Belfast Telegraph

John Simpson: Pain is lurking behind the good news of this Budget

Analysis

By John Simpson

The UK Budget was deceptive. To individual taxpayers, the increase in personal allowances and the absence of major new taxes on drink and petrol, combined to create a sense of relief. The other parts of the Budget contained more painful messages.

Not mentioned in the Budget were the potential threats which will become clearer as the final Brexit arrangements are made. A 'no deal' Brexit could mean that a trading border is a consequence. There are many other knock-on possibilities.

There were some positive budget changes affecting Northern Ireland:

• Barnett formula consequentials of £320m in two years;

• Universal Credit payments may attract an extra spend of over £30m;

• Shared education and housing has £300m remaining, under the Fresh Start Agreement;

• Belfast city centre regeneration after Primark fire attracting an extra £2m;

• The 15-year Belfast City Region Deal comes with a budget of £850m;

• The argument for concessions on Air Passenger Duty and tourism-related VAT was put on the long finger.

Each of these headline grabbing promises should be carefully examined for potential impact and timing.

The figure for Barnett formula consequentials is deceptive. It is a two-year figure, of which only £243m will be allocated in 2019-20 following £74m earmarked in 2018-19.

The real pain is revealed when these changes are broken down into the amount available for current public services.

The serious impact of the Budget will be seen in the amount available for continuing pubic services. The overall current spending budget of just over £10.1bn will increase by just 2% in cash terms. In other words, even before any discretion is used to give some extra funding to health, the overall public services budget is, at best, static. Any extra discretionary allocation to health will mean reductions elsewhere.

An unseen budget consequential lies in the agreed cost based payments from Treasury for social security. In that framework, the UK-wide agreement to provide extra funds to help introduce Universal Credit may attract support payments to claimants which are £30m higher than originally provided.

Locally this money may reduce, but not eliminate, the claims of social distress, as Universal Credit continues to be gradually introduced.

One aspect of the Budget was better than might have been feared. The allowance for Northern Ireland public sector capital spending in 2019-20 has increased by £92m to provide for projects costing a total of £1.3bn and this increases by a further £64m for 2020-21. These are increases of over 7% and nearly 13% in each year. However, without denigrating the importance of the increases, they are relatively small against the scale of infrastructure needs.

The Budget reference to £300m remaining for shared schools and housing might be important, but may be partly frozen in the absence of local Ministers. The housing element might be allocated through the social housing plans of the housing associations.

Potentially the largest impetus for change arising from the Budget could be the delivery of the Belfast City Region deal. At this early stage the operational mechanisms for the Belfast Region have not been fully stated.

There is an expectation that institutional arrangements will be made to give management coherence and public accountability to the approved spending. However, each single project is to be tested for value-for-money before funds are released. At this stage only a 'heads of terms' framework is available.

The Belfast deal is expected to be delivered over about 15 years. Ambitious claims that there might be 20,000 extra jobs will need to be scrutinised.

Also, the deal will need to be built as a supplement to the normal public sector capital plans. In the first year there may be very little spending from the full multi-year £850m budget.

In total, the recent budget announcements will make only a marginal direct impact on the economy in the year 2019. The serious debate about public sector spending is scheduled during 2019 for longer-term changes.

Belfast Telegraph

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