Category Archives: Welfare

Where now for Welfare Reform mitigation?

The “Fresh Start” Agreement put in place funding for “mitigation of welfare reform”, to be allocated on the basis of a report by Dr Eileen Evason, Emeritus Professor in Social Administration.

The objective of the report is to:

  • allay anxiety over reform, partly by providing supplementary payments for up to four years to carers and those with ill-health/disabilities;
  • supporting and protecting claimants with independent advice, particularly with regard to sanctions; and
  • follow the strategy adopted in Scotland to alleviate hardship for those losing out under Universal Credit.

The report specifies a (reasonable) assumption that the “Bedroom Tax” will be fully mitigated against.

Carers will retain a supplementary payment of one year from cessation of Carer’s Allowance, in the event that the person they are caring for currently qualifies for Disability Living Allowance but, under the new system, qualifies for neither Disability Living Allowance nor the Personal Independence Payment. In the event of a successful appeal and subsequent award of Personal Independence Payment, any supplementary payment will cease and the carer will be advised that they may once again claim Carer’s Allowance.

Employment and Support Allowance (ESA) will only be withdrawn with three months’ warning, after an automatic check has established an entitlement to income-related ESA does not exist, and after one year during which a supplementary payment equivalent to the ESA previously claimed will be paid. This in effect