First thoughts for NI on the UK Budget

UK Budget Day is always frustrating for regional analysts. It takes ages for the local Department of Finance and Personnel to come out with the local implications. Devolution aggravates the problem. It’s no more in the interests of NI than UK ministers to spell out the worst, so we may suffer from a double spin. My belief is that public spending levels are OK for another year and then are up for grabs, either from a Tory government or the present one. Those growth forecasts look even more dubious than usual. I claim a prize for spotting an obscure Budget point. Before Darling got to his feet, Gordon Brown at PMQs dismissed the DUP ‘s David Simpson ‘s fears of swingeing budget cuts for NI, declaring that Barnett levels were “based on need” (eh?) and quoting the block grant of £6oo million as if it were unaffected by what Darling was about to say and adding : “ you have made your representations for extra policing costs and can look forward to the Budget statement”. Well, where was it? Did I miss it ? Brown though seems to be confirming that the J&P money will be on the way – and why not? It’s already in the NIO and Department of Justice budgets, so why is there any hesitation about transferring the funds over? Fumbling about like this was hardly the best way to encourage the Assembly to make the big leap of the final step of devolution. As usual, Finance and Personnel have gone to sleep on UK Budget Day and are as slow as ever in putting out an analysis of the local implications. Public spending to be cut from 1.1% next year to 0.7% in 2011-2012

This puts additional pressure on the Executive to revamp the NI Budget

• Growth expected to pick up in 2010, expanding by 1.25%.
• Economy to grow by 3.5% annually from 2011

These growth forecasts have been greeted by a big raspberry. The IMF joins the pack, forecasting instead an 0.4 % fall next year.

• Borrowing levels to rise by £173bn, £140bn, £118bn and £97bn in years after, an eye-watering total of £606 billion.

This casts doubt on whether the UK Treasury can manage to sell its debt in the form of £260 billion of gilts ( government bonds). That would make the debt more expensive and could result in a lowering of the UK credit rating. Remind you of anybody?

We need to know NI’s share of the modest increase in support of the long term and young unemployed and for housing and construction industry. Is there any new money here or has it all been pre-announced locally?

• All long-term unemployed under 25s to be offered job or training
• £1.7bn additional resources for Job Centre network
• £250m funding to help people get work experience in growth industries
• Funding to create 54,000 new places in sixth form education

Housing
• Scheme to guarantee mortgage backed securities to boost lending
• Stamp duty holiday for homes up to £175,000 to be extended to end of year
• Extra £80m for shared equity mortgage scheme
• £500m to kickstart stalled housing projects – including £100m for local authorities to build energy efficient homes

All this is small beer. The real meat is about whether you believe the growth forecasts and how long it will take to repay the highest public debt burden in history, 80% of GDP. The Big Picture remains in Washington. A US revival will create the tide in which other boats will rise, with growth reducing the debt burden… We hope!

  • cjb28

    OK so I am not very good with economics.

    But can this not be seen as a good thing? Would a cut in spending on an already overburdened public sector not encourage the Assembly to contract out certain front line public services to the private sector? Would this not create private sector jobs and inject some life into the local economy?

    Does this not mean we take a hit now but look at it as an opportunity and reap the dividends in the next few years?

    My assessment could be entirely wrong here.

  • It could all have very negative implications for Sammy Wilson too http://www.oconallstreet.com

  • Comrade Stalin

    It looks like Slugger’s readership has gone to sleep too.

    The budget was not especially controversial, although the rise in fuel duty is going to cause pain later on when fuel prices rise.

    What’s annoyed me more is the fact that Westminster is still giving favourable treatment to NI politicians. There are plenty of ways we could have been made to pull our weight – water charges, or increases in rates to UK council tax-like levels. Instead the government chose to cut us a lot of slack. Is this another example of Peter Robinson’s blinder playing ? Did he have a quiet word with Gordon and Alister about the facts of life in a hung parliament ?

  • brendan,belfast

    CS, “What’s annoyed me more is the fact that Westminster is still giving favourable treatment to NI politicians.”

    Why does that annoy you? It might be unfair to Scotland and Wales etc but surely lets take wjat we can get – before they force our guys to grow up.

  • Comrade Stalin

    Brendan,

    I can’t argue with that but I don’t like the feeling that we’re being told that we don’t have to pull our weight. It might reduce the number of bargaining chips we have later.

  • cjb28

    I think the main concern with the approach the budget took to NI is the implications it will have for our continued overreliance on British funds. If Darling were to take a greater chunk away from us it might encourage the assembly to tender out some front line public services to the private sector and reinvigorate our local economy.

    On first look I believed this budget might have done that but Northern Ireland has “got off” very lightly.

    We cannot rely on Westminster forever.

    There is an argument for greater devolved powers here, in my opinion.

  • Mack

    Can anyone explain the purpose of the scrappage scheme? Is it a subsidy, or will the UK government make money (selling the scrap, VAT on car sales, income tax from car salesmen, broad benefit to the UK economy)?

    If it isn’t a subsidy, can I trade in my Dublin reg and purchase a UK car in exchange? If not, why not?

    If it is a subsidy, what is the point of subsidising car salesmen and foreign imported cars?