At the moment, the UK has a budget deficit of around £150 billion a year. The Coalition Government has embarked upon an austerity package which will see that deficit reduced to £20 billion over the next 5 years. The National debt will have to rise in the meantime and will not start to fall until the next Parliament.
Northern Ireland, as a region, has a budget deficit of £7 billion (the difference between public expenditure (£19 billion) and tax receipts (£12 billion). It might look unfair to isolate Northern Ireland like this. It is, after all, not the only region in the UK which as a so-called budget deficit. However, these figures can not be ignored, whichever side of the tribal divide you happen to be on.
If you are a unionist, you might be concerned that the English may start to resent propping up Northern Ireland and begin openly supporting a United Ireland.
If you are a Nationalist, you might be concerned that the Republic of Ireland would not be interested in a united Ireland if the North was such a financial burden under these circumstances.
Even if you are neither unionist nor nationalist or if ‘bread and butter’ is your priority, would you not want to have more prosperity and better job prospects for your homeland?
Here are some more statistics. Northern Ireland’s population is about 3% of the rest of the UK. Its budget deficit, in proportion of the overall UK budget deficit, is about 4.67%. If Northern Ireland was to be brought down to a share which was proportionate to the rest of the UK, it would have to cut that figure of £7 billion by £2.5 billion to £4.5 billion. Compare and contrast that figure with the £128 million which was Northern Ireland’s share of the initial £6 billon of UK spending cuts announced in May. It is looking increasingly likely that Stormont politicians will not be able to agree on how to deal with that or avoid a deficit in the Budget which is controlled by the Executive.
Northern Ireland’s budget deficit, as a proportion of its GDP, is 32%. That is two and a half times more than bankrupt Greece.
I don’t wish to scaremonger here. Northern Ireland is not going to be asked to slash 2.5 billion from the deficit immediately. However, there is no way that the Coalition Government is going to allow Northern Ireland’s budget deficit to continue. Over the next 5 years, the Government will demand a cut in Northern Ireland’s block grant so that cuts are made in the cost of spending on public services.
With the Conservatives having negotiated the terms of a coalition with the Liberal Democrats, there was no need for a confidence and supply agreement which, the DUP had hoped, could have been agreed with the Conservatives.
A Confidence and Supply deal would have been absolutely no good for Northern Ireland. It would have been like a junkie using blackmail to get its next fix. That, unfortunately, is the perspective of Northern Ireland politicians at the moment. They can not see further ahead than their next demand for funding or the next election. When it comes to longer-term planning and the need for a cross-community sense of purpose, Stormont politicians are found wanting.
The Conservative/Lib Dem Government is committed to making Northern Ireland more prosperous and less economically dependent upon the rest of the UK. Unfortunately, prosperity is far less likely to be achieved, relatively quickly, without a certain amount of initiative and co-operation, coming from Northern Ireland politicians.
With the UCUNF project having totally failed, that leaves Northern Ireland without any direct political influence over how the Conservative Government allocates revenue to Northern Ireland over the next 5 years. That would not be such a bad thing if Northern Ireland politicians could find unity of common purpose to enable them to share a partnership with the Government.
In practice, that means that the main parties of Northern Ireland would have to put aside their differences and present a united package to the Coalition Government which would meet their agenda both for reducing the budget deficit and growing Northern Ireland’s private sector. If that could be achieved, the potential rewards for the region would be enormous.
Yes, the Executive would still have to have cuts in funding public services. That does not necessarily mean, however, that the budget deficit for Northern Ireland would immediately have to be cut in net terms. When I spoke to Owen Paterson about the Northern Ireland economy, he indicated that even with the cuts required for spending on public services, Northern Ireland would still benefit from fiscal measures, such as a cut in the Corporation tax, thus achieving revenue neutrality. If Northern Ireland was able to retain revenue neutrality while public sector services continued to be cut, its budget deficit would steadilty fall as its GDP rose through private sector growth.
In addition, any measure proposed by the Assembly, which was designed to stimulate private sector growth, could also result in Northern Ireland achieving revenue neutrality, so long as cuts in public sector service funding continued.
For example, new capital projects, designed to make Northern Ireland a more attractive place for overseas businesses to invest in, such as building new roads, bridges, motorway, railway and airport extensions which are designed to improve Northern Ireland’s infrastructure, could replace those spending cuts.
Another area which could be looked at is the Business Rate. If it was cut, the Government would almost certainly be prepared to replace the lost revenue, so long Northern Ireland continued to reduce the cost of public sector services. In the latter example, Northern Ireland’s Land and Property Services Department and the Rates collection Agency could be slimmed down.
Such initiatives would give Kudos to the Conservatives and Lib Dems politically too, if it results in the Northern Ireland economy becoming less of a burden on the English.
That is the game which the Northern Ireland politicians need to play – the Centre-Right game – which attracts inward investment, strengthens home businesses and nurtures the private economy into a position of strength. Can Northern Ireland politicians achieve this?
The Government, will not, of course, be in any position to make these investments without cross-community support. If Unionists continue to be obsessed with preventing Martin McGuinness becoming first Minister, that will not happen.
If the Executive fails to do business with the Government in this way, a huge opportunity will have been lost and prosperity will take much longer to achieve. In those circumstances, the result will more likely to be that Northern Ireland will have little to look forward to in the medium term, except high unemployment and net emigration.