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New Decayed, New Reproach... the battle over cash will be interesting

Jon Tonge


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Secretary of State Julian Smith

Secretary of State Julian Smith

PA

Secretary of State Julian Smith

New Decayed, New Reproach. The optimism over the restoration of the devolved executive seems to be heading west even faster than Meghan and Harry.

Last week I wrote that the deal comprised lots of new cash and commissioners. One week on and critics think it is looking more commissioners than cash.

The Secretary of State, Julian Smith, seems to be operating under the extraordinary basis that Northern Ireland pays its own way. That would certainly change custom.

Public spending per head in Northern Ireland last year was £11,590. That was 21% higher than the UK average. Each Northern Irish citizen costs the UK Exchequer almost £3,000 per year more than a resident of South-East England and nearly £2,500 more than Mr Smith's Skipton and Ripon constituents.

There are many historical reasons and plenty of pleas in mitigation.

High levels of post-WW2 unemployment amid the decline of traditional industries, then the debilitating impact of conflict, the accompanying scale of subvention and the legacy of a lack of indigenous industry are all factors which have contributed towards public sector dependency, high economic inactivity and self-sufficiency a distant prospect.

And Northern Ireland does have greater social spending needs England. Some 28% of Strabane's schoolchildren are from families with such low income they are entitled to free school meals. That's more than double the total you will find in Skipton.

The Secretary of State reminded us, via Twitter, that "MLAs have been off work 3yrs at a cost of £15m+ in salaries". The £1.6bn cost of the Westminster Parliament - see the Institute for Government's report - over the same period proved outstanding value of course.

What is to be done to meet Mr Smith's demands for greater fiscal rectitude? Unsurprisingly, there is unity across the Executive that more money is needed to deliver the plethora of commitments in the Stormont deal. Government wants more money shocker.

That united approach is justified in terms of the health crisis and to improve standards in public services.

Where the parties struggle is in accepting the need for painful local revenue raising. The old idea of reducing corporation tax to 12.5% to simulate the economy - contained in the Fresh Start Agreement - seems to have faded. But if the emphasis has switched towards local revenue-raising, how?

Alone on the Executive, Alliance (reluctantly) accepts the need for water charges. They would cost an average household more than £400 per year.

Given that a £150,000 house in Northern Ireland is charged an average of almost £1,200 in rates annually, an increase in domestic charges of one-third would certainly be tough. That is before the gas and electricity bills are paid. And I don't see Julian Smith feeding the meter at Hillsborough Castle.

But if not water charges, what are the alternative big local revenue possibilities?

All the parties were feeling the sleight of hand of history on their shoulder by the end of this week, as the government punctured the euphoria and stressed the need for Stormont to balance the books. Yet close reading of New Decade New Approach reveals few specifics on financial assistance.

Whilst occasionally actual sums are quoted, such as for a continuing Reconciliation Fund, there are far more pledges than figures.

The government promises more money for areas which "could include" policing paramilitarism, tackling deprivation, cultural development, language, the Stormont House Agreement and Fresh Start, with matched capital funding for infrastructure, regeneration and tourism. But these items are not priced.

Much of the document talks about what the Executive will provide. It does not indicate the wherewithal.

Moreover, the government makes clear that budgets must balance and that a new fiscal council needs to operate as a financial watchdog. Sequels are rarely as spectacular as the original anyway, but the government's determination not to watch an RHI 2 is apparent.

Unpacked, the government is offering approximately £1bn of new money to Northern Ireland.

This includes £200m to settle the nurses' pay dispute and almost £250m for improvements to public services. Given that the DUP rightly trumpeted the extra £1bn it secured in the 2017 confidence-and-supply deal, it could hardly sneer at a similar windfall nearly three years later.

Yes, the government's packaging of the programme as a "£2bn deal" grated, replete with needless spin.

A GCSE economics student could spot that half of that sum was owed anyway, given the automatic adjustment to expenditure under the Barnett formula, proportionate to increases in spending in England. But that's politics.

Despite its grumblings, the Executive has been relaunched on a rising financial tide, but it is neap not high. And as Sammy Wilson, above the fray at Westminster, has indicated, the parties can hardly abandon a ship which has barely left port.

Blaming shortfalls on Treasury meanness is a governing strategy of sorts, around which the embryonic administration can coalesce.

The battles over finance will be worth watching, but I've got to go. Got a water bill to pay.

Jon Tonge is Professor of Politics at the University of Liverpool

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