Let us begin with the resignation of the First Minister, Paul Givan, and the collapse of the Executive – a decision which will impact disproportionally on the poor and working class.
The draft budget cannot now be brought before the Executive and the proposed 10% increase in health spending is stalled. Moreover, a staggering £300 million must be returned to the Treasury and a further half a billion for renewable heat may have to be returned as the Department for the Economy has failed to develop plans on how to spend it. In addition, it is reported that the voluntary sector which provides vital support to the neediest in our society may have to cut thousands of jobs because of the failure to agree co-funding for EU programmes. The collapse of Stormont could not have occurred at a worst time. The pandemic, which impacted disproportionally on the lower socio-economic groups, is not yet over. Energy costs have recently doubled, the cost of food and other essential items are rising, and inflation has reached the highest level since the 1990s – all factors which will have the greatest consequences on the least well off. The war in Ukraine can only make matters worse.
In 2019–2020 – the latest figures available – already some 19% of the population in Northern Ireland were living in poverty. In stark terms, this meant that some 350,000 people – roughly equivalent to the population of Belfast – were living in households with an income of 60% below the average.
Just under a quarter, or 107,000, were children – the equivalent to the populations of Armagh and Derry combined. These shameful figures are only likely to increase, and more and more people will be forced to use food banks and the Executive will not be able to assist.
After more than sixteen years of active devolved government, there is still no comprehensive anti-poverty strategy in place. In December 2020, an expert advisory panel published “Recommendations for an Anti-Poverty Strategy”, but over a year later work on the development of an anti-poverty strategy continues. The much-needed welfare mitigations as well as the living wage requirement for companies bidding for public contacts are, however, positive steps in the right direction.
Over the years, Stormont has been able to maintain, or introduce, several policies which have benefited the middle classes. Take rates. Households in Northern Ireland pay on average one third less rates than households in Great Britain under the equivalent council tax with the middle classes benefiting the most.
For example, a crude comparison between the cities of Belfast and Liverpool, shows that while households in lower valued properties in Belfast pay on average roughly £1000 less annually, those living in higher valued properties are more than £1500 better off.
In October 2008, Nigel Dodds, provided further help to the better off in Northern Ireland and introduced a cap on the rating value at £400,000 on the grounds that high-value homes were not overly penalised when their owner’s incomes may not have kept up with rising property prices.
The failure of Stormont to introduce water charges provides another example. In 2007/2008, I chaired the Independent Water Review Panel which recommended the introduction of domestic water charges, supported by a generous affordability scheme to prevent water poverty.
Our proposals would have helped address class inequalities in two ways. First, as we proposed that charges should be based on the capital value of properties, rather than the expensive option of metering, the middle classes living in higher valued properties would have had to pay more.
Second, the Barnett formula – the mechanism for allocating funds to Northern Ireland, from the Treasury – does not cover water charges. As a consequence, £3.7 billion – yes, £3.7 billion – has been taken from the health, education and other budgets since our recommendations exacerbating the existing class inequalities in these areas.
Despite the abolition of the 11 plus, selection remains, privileging middle-class children whose parents often pay for tutoring before selection and then pay fees for all sorts of activities to enhance the resources of the grammar school sector. The consequences are stark. Over 90% of grammar school children can be guaranteed to achieve at least 5 GCSEs Grades A*–C. At the other end, less than half of children on Free School Meals obtained these grades. Moreover, since the signing of the Good Friday Agreement in 1998, over 20,000 children left Northern Ireland schools either without any GSEs or no qualifications at all.
Similar class inequalities are seen in health. In 2017, a person living in one fifth of the most deprived areas in Northern Ireland could be expected to die 7 years earlier than a person living in one fifth of the least deprived areas.
The underfunding of health over many years has led to long waiting lists with increasing numbers in the middle classes taking out private health insurance and going private – an option not available to the less well off.
The abolition of prescription charges for everyone was another Stormont policy which principally benefited the middle classes as most of those who could not afford to pay were already eligible to free prescriptions. It is a subsidy to the middle classes costing about £8 million a year.
Class inequalities in Northern Ireland are perhaps being increased most by housing market dynamics. The introduction by banks of buy-to-let mortgages in the mid-1990s coupled with tax breaks for landlords has been a major factor in wealth accumulation of the middle classes. The private rented sector has expanded rapidly and now forms some 14% of the housing stock. It has been an excellent investment for those who could afford to buy houses to rent as house prices have increased by 2.5% annually when adjusted for inflation.
Moreover, the sector has been supported by housing benefit payments to tenants to enable them to afford to rent, which cost over £200 million in 2018–2019 – an indirect welfare subsidy to private landlords. To further help the landlord class, Stormont allows 10% reduction in rates for landlords who make lump sum payments for several properties at the same time – a subsidy of estimated to be £13 million!
The Independent Fiscal Commission, which Conor Murphy established in March last year, provides the potential to develop more redistributive policies. One can only hope that our politicians use it to develop a comprehensive set of tax and spend policies to develop a fairer society in Northern Ireland.