On Welfare and the Budget, reality for Stormont is acceptable

Only the rashest observer would claim that s/he has a complete understanding of the complexities of welfare payments and reform and the  other details of the negotiations that are said to be reaching a climax. My feeling is that they are less about negotiations and more about accepting realities they can live with.

On welfare and other public expenditure issues it hardly came as a surprise that most local politicians – and not only Sinn Fein – at first adopted the line that whatever they were, we were against them. In  a major shift in the UK government’s approach to Northern Ireland from offering juicy carrots to  giving a fairly gentle prod from a stick, Treasury fines were greeted with shock and anger and precipitated some talk of existential crisis, in what I like to think of as the lisping Violet Elizabeth Bott’s  strategy of issuing dire threats to William and the Outlaws to force herself into their gang :  “I’ll thcream and thcream and thcream  until I’m thick.”  However, Violet Elizabeth’s tactics produced  greater success than Stormont tantrums have so far achieved.

By  registering zero impact outside the Northern Ireland bubble, they exposed the lack of leverage that has been one of the ironic effects of peace and a natural consequence of a £9 billion annual transfer from the GB taxpayer to Northern Ireland.

For every £1 spent by government in the UK as a whole, each person in Northern Ireland  received an addition 21p in 2010-11. Whilst this apparent disparity is down slightly on previous years, Northern Ireland retains the highest level of per capita spend in the UK.

And there’s more. Last year the Institute for Fiscal Studies found that every Scottish man, woman and child achieved an extra benefit have benefited by around £113 , while people in Northern Ireland have been saved £110 each. This was because the block grant was calculated on the basis of public spending in England but before cuts to English local spending had been factored in.

To start with, none of this appeared to cut much ice in Stormont.   In spite of all the evidence to the contrary since 2010, fond memories of the Downing St sofa still lingered.  Cameron’s far greater preoccupations, the massive pressures of  continuing austerity and the political neuroses that accompany them, such as immigration fears, the real threat UK breakup and growing English alienation from EU institutions counted for naught. Of course Northern Ireland continues to matter and arguably all areas of devolution received less attention than their due from Whitehall. This comparative neglect should have been celebrated rather than resented.

Nonetheless, this may yet prove to be a significant political moment  The old reflex of bringing our own house down is surely exposed as embarrassingly  immature and anachronistic.What was near tragedy in 1999- to 2006  is being partially replayed as near farce. Perhaps the Stormont leaderships  have woken up to that obvious fact. There are signs that Robinson and McGuinness get it ahead of many in their parties  all of them can hardly be surprised  that they’ve now been rumbled.

After months of tightening deadlock, they  now need to present a balanced picture to save their faces as well as encouraging their own supporters.

As the business magazine Agenda  NI has  pointed out

Welfare cuts is a contested term. It is true that welfare reform is reducing or ending some payments to individuals – but the overall budget is still rising. The Executive’s allocation for social security has increased from £5.1 billion to £5.6 billion since the Coalition Government came to power. Actual payments increased from £4.3 billion in 2010-2011 to almost £4.7 billion in 2012-2013.

If this was generosity, it didn’t  seem so from a different analysis of the figures. Just over a year ago the  Sheffield  Hallam University research paper sponsored  by the NICVA, The Impact of Welfare Reform on Northern Ireland  raised the alarm, forecasting that UK coalition  welfare reforms…

would take £750m a year out of the Northern Ireland economy. This is equivalent to £650 a year for every adult of working age. The financial loss to Northern Ireland, per adult of working age, is substantially larger than in any other part of the UK. Belfast is hit harder by the reforms than any major city in Britain.

The biggest financial losses to Northern Ireland arise from reforms to incapacity benefits (£230m a year), changes to Tax Credits (£135m a year), the 1 per cent up-rating of most working-age benefits (£120m a year) and reforms to Disability Living Allowance (£105m a year).

But it was pointed out by the economist John Simpson among others that the interpretation of the  £750m figure was misleading. Much of it had already been accounted for. The real shortfall was  closer to £250 million – around the figure a united Executive are now asking for annually.

As the BBC’s John Campbell reports, Sinn Fein have been holding out against a cap.

The main changes are the introduction of Universal Credit (UC) – a new benefit that combines in and out of work benefits, mainly Job Seeker’s Allowance, Housing Benefit and Tax Credits. The introduction of a benefit cap means an out of work family could not get more than £25k a year.  A Sinn Féin paper published earlier this week continued to take a tough line – repeating their rejection of the benefit cap.

The 2015/16 draft budget assumes a deal on welfare will be done and sets aside £70m – hardly enough to cover it. But how tight is this squeeze? The Institute for Fiscal  Studies in its study of universal credit found that:

Although benefit entitlements will fall very slightly overall in both Northern Ireland and the UK as a whole, this disguises significant winners and losers from the reform. In Northern Ireland, around 9% of families will gain and 9%of families will lose from the introduction of Universal Credit, ignoring transitional protection. Both of these figures are larger than in the UK as a whole: as Northern Ireland is a relatively low-income part of the UK, more people are entitled to means-tested support, and hence affected by reforms to means-tested benefit.

By increasing support for single-earner couples while reducing support for workless families on average, Universal Credit will strengthen the incentive  for one member of a couple to do paid work rather than none. Universal Credit also strengthens work incentives for single people without children.

 However, because means-tested support is withdrawn more quickly when the second member of a couple enters work under Universal Credit, the reform weakens the incentive for both members of a couple to be in paid work rather than just one. This effect is particularly acute in Northern Ireland, as lower average earnings levels mean that a greater proportion of single-earner couples are entitled to means-tested support, meaning that those not in paid work who have a partner in paid work are more likely to face withdrawal of Universal Credit if they were to enter paid work.

Of course any cuts are bound to be tough. It may well be right to incentivise  work;  but if there is no work the relevance of the incentives is  in suspension. In part this is a circular argument.  Sinn Fein’s  economic  policy,  There is a Better Way is feather-lite on detail on the North  ( but hardly uniquely),  with its  a call for “ tax varying powers  and increased borrowing  to stimulate  the economy.”

In the immediate circumstances the devolution of corporation tax is an irrelevance.  With such levels of dependency and the poverty of constructive debate locally, it’s inevitable that Westminster and the Treasury will set the terms.

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  • hugh mccloy

    The link http://http//www.sinnfein.ie/economy is not working ?

  • barnshee

    “The link http://http//www.sinnfein.ie/economy is not working ?”

    KARMA

  • Brian Walker

    Sorry, just can’t get the link to work, but at least you can look it up.

  • Nevin

    Brian, you’ve left out the colon after http:

    http://www.sinnfein.ie/economy

  • ted hagan

    Sorry to see that Slugger has become just a Sinn Fein bashing exercise. Then just what would we expect from an old establishment hack like Walker. It was the likes of him and journalists from the Belfast Telegraph who should hang their heads in shame for the lack of real investigative journalism that was done in Northern Ireland.

  • notimetoshine

    Are you are what you really mean isn’t ‘real investigative journalism as long as it doesnt involve sinn fein?’

  • Surveyor

    Ian Duncan Smith sneering and laughing whilst listening to a debate about how the bedroom tax is affecting tenants sums up the Tory Party perfectly. It may be a token resistance but at least Sinn Féin are trying to blunt the worst aspects of a malicious party hell-bent on food banks for the poor and tax cuts for the rich.

  • chrisjones2

    You mean listening to every worst possible case that LAbour MPS can dredge up? And many of which stem from mismanagement by Labour COuncils?

    ANd tell me why sould a family with sayu 3 kids sit in cramped accomodation when a pensioner couple pooccupies a 3 bnedroom house?

  • chrisjones2

    they want to claim they have a policy but not let anyone see it?

  • Comrade Stalin

    The unionists say that they don’t come to Slugger because of all the nationalists spewing republican propaganda and attacking “unionist culture”.

    Republicans come along saying that there’s nothing but articles bashing SF.

    They can’t both be right. Can they ?

  • aber1991

    Ah, so you are anti-Sinn Fein.

  • notimetoshine

    I wouldn’t vote for them that’s for sure. But I do think sinn vein and their supporters have a tendency to be a little defensive when they are challenged or reported on.

  • mickfealty

    We used to joke at school that our motto was “if you can’t get the man, get the ball…” This was as good a piece of journalism on the subject as you will read anywhere.

    It’s not our job to protect the established parties in Stormont or anywhere else, nor is it our job to be beastly to them.

    That’s a pretty cold dish of Brian’s above. Personally I would like to hear real challenges to it rather than the usual generic whinge.

  • Morpheus

    The Institute of Fiscal studies, quoted above, had another interesting take on Welfare Reform when they published their report into ‘Child and Working-Age Poverty in Northern Ireland from 2010 to 2020.’ This quote from them is important when it comes to Universal Credit:

    “In the long run, our projections show the poverty-reducing effect of the introduction of Universal Credit being outweighed by the impact of other reforms, in particular the switch to CPI indexation of benefits. The impact of reforms since April 2010 on child poverty in Northern Ireland increases each year. In 2020, relative child poverty is projected to be 6.9ppts higher as a result of reforms, and absolute child poverty 8.8ppts higher. For the UK, these figures are 5.7ppts and 8.3ppts respectively.”

    and this

    “The result of this policy [WelfareReform] is that, despite the impact of Universal Credit, the overall impact of reforms introduced since April 2010 is to increase the level of income poverty in each and every year from 2010 to 2020, and to increase the rate at which poverty increases over time, among both children and WANPs.”

    As an example below is one of their charts showing their predictions of the effect of tax and benefit reforms on relative child poverty to 2020.

    “But it was pointed out by the economist John Simpson among others that the interpretation of the £750m figure was misleading. Much of it had already been accounted for.”

    NICVA responded to John Simpson’s comments (calling his criticism “inaccurate”) but then went on to release a further clarification of their £750m pa figure. They made it clear that their analysis showed that:

    1. £498m p.a. of cuts were implemented from Westminster (changes to tax credits, incapacity benefits etc) and
    2. The Welfare Reform Bill, still sitting in ‘Consideration’ stage at Stormont so it still has not reached the assembly floor, will result in an additional £268m of cuts…most of which effect DLA and incapacity benefits.

    (Plus “enables” the Tories to implement phase 2 of WR by removing JSA from 18-24 year olds)

    Granted the Professor’s analysis and £750m p.a. figure may be inaccurate but has anyone else seen anything put forward by our “government” to prove it inaccurate and show what the real figure it? What the impact will be?

    From an NI PLC perspective whether or not the £498m p.a. has been accounted for is irrelevant. The £498m p.a. of cuts still need to be addressed. I have seen no evidence that they have been – in fact the polar opposite is true, especially when we see in the huge increase in the numbers going to food banks. One of the few NI representatives who did any investigation into the impact of Welfare Reform, Michael Copeland, has said this:

    “”…some of the reforms across the water have been shambolic. Universal credit was expected to be rolled out by the end of 2017. As of last month, 11,070 households were receiving universal credit. The policy in GB is clearly failing, and I see nothing to reinforce the view that it will do anything other than fail here. DWP is 986,740 short of the original target of moving one million people to universal credit by April. In fact, Iain Duncan Smith also missed his own revised and much downgraded target of 184,000. Given that there are currently 11,000 claimants, welfare reform is not working well there either.”

    and went on to confirm:

    “The demographic that will be the most seriously affected is not the scroungers, even though they do not really exist, or the unemployed; it is low-paid working families with children”

    As I said in a different thread the cuts are happening regardless of what SF or anyone else says/does – even though we have the right to vote on The Welfare Reform Bill it doesn’t matter how we vote. If we vote against the cuts happen plus we get fines so why we have the option of voting at all in beyond me.

    “We have to play the cards we have been dealt” as a wise man once said but I have seen nothing that indicates that our Government even know what the cards are, never mind how to play them. We are in for a ROUGH few years

  • eiregain

    (I’m aware I’m stretching the analogy)

    That’s all good and well Mick but if this is your regular tactic what happens when the “ball” isn’t won?
    The man is challenged and only damage has been caused.
    If over time you systematically employ your ability against one person on the pitch, the tackle then doesn’t become about the ball and subsequent tackles given and received will be filled with venom!
    I agree “its not our job to protect…be beastly” but you should be striving for excellence and objectivity is something uncommonly seen on slugger.
    Diving in for challenges like this is hardly beneficial.

    Use your head sluggers, don’t dive in and hope you got the ball, stay on your feet! use you experience! and swipe that ball away with a bit more finesse than Mick suggests.

    This biased piece is not helping us understand the true problem of welfare reform.

  • Morpheus

    To run with your analogy a bit further the thing that gets me is that it is perfectly acceptable to run on the pitch and boot everyone in the opposing team. Have a look at the comments about drones, shinnerbots, lacking moral decency etc. all without recourse yet the word B1G0T was disallowed from Slugger use because of it’s use against Protestants!

  • eiregain

    It has been very clear to me over the last few weeks that there is a biased within many of these pieces. Annoying me so much, that i can barely express my discontent, I usually end up just ranting (which doesn’t help). Morpheus, yourcontribution to some of the more recent debates regarding welfare have been quite constructicve and forthcoming with information, unlike the bloggers themselves who seem to dwell in opinion and gossip.

  • Morpheus

    “The work on how to shape the Welfare Reform legislation in Northern Ireland has been guided by four principles. These principles are:

    Firstly, we need a welfare system that continues to protect the most vulnerable in our society. This is at the core of our social welfare system and we should never lose sight of this objective.”

    Protect the most vulnerable? Ha. Fail

    “Secondly, we need a welfare system designed to provide maximum support and encouragement to help people into work. Employment is critical to supporting individuals, families and local communities and we should be doing everything to help people take up work. This is critical to the long term development of our society and to tackling poverty.”

    Back to work? What work? Fail. Tackle poverty? Don’t make me laugh. EPIC FAIL. See below.

    Thirdly, a welfare system that is fair for both claimants and those who fund the system. We need to recognise that those that fund the system have an interest as to how their money is being spent.

    Pass, we are most assuredly looking after the interests of those who fund the system. On the other hand, fair for claimants, FAIL.

    Finally, a welfare system that promotes personal and social responsibility and which strengthen individuals, families and local communities.

    Where to start? Epic Fail.

    DSD Minister Speech to the NICVA and Advice NI Sector Conference
    29 October 2014

  • Zeno1

    Interesting that as the talks come to a close that few are interested in the outcome.
    Has the boy cried wolf too many times? Sorry, not Wolf, “Crisis” “Collapse”

  • Zeno1

    SHOCKER as SF/DUP agree not to derail Gravy Train and put themselves on the Dole!!

  • Zeno1

    “It may be a token resistance but at least Sinn Féin are trying to blunt the worst aspects of a malicious party hell-bent on food banks for the poor and tax cuts for the rich.”

    It certainly turned out to be a token. SF and the SDLP spoke like Chomsky and are now behaving like Thatcher.