Devolution in Northern Ireland is in the political equivalent of a hospital high dependency unit with a serious discussion about whether or not it is should head rapidly to intensive care. This deterioration in its health is as a result of the insistence by Sinn Fein to block the next steps of Welfare Reform. This will set out how this approach is a meeting of voodoo economics and crappy politics.
1) It doesn’t stop any cuts
The premise of Sinn Fein’s approach is to oppose Tory cuts. It doesn’t work. It doesn’t stop any cuts. This approach simply moves the costs from the welfare budget (part of the Annual Managed Expenditure (AME) budget) to the block grant (Departmental Expenditure Limits (DEL)). Why pursue a policy that doesn’t do what you say you want it too? It is a failure from the start.
2) It will magnify and multiply the harm
If Welfare Reform proceeded some people would lose money. Some will actually be better off. The harm to the economy of those that lose out is the multiplier effect of that money being withdrawn from the economy in general and vulnerable communities in particular. The alternative to this is worse.
Under the Connolly House masterplan the money is still lost from the local economy plus we get the costs of not implementing it. The savings of utilising national computer systems will go. We will have to spend hundreds of millions of pounds to create our own computer systems. This will have to be taken from our capital budget, which is a key driver in our local construction industry and the IT contracts could end up with a non-NI contractor.
However, moving the costs to the block grant magnifies the cuts in multiple ways. Each cut will act like a domino that increases the impact and it will be hard to see where or when the dominos stop falling.
Here are some examples:
- In Belfast there are a number of European Regional Development Fund (ERDF) programmes that are co-funded by central government e.g. the Waterfront Hall redevelopment. If central government cuts its resources to such projects the Council will have to find the extra resources through additional borrowing or rates hikes. If the Council can’t find the resources then the ERDF money is lost to our economy and the economic benefit of these schemes frittered away. There will be similar projects across NI.
- The expansion of Magee has had to be stopped. There is the harm to Londonderry through the loss of the investment but consider the knock on to students. Students will have less opportunity to study here. This will mean having to study in England and Wales at higher tuition fees. The practical outworking of this means Sinn Fein are condemning hundreds of our young people to more personal debt.
- The cuts have already cost jobs. The reduction in DRD and Health contracts has already led to layoffs. This would continue with further cuts. The result will be more people on welfare. Similarly, jobs in Northern Ireland service the welfare system on the mainland. If we got it alone with our own system those jobs go too.
- The programmes that people rely on to try and tackle poverty will be reduced in quantity and/or quality. Ill-health is a major contributor to poverty, if we can’t keep the health budget protected we will see reductions in services exacerbating this problem. (The SDLP suggestion of an audit of health offers little but delay. On past precedent external reviews would suggest more private sector involvement which the SDLP generally oppose. So they should be careful what they wish for.) DSD will cut back on its regeneration programmes in the neediest communities. No or poor qualifications are what keep many from the labour market. Training programmes will reduce in quantity and quality and will keep them out of jobs and trapped in the cycle of dependency. In education, the decisions will be around closing schools or cutting back on support programmes or both.
If you protect one part of the budget you multiply the impact elsewhere. The interconnectedness and interdependency of the work of government means moving the cuts to the DEL budget from AME magnifies and multiplies their impact. To sum up, the practical effect of Sinn Fein’s approach is to put the Tory cuts on steroids.
3) Bad faith
The Northern Ireland Assembly does possess powers on welfare. However, that power always came with the financial consequence. If we exercised those powers we had to pay for them. Sinn Fein and the SDLP are trying to ignore the second part.
4) Opposed on Principle?
Really? The block grant was cut by the ConDem coalition government at the start of this Assembly term. After a few extra meetings with Downing Street that didn’t deliver any more money Sinn Fein accepted and voted to implement the budget we were given. Earlier parts of the Welfare Reform programme were passed in the Assembly without SF starting a full blown standoff. This makes the claim of standing on principle nonsense.
There is also the contradiction in the public discourse around it by nationalism. It says it opposes the principle of the changes but then wants more talks to seek more changes and criticises Nelson McCausland for not getting enough changes. What is it? If you oppose on principle a couple of tweeks shouldn’t make it acceptable?
