Belfast Telegraph

Will Stormont crumble under the weight of massive debts?

Our politicians are still facing a lot of work to balance the books, starting on Monday week when they reconvene, Liam Clarke reports

Will Stormont crumble under the weight of massive debts?
Will Stormont crumble under the weight of massive debts?

A special meeting of the Executive is to be held in an effort to get the Welfare Reform Bill onto the floor of the Assembly this month.

It is one of the immediate challenges facing MLAs who return to Stormont on Monday week following the Christmas recess and the mammoth talks that culminated in the Stormont House Agreement.

Although there is no formal recommencement of the inter-party discussions, sources have indicated that work has been continuing behind the scenes - and will continue in the coming weeks.

It is likely, because of the volume of work involved in welfare reform, an additional meeting of the Executive will have to be held this month with the aim of placing legislation in front of the Assembly before the end of the month.

This means accepting the welfare reform changes decided by Westminster but setting up a hardship fund to ensure no claimant loses out from the changes.

According to official figures, 86,000 households would be disadvantaged by the changes and potentially entitled to apply for help from Stormont coffers. However, the same figures show that 102,000 households would gain from the change, while 99,000 will stay roughly the same.

The fund would cost a minimum of £120m a year of our own money and would have to be financed by cuts, taxation or asset sales. Westminster will, however, refund a good deal of the £114m welfare fines for 2015-16 - if we come into line with the rest of the UK.

Another challenge facing the Executive parties is to agree "a final balanced budget for 2015-16 with a clear commitment to putting the Executive's finances on a permanently sustainable footing for the future".

Although extra spending power has been given to Stormont by Westminster, it means shouldering billions in cuts and loans. A large part of the new borrowing offered to us by Westminster is diverted from capital spending to running costs, which is a bad sign.

Theresa Villiers, the Secretary of State, said in her New Year statement, that our politicians face "significant challenges ahead" that will require more of "the leadership and determination" they had shown in negotiating the outline deal.

It appears the will to succeed is there - if not, we will be plunged back into crisis if they are not fully met.

"We have to work our way through what has been agreed," said one MLA.

Without these two measures being introduced by the Assembly, Westminster will not devolve corporation tax-raising powers to Northern Ireland.

The legislation, which is being fast-tracked through Parliament, will have a commencement date of April 2017 for devolving the powers - but only if the Executive demonstrates it can handle the strain.

Stormont plans to cut the 20% levy on business profits by around eight points to the 12.5% charged in the Republic, or even less.

That will cost us about £40m a percentage point a year, and under EU rules prevents Westminster from subsidising us.

In fact, London takes a hard line in the document saying that it will deduct money if our economy grows and also if it feels firms are basing their UK operations in Northern Ireland simply to reduce their tax bill. The paper also specifies that we will not share in benefits which flow to London if more firms invest and our economy improves as a result of changing corporation tax.

The agreement talks of devolving more taxes in the future including aggregates levy, stamp duty land tax (on the sale of property and real estate) and landfill tax. Sinn Fein will be pushing for maximum taxation powers to be devolved, but is unlikely to be supported by unionists.

Another issue that must be handled quickly is the public service "exit scheme" designed to trim about 10,000 teachers, civil servants and other workers from the public sector payroll.

Around £700m of the loan will fund the major public sector restructuring reform programme, which includes a voluntary redundancy scheme aimed at rebalancing the economy, which is heavily reliant on the public sector.

Although the details have yet to be announced, sources say that it will take about 18 months to pay back the debt and start showing a profit on each individual redundancy.

It is planned to raise more cash through "capital assets through reform or restructuring to realise income and longer term savings".

One target is Belfast Harbour which could be sold or raided for cash. And London is considering gifting us some land and assets that could also be sold.

Belfast Telegraph


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