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Failure to resolve welfare reform row 'will leave £500m Budget black hole'

Exclusive: As Finance Minister warns of welfare reform ‘catastrophe’, McGuinness claims crucial papers were withheld

By Liam Clarke

The Finance Minister has warned of "catastrophic consequences" if the political row over welfare reform isn't resolved by next week.

In an This madness will cost us millions we just haven't got, Simon Hamilton painted a stark picture saying that the Budget will be plunged into crisis with a £500m black hole.

"We could be close to £500m short of what we need to make the books balance in 2015/16," he writes. "How does Sinn Fein believe that we could deal with a Budget black hole like that?

"Do they want to take the axe to services like schools and hospitals to pay for their folly?" With the future of Stormont once again in doubt over the welfare reform dispute, Mr Hamilton is in talks with Treasury officials.

The crisis broke on Monday when Sinn Fein unexpectedly withdrew support for the legislation enabling new welfare measures in Stormont.

Mr Hamilton warned that this will unpick the entire budget, which is dependent on Treasury loans and flexibilities.

Next week is important, because after that parties will focus on the general election.

Key papers were withheld from us and figures deliberately inflatedit was told the new welfare measures it negotiated would ensure there were no benefits losers. Stormont had aimed to introduce a hardship fund and at an early stage First Minister Peter Robinson, the DUP leader, and Sinn Fein said this would mean no claimants would be disadvantaged. However, they differed on whether this would apply to new or existing claimants.

If the welfare changes aren't made, then the Treasury will make Northern Ireland hand back the extra benefits.

Mr Hamilton, a DUP minister, said: "It was obvious it was not going to cover everything. If you look at the package in place it was on average £90m a year to cover that. It would be £114m next year, £150m the year after and up to £300m the year after that."

"That is the amount that the Treasury thinks we will overpay in benefits but we were only putting £90m in to cover that - it would never cover it all, anyone can see that."

Last night Conor Murphy of Sinn Fein issued a dossier which he said showed that "at all times Sinn Fein was absolutely clear, privately and publicly, that the agreement was to provide full protection for current and future claimants of benefits under the control of the Executive". This stance was backed by Martin McGuinness who last night pointed out that Mervyn Storey, the DUP minister, had said there would be no losers in an Assembly debate. The Deputy First Minister also accused the DUP of holding back key documents from its view.

"The DUP's attempt to claim it was their intention to provide only partial protection to current recipients of benefit and no protection whatsoever for future claimants is a blatant display of bad faith and flies in the face of the evidence," he said.

"It is now clear that in attempting to effect Tory welfare cuts by subterfuge, key financial papers were withheld from Sinn Fein during the negotiation process and figures deliberately deflated. 

"That is totally unacceptable to Sinn Fein. If the DUP want to strip benefits from the most vulnerable and push children further into poverty, then they need to explain that."

Mr Hamilton dismissed the claim around Mr Storey.

"There was no ambiguity," he said. "We agreed what we agreed. No other party in recent days shares Sinn Fein's version of events."

He warned that "very quickly we will see that the budget doesn't add up, there is a black hole and everything starts to unravel".

"At that point it doesn't matter we can work with Sinn Fein or not, the Budget isn't in place to let us do our job."

Yesterday both the British and Irish governments put most of the blame for the crisis on Sinn Fein.

Secretary of State Theresa Villiers expressed "huge disappointment" with the party's stance. Irish Foreign Minister Charlie Flanagan said urged the parties not to squander the potential offered by the Stormont House Agreement.

Read more:

This madness will cost us millions we just haven't got

Key papers were withheld from us and figures deliberately inflated 

We should all learn to live within our means 

Reduced public transport, broken street lights, longer hospital waiting lists, the reality is we are all going to suffer unless we sort this mess 

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