The likely impact of the cuts – doom or just dread?

As the countdown quickens to the comprehensive spending review (CSR), in a fortnight’s time, Peter Robinson argues for Northern Ireland to continue to be treated as special case. This runs counter to  other indications e.g.. “Any arguments made that the region requires special „exemption‟ from cuts or that there are specific circumstances requiring a sustained flow of support are almost certain to fall on deaf ears” – (Oxford Economics)

Perhaps he knows something we don’t; let’s hope so. On the face of it though, the devolved administrations are at a disadvantage in the negotiations with the Treasury compared to Whitehall departments serving England. They are not part of the intimate process with the right of appeal to the cabinet committee on the cuts, having to rely instead on the weaker and largely untried mechanism of the joint ministerial committee.

How big are the cuts likely to be for NI, based roughly on pro rata with England?  £1 .2 billion minimum to 2015/6 according to Oxford Economics? Or more widely £2 billion like John Simpson, leading to a further 32,000- 40,000 jobless? Estimates vary. Either way, there may be small silver linings in the otherwise dark cloud.

Northern Ireland starts with a very high public spending base of near £11 billion in total – spending doubled in 10 years, an extra 1 billion in the last five years alone. Is it all doom and gloom if we are left with say, 2003-4 spending levels with cuts spread at  3.5% p.a?

NI will get the benefit of protected English health spending and education limited to 10% cuts

Early indications from George Osborne’s party conference speech are that new limits on welfare spending , a third of the UK total (and higher in NI) seem far from drastic at first glance. Payments on a single family will be limited to £500 a week, excluding disability benefits. This leaves out the longer term reform, to compel a move from welfare to work. It’s not yet clear what happens if no work is available. Eventually though, pressure on welfare spending will face NI with tough decisions.  Can demand continue to be met or will the sacred cow of parity with GB have to be abandoned?

Without spelling them out at this stage, the Chancellor also promised  “incentives” to develop small business, high tech and green energy. Perhaps we will benefit there.

And what’s happening to the idea of making NI an enterprise zone with favourable tax breaks?

In a report for the NI Council of Voluntary Assocations on how the cuts should be met down the road from Whitehall,  Oxford Economics feel impelled to warn against the sort of panic that leads to bad decisions. Like the rest of us they wonder why the Executive has so far failed to launch a strategic debate. They now urge them (as in Whitehall) to take the “opportunity of adversity ” and begin strategic planning, with all departments playing a full part, not just the DFP at arms length.

Is this not leaving it far too late; or is it a case of  better late than never?

 Other points in the report:

The present programme for government is “unsustainable” ( whatever some politicians say and may even believe). Output analyses – how efficient and effective is the service? – should include health and education, protected for England . Protecting them fully would impose ” unsustainable” cuts of 21% on other services. “There should be no sacred cows.”

Capital budgets should not be slashed in favour of short term gains to save some jobs  ( a key temptation for every politician) .

Start reducing the rates, water and other subsidies that cost £300 million a year.

Drastic cuts to the voluntary sector (budget, £260 million) in favour of in-house services should be resisted.

Assessment of cuts options should involve an independent element to prevent the civil service acting as judge and jury in its own interest, like an Bord Snip in the Republic.

Freezing public sector pay is no magic bullet and  they duck a straight recommendation .

 “Protecting employment and wages within the public service has already had strong support from the Unions in particular, though the idea that cutting spending external to the public service (i.e. in the private sector) will have no impact but cutting public sector wages would is clearly not the case. Equally the idea that recruitment freezes are a ‘victimless’ way of reducing headcounts and thus costs is also incorrect as this creates a large pool of youth unemployed who might other wise have joined the public service. These two points further highlight just how sensitive, complex and ultimately painful the process will be no matter what choices are made.”

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  • Glencoppagagh

    “Freezing public sector pay is no magic bullet…”
    Probably not but cutting it certainly would be.
    There would be some consequent damage for retail and services but unless public servants decide to starve rather than forgo a foreign holiday or a new car that should be the height of it.

  • Was it Oxford Economics that said 25% of the education budget could be saved if there were more integrated schools.?

  • Seymour Major

    “Perhaps he knows something we don’t; let’s hope so…”

    You did not mention the legal angle.

    http://nicentreright.wordpress.com/2010/10/04/threat-of-legal-action-over-cuts-highlights-need-for-a-seperate-ni-centre-right-party/

  • Brian Walker

    Seymour what “legal angle” in this? Just a pledge they are fulfilling – as I’m sure you know, really .

    In the context of restoration of the institutions” St Andrews says “the Governments remain committed to ensuring the Executive has the capacity to provide quality public services, to continue the process of necessary reform, to plan for the future, to make the long-term capital investments to underpin the economic transformation of Northern Ireland, as well as bringing long-term benefits for the island as a whole.”

  • Brian Walker

    btw I admit I’m as guilty as the next one by banging on about the UUs. But look at the response to the micro-subject of Trevor Ringland is above – about 18 time greater so far than this post on on the economy. It’s a perfect examples of skewed priorities in NI.

  • Pete Baker

    Brian

    The St Andrew’s reference is, indeed, a red herring.

    As Mark Devenport pointed out, what’s really being referenced is the subsequent, 1 November 2006, government commitment to a funding package.

    As Mark adds

    It’s smart politics for the First Minister to throw in St. Andrews to the current negotiation with the Treasury, on the grounds that the other devolved regions will no doubt be marshalling whatever arguments are at their disposal. But it’s hard to imagine this one going all the way to the International Court of Justice. If it did the lawyers would have to decide whether Chancellor Brown’s subsequent funding package was covered by the government’s treaty obligations, or whether the rather more vague wording of the Agreement’s Annex C gives Chancellor Osborne the flexibility to cut the Executive’s capital budget.

  • Pete Baker

    “It’s a perfect examples of skewed priorities in NI.”

    It’s also a perfect example of playing to prejudices…

    But I wouldn’t read too much into the number of comments generated by such posts.

  • HeinzGuderian

    Indeed…………..just the usual suspects,putting the boot in……….Isn’t that what we do best ??

  • Glencoppagagh

    And you haven’t even mentioned football-related threads

    The reason is probably that most of the regular contributors are state dependent but they know that there is no coherent intellectual argument against reducing state dependency in NI so they revert to ‘no comment’ mode.

  • Archie Noble

    Expect job losses of around 20% across the public sector begining with ‘natural wastage’ and then gouging into the younger work force. Suprisingly, to me anyhow, any exemption for NI is being actively resisted by CEO’s in the English public sector.

    The international treaty that is the GFA might give some comfort but I would not count on it.

    If we still had the late and much lamented Horseman no doubt he would tell us how cuts of that scale would impact on the respective communities. Perhaps someone on Slugger knows the answer?

    A second question would be what % of the NI private sector is dependent on the public sector?

  • Glencoppagagh

    Depends whether you mean wholly or partially dependent.
    I’d hazard a guess that at least 50% of ‘legal services’ are directly paid for by the state. There’s also the easy ‘consultancy’ income which the large accounting firms rely on. PR and advertising is another sector which receive a big chunk of their revenues from the state.
    The cuts will hurt North Down as much as West Belfast which is probably why Lady Hermon steered clear of UCUNF.

  • Archie Noble

    Yes that is the interesting dimension to the cuts debate. Many in favour are unaware of the level of private sector dependence. In addition to the things you mention I wonder how many businesses have major supply contracts with the public sector. Retail will also take a hammering.

    I’m sure your right about Lady Hermon foreseeing the trauma.