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Harsh financial reality is now setting in for Northern Ireland politicians


Chancellor Philip Hammond

Chancellor Philip Hammond

Chancellor Philip Hammond

Government departments in Northern Ireland are preparing the public for bad news from the Treasury.

As the UK Government budget announcements for 2018-19 are in preparation, the local politicians and officials, in the absence of local Executive Ministers, are softening public opinion up for more difficult decisions.

The Treasury, with the support of the Chancellor, is reminding everyone that the plans for the Northern Ireland share of the UK budget have already been set.

Westminster has, until now, assumed that the total level of Government spending will fall in real terms by about 2% each year. This is broadly the same tension, pushing for greater efficiency, as is being applied nationally.

The problem for the Treasury is that in Northern Ireland there has been continuing resistance to the constraints.

In NI we don't 'do' austerity, even when it is in the name of greater efficiency, or doing more with the same amount of funding. Year by year, NI has made a case to have some easing of the overall budget pressure.

Essentially, whether as a 'fresh start' or under some other guise, NI has managed to extract more money from London to the point where the serious bite of real spending reductions has been partially avoided.

The charade of living with the Treasury real terms funding reductions cannot easily continue. The pain of the real changes has become more and more difficult to disguise in Northern Ireland and the Treasury seems more resistant to fudge the adjustments to quieten opposition.

There is no surprise and no deception in the pessimistic arithmetic that points to a NI budget shortfall increasing to nearly £1bn on an annual basis.

It is no accident, simply a reflection of excessive expectations, that the illustrations of budgetary problems apply to much more than the health budget.

The Treasury will argue that NI was perfectly able to see the budget squeeze coming and, unfortunately, took refuge in temporary easements which, briefly, disguised the real challenges.

There is no surprise that, joining health in the lengthening queue, education, infrastructure, housing and security feel that they have compelling cases for, not just a standstill in the next UK budget (and its Stormont Barnett allocation), but a real terms increase. Even the special package presented by the DUP-Conservative deal would not fully remove the tightening pressure.

If in 2019, Northern Ireland introduces a lower rate of corporation tax then the consequential adjustment to the Barnett formula would give an extra squeeze to the tight NI Budget.

By the end of November, the Chancellor will have presented the UK Budget for 2018-19. NI will know if the expected slight easing of the UK finances will bring an easier budget balance problem here.

Northern Ireland is facing a series of crises in financing parts of the public sector. We should have seen this coming and been better prepared. We have temporised for too long. A reformed devolved Government will inherit difficult decisions. Power sharing will call for difficult decision sharing.

Belfast Telegraph