Belfast Telegraph

John Simpson: A bumpy Brexit road ahead for Northern Ireland economy come what may

Stormont faces many financial questions
Stormont faces many financial questions
John Simpson

By John Simpson

Northern Ireland, as these words are being written, has shaped the Brexit headlines. The changed customs and regulatory alignment arrangements contained in the Withdrawal Agreement agreed by Prime Minister Boris Johnson last week would bring a new complex baseline for decision making.

Of necessity, politicians and business interests may have to face the challenge of a new economic environment, if the House of Commons votes in favour of the deal.

If the deal is to be implemented, the question is, how quickly? Optimistically, the transitional period would soften the process.

But if there is no-deal, no transitional agreement and November 1 brings a formal break and the immediate arrival of a completely changed trading environment, then our businesses will face a distinctly disruptive change with some serious challenges in vulnerable sectors.

Whatever the precise details of Brexit implementation, or delayed implementation, the Northern Ireland economy faces a period of uncertainty. That has an immediate worrying negative impact for businesses.

Employment opportunities may be put on hold and some investment decisions deferred. The private sector which has recently maintained near record levels of employment, although with disappointing levels of output, may soon begin to lose jobs.

Alongside the uncertainties affecting the private sector, the public sector in NI is facing a number of serious challenges with dangers for the wider economy. The public sector has functioned with increasing difficulty in the absence of ministerial decision making. The Permanent Secretaries have played a difficult operational role well and have avoided, unhappily, expressing their policy conclusions on the now long list of unanswered questions.

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To prepare for critical policy questions if (or when) ministers are re-appointed, there has been little encouragement of well-informed public debate on policy options. If that debate was given a degree of priority, it would provide both a preparation for forthcoming policy changes and should serve as a stimulus to discussions on reshaping the Executive.

The debate about the public sector might easily become just a campaign for a larger Stormont budget. That would be informative but would be inadequate and misleading.

Major public sector financial tensions can be seen in:

● Health and social services with budget shortfalls;

● Education capital and current spending difficulties;

● Social housing provision falling short of demonstrated needs;

● Policing requests for larger budgets;

● Social security crisis if mitigation is set to end;

● Capital infrastructure budgets lower than needed for water services.

Each, and all, public sector departments have been forthright in pointing to spending constraints in graphic terms. Phrases such as 'approaching a knife edge' have conveyed the serious nature of the budget arithmetic. The apparently easy answer would be to ask Westminster for extra funds.

Before the Permanent Secretary to the Department of Finance is asked to make a case to the Treasury, or the Secretary of State lends his support, some assessment should be made of the comparative scale of the funding already received from local taxes and the Barnett formula subvention. Does a plea for extra revenue stand up in a comparison of public sector funding available elsewhere in the UK. Every part of the UK public sector would welcome additional funds to meet continuing priorities.

However, the case for Northern Ireland must be made with the knowledge that public sector spending per head in Northern Ireland is over 15% higher than the UK average.

With that advantage, what has caused the apparent shortage of funds across public services?

Part of the answer lies in an examination of how Stormont has used the inherited generous provision of the Barnett formula.

What could have been discretionary funds for health, schools or houses, have been allocated in other directions.

The outstanding example is the use of Stormont funds to avoid domestic water charges, unlike any other part of Great Britain. The UK Treasury can be expected to give a critical reply to a plea of Stormont hardship.

Why is this choice not being made clearer in the debate?

Belfast Telegraph