The Chancellor giveth… and the Chancellor taketh away?

There seems to be some confusion over what the Chancellor’s announcement of £2 billion extra for the Health Service across the UK would mean for Northern Ireland. All are agreed that it would mean an uplift in Northern Ireland’s budget, but how much and where?

The system is in fact fairly simple. “Territorially identifiable expenditure” is established for each financial year in the Budget, the Comprehensive Spending Review and in other announcements. Population estimates are used for each country of the UK to establish how much money in “territorially identifiable expenditure” must be spent in each country for every £100 spent in England – currently this is £3.45 for Northern Ireland (and £10.03 for Scotland, as that’s currently in the news). This means for every £100 added to spending on Health, or roads, or education in England, £3.45 must be added for Northern Ireland.

From this, we reported initially a figure of (just under) £70 million for Northern Ireland, on an original understanding that the £2 billion figure was going to be announced for England. If the £2 billion figure applies to the whole UK, however, that reduces the Northern Ireland figure, by our calculations, to just under £60 million. BBC NI is reporting £41 million – we don’t know where this figure comes from, but perhaps it is based on a lower overall figure – we will see when the Autumn Statement takes place.

However, money allocated to devolved authorities is in fact allocated to that country’s Secretary of State, who passes it to the relevant Department of Finance in the devolved Executive (or Government). That Department may choose to allocate the extra money wherever it wishes. There is no obligation, therefore, for Northern Ireland to spend all the extra on Health. In fact, it could spend all of it on something else if it wished. It was ever so, and indeed it has frequently happened – of “territorially identifiable expenditure” Health already accounts for 22% in England but less than 19% in Scotland and Northern Ireland, precisely because Scotland and Northern Ireland have generally chosen to spent part of the money allocated from rising Health spending in England on things other than Health in Scotland and Northern Ireland.

There is a big catch. When, for example, Scotland chose to move away from Tuition Fees altogether and Northern Ireland chose to retain them at previous levels as England tripled its, the reverse happened – money was removed from university education in England, and thus taken from Scotland and Northern Ireland. The assumption is always that Scotland and Northern Ireland (we are leaving Wales out of it because it is a little different) will do the same as England – if they don’t in the case of a reduction in spending in England, they have to find the money to cover that reduction elsewhere.

Here is the warning for Northern Ireland. An pre-election give-away uplift in Health spending (and perhaps also in other areas) will see anything from £41 million (by our calculations, from £59 million) added to the Northern Ireland Departmental budget now. However, all sides are agreed that post-election, the reverse will happen – further spending reductions will be implemented and that means in effect that Scotland and Northern Ireland will have to implement them too (although they could choose to close the gap by raising taxation/rates/charges if they wished). Those of us operating in Scotland and Northern Ireland need to be keenly aware that what the pre-election Chancellor giveth, the post-election Chancellor probably taketh away…

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