Belfast Telegraph

Thousands of public sector jobs at risk in Northern Ireland as cuts deadline looms

The clock is now ticking as Stormont cuts deadline looms: Executive must axe £200m or else London will step in to avoid public sector job cuts

By Liam Clarke

The Executive has been warned it must find £200m in funding cuts or it will bust its spending limits and face a Treasury intervention, the Belfast Telegraph can reveal.

The first opportunity to make the 6% saving, which will affect all departments except health, will be at tomorrow's Executive meeting.

The stark warning to cut services was outlined to ministers during a secret briefing last week. If the savings are not made by the end of this month, then the Treasury in London will intervene to run our economy along with civil servants.

The revelation came following another day when the sense of crisis enveloping Stormont deepened:

  • two prominent DUP ministers were sacked from their posts in a major party reshuffle;
  • deadlock over the introduction of welfare reforms intensified with MLAs split down the middle during a crunch vote;
  • Sinn Fein said if a welfare bill is not brought before the Assembly, then an election should be called.

The latest cuts which the Executive has been told it needs to make go further than those which have previously been announced by the finance minister.

The 6% cuts will run between now and April – after that there will be more and a redundancy scheme for civil servants seems inevitable.

Redundancies are almost impossible to avoid because at least 60% of public spending here is on wages. There are 220,000 people working in the public service as a whole which includes the police, teachers and others. The civil service alone employs around 24,000 people.

The cuts which threaten them with redundancy are necessitated by a mixture of factors. The main issues are Stormont's failure to introduce welfare reform and the need to plough more money into health.

A minimum of £60m must be allocated this month in order to keep health services afloat after warnings by Edwin Poots, the former Health Minister, and top doctors that lives could be put at risk without a massive cash injection.

Avoiding difficult decisions by make-do-and-mend measures ever since 2007 has also contributed to the financial debacle.

"This is like a can the Executive has been kicking down the alley for some time. They have now reached a wall and it is bouncing back on them. There is nowhere left to go, the easy options are all gone," a senior source close to the negotiations said.

If ministers cannot make the saving this month, we will exceed the overall "control limit" placed by the Treasury on our spending by hundreds of millions. Civil servants would then step in to keep things running and the Treasury would also intervene.

As this paper revealed yesterday, the gloomy outlook was outlined to ministers and senior officials last Thursday in a secret briefing by the Department of Finance and Personnel. It was also revealed yesterday that cuts next year are likely to be 14% in all departments except health. They will be even deeper if education is also protected, but new and even more worrying details have become available.

Things are coming to a head this month because of the fallout from the June monitoring round, a time when unspent surpluses in departments are normally reallocated.

One source close to the negotiations said. "We have already absorbed 2.1% cuts in the last monitoring round in June. We were put on notice that it would rise by another 2.4% in October and we have absorbed that. We were then told that we need to find an extra 1.5%. It keeps rising."

Last Thursday ministers and senior officials were told the cost of a number of giveaway measures which are offered here but not in Britain. We are the only region without water charges and this costs £180m to other programmes. If our local government charges – regional rates – had risen at the same level as in England instead of being held down then the Executive would have another £150m a year. Housing benefit is subsidised by about £80m.

Smaller sums go on voter-friendly measures like free prescriptions, free public travel for the over-60s, and subsidised student grants.

Combined such measures add up to half a billion a year.

"This makes it very hard to ask the Treasury for special treatment," a source said.

"In fact ministers were told last week that we cannot argue that we have been subjected to cuts this far.

"At worst our budget has flatlined, arguably it increased in real terms. The problem has been how it was managed."

Treasury's intervention will be swift if no agreement reached

Things could move fairly quickly from this point.

  • If the Executive cannot agree swingeing cuts, preferably tomorrow, then it will be spending on false projections and will overshoot its Treasury-imposed spending "control limit". This is the amount of money granted to it by Westminster. Civil service accounting officers must effectively stop signing cheques if they see that happening.
  • The Treasury may also intervene and the permanent Secretary of the Department of Finance could step in to set an emergency budget to stop things grinding to a halt. That could happen within a matter of weeks.
  • The Government is hoping to start talks shortly. Sinn Fein and perhaps other parties are likely to press the Government for more money which, on past form, it has refused. Some politicians think there may be some give this time, but only at the margins.
  • Sinn Fein invites the DUP to propose a vote on welfare reform legislation on the floor of the Assembly. There would now be an atmosphere of crisis. If Sinn Fein raised a "petition of concern" – a mechanism designed to ensure cross-community support – the proposal would be defeated as it would not have the support of a majority of nationalists.
  • Sinn Fein then proposes an Assembly election on the issue of cuts.
  • If the new Assembly cannot reach agreement then another standoff with the Government would ensue.
  • After that direct rule, with more Irish government input, might be the only alternative.

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