What Stormont must do to convince Cameron to up his offer

Are the political parties still hoping that David Cameron will turn into a White Knight and Save Ulster from Austerity?  What does Stormont have to do to persuade him to answer  their pleas to up his offer? Among the elements are: devising a proper three year  plan for the first time so as the world can see how they’re spending mainly GB public money; and even more difficult, to hold out at least the prospect of following the Republic in increasing public service charges. Hasty assets sales are unlikely to be enough.  ,

What has a multiparty Executive got to lose if they’re all in it together and the Brits are holding guns to  their heads instead of the other way round?

The measure of what they may have to do is expressed  by local commentators.  In the grim Economic Outlook just published by Price Waterhouse Cooper’s, Esmond Birnie the chief economist repeats  the familiar point in restrained economist’s language, that Northern Ireland  never has had a proper budget.

The absence of any detailed performance data from the Executive’s Programme for Government 2011-15 and the decision to create a draft budget in isolation from any new Programme for Government leaves the economy with few baseline performance indicators.

In other words no one really know how the hell we’re  doing with public spending –and never have  ever since the Executive merry-go-round started turning as PWC have regularly made clear. And note that the budget of Simon Hamilton’s is only a draft budget. The real thing which will depends on the outcome of the talks.

The warnings have been  loud and clear for years. Stormont will have to change its  ways of working well beyond the modest structural  reforms which the British government have put on the table.  In spite of a bloated OFMDFM, each department operates mainly in its own silo – never more graphically illustrated by Arlene Foster taking Mark H  Durkan to judicial review over signing off  the Belfast Metropolitan Plan. This state of affairs is insanity on stilts. Yet people have grown to expect it as the power sharing norm.

PWC concludes that the NI outlook is particularly downbeat.

“But despite the improving employment situation and modest real terms growth in exports other data suggest these are not being matched by growth in key feel-good factors like average wages or increased productivity.

“The prosperity gap between Northern Ireland and the other UK regions is actually widening and the modest growth in manufacturing sales and exports is mostly being delivered by fewer than a dozen companies.

“Our forecast for 2015 is for growth to slow reflecting a fall in household spending, marginal growth in most private sector activities and a sharp decline in public sector employment and spending.”

In terms of the labour market, the latest NIEO says that Northern Ireland’s claimant count unemployment fell by 8,700 to 5.9% in the year to October 2014 but remains over twice the UK’s 2.8% level. Overall, the rate of decline is about half the UK rate and local unemployment is the highest of the 12 UK regions.

Employment grew by around 14,000 over the past 12 months to more than 821,000, taking the region’s employment rate for those aged 16-64 to 68.5%, an increase of 1.4% points over the year. However, this is well below the UK average of 73.0% and is the lowest rate among the UK regions.

Northern Ireland has 566,000 economically inactive people, 5,000 more than a year ago and at 27%, is the highest amongst the UK regions and significantly above the UK average of 22.2%.

PwC says that, despite steady jobs growth, the latest data from the Annual Survey of Hours and Earnings suggest that, in the year to April 2014, average earnings in Northern Ireland declined in real terms and at a greater rate than the rest of the UK.

PWC’s Esmond Birnie warns that the draft budget only “represents a starting point for both negotiations towards a final agreed Budget and a baseline from which a more comprehensive Budget can be agreed for the period post 2015-16.

Can this be more than a fond hope?

John Simpson spells out the situation more bluntly in the Belfast Telegraph

The current budget for 2015-16 is ‘only’ reduced by 2.1% – a net reduction of just over £200m.

That cut of £200m is deceptive. It needs to be amended to take account of a range of complications to deal with extra spending commitments in departments which will exceed their budgets. Health is the biggest (but not the only) example.

In reality, the total cuts and re-allocations add up to £872m, or close to 9% of the current budget.

When this reduction is shared out, some departments face horrendous challenges. Indeed, reductions so large that the delivery action plans lie outside the past experience of any of the ministers or today’s civil servants.

Simpson’s solution  is eminently realistic, looked at from the  world outside.

First, should the Block Grant allocation from the Treasury be challenged? Has it now been squeezed to the point where it is inadequate to meet legitimate social needs?

This is not easily argued. The current Block Grant makes Northern Ireland the most generously treated region of the UK. There is a margin of over £700 per person (or over 7%) when Northern Ireland is compared to the next highest region, Scotland. A large part of the local advantage comes in higher social security and public order spending.

A plea for an improved Barnett formula would face serious challenges from other regions.

Second, should the Executive consider alternative methods of raising funds to offset some of the spending cuts?

The average household in Northern Ireland pays about £500 a year less in charges, rates and local service costs than households in England. That gives Northern Ireland an advantage worth over £350m each year. Should some of that be clawed back to the local budget?

This would be the option that might be expected from the Treasury.

It is not easy to resist. Closing the gap on rates, housing rents and water charges become serious proposals.

If the minister, Simon Hamilton, and the Executive can deliver an operationally practical budget, they will have survived the most demanding test yet faced.

Sadly, the budget deficit now being faced is too large to be removed in one single budget.

The Treasury must realise that the arithmetic is badly flawed. If the Stormont budget is to survive, the required financial adjustments will need to be slowed and planned over a three year period. Northern Ireland needs even more generous help from the Treasury.

Sadly too, there’s not a snowball’s chance in hell in upping rates, rents and water charges with an election a year over two years. Will the rest be enough self-help for Stormont  to save  the situation ?

 

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  • Practically_Family

    It’s not going to happen in this term of government.

