst. We have found imaginative ways to deal with our financial difficulties and still make significant allocations to priority areas."

Mr Hamilton also clarified his department was already working on a "workforce restructuring plan" for the public sector.

"This will embrace all possible personnel interventions, including a recruitment freeze, suppressing vacancies, use of temporary staff, pay restraint and a voluntary mechanism to reduce workforce numbers," he added, promising to bring detailed proposals to the Executive in the next two weeks.

However, the draft budget proposals do not factor in a £114m Treasury penalty next year over the failure to implement welfare reform, which could mean an early review of the draft plans.

Instead ministers have made an assumption that welfare reform, at least to some degree, will be agreed in the next few months and introduced in the province before next April. They have also set aside £70m to help ameliorate the effects of the reforms on the most vulnerable.

But after a face-off between the DUP and Sinn Fein for more than a year, Mr Hamilton conceded if the two parties do not agree a deal on welfare reform, then the 2015/16 budget will need to be revised.

Ministers have already made provision for covering the £100m loan given to the Executive by Chancellor George Osborne last month in the form of expected receipts totalling around £108m from repaid loans and selling some assets including housing stock. The draft budget was supported by the DUP and Sinn Fein, who have a majority of ministers on the Executive and MLAs in the Assembly, but opposed by the three other Executive parties, Ulster Unionists, SDLP and Alliance.

Background

A draft budget involving a £160m cut from the annual £10bn block grant has been agreed.

The total range of pressures the Executive had to confront amounted to £872m worth of reductions to the block grant. But around £710m of that is reallocated to meet other spending pressures and the Executive has prioritised health, job creation, education and policing.

Where the axe will fall

OFFICE OF THE FIRST MINISTER AND DEPUTY FIRST MINISTER

While Peter Robinson and Martin McGuinness’ officials will again have to review their range of projects, perhaps including the Social Development Fund, they will be relieved to have been given £5m to cover the Historical Institutional Abuse Inquiry. They have also been given a further £3m for the victims and survivors service.

DEPARTMENT OF CULTURE, ARTS AND LEISURE

Arts and sports, already having sustained one of the worst blows from the quarterly monitoring rounds, will be forced to cut back on support for organisations by a further 10%. The Ulster Orchestra, theatres like the Grand Opera House and various festivals are among the many arts sector elements facing further public funding reductions.

DEPARTMENT OF EMPLOYMENT AND LEARNING

£1.3m has already been cut from the Student Hardship Fund and now minister Stephen Farry may have to look at other student support streams as well as major projects like the expansion of Magee College, Londonderry. His department is facing the third biggest reduction, just below Finance and Personnel, of 10.8%.

DEPARTMENT OF AGRICULTURE  AND RURAL DEVELOPMENT

While grants to Northern Ireland’s farmers will continue to be cushioned by subsidies from the European Union, a 5.2 % cut in Michelle O’Neill’s department could hit other support schemes for agriculture and those living in the countryside, although a £15m injection includes money to finance compensation for tuberculosis in livestock.

DEPARTMENT OF THE ENVIRONMENT

SDLP minister Mark Durkan is facing the biggest single cut next year, of just over 11 %, which may mean more drastic measures in addition to his decision not to fill potentially hundreds of vacancies and temporary jobs. His department will also have to reduce programmes on waste and air quality, cut back a fund aimed at helping coastal communities and cease any new projects.

DEPARTMENT OF EDUCATION

The ring-fenced status granted to John O’Dowd’s department in the June monitoring round has now been revealed as being worth £145m, which is less than the full protection that might have been expected. Education is coming under pressure to consider school amalgamations to reduce the costs to the public purse of thousands of empty desks around Northern Ireland.

DEPARTMENT OF HEALTH, SOCIAL SERVICES AND PUBLIC SAFETY

New minister Jim Wells’ department remains firmly ring-fenced as the top priority of the Stormont Executive in the next financial year, with additional funding of £200m being set aside, which officials from the department have argued is fully justified in the face of heavy winter pressures on the health service and other issues and commitments.

DEPARTMENT OF JUSTICE

The Department of Justice has lost its ring-fenced status — awarded when policing and the courts were devolved in 2010 — apart from funding for national security measures. This exposure to cuts now leaves Justice Minister David Ford vying for resources on the same basis as other ministers, with a 6% reduction next year, which he has already warned may hit policing.

DEPARTMENT OF ENTERPRISE,  TRADE AND INVESTMENT

With the Executive’s emphasis on securing new jobs, minister Arlene Foster’s department and Invest NI have also been protected from the worst of the cuts. A further £30m has been given to DETI to boost job creation efforts, and it is the only department, apart from health, not to face the prospect of implementing cuts in real terms.

DEPARTMENT OF FINANCE  AND PERSONNEL

Finance minister Simon Hamilton’s own department is facing the second biggest single cut in this latest budget — just 0.2% less of a reduction than that of Environment, and is thought more likely to affect personnel than finance in the longer term. There may also be implications for arm’s-length bodies, such as Land and Property Services.

DEPARTMENT FOR REGIONAL DEVELOPMENT

Minister Danny Kennedy describes the 4% cut to his department as “savage”, given it has already been necessary to curtail all expenditure on routine road maintenance activities. Transport NI, for example, has been unable to issue new works contracts to contractors. The current inability to fix street lights or potholes is likely to be exacerbated.

DEPARTMENT FOR SOCIAL DEVELOPMENT

New minister Mervyn Storey is also facing a budget cut of just under 10%, which could impact on new social housing projects and plans for the Housing Executive. But it is his department which will also have to implement any agreement on welfare reform, including a new Bill before the Assembly, and the £70m package of measures to cushion the worst impacts of the changes.

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