£7 Billion deficit in investment plan

Eamonn McCann, in the Belfast Telegraph, takes issue with the DUP’s claim that “Northern Ireland’s not for sale”.. oh yes it is, says Eamonn.. and reminds us that as well as publicly owned buildings being put on the market, the widely opposed tacitly approved PFIs will increasingly dominate any government investment in NI. Although he doesn’t seem to have seen the report from the A&L Goodbody consultancy firm, published recently, which states that, based on ISNI figures there is likely to be a deficit in public investment in infrastructure of £7 billion over the next 10 years [NI details in chapter 13 of PDF file].. that’s a lot of PFI [or PPP] contracts.

The report highlights the Investment Strategy for Northern Ireland [which I would link directly to.. but the website (part of the Office of the First Minister and Deputy First Minister) doesn’t seem to exist.. despite the links to it in the statement on 20 December 2004 by then-Finance Minister, Ian Pearson.] –

13.2. Infrastructure Deficit

Large deficiencies exist in infrastructure and public service provision in Northern Ireland. This is largely due to a legacy of under-funding in comparison to other UK regions. Not only does Northern Ireland have an infrastructure and investment deficit, but the problem is further exacerbated by the fact that the shortfall is concentrated in areas that are key to the economy’s growth and prosperity. Unemployment is still above the UK average; a large percentage of the population depend on benefits; health service performance is poor and there exists a huge difference in health status between the best and worst off. There is general agreement that failure to adequately address this infrastructure deficit and increase investment levels will seriously hinder future economic growth.

13.3. Investment Requirements

The ISNI outlines the possibility of delivering £16 billion (€23.6 billion) of investment in key infrastructure by the end of 2015 (at current values). This strategy aims to put in place the infrastructure that is needed to enable Government to deliver public services throughout Northern Ireland that are suitable for the 21st Century. Due to the suspension of the Northern Ireland Assembly and Executive from October 2002, this important strategic document has not been adopted.

And the A&L Goodbody report goes on to say this –

13.6. Public Private Partnerships (PPP) Opportunities

Given the projected shortfall in capital provision over the next decade, it is accepted at Government level that there is significant potential for PPPs to be developed in order to achieve the goal of eliminating the infrastructural deficit and stimulating economic development in Northern Ireland. Northern Ireland also has a clear policy framework for PPPs.

As the report also points out –

13.4. Funding Options

The UK Budget (2005) announced a rise in capital investment for Northern Ireland of approximately 30% over previous levels bringing the budget for capital investment to over £1.2 billion annually, an increase of some £200 million. Despite this increase, there will still be a significant difference in terms of public investment levels required over the next 10 years by the various Northern Ireland Government Departments and the allocations provided under current budgeting strategies.

The gross investment deficit [in NI] amounts to approximately £7 billion over the next decade with investment need significantly outstripping capital baseline funding. This highlights a clear potential for PPPs to address the capital provision shortfall.[added emphasis]

  • George

    Excellent blog Pete,
    really shows how much stuff is going on at the moment and how every day that the people of NI are out of the decision-making loop, somebody else is making a hugely important decision for them.

    I couldn’t believe the Irish government seeing a whopping 100 billion being spent in the next ten years on Ireland’s infrastructure.

    An incredible figure but very interesting that there is a lot of talk between Ahern and Blair about creating the Londonkenny/LetterDerry hub and getting Irish construction firms to start tendering for Northern Ireland’s construction projects.

    The most astounding figure I found was that only 21 million is budgeted on arts and culture in the next ten years.

    Northern Ireland is for sale it seems and it also seems as if the Irish government and Irish private sector have the chequebook out.

  • fair_deal

    It is clear from these figuress that the doubling of the rates and the RRI won’t be enough so we must look seriously at reducing the public sector here to raise the necessary investment.

    On the PPP stuff when devolution returns the parties need to look at other possible methods of finance (the IPPR has done some interesting research on alternative models). We have the opportunity to innovate not just adopt the policy hand-me-downs of central government, who knows they might end up learning something from us.

    There is substantial potential to utilise the massive infrastructural investment to address the issues of unemployment. If local labour clauses were introduced in the contracts (which is the practice in other parts of the UK, RoI and parts of Europe) could provide significant numbers of jobs and more importantly decent training/apprenticeship opportunities.

