Stormont's Treasury bailout 'the dearest sticking plaster in history'

Stormont's £100m loan from the Treasury has been criticised as a "the dearest sticking plaster in history" and a solution that only defers financial problems that must be faced.

Economists have also warned that the loan could have grave implications for the way Northern Ireland block grant of funding comes from Westminster.

The Treasury agreed to lend Stormont £100m to deal with the current budget crisis after First Minister Peter Robinson and Finance Minister Simon Hamilton made the proposal to Chancellor George Osborne.

The money will enable ministers to reach agreement on immediate financial allocations. It will also ensure Stormont does not breach its spending limits by more than £200m at the end of the financial year. However, it will further increase the amount owed to the Treasury next year.

Economist John Simpson said that the short-term gain of the loan could be outweighed by long-term consequences. He added: "If I was in the Treasury, I would not have been keen to give this flexibility to Northern Ireland because it goes outside the Barnett Formula, which determines how much money we receive in the block grant.

"It is an understandable request in the circumstances, but the Treasury will want assurances on how it is used and how it is repaid, and we will feel the impact in next year's Budget. I would not be surprised if the assurances meant we had to sign up for an agreed deal on welfare reform.

"If they get the loan and we accept the conditions that go with it, I would hope that the Treasury would lift the welfare penalties that are being charged."

TUV leader Jim Allister also criticised the deal and said: "This has to be the dearest sticking plaster in history – £100m to keep an overspent, failed Executive limping along. Another £100m to pay back on top of welfare costs. Solves nothing, but adds to the debt.

"The Treasury must be more generous than I imagined to accept an IOU from Stormont.

"It doesn't solve anything – it only pushes it further down the road. It's a sticking plaster.

"I suppose it is a bit of Wonga loan. It won't solve anything in the long term because they haven't resolved the issues. It's kicking the can down the road. A loan by its nature has to be paid back."

PWC economist Esmond Birnie said the ideal approach for the Executive to deal with the budget crisis was to reach a deal over welfare reform.

"This buys them a bit of time," he said. "(But) the policy challenge debate dilemma is just pushed down the pipeline a bit and has not been resolved.

"There is a sense in which we now see other devolved administrations in Scotland and Wales getting and using extra devolved powers and, indeed, extra or increased borrowing powers. But, crucially, they are borrowing to invest in expanding their capacity for future growth – building better roads and so forth.

"At face value – and obviously the devil is in the detail – this looks like the Executive has borrowed to buy time to decide what its policy is."

Belfast Telegraph