This official statement of the Non Ring Fenced DEL Budget for 2023–24 shows the following cash and percentage reductions in day-to-day spending for some major Departments:
The only increases appear to be a minimal amount of £20.9m for Health (+0.3%) and Food Standards £1m (+6.9%). These figures are hard to interpret given the intricacies of governmental finance. But we have all heard the howls of rage, outlined elsewhere in this issue, from those engaged in front line services in health, social care and education.
The political parties seem agreed only on a refusal to contemplate any savings and are all apparently expecting someone else to find the money. The Secretary of State is blaming them all for failing to reinstate the Assembly and Executive and in the meantime is instructing the Permanent Secretaries of the main Departments to decide where the cuts should fall and what funds could be raised in areas that are not charged for here as they are elsewhere in the UK – water charges, prescription charges, university fees and much else. It is ironic that the Fiscal Commission has estimated these to amount to well over £600m which would go some way to avoid the most worrying cuts. Here are some of the major items;
|Domestic water charges||£345m|
|Welfare mitigations (bedroom tax etc)||£43m|
|Vacant Property Rate relief||£35m|
|Free domiciliary care||£18m–£32m|
|Free bus and rail for over 60s||£29m|
|University Tuition Fees||£14–£90m|
|Landlord rates allowance||£13m|
|Housing benefit reduction refund||£12m|
|Other smaller items||£11m|
The question that this poses is how many of these items would the parties be prepared to agree to as savings in order to persuade the Treasury in London to agree to some additional funding. Then there is a second question: how much other revenue would they be willing to raise, such as an increase in the regional or local rates or charges on pollution in transport or agriculture.
Fiscal Council recommendations
There is little doubt that Northern Ireland is facing a spending crisis in part because the time limited funding packages for political agreements have come to an end. According to the Fiscal Council, the spending premium for Northern Ireland has declined from 40 percent above that of England in 2018–2019 to around 23 percent in 2024–25 based on current plans. This is just under the required spending to provide the same standard of public services in England considering differences in population characteristics and socio-economic conditions.
The Fiscal Council has, therefore, recommended an uplift in the Barnett consequentials, similar to Wales, to provide a cushion against the funding falling too quickly. Based on different scenarios, this would result in an additional Block Grant funding over the 2021 Spending Review period of between £500 to £1,400 million. Whether the Government will accept this analysis when households in Northern Ireland pay considerably less on their rates and nothing for water and sewerage services is open to doubt.
Longer term issues
This is not just an argument over current financing. It is also about longer term issues on the governance of Northern Ireland. It is clear that the Tories are fed up with the failure of the DUP to agree to the Windsor Framework and are unlikely to produce much by way of an incentive to encourage the re-establishment of the Assembly and Executive. They may now be more ready to envisage a return to direct rule and/or some form of joint authority with the Republic. The same may go for some in the Labour Party who have always been attracted by Irish unification. Keir Starmer has broken with that, saying that he would be an advocate for the union – tailoring his position to his policy on Scottish independence. But he also needs better relations with the EU over the Protocol.
The fact that the Irish Government is currently awash with revenue from its multinationals, while the UK Treasury is battling with its own domestic austerity measures adds to the equation. This is another area in which the abstentionist stance of the DUP may actually lead to the opposite of what they are arguing for. When the Anglo-Irish Agreement was agreed in 1985 one of the key arguments was that the UK was in a better position to fund the deficit in Northern Ireland while the Republic could not realistically take on a substantial share of the cost. That is no longer the case. The Government in the Republic is already providing substantial funds under its Shared Island programme: €10m for cross-border nursing training and €44.5m for a shared Magee/Donegal Atlantic Technical College campus in Derry/Londonderry.
Retaining the devolved institutions
So what can the party leaders offer in order to retain the devolution settlement and fend off serious moves towards direct rule and joint authority? Sinn Fein and the SDLP will probably be keen to support greater financial contributions from the Republic. What are the Unionists and Alliance willing to offer in order to retain the current structures.
There are some measures that could help to make this possible. One would be to focus any revenue raising on the better off sectors within Northern Ireland. There are few options given the limited taxation powers of the Executive. The most obvious option is the introduction of some form of a domestic water charge. There are powerful economic, social and, crucially, environmental arguments for such a policy as outlined by the Independent Water Review Panel (IWRP) in 2007/2008.
First, there is no contribution by HM Treasury in the Barnett formula for water and sewerage services – they are privatised in England. Every year around £345 million is taken from health, education, and other budgets in Northern Ireland to pay for these services. A total of nearly £4 billion has been taken from these budgets since the Executive rejected the proposal of the IWRP.
Second, Northern Ireland Water (NIW) requires substantial funds to upgrade much of the water and sewerage structure. Currently, the sewerage systems in 91 towns in Northern Ireland are full. NIW therefore needs to be turned into a Municipal Company and enabled to raise funds from a dedicated income stream, not dependent on the vagaries of government funding.
Third, it is environmentally irresponsible to produce at considerable cost millions of litres of clean water only to lose thousands of litres through leaking pipes. In addition, households flush around a third of all the clean water they consume down the toilet in the absence of grey water systems.
The simplest and cheapest way to introduce a domestic water charge is through the rating system which would mean that the greater the capital value of the property, the higher the water charge. There should also be an affordability scheme to prevent people falling into water poverty. That could be paid for by abolishing some of the current questionable subsidies in the rating system – industrial derating (£70m), vacant property relief (£35m), landlords allowance (£12m) and the cap of £400,000 on rates (£4m).
Another progressive revenue raising option is to introduce a pollution charge on all petrol and diesel vehicles. As we are facing a climate emergency, it is essential to raise funds for a ‘Green Sprint’ involving the retrofitting of houses, subsidising electric vehicles and heat pumps and building resilience against the inevitable consequences of climate change. A pollution charge could be based on the extent of carbon emission of the vehicle, but this would benefit the better off sections of society. A fairer method would be to base the charge on the cc of the vehicle, the larger the cc the higher the charge.
The pollution charge would be separate from the car tax or road tax (VED) which is essentially a tax for using a vehicle on a public road. The aim should be to raise £100m from the 1,220,000 vehicles registered in Northern Ireland in September 2020.
Serious consideration must be given to finding savings which do not fall on the most deprived sections of society. One area where possible savings can be made is in the huge bureaucracy which administers Northern Ireland. In April 2021, there were 23,216 civil servants in the devolved government, one for every 82 people in Northern Ireland, compared with one for every 248 people in Scotland, and one for every 572 people in Wales. A further 10,000 people are employed in the eleven council areas in Northern Ireland: but they do not employ binmen or other front line employees. It is some of the duplicated administrators that need to be culled.
Savings could be made if there was only one Health and Social Care Trust instead of five and the Housing Executive should again assume the major role in the provision of housing rather than the plethora of Housing Associations.
The biggest saving would come from the introduction of a truly secular education system. While it is debatable just how much would be saved from the current duplication, it must be in the millions. The Integrated Education Fund has estimated that in the last decade over £1 billion was spent bringing our young people into contact with each other in various cross-community initiatives. Incentives for shared campuses at primary and secondary levels or more shared teaching posts would be a good start – or perhaps even reductions in current funding for not agreeing to them.
All this could be put together in a Programme for Government for any new Assembly and Executive. That could be achieved under yet another Northern Ireland Act 2023 reversing the St Andrews Agreement and reverting to the original Belfast Agreement provision for the election of First and Deputy First Minsters by a majority vote. As explained by Conor McCormick in Issue 489 that can legitimately be done after consultation but not necessarily agreement by all the parties.