Belfast Telegraph

Saturday 12 July 2014

Tap tax could save us from worst of the cuts

There can be no sacred cows in the looming round of public spending cuts. Health must be prepared to take its share of the pain, argues Stephen Farry

The key political question for the autumn session of the Assembly and Executive is whether they will be able to rise to the challenges posed in the public finances.

The Block Grant currently amounts to approximately £10bn for both current and capital expenditure. On October 20, the funding envelope to be made available to the Northern Ireland administration for the next four years will be confirmed.

It is almost certain that cuts will amount to well in excess £1bn — and maybe as much as £2bn — through to 2015.

There remain battles to be fought at Westminster over the pace of debt repayment for the UK as a whole and also for some reflection of the special circumstances of Northern Ireland as a society trying to build a post-conflict economy.

Nevertheless, the emphasis will swiftly shift to how the devolved institutions come to terms with the financial settlement that is imposed upon us.

It is expected that the Executive will produce its own four-year Budget for 2011-2015. This may, or may not, be accompanied by a Programme for Government. Joined-up government would suggest that it should.

Such a four-year budget poses two fundamental problems. First, there is a lack of flexibility. The last three-year budget covering 2008-2011 was created in a completely different economic environment and became unfit for the evolving financial circumstances.

Second, there is a democratic issue. Is it right that, in the dying months of this Assembly, decisions are made covering almost the full term of the new Assembly to be elected next May?

While the UK Government may give a four-year funding programme, there is no iron rule that our Assembly must also respond with one four-year budget rather than deal with the problem in smaller chunks.

Yet, I fear that, unless we do so, the temptation will be overwhelming for the Assembly to play politics and to push the difficult decisions further down the pipe — entailing even greater pain in the future.

All programmes and policies need to be assessed and prioritised. As much as possible must be done to protect key public services and to ensure that resources can be used to rebalance the local economy. In this, there can be no sacred cows.

For Alliance, the starting point to savings should always be addressing the cost of a divided society.

It is increasingly accepted that more than £1bn each year is diverted to manage a divided society rather than building a shared future.

While this distortion may take many years to address, a start must be made.

The recognition of the issue in the draft Strategy for Cohesion, Sharing and Integration is welcome, but needs to be followed through.

Even wider than this, there is a strong case for examining the profile of expenditure in Northern Ireland, both in terms of how resources are divided between departments and the priorities within departments.

On the subject of health, it is difficult to justify ring-fencing it, at least fully, from all cuts. While there is ongoing under-funding compared with other jurisdictions, once relative levels of ill-health are factored in, ring-fencing health entails almost doubling the cuts in every other department, and also will mean that the inefficiencies that do exist in health will go unaddressed.

Innovative thinking is required. Across the board, a focus upon early intervention and preventive measures can deliver benefits.

These have too often been regarded as optional extras to the core business of departments. There is a case for shifting the balance of funding in this direction, even if this means taking a leap of faith with reductions in the funding of existing commitments.

Northern Ireland should also be open to the potential for shared service savings being found on a cross-border or all-island basis.

With staffing costs a major element of local public expenditure in general, some form of cost control in this regard is inevitable.

Finally, the Executive must face up to the reality of the need to raise additional revenue. This inevitably includes the difficult issue of water charges.

Most governments will seek to address any funding crisis through a package of spending cuts and tax rises. The political debate is over the precise balance.

The Budget of the current coalition Government reflects this reality with its 77:23 split between spending reductions and increases in revenue.

Yet, in Northern Ireland, the emphasis seems to be almost entirely on spending cuts. Beyond the cheap populism, this approach is regressive as it is those on low incomes who will suffer the most as they depend disproportionately on public services.

For example, look at the clear linkages between low income and poor health. Any water charge must be fair, through being based on ability to pay.

The choice is clear. We either face up to water charges or the level of spending cuts will be even sharper than elsewhere in the UK.

As someone who regards himself as both economically liberal and socially liberal, I can see this stark reality.

I am amazed at the continued denial of others who also claim to support social justice.

Stephen Farry MLA is the Alliance Party’s finance spokesperson

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