Stormont's red alert as Sinn Fein and DUP accept £100m Treasury bailout

Stormont's Executive has voted to accept a £100m lifeline loan from the Treasury to avert an immediate financial crisis.

DUP and Sinn Fein ministers agreed the loan, which must be paid back in the next financial year on top of the £87m already being removed from Northern Ireland's block grant over the administration's failure to implement welfare reform.

Alliance, Ulster Unionist and SDLP ministers voted against the proposal from Finance Minister Simon Hamilton, arguing the move only "pushes the problems down the road".

Chancellor George Osborne attached stringent conditions to the loan, which is £50m less than the upper limit asked for, including that the Executive lives within its increased total budget.

Mr Osborne and the Treasury also required that a final budget for the next financial year be put in place by the New Year.

The two main parties were locked in negotiations for almost six hours yesterday. The final deal, agreed just before 9pm, included the promised extra £60m for the health service and minister Jim Wells, on top of the £20m given to his predecessor Edwin Poots in the last spending round in June.

Justice Minister David Ford's department is to get almost £30m to help meet rising policing costs, such as the Twaddell Avenue protest camp.

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The "bottom line" of £1.3m for the Victims and Survivors Service demanded by the Assembly has also been met, although Ulster Unionists wanted £3m.

A further £13.8m will go to Invest NI to help promote jobs and sporting events. And £4.5m will go to concessionary fares for senior citizens after warnings they could be asked.

The package came after First Minister Peter Robinson and Mr Hamilton warned the Chancellor the Executive was going to be unable to live within its limits, which would mean busting its budget.

That in turn would have triggered intervention by the Treasury, which Mr Hamilton warned would regard such an event as "a serious mismanagement".

The Finance Minister told his colleagues: "The reason why we need to take an immediate decision is that as each week progresses, it becomes increasingly difficult to take remedial action and departments have less time to deliver required reductions.

"This, therefore, would increase the likelihood of the Executive incurring a NI block budget breach, (which) could trigger pre-emptive action by the Treasury."

But DRD Minister Danny Kennedy attacked the deal as a "patch-up job" and said: "This is no way for an Executive to be handling its budget. It pushes the problems further down the pipe.

"It has been a very frustrating day. While I welcome the decision that concessionary fares will be fully funded, this does not deal with the economic issues before us. It is a patch-up job."

And Mr Ford, whose Alliance ministerial colleague Stephen Farry returned to a trade mission in America after more positive signals from an extra Executive session on Wednesday, called it a "cobbled-together" agreement that would not solve Stormont's financial black hole.

"It is just like using a second credit card because the credit on your first is all used up," he said.

"They still haven't resolved the issue of welfare reform and they continue to protect the Department of Education on the basis of a 'one for me, one for you' carve-up. Worst of all, they have agreed to pile an extra £100m debt onto next year's budget, but (there is) no agreement to make the kind of reforms that will be needed."

After several hours of protracted meetings, a proposed 1.5% pay increase for civil service staff was removed from the main paper put before the Executive. But there will be a further paper later this month.

In a letter to Mr Robinson, seen by the Belfast Telegraph, the Chancellor said: "You have indicated that even with that action and further planned reallocations, the Executive will be unable to live within its 2014/15 Budgets.

"You have suggested that the Executive be provided with a facility of between £100m and £150m to cover emerging pressures which you believe are inescapable. I am prepared to permit access to the reserve of up to £100m."

The Chancellor also set out a number of conditions, including a "credible" Budget. And he pointed out his offer was "only granted exceptionally and there can be no expectation that further access will be available in future years".

Wonga Chancellor will want his money back

So is this a return to old-style Northern Ireland ‘begging bowl’ politics? On the face of things, it is not far off and even reinforces the seeming mantra of some politicians that ‘the Brits will always bail us out’.

The £100m ‘facility’ from Chancellor George Osborne gets the Executive out of its immediate difficulty and buys time for government departments facing massive financial pressures.

But it is only a loan, not a hand-out. And the ‘Wonga’ Chancellor wants his money back at some point in the next financial year, which starts in less than six months.

Are there any suggestions that on the far side of the next Westminster election in May, a Conservative — or even Labour — Chancellor will take pity again on ‘poor’ Northern Ireland and not demand the borrowed money back?

For in his letter to the First Minister Peter Robinson, Mr Osborne also makes clear his exceptional offer is not likely to be repeated.

The deal, finally hammered out at an Executive meeting lasting 40 minutes following more than five hours of to-ing and fro-ing as Stormont Castle became increasingly deserted, also includes stringent conditions.

Not only does the Chancellor want a guarantee that departments here will now all live within their budgets, he wants an entirely new budget for the next financial year.

And he goes further in his letter to First Minister Peter Robinson, demanding an in-year assessment on an ongoing basis to ensure departmental plans are deliverable.

This will need to include, in the relatively near future, an assessment of what the budget will be in the 2015/16 year.

The Executive has agreed also to accept the departmental cutbacks already under way from June, which have seen significant spending reductions.

That financial squeeze will only intensify in the months ahead. It is a breathing space. But Stormont cannot hold its breath indefinitely.

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Belfast Telegraph