Belfast Telegraph

UK Website Of The Year

DUP to propose 'fantasy budget'

Published 08/06/2015

Theresa Villiers says the provisional budget idea would be helpful
Theresa Villiers says the provisional budget idea would be helpful

Stormont's so-called "fantasy" budget will be tabled at the Assembly next week in a bid to buy further time to resolve the financial crisis that threatens to swamp the power-sharing Executive.

Democratic Unionist Finance Minister Arlene Foster will propose a partially unfunded spending plan to MLAs so she can start the passage of required budgetary legislation, hoping the money to plug a £600 million gap will materialise in the coming weeks by way of a settlement to a bitter wrangle over welfare reform.

A three-year impasse over the introduction of the Government's welfare reforms in Northern Ireland, and the resultant stalling of last year's landmark Stormont House Agreement political deal, has pushed the five-party mandatory coalition Executive toward the edge of a financial cliff.

If the budget does not complete its legislative passage by the end of July, a senior civil servant will take over control of Stormont's purse strings - a move that could well trigger the collapse of the power sharing administration.

The DUP has proposed a budget based on the assumption the Stormont House deal has been implemented.

By itself, the unusual move would not bring a resolution to the deadlock any closer, but it would potentially push the point of no return a few more weeks down the tracks.

"We are basing this budget on the full implementation of the Stormont House Agreement and that of course includes the implementation of welfare reform," said Mrs Foster.

The Finance minister said if the reforms were not introduced by the end of July then the civil servant would step in.

She repeated her party's call for the Government to step in and implement the changes to the benefits system over the head of the Assembly - thus overriding a Sinn Fein/SDLP veto that is blocking their introduction.

"We are indicating that we believe welfare reform has to happen to make this budget balance and we want the Secretary of State to move very quickly to implement that welfare reform," said Mrs Foster.

Earlier Northern Ireland Secretary Theresa Villiers said the fantasy budget would be "helpful" in creating more time to find a resolution to the welfare row, but she insisted direct intervention by the Government remained very much a "last resort".

"Devolution should mean these choices rest with people who are elected in Northern Ireland," she said.

Sinn Fein has not ruled out the DUP's budget plan, but has made clear that Government intervention on welfare was not on.

Deputy First Minister Martin McGuinness today told the Assembly such a move would be "completely and totally unacceptable".

But he said the dispute over welfare was not insurmountable on a local level.

"Those difficulties need to be resolved. I still believe it is possible to do that and I am very much in problem-solving mode," he said.

While the Executive would currently not have the money to see through many of the funding commitments made in Mrs Foster's budget, those funds could latterly become available if the local politicians subsequently resolved the welfare dispute in the weeks ahead.

Theoretically the money would also materialise if the Government stepped in to implement welfare - but that course of action also runs the risk of Sinn Fein walking out and collapsing the institutions.

Ms Villiers said the budget plan could help avert an immediate crisis.

"I think agreeing that sort of budget on a provisional basis would be helpful," she said.

"It at least gives a little bit more time to see these matters resolved."

The defeat of the Welfare Reform Bill in the Assembly last month, due to the Sinn Fein/SDLP veto, has endangered other political and economic developments that hinge on the implementation of the agreement, such as the devolution of corporation tax powers, access to £2 billion of increased borrowing powers from the Treasury, a major civil service redundancy scheme and new structures to address the legacy of the Troubles.

As such, the future of power-sharing essentially hangs on the fate of the agreement, with the failure to implement it having left the Executive facing a funding gap of hundreds of millions of pounds this financial year.

It is estimated the Executive will lose out on £604 million this year if the agreement is not introduced.

While much of that total will not directly impact on current spending on front line services - as it is money that would only have been available to roll out specific elements of the deal - a significant proportion will put pressure on the Executive's core budget.

Funding for key public services will certainly been hit hard by on-going Treasury penalties for non-implementation of welfare reforms, currently running at just under £10 million per month.

If a senior finance department civil servant is forced to step in at the end of July, that individual will be subject to tighter spending restraints than Executive ministers, which will mean even more funding will be cut from public services. The DUP estimate a total of £2.8 billion will be slashed if that scenario plays out, though Sinn Fein claim the amount is much smaller.

Mrs Foster has circulated her spending plan to colleagues in the Executive and will next week ask her Stormont scrutiny committee to grant her Bill "accelerated passage" through the Assembly.

She said it would become clear at the committee whether Sinn Fein intended to back the plan or not.

"If Sinn Fein don't back the budget then we are probably back to the situation we were in before we tried to find a solution to the problems that they created in the first place by not backing the Welfare Bill," she said. "We'll be back to the situation of a senior civil servant in my department acting under Section 59 of the Northern Ireland Act which brings forward huge public service cuts and we are just simply not prepared to countenance those."

Ms Villiers, who today met business leaders in Belfast to discuss the economic impact of the crisis, said a provisional budget was better than no budget at all.

"Failing to agree a budget of any kind would mean we face those emergency budget measures which could detrimentally start to impact on public services," she said.

After the meeting with CBI representatives in the city, Ms Villiers said there was particular concern in the business community over the hold-up on corporation tax devolution.

Chancellor George Osborne pledged to transfer the power to set the levy on business profits to Stormont in last year's autumn statement - but only if the Executive could put itself on a firm financial footing.

With budgetary instability seemingly resolved in the Stormont House Agreement, the Government pushed through legislation to facilitate the transfer at the end of the last parliament.

But while the devolution of corporation tax is now on the statute, it will only be activated when Mr Osborne gives the green light and triggers the legislation's commencement clause. Again, the chancellor has made clear this will only happen when the Executive's finances are in order.

Ms Villiers said transfer would be "impossible" in the current financial situation.

"We are certainly quite some way from the finances of the Northern Ireland Executive being stable enough for that devolution to take place," she said.

Sinn Fein and the SDLP vetoed the welfare reforms because they claim they will hit the most vulnerable in society.

The Government has insisted the reforms are necessary, and must be introduced if the rest of the Stormont House Agreement is to be implemented.

While initially backing the welfare element of the agreement, Sinn Fein changed stance three months later, claiming that Executive-funded top-up measures to support claimants losing out under the new system were not as comprehensive as it believed were envisaged in the accord.

The DUP has accused its main partners in power-sharing of welching on the deal.

Ms Villiers today also warned that enhanced flexibilities afforded to the Executive, in areas such as Treasury borrowing, were also under threat if the Stormont House Agreement falls.

But she said there would be "no rush" to shut down the flexibilities in the short term, claiming such a move would only exacerbate the current financial difficulties facing the administration.

As well as the five Executive parties, the British and Irish governments signed up to the Stormont House deal. The Dublin Government's role is essentially limited to some of the initiatives to deal with the legacy of the Troubles.

Irish Taoiseach Enda Kenny and Prime Minister David Cameron are set to discuss the deadlock at their annual summit meeting this month.

Your Comments

COMMENT RULES: Comments that are judged to be defamatory, abusive or in bad taste are not acceptable and contributors who consistently fall below certain criteria will be permanently blacklisted. The moderator will not enter into debate with individual contributors and the moderator’s decision is final. It is Belfast Telegraph policy to close comments on court cases, tribunals and active legal investigations. We may also close comments on articles which are being targeted for abuse. Problems with commenting?

Read More

From Belfast Telegraph