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John Simpson

Running out of reasons why Northern Ireland needs more financial aid

John Simpson


‘Inadequate’ offer: Conor Murphy

‘Inadequate’ offer: Conor Murphy

‘Inadequate’ offer: Conor Murphy

Northern Ireland Executive ministers face a continuing critical assessment from UK ministers and the Treasury.

NI ministers are being told to deliver a better public sector budget to contribute more from current budgetary funds to tackle pressing needs.

Average income households in Northern Ireland pay at least £500 every year less in general taxation than a comparable household in the north of England.

Simply pleading for compensation for a backlog of public sector investment gains little sympathy when the financial and social budgets of the last 30-40 years are taken into account.

NI has had enough money for public spending to be higher than in other regions.

Critically, any serious analysis of public sector spending in NI shows that, with the discretion of devolved decision-making, Stormont decisions have used proportionately more money to avoid parity of general taxation and less on sustaining and strengthening the economy.

Levies on households, whether as domestic rates, paying for water, paying for rented housing and (on a smaller scale) paying for university fees, are an unsung benefit. Spending on health services, new social housing and improving the quality of our education estate are all services which might deservedly be increased.

It would help if the Department of Finance actually filled an information gap and annually published details of a three-year budget perspective.

The Department of Finance has continuously proved shy of publishing a detailed NI Budget. There are some comparators that are readily recognised.

However, to the civil servants who advise ministers in London and must try to ensure an acceptable degree of equity when taking account of Scottish and Welsh interests, the scale of comparative public spending advantage for Northern Ireland is increasingly criticised.

The Scottish mandarins are ready to seek parity of treatment when NI receives supplementary allowances.

The financial allocation proposed by the Secretary of State to back up the establishment of the renewed Executive can be seen as less than expected but in the UK context as being another generous handout.

The plea that we have an inherited backlog of underinvestment in public services is effectively eroded when attention is drawn to the ways in which NI already has made local commitments which keep taxation (including rates) well below what might be justified as equitable.

Into that scenario, there should be added the supplementary allocations for features such as the Belfast Region and Londonderry-Derry Strabane City Deals as well as the continuing mitigation of social security housing benefit reductions.

After 20 years of the highest public sector spending per person across the UK, the 'Troubles-related' claims for more funds are less forceful than may once have been justified.

The Secretary of State, on the advice of the Treasury, has decided that the offer to the NI Exchequer of £1bn Barnett consequentials and a further £1bn to help to finance the proposals in the New Decade, New Approach document is an adequate response.

Finance Minister Conor Murphy argues that the offer is inadequate.

What is not clear is how this extra £2bn should be interpreted.

Will the baseline NI budget be increased by £2bn in each succeeding year so that there is a multi-year cumulative total or will the NI budget gain only £1bn in the second and succeeding years?

If, as seems likely, the former is intended, that makes the proposed allocation seem acceptable.

The New Approach document contains many proposals that will only be implemented over a five-year period.

On that basis, £1bn extra each year may mean, in total, more than £5bn.

The setting up, later this year of the new Fiscal Council means that, whatever Stormont ministers may wish, there is a new impartial agency which will apply a serious professional judgement to Stormont finances.

Beware the risks of unjustified special pleading. The debate about financing Stormont is just starting.

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