Belfast Telegraph

Sunday 28 December 2014

Reforms will hit the economy, but going it alone would be even more expensive

The Welfare Reform Act 2012 received royal assent last March and will produce reductions in benefit payments here.

Together with other welfare changes, they are estimated to suck anything between £450m and £750m a year out of the local economy.

The changes don't automatically apply, they have to be ratified by Stormont, but the amount of money we get is our block grant from Westminster is linked to benefit spending in England. So if we introduce our own system to protect people from the cuts, or even keep the old system running, we would have to make up the shortfall ourselves.

We could find this money by making cuts in other budgets, and health, which is nearly half our spending, could hardly escape.

Alternatively, we could impose new local taxes to cover benefit costs.

Yesterday, Mike Penning said that the initial hit would be £5m a month starting in January and that that this would rise to £200m by the end of 2015 as more changes come on line. He believes it is too late to avoid this cost in the early months, even if Stormont legislates now.

We have already agreed to shoulder a small portion of this bill to cover the so-called bedroom tax.

This reduces housing benefit payments to people who have more bedrooms than the Government believes they need.

The intention is to force claimants to downsize or take in lodgers to fill the extra bedrooms.

Stormont has agreed not to apply this to existing tenants. The Treasury has agreed to allow us to offset that by a £17m annual reduction in our block grant, but this will reduce over time because new tenants won't qualify.

This may be partly offset by £10m extra we will get in our block grant to cover the Help to Work scheme, a measure aimed at pressuring the long-term unemployed into voluntary work.

Although we will get the money for the scheme, we don't necessarily have to introduce it here.

Britain will be changing its benefits IT and software system in 2015 and, the Treasury has warned, it won't be able to deal with a separate benefits system in Northern Ireland.

"If you run a two-tier system separate from the rest of the UK, then you would have to develop your own IT system to administer that," Mr Penning said.

So far, a cost on that has not been set out, but it would be considerable.

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