    Again the failure of health provision is highlighted, whoever gets the health portfolio in future better be prepared to kick arse and to get the backing for tough decisions. In the meantime reassign it to Lord Rooker he doesn’t seem to shirk tough decisions and seems willing to tell his mandarins were to go.

  • fair_deal

    “getting Irish construction firms to start tendering for Northern Ireland’s construction projects. “

    This already happens.

  • Alan

    Dare we let our politicians loose on this? Dare we let our civil servants loose on this?

    There is a crucial issue of competence here that worries me. Has there been sufficient learning from the past mistakes of electricity, and now gas, to allow us to make the key decisions?

    Years ago in Opsahl ( yes many years ago ), I suggested that we could say that our politics had matured when a local minister defended the decision to close a hospital. That has happened now, but I’m still reserving judgement until the decision is not a constituency matter.

  • looking in

    Agree with George – excellent post lots of info which just doesn’t go across the radar of tabloid reading joe punter. which is a shame.

    There are several issues which are just staring to rear up

    Level of westminster support, equalisation of economies north and south and role of EC structural funding, massive rationalisation of NIO

    I am somewhat depressed that our current generations of politicians are not up to the tasks – economics and globalisation is not prod/taig/union/nationalist and I worry and doubt that current crop cannot make that leap – see recent bleatings for hand-outs as proof.

    It is said that there is approx. 1 person per million capable or running a society – so UK has around 60 and NI ehhhhh…. 1 or 2. Any speculation on who they might be?

  • IJP

    Some very good posts above.

    Unemployment is still above the UK average

    It isn’t, actually. And this, bizarrely, is part of the problem.

    The NI economy in theory isn’t doing too badly – higher-than-average growth, lower-than-average unemployment.

    Yet this simply hides the real issue: ‘unemployment’ becoming ‘other forms of benefit’, ‘growth’ being based on ‘public spending’, and so on.

    So people haven’t yet noticed that we have serious and basic economic difficulties to overcome. Meanwhile all most politicians do is harp on about ‘more resources’…

  • aquifer

    So why should people in the low wage and insecure private sector, and the self-employed, pay to have others with public sector jobs for life with union rates?

    Our public sector is too large and needs trimming, even if its functions continue to be carried out by part-timers, private sector firms, or the voluntary or co-operative sector.

    We should think about approaching the ROI corporation tax rate or joining the Eurozone. I heard a report recently of ROI getting as much American investment as China. The income taxes and the VAT on consumer spending from all those extra employees will pay for a lot of that infrastructure.

  • mnob

    Aquifier, there is something to be said about the republic’s corporation tax rate, but there are also dangers involved in selling youself as being cheaper than everywhere else. I’m not sure how long the rest of Europe (and indeed the US) will tolerate corporations artificially moving their profits to the republic so that they can pay less tax. Also, being the cheapest can easily be trumped by some of the newer EC states and many many non EC states.

    I find it strangely ironic that the very same people whose state was formed largely as a reaction to absentee landlords are happy to sell their state to the 21st century absentee landlords – ‘multi national’ (sic) corporations.

  • dutch

    The success of the ROI economy in the 1990s and beyond was only partly to do with the low rates of corporate taxation. The fact that the country was English speaking with a young, educated population was also a major factor. Perhaps the biggest factor success was the Industrial Development Agency (IDA) which was unbelievably successful in marketing ROI as an investment location. The IDA convinced the Irish government to think in clusters which meant that pharma, software and food ingredient companies were specifically targetted.

    The question is whether NI can copy that success. The region does have some major plus points. NI consistently sends more people to university from lower income backgrounds that in the rest of the UK. There definitely is an education ethos which can be tapped into to generate the skilled people needed for a successful economy. It is also true that NI firms consistently undersell to the ROI so there is a great opportunity there.

    However, the fact remains that Great Britain pumps way too much money into NI. The region does not come near to paying for itself even leaving security costs out of it. The British goverment should change the taxation model for NI to start making the region accountable and self-supporting.
    Right now there is no incentive for local politicians to show the inititative ROI politicians showed in the 1980s. Ironically, this is anathema to unionists because they know in the back of their heads that the result will be an economic united Ireland.

