Austerity budget must prompt radical approaches in Northern Ireland

 We are facing the first truly austerity budget for a generation. Cuts of 25% over 4 years in all departments except health (why ringfence Health?) are truly frightening and require radical reform in delivery. We need a radical approach that challenges the shape of our politics. Peter Robinson has already warned:

A fundamental reassessment of spending commitments will be required as Northern Ireland seeks to meet £128 million cuts imposed from Westminster…This does not include almost £400 million of separate spending reductions…. The result of this reduction is that local departments will need to make savings, although these should come from reductions in bureaucracy and administration costs in the first instance, frontline services will need to become more efficient.

This  does not go far enough. Now is the time to start facing up to the  challenges of our wastefully expensive divided society. The  power sharing Executive must  plan for a new departure that would begin to reshape it.  “Civil society,”  in other words, the movers and shakers who actually deliver must swap their customary mealy mouthed responses for speaking out clearly to help the politicians  do a better  job. Tough choices  are needed to free up money for the front line.   

Reaction so far is piecemeal

Owen Paterson SoS (What else does he do except give soundbites?)

“Working closely with the Northern Ireland Executive, we will publish a consultation paper in the autumn. This will look at mechanisms for giving NI a different rate of corporation tax and other economic reform options

Report due in the autumn. Ideas urgently needed – but you can forget harmonising corporation tax with the Republic. This is too divisive in a UK under budgetary austerity. Economist Richard Ramsay says:

Clearly, obtaining the status of an ‘Enterprise zone’, with an array of enhanced incentives, would be beneficial to the economy. However, the other side of the enterprise coin will be trying to tackle and dismantle NI’s current status as a ‘welfare benefit zone’.

“Without aggressively tackling the latter, Northern Ireland will fail to make meaningful progress in fostering a new entrepreneurial culture. Northern Ireland needs to look at more radical, region-specific solutions, to address our welfare dependency and economic inactivity. It is noted that number of Northern Ireland individuals neither in work or looking for work due to sickness (@90,000) is broadly the same size as the combined workforce currently employed in manufacturing and the financial services sector.”

Nigel Smith, NI CBI quoted in InsideIreland

Significant cuts in public expenditure were confirmed today though the exact impact on Northern Ireland remains unclear.

“However the Northern Ireland Executive needs to start preparing for more radical re-engineering of how public services are delivered.”

The rise in personal income allowance by £1,000 to £7,475, according to the government, will see 600,000 people in Northern Ireland benefit by £170 a year (in terms of the basic tax rate).

The NI Executive was told last month it must save an extra £128m on top of £393m other savings this year.

The bonanza of cross border trading for the North may be over.

Fine Gael TD Joe  McHugh

“Border retailers will welcome the announcement that British VAT is to rise from 17.5% to 20% next January. This may re-balance trade between the Republic of Ireland and Northern Ireland. (although the standard VAT rate in ROI is 21%).

Meanwhile Retail Ireland director Torlach Denihan said:

“The decision by the UK to increase its VAT rate from 15% to 20% is extremely significant.

“This is a further nail in the coffin of cross border shopping, which had already declined significantly due to substantial price cuts by retailers on this side of the border, the 20% reduction in the Irish rate of excise on spirits and the 6% increase in the value of sterling against the euro in the year to date.”

NI’s welfare dependent will be hard hit in the medium term, From Polly Toynbee’s hostile analysis

Professor Colin Talbot of Manchester Business School yesterday estimated a fifth of public sector jobs would go, a million people fired.

Benefit entitlements are being reduced to create work incentives but where is the work for them to go to?

The best hope is that once facing the detailed reality in the autumn spending review even Osborne will discover such savagery really is unthinkable.

Child poverty won’t be increased says the Chancellor but the poor are the hardest hit after the richest. And the welfare cuts are projected only for two years, with yet more to come after 2012

• Benefits, tax credits and public service pensions will increase in line with consumer prices rather than the retail price index.

Child benefit to be frozen for the next three years.

• Caps on housing benefit to be introduced – from £280 a week for a one-bedroom property to £400 a week for a four-bedroom or larger. Together with other measures this will reduce costs of housing benefit by £1.8bn a year by the end of the parliament.

• Sure start maternity grant will go to the first child only.

Eligibility for child tax credits to be reduced for families with a household income of more than £40,000 from April next year

• The baby element of child tax credit will be abolished from April next year

• Child element of the child tax credit to increase by £150 above indexation next year.

This is no time to waste a good crisis.

Former BBC journalist and manager in Belfast, Manchester and London, Editor Spolight; Political Editor BBC NI; Current Affairs Commissioning editor BBC Radio 4; Editor Political and Parliamentary Programmes, BBC Westminster; former London Editor Belfast Telegraph. Hon Senior Research Fellow, The Constitution Unit, Univ Coll. London