The brinkmanship over the budget is over. The emptiness of a threat to return to Direct Rule has been exposed. Martin McGuinness’s attempts to create a late Hallowe’en scare over the prospects of what Direct Rule might mean in reality amounted to the agenda for future Executive action that still awaits – including water charges and perhaps some hike in university tuition charges for the many who can afford them. The parties belatedly bowed to the inevitable at a cost of an unnecessary £100 million to see us through the year. As the deal was done hardly a word was said about the welfare cuts that were the immediate cause of the phoney crisis. By consigning that issue to the interparty talks, Sinn Fein has in reality conceded defeat this side of the 2015 election at least. The political outcome is a great deal better than the posturing that preceded it. Sinn Fein ended up where they started from before they tried to block a budget deal over welfare. The political gain is not apparent to me . A great deal of political dust was raised with no result. Simon Hamilton has done a good job of patiently spelling out realities with a minimum of party rhetoric. As usual the clearest analysis comes from John Simpson in the Belfast Telegraph
Resource spending is set at £213m less than was set out in the original baseline for 2015-16. Superficially, the changes seem quite small. Current spending measured in cash terms is to fall by 2.1% (or in real terms near to 4%)
The financial pain emerges because some departments face demands which are so strong that priority allocations have been needed. Health and Social Services gains £150m. Enterprise, Trade and Investment gains £10m.
The scale of the budget deficit should have been appreciated two to three years ago. However, the real test during 2015 will be whether the reductions can be achieved. Budget reductions of 10%, even with a workforce reduction programme, will be stressful.
First, the minister Simon Hamilton has set the scene in the context not of a stiff one-year adjustment but in the context of a continuing year-on-year reduction up to 2019.
Second, the minister has opened the way to more ambitious interventions to allow a larger programme of infrastructure investments. Northern Ireland is to have a separate investment fund which he hopes will be launched with capital backing of up to £1bn. In some novel ideas, he sees a role for this fund in borrowing from the European Investment Bank and as an intermediary in the allocation of Financial Transactions Capital from the Treasury. Most interestingly, he suggests it may act on social and affordable housing, energy production, renewable energy, telecommunications and urban regeneration.