    It is a strange irony when you think of the rich industrial heritage of Ulster.

  • Joel Barnett

    Regrettably, one of the great costs of NI government is its devolved nature. For example, the DVLNI might bring jobs to Coleraine, but it also adds to the costs of administration- and surely adds to the lack of competition in the car insurance market.

    The local government system looks pretty inefficient also.

    GB has thrown money at NI to keep the children quiet, and now that the black sheep of the IRA has gone quiet, normal politics can resume. Why waste money on NI when nobody there can vote for you?

    At the very least NI can expect its people to pay taxes in line with other UK taxpayers. If taxes are spent badly on local services, that’s a matter for local civil servants and politicians to sort out- rather than begging for more cash.

  • Dessertspoon

    Why does the DVLNI being in Coleraine mean there is a lack of competition in the car insurance market? I always thought it was partly to do with differences in legislation re compensation payouts (NI is more generous so it costs more etc). Happy to be wrong but I really don’t see how the Driver Vehicle Licencing department is to blame.

  • beano

    I was with DS on this one. I thought it was between the jury deciding compensation claims (and usually deciding larger amounts and more often in favour of the claimant) and the result of this, ie the claim culture we’ve got here (although this now seems to be spreading to the mainland too if all the ambulancechaser4u adverts are anything to go by).

  • Jo

    I wish people would do a little more thinking than simply trot out the old hackneyed and downright ignorant “cut the public sector” triteness when the vast bulk of public spending here is for the benefit of the entire community in the form of much needed infrastrucural development and in supporting people who are on or below the poverty line and at the same time paying through the nose for services which are grossly more expensive than other parts of the UK. Anyone with a titter of wit would know that public servants pay is a minute proportion of overall expenditure so calls for the sacking of civils ervants is really a call for more jobs for call centres in India. Pure ignorance.

  • dutch

    Jo,
    There is nothing wrong with public spending. There is also nothing wrong with spending on much needed infrastructure like good roads, schools and hospitals.
    However, what NI generates in tax and other income for the exchequer does not cover what is being spent there. The gap is paid for by transfers from Great Britain. If NI was encouraged (or forced) to pay for itself then I truly believe that local politicians would be forced to think beyond the begging bowl and they may do something to generate an enterprise culture in the region.
    On what basis is it acceptable that so much tax revenue raised in southern England is spent in NI?
    Do you think that southern English people are getting value for these tax pounds?
    If NI is justified in its existence, in whatever form (UK, joint sovereignty, federal Ireland) it should at least pay its own bills. Or am I living in a parallel universe?

  • Jo

    Dutch
    How much subvention does the UK exchequer pay per Falklands Islander and why?

  • dutch

    Jo,
    Thanks for asking that question because now I have discovered that the Falkland Islands proves my point.
    Have a look at this link:
    hyperlink

    The salient point is “The squid boom filled up the Falklands’ coffers and sowed the creation of a self-financed South Atlantic nanny state. Only the cost to maintain 2,000 troops, which stands at 110 million pounds annually, are picked up by the United Kingdom.”

    Leaving out security costs that means that the Falkland Islands can justify its current constitutional existence. I am sure that the taxpayer of southern England does not mind paying for the troops given the history with Argentina.

    Unionists should not think that Britain owes them a living. If you choose to live in the Orkneys you can’t expect the same standard of living as in you would have in London. Ultimately every region should be trying to help itself.

    Belfast was once a roaring industrial city, trading with the rest of the world. Surely the unionist community wants to recover that pride. There is nothing wrong with self-sufficiency. You don’t have to draw the dole just because you are entitled to it.
    Dutch

    I don’t think comparing NI to the Falkland Islands is realistic.

  • dutch

    Jo,
    Thanks for asking that question because now I have discovered that the Falkland Islands proves my point.
    Have a look at this link:
    hyperlink

    The salient point is “The squid boom filled up the Falklands’ coffers and sowed the creation of a self-financed South Atlantic nanny state. Only the cost to maintain 2,000 troops, which stands at 110 million pounds annually, are picked up by the United Kingdom.”

    Leaving out security costs that means that the Falkland Islands can justify its current constitutional existence. I am sure that the taxpayer of southern England does not mind paying for the troops given the history with Argentina.

