Belfast Telegraph

Package of support can provide impetus to help Northern Ireland Executive move forward

Sir Jeffrey Donaldson and Gavin Williamson sign the deal
Sir Jeffrey Donaldson and Gavin Williamson sign the deal

By John Simpson

The deal that the DUP has negotiated with the Conservatives to conditionally prop up the Government brings a welcome boost for the budget of the Stormont administration.

Two key features stand out.

First, to make effective use of the extra funding allocations, a functioning Stormont Executive is needed.

Second, the extra funding now available makes the preparation and presentation of a Northern Ireland budget a more acceptable possibility.

Without the extra funding, the Stormont budget was facing - in real terms - a £200million reduction each year to live within the allocation under the Barnett formula.

The forthcoming Northern Ireland budget, overdue for the last five months, was facing critical tensions as the Executive - when it was restored - balanced its commitments and obligations inherited from the earlier Stormont House and Fresh Start agreements.

If the Executive is now restored, a revised and acceptable Northern Ireland budget is possible.

The deal with the Conservatives means that Stormont can hope to approve a budget for 2017-18 and 2018-19 and into the following year.

In 2019, on present plans, budgeting for the Northern Ireland administration might again look difficult unless UK budgeting moves further away from the deficit reduction targets and the implicit austerity agenda.

Of course, this deal with the Conservatives does not need to be guaranteed through 2019. By then, whether Brexit is agreed or even implemented with no agreement, there must be an expectation that new budgetary arithmetic will be in play.

The packaging of support now agreed is focused mainly on the next two years. However, the language of discretion points to the Treasury having agreed elements of flexibility in timing and application, leaving much of the detailed decision making to the local Executive.

Where specific funding is earmarked, delivery is 'front loaded'.

Some £200m each year for two years is assigned to infrastructure development.

Critically, top priority is for the York Street interchange but the timing is necessarily imprecise since there will be contractual problems to solve which may mean an early start is simply not practical.

However, for the Executive, this infrastructure funding is available with flexibility in the choice of projects. Ministers will now need to revisit all the infrastructure capital plans knowing that there will be another £200m-£300m to be allocated.

One surprise in the extra funding is a two-year package of £150m to help provide ultra-fast broadband. The commercial pressure to put Northern Ireland ahead of this technology is a useful selling point for business developers.

In some respects, the extra funding package will have disappointed certain schemes which had attracted vocal endorsement.

The delay in the full devolution of corporation tax until the budget of Autumn 2017 means that it cannot be introduced until the finance year 2018-19. That confirms the one year delay.

Also the wording on arrangements for corporation tax devolution seems to hold out little hope that the full rigour of the EU Azores ruling as it affects the Northern Ireland budget can be avoided, at least initially.

Expectations of other changes to local economic policy are raised, but not promised, in other ways.

Northern Ireland is encouraged to work towards a set of comprehensive and ambitious city deals probably using the concept of enterprise zones. No locations are identified but it will not be a surprise if this concept does not now attract bids from other larger urban centres than the existing commitment in Coleraine.

The commissioning of a consultative paper on the impact of VAT and air passenger duty on the tourism sector will be enthusiastically welcomed by tourism providers.

Now the real debate about what activities would qualify and the possible incentive value of changes in VAT or APD should be carefully disciplined. A large grab for extensive tax remissions could be counter-productive.

The Executive budgets for health and education will be supplemented in part by extra annual allocations for two years and also as a consequence of Barnett changes after GB spending increases.

The extra money for health and social services is welcome but seems modest in the light of known budget pressures.

The specific reference to earmarked provision for mental health is modest, at £10m pa for five years, but meets a well-documented need.

Finally, tucked in the statement of financial support is an allocation of £20m a year for five years towards tackling pockets of social deprivation.

This sounds like an extension of the former Social Investment Fund.

With a refreshed Executive, it may be sensible to ask that the flaws in the previous allocation system should be corrected and a more selective focus applied by independent people with expertise in this critical service.

This financial and policy package brings fresh emphasis to the efforts of the Executive.

This is a once-only deal - for unexpected political reasons - and modest though it is in total, this can be the beginning of a major refresh of a new programme for government.

Belfast Telegraph

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