  • ted hagan

    It’s only days ago that Walker was urging Cameron to click his heels, stamp his feet and assert his Tory authority on the peasants of Northern Ireland. What happened, did the wind change?

  • Alan N/Ards

    What a bunch of parasites we have at Stormont. The people voted them in to govern in a responsible way. Shameful!

  • Morpheus

    The average household in Northern Ireland pays about £500 a year less in charges, rates and local service costs than households in England. That gives Northern Ireland an advantage worth over £350m each year.

    What about the discrepancy in wages?

    …the 2013 annual gross salary for full-time workers here was £27,697 – almost £6,000 below the UK average of £33,288. – NI Centre for Economic Policy

    I think the average Joe in NI would happily pay £500 a year in charge if it meant his average salary went up £6k as well.

    What the parties here should have been doing from the off is working together to show that NI is indeed a special case – and in terms of the UK is obviously is as we can see above. They should have had a detailed, costed plan – like anyone would if they were talking to the bank manager – complete with impact analysis. The Government won’t sign a blank cheque but I am sure they could be convinced with a well thought out plan

  • Practically_Family

    The people voted them in, principally, to wind up themmuns.

    Which is where the problem really lies.

  • Sharpie

    Funny that PWC has to produce this type of report when it is also one of the biggest sucklers at the Government teat.

    Right now Government is going round cutting off services delivered by third parties – especially non-profit sector. This is where the first wave hits. Then they will have to buy more consultancy to deliver the work that’s needed.

    The cost neutral way has to involve re-investing every pound saved in public services into creating the private economy. Not by corporation tax so much as getting their crap together to make a realistic and ambitious economic development plan that tackles skills, infrastructure, using diaspora to seed it, and makes life easier to do trading. The plan needs big thinkers, heavyweight business people, and prioritisation in a way that makes it fairly obvious how investment will be spent over five years. They kind of did it with the signature projects in tourism, which I think were successful – certainly the Titanic and Cuaseway benefitted.

    What will give the greatest return on investment in building an economy out of a heap of manure?

  • Practically_Family

    Growing roses.

  • Sharpie

    You wouldn’t earn a scent out of that.

  • barnshee

    “What about the discrepancy in wages?”

    1 What discrepancies?– Public sector wages are on a par with GB?

    2 For a lot of jobs supply seriously exceeds demand— NI has churned out teachers way beyond local requirements, with graduates fleeing to GB where they patch up supply in the South East.

    Too many people too few jobs wages suffer The laws of arithmetic are hard to overturn

  • Old Mortality

    Then the people need to suffer the consequences of their stupidity.

  • Practically_Family

    They have been doing so for years.

    According to some poll or other we’re the happiest place to live in the UK.

  • delphindelphin

    The Department of Finance dismissed the PWC report as “lacking
    understanding” of the complexities of public expenditure. Strange, as the DoF minister Hamilton is an ex employee of PWC
    – the place must have gone to the dogs after he left.

  • Comrade Stalin

    For a fair comparison you should compare NI with other specific regions of the UK. Greater London pushes the average up.

  • Zig70

    If they call elections over the head of this then we should boycott voting until they reduce the number of MLAs to a reasonable head count. By half as a bare minimum. That would save a good few bob. We might even raise the money to pay for a doctor.

  • Zeno1

    The cost of 108 MLA’s including their expences is £14.5 million per year.
    The wage bill for the Office of First Minister Deputy First Minister and their 300 odd “staff” is £16.6 million per year and rising.

  • Gopher

    The only thing that will get Cameron (or any other British primeminister) to up their offer is a comprehensive deal on every issue. No use having other quangos that report back in 15 months on flags, parades, the past or some other ludicrous prop used for party politics. In Northern Ireland we sacrifice our future to the present.

    The only option left as there is no chance of agreement is for the DUP and whoever else is minded to show how serious the situation is, is to leave the executive and let what remains administer the budget. The only salvation left is minority positions need to be demonstrated as farcical instead of propping up Gerry Adams electoral ego trip in the south. Peoples jobs are on the line its time to go nuclear.

  • chrisjones2

    their problems that PWC DO understand public expenditure

  • delphindelphin

    You are stating the bleeding obvious CJ

  • Ian James Parsley

    I’ve no idea where NICEP’s figures come from or what they are (median or mean; full-time or all).

    Official ONS figures show NI wages at 88% (all) or 89% (full-time), but after housing costs this means the average household has 96% the income of the GB average (and actually higher than Wales and Northern England).

    This is all despite the fact our economic output is just 78% of the UK average. No one has come up with an even remotely serious strategy to turn that around. There comes a time when our refusal to contribute fully economically will rightly be held against us.

    All explained here: http://ianjamesparsley.wordpress.com/2014/12/17/northern-ireland-the-most-affluent-part-of-the-british-isles/

  • Ian James Parsley

    Spot on both!

  • Ian James Parsley

    Correct.

    The Assembly doesn’t really cost that much in general.

    However, we could offload nearly the entirety of OFMDFM and about a quarter of Health Administrators and, genuinely, no one would notice.

    Whether that is also true of the Assembly is a matter of debate, of course. I happen to believe in self-government personally, and we get what we vote for.

  • Zeno1

    ” I happen to believe in self-government personally, and we get what we vote for.”

    That’d be great. They should bring that in instead of government that only represents just over half of the electorate.

  • Ian James Parsley

    Well that’s what I vote for. Sadly 90% are agin me!

  • Zeno1

    I’m in the biggest group in NI. We don’t vote. We know there is no point.