    Unionists should not think that Britain owes them a living. If you choose to live in the Orkneys you can’t expect the same standard of living as in you would have in London. Ultimately every region should be trying to help itself.

    Belfast was once a roaring industrial city, trading with the rest of the world. Surely the unionist community wants to recover that pride. There is nothing wrong with self-sufficiency. You don’t have to draw the dole just because you are entitled to it.
    Dutch

  • mnob

    Dutch,

    You just dont get it do you. NI is part of the UK. Money flows between regions. Probably the *only* region which produces more tax revenue than it costs is the South East of England as that amongst other things is where the centres of administration and business for the entire country are based, (and as an example of reverse subvention to which NI educated people migrate)

    If we’re cast out for being unprofitable should we not get a refund for the significant periods of history when we were net profit to the Union ?

    Should the UK cut off every region which apparently costs more than it provides ?

    Do you think Dubliners are getting value for their tax euros or should Donegal be cast out of the Republic ?

    Do you think UK taxpayers are getting value for their taxes or should the Republic be cast out of the EU ?

  • Jo

    Money doesn’t talk, it swears.

  • dutch

    Mnob,

    I understand what you are saying but you have to take some things in to account:

    i) Nobody in the ROI wants to kick out any region of the country. If the voters of Great Britain had a chance tomorrow they would vote NI out of the union.

    ii) No other region of the UK gets anything like the subsidy that NI gets. The disproportionate fiscal transfers have resulted in an artificial economy unlike that of GB or ROI.

    iii) What about pride? If unionists are so proud of wee Ulster then how come they are so happy to take so much money from GB and still ask for more?

    I believe that a large majority of NI people, unionist and nationalist, are in favour of the union as it is now but, if NI was treated like any other UK region, that support would disappear pretty quickly.

    I would like to see a real all-Ireland economy. After that the politics will take care of itself. Right now the UK government is distorting the natural economic forces.

    Dutch

  • Joel Barnett

    On the DVLNI: Surely the reason for high insurance premia is not just a higher accident rate or car theft or compensation culture. Competition is part of it. How many GB insurers insure in NI? Not many, and I would have thought the separate licensing system would have a part to play in that, as it effectively makes NI a distinct market- and one that is small and not worth competing for. Move from small town Bangor to big city Edinburgh and watch your premium halve before your very eyes!
    A similar state of affairs would pertain in the Republic re: lack of competition.

    See also the NI banking regime!

  • Jo

    Dutch
    i) Government isnt always about delivering what majorities want. deepending on the timing, this would mean the public hanging and quartering of Ian Huntley/ Gerry Adams/Myra Hindley

    ii)Do you not know the history of how NI as a state was established? Why do you think it included 2 counties where the majority would not have wanted to stay within the Union?

    iii) Unionists are above all a proud people. Look how the sacrifice of 1916 is marked each year. A price paid in blood both then and more recently needs recognition.
    In 1974 PM Wilson called them “spongers” and asked “who do these people think they are” The answer was resounding and also unfortunately negative – “these people” wanted an end to power-sharing with their Catholic citizens.

  • susan

    Jo
    I agree that the view of public services as being a drain on tax payers is too simplistic, but I agree with other posters that the civil service, not public services such as schools and hospitals, does need a radical ovehaul.

    Direct rule in Northern Ireland has led to a situation where senior civil servants make policy unchallenged. Direct rule ministers change rapidly, as soon as they have mastered their brief they are gone. Also their brief is so wide that even if they care what happens in this God forsaken backwater, they haven’t the time to examine or question the briefings they are given by civil servants. Briefings to ministers are selective and leave out conflicting information.

    This leaves real power in the hands of a complex bureaucracy which controls power by making the process of finding out what is happening so difficult that it is impossible to establish a clear answer.

    Decisions are frequently taken in a manner which defies logic; for example PFI’s have proved to be a disaster where short term capital savings have been at the expense of long term recurrent expenditure and nightmare situations where managers can’t get leaky buildings fixed.

    Policies are made after decisions have been made and are then adjusted to fit. The amount of money wasted is huge and the decisions on how it is spent are made by unelected, unaccountable, autocratic senior civil servants who don’t care about teachers in class rooms or nurses in hospitals.

    I have sat in meetings with civil servants and heard them talk glibly about redundancies and rationalisation when the biggest drain on the public purse and the people who contribute nothing to public life are them. They don’t educate anyone, they don’t nurse anyone and they never meet a member of the public. They will retire at 60 on an index linked pension and will never face redundancy.

    Public services in Northern Ireland don’t need reviewing; the poor sods on the front line are doing the best they can with the pittance they get – the civil service and particularly the senior civil service does and the sooner the better.

    God it felt good to get that off my chest!

  • dutch

    Jo,

    What is your point about the two counties that may not have wanted to be in the Union?
    If you mean that the border was illogical, that is clear but it is what it is and so many years later its not for changing.

    About the war sacrifice in 1916, do you really think that the modern fiscal transfers are some kind of repayment for past services rendered? That’s a new one on me. I definitely don’t think that the average Englishman sees it that way.

    Dutch

  • Jo

    Susan:
    I am glad indeed that you got that off your chest. Feel free to avoid the new dual carriageway to Newry as you feel that Roads Service dont deserve any recongition for securing the budget for this and smoothing the process of speeding up your journey southwards as they as civil servants of course add no value to real life. 😉

    Dutch:
    The reason that NI consists of 6 rather than 4 counties shows that democratic interests were subservient to economic viability interests.
    How much more of a subvention would have been required for a 4 county NI than what we have? Are you English, perchance? You dont appear to understand NI perceptions about the duty owed by the Crown to its subjects. Lockean defeasible loyalty is the key 😉

  • dutch

    Jo,

    Thanks for giving me a different view on things.

    I am not English, I just didn’t realize that the Crown was expected to just keep on paying for historic sacrifices. When will the debt be paid off? Never?? Weird.

  • Jo

    Dutch:

    Well, thats my take on such things. I think the Monarchy…well I shall save my comments on that incestuous history for another thread.

    As regards the sacrifice of 1916, those Catholic Irish Volunteers who died at the Somme and are an embarrasment to modern Nationalists represent a saving to the Crown as they retreated into quiet ignominy for having dared take the Queen’s shilling in 2 world wars:)

  • Jo

    “Direct rule in Northern Ireland has led to a situation where senior civil servants make policy unchallenged”

    …Obviously the lovely Mr Spellar doesnt count. Nor does Lord Rookers decision on John Lewis?
    Aw come on…

  • George

    Jo,
    “As regards the sacrifice of 1916, those Catholic Irish Volunteers who died at the Somme and are an embarrasment to modern Nationalists represent a saving to the Crown as they retreated into quiet ignominy for having dared take the Queen’s shilling in 2 world wars:)”

    They are not an embarrassment to the Irish people, neither the ten of thousands who volunteered in WW2 and the tens of thousands who died in WWI.

    The tens of thousands who marched to their deaths in World War I for small nation Belgium (and who were treated with so little respect that they were banned from even marching under their own banner) in the hope that Britain would respect the democratic rights of small nation Ireland when the war was over are more pitied by Irish people today.

    In Ireland, you don’t glorify someone who was sold a pup and the Irish Volunteers were sold one hell of a pup.

    While you seem to think Northern Ireland should cash in on its World War I dead, the people of the Irish Republic see it for the horrible waste and Imperial charade it was.

    Today it is the Irish government that is demanding, unlike unionists, that those Irish soldiers, Protestant and Catholic, murdered by the British by means of summary execution in WWI, have their honour returned to them.

    But there’s no money in that so it’s not surprising Northern Ireland remains stumm.

    The Irish people remember their foolish dead and their bravery but that memory will always be tainted by the knowledge that they died for nothing and Britain treated them abominably and betrayed them by refusing to accept the democratic wishes of the Irish people when the war ended.

    At least they aren’t as forgotten as much as those southern Irish unionists who fought and died with the British Army against the Irish Defence Forces in the War of Independence.

    But then again I suppose there is no cash to be gotten out of them by Northern Ireland either.

  • susan

    Jo
    Replying to your comment about senior civil servants. How unchallenged they are depends on the department and the minister.

    I have sat in meetings and listened to them talking about making people redundant as ‘rationalising duplication of resources’ the resources being people.

  • barnshee

    “every day that the people of NI are out of the decision-making loop, somebody else is making a hugely important decision for them. “
    What difference would the NI assembly make? SFA