In her first move as finance minister, Arlene Foster is right to echo Theresa Villiers in ramping up pressure to implement the Stormont House Agreement and pass the £ 10 billion budget and the Welfare Bill. Unless Sinn Fein gives way, the budget will have a £500 million gap. Funding for 30,000 public sector redundancies will be withheld and corporation tax will not devolved to Stormont.
No doubt before the election the DUP were hoping for a modest improvement in what was already billed as the better deal of the Stormont House Agreement. But it’s Sinn Fein’ s U turn over welfare funding that’s at the heart of the impasse. Key points seem still to be clarified. Will there be a time limit for the payment of Employment Support Allowance ( ESA) which is one of Sinn Fein’s grievances?. If these and other details can’t be conceded or explained away, the choice seems to be between continuing defiance or compliance ( a gentler word than surrender).
A trade off has been made between softening the blow of welfare cuts, and spending on public services. But it has to be faced. The money allocated to mitigation is not enough for full protection from the blast of the cuts. So while the blows have to some extent been softened the cuts can’t be wished – or threatened – away. Blame the Brits if you like but freezing or wrecking the Assembly would be pointless.
Whatever the politics, concern at the impact of welfare cuts – already implemented and in the pipeline – is real enough. But so are the measures to ease them. It may be cold comfort to say that while most poor people will be still poor, they won’t be much worse off.
An authoritative analysis was made by the Institute for Fiscal Studies a few weeks ago. . It concludes that the UK Government has made substantial benefit cuts which hit poorer households incomes. Northern Ireland has been hit harder than average, as we have large numbers of disability claimants.
But the IFS make it clear that the costs of failing to implement the Stormont House Agreement are higher than complying with it . By failing to ratify it, UK government will take of £114 million and rising from Northern Ireland’s annual spending by departments. The SHA provided £94 million to soften the blow.
This would require cuts in other areas of 0.9 % of overall spending, 1.6% of resources excluding Health . The IFS adds “ Remember this is less than the ‘fines’ of £ 114 a year. Finding a further £20m for welfare would mean cutting resources by further 0.2% or excluding Health by 0.3%.
However more cuts are to come. Northern Ireland’s share of £12 billion UK wide cuts expected to be announced next week is estimated at a further 2-3% for Northern Ireland, or £450m. I think we can be sure that this will happen, whatever the protests from the Assembly.
It’s true of course that averages have little meaning when it comes to welfare payments. Northern Ireland has some of the poor people in these islands and the poor are hardest hit by welfare cuts. But how worse off will they be when ther full range of cuts are implemented?
Many of the severest will be softened.
- The reviled household benefits cap will affect very few families because most have children. And those affected will be able to submit claims for discretionary support
- The “ bedroom tax” will be offset by a ‘separate fund’ for most social-sector tenants
- No time limit has yet been set for employment support allowance (ESA) without doing training or voluntary work ( a year in England). This needs to be urgently clarified.
- Universal Credit to replace Job Seeker’s Allowance over time will start to be rolled out. But payments can be split, paid every 2 weeks, and housing element paid direct to landlords. A “Supplementary fund” will provide cash support for those who lose from lower ‘standard’ disability premiums.
- The UK Government cut funding it gives to NI to fund rates rebates (as in rUK) But the Executive has made up difference (as in Wales, Scotland, parts of England)
The desire to cut corporation tax to 12.5% will cost an estimated £300m a year, equivalent to 3% annual expenditure or , 5% excluding health). It’s hoped CT reduction will help create 37, 500 jobs by 2033, ( worryingly over- exact figures surely) and that’s a mighty long wait.
In conclusion, the main point to grasp is the Treasury “fines” of £ 114 m a year and rising, are higher than the marginal cost of implementing the Welfare Bill, a comparatively small concession. If this doesn’t happen what passes for fiscal and economic strategy will be in ruins. Even if the Assembly continues to tick over, devolution will be a mockery and we will in effect be entering a new period of economic direct rule – if we’re not there already.