5) Poor negotiating strategy
If London had wanted they could have told us to like or lump it as regards the Welfare Reform package. They didn’t. They engaged on the issue from the start. They gave us extra time and agreed to a special package of measures to tailor it to Northern Ireland as much as possible. In the Executive this was pursued by the DSD minister Nelson McCausland working with a multi-party Executive sub-committee established around this difficult topic. This is what ultimately led to a package agreed with London and Martin McGuinness.
London had shown flexibility. The DUP had acted in the interests of Northern Ireland by pursuing changes relevant to our needs and as good coalition partners by appreciating the added difficulties Sinn Fein faced on the issue. This approach succeeded in gaining the best Welfare Reform offer in the United Kingdom. Sinn Fein walked away from it.
This is what undermines SF (and SDLP) calls for more talks. This strategy was already pursued and pursued successfully but SF and the SDLP walked. Again as they say they oppose on principle now it looks like the previous talks were a conscious con. SF pursued their own talks and got nothing. Villiers has told them there will be no more. Clegg has told them be no more. Cameron has told them no more. Why would anyone take further talks on this issue with them seriously?
6) Bad budgeting
In general when managing reductions you should try to be as strategic as possible. If faced with a 12% cut you will take different decisions than if you are faced with 4 3% cuts. If you take the 4 decision route you tend to take more short-termist decisions and cause greater harm across a broader range of areas. A number of months ago Sinn Fein dismissed the notion there would be penalties from the Treasury. Now they have arrived they have tried to wish them away. This means the approach to managing the cuts will be through the Monitoring Round process, effectively the salami slice approach. So Sinn Fein’s approach means we are not only getting the cuts but expected to implement them in the worst way.
7) It destroys the budgetary safety valve
The existing reductions in the budget have been reasonably well managed by the Executive. The protection for health allowed it to at least manage its perennial pressures. Public sector wage restraint also helped. However, a key tool has been the budget monitoring round. It acted as the main safety valve for budgetary pressures particularly on health. The level of the fines we will start receiving will essentially destroy that safety valve.
8) Treasury smiles
No government programme of welfare changes has delivered the level of savings that were set. The level of savings the Treasury expects will almost certainly not be achieved. However, by SF moving the cuts from AME to DEL spending guarantees they will get every penny they want. Sinn Fein have provided an all your money back guarantee for George Osborne. He should be sending a thank you card to Connolly House.
9) Goose and Gander
We are essentially 4 years into a 9 year budgetary tightening. The UK is still borrowing billions of pounds and the plan to balance the books is behind schedule. Once we balance the national books we will have to pay down the debt. If we don’t we run the risk of higher interest rates on our borrowing or worse being kicked out of the lending markets and ending up an undiluted austerity programme under the direction of the International Monetary Fund. This dictation by the IMF is exactly the position that Sinn Fein decries for the Republic but they seem content if the UK headed in such a direction.
This also means in the next Comprehensive Spending Review we will see further reductions. By Sinn Fein volunteering Northern Ireland for extra DEL cuts of hundreds of millions they make a difficult situation disastrous.
A Sinn Fein cliché is about recognition of their mandate. Labour, Conservatives and Liberal Democrats all went into the last election accepting reductions in public expenditure and reform of the Welfare System. The national debate was not about cuts or no cuts but the timeframe for them. There was also a consensus that a welfare system that had not succeeded in getting people into work during a period of sustained boom and job creation lasting a decade (even if it had proven to be an unsustainable bubble) had something wrong with it. The political mandate for this was clear.
The expectation that the Labour Party will come riding to the rescue in the 2015 election is a false one. They are being very limited in the promises they make around the welfare system and about spending plans as well. It is highly likely that the special package attained for Northern Ireland already will still be better than what Labour implements in England and Wales. Labour may open the top button of our financial shirt but they won’t be loosening the trouser belt.
In conclusion, the purpose of devolution was to fulfil Northern Ireland’s potential and promise. Sinn Fein’s strategy is making it a punishment. The opposite of what it was intended to be or should be.