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Esmond Birnie

Budget's short-term fixes ignore clouds on horizon for Northern Ireland

Esmond Birnie


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Deserted shopping streets around Belfast, where traders say they are unlikely to qualify for main means of government support

Deserted shopping streets around Belfast, where traders say they are unlikely to qualify for main means of government support

Photo by Kelvin Boyes / Press E

Deserted shopping streets around Belfast, where traders say they are unlikely to qualify for main means of government support

It is hard not to feel a little sorry for the Finance Minister, given the challenge of drafting a Northern Ireland Budget for 2020-21.

Even before Covid-19, it was clear that the sum of bids for funding across the public sector vastly exceeded the funding available, perhaps by billions. And then the health crisis came along.

The speed of the Government's response, including from London, has meant that it was impossible for the Northern Ireland Budget document to add into the departmental totals all of the recent increases in public spending.

Nevertheless, the Finance Minister told us that so far the Executive had received £912m of additional funding to deal with the virus.

Free school meals are being provided for 97,000 children.

The grants to 30,000 businesses to cover 80% of wage costs will cost about £370m.

Households will benefit from both a delay in their rates bill until June and the regional rate will be held constant in cash terms.

Businesses gain from a three-month rating holiday and their regional rates are reduced by 18%. Small business rates relief is renewed and the rates reduction on rural cash machines is restored.

All told, such measures will account for about £500m of the Covid measures. Most of the remaining £400m will probably go to the health service, including buying many more pieces of personal protection equipment,.

Further monies are likely to be coming from the UK Government.

What about the spending at the level of departments? In 2020-21, total day-to-day spending (resource spending) is to be £12.2bn, with a further £1.5bn spent on capital projects. That is a cash terms increase of about 8%. Even allowing for inflation, every department is to enjoy a real terms increase, although no doubt there still be claims that more is needed. Education, for example, enjoys an increase in resource spending of £227m and health a rise of £400m.

One of the most striking increases is in the Executive Office - that is, for the First and Deputy First Ministers - where there is £41m of extra resource funding, or a 72.4% increase.

That huge percentage increase is not explained.

It will be a few months before we get the detail about what is happening at the departmental level and how the bulk of the Covid money has been allocated.

It is therefore very difficult to evaluate what is in all fairness a Budget in time of emergency.

However, these points can be made:

  • The immediate response to the virus has been to freeze or cut rates. Very understandably, the issue of revenue raising has been parked. However, that dilemma has not gone away. It will return in the medium term.
  • Another longer-term cloud on the horizon relates to the subsidy payment to farms: £279m in 2020-21. In this Budget, Northern Ireland has benefited from a decision to maintain farm support payments at pre-Brexit levels. After 2020-21 that will probably not be the case and the Executive will have the dilemma of cutting farming subsidies or moving money from other departments.
  • The Finance Minister closed his speech by saying he was working towards multi-year Budgets in the future. That was a salutary reminder that even in the midst of the crisis the normal development of policy and long-term business of government continues as it should.

Dr Esmond Birnie is senior economist at the Ulster University Business School

Belfast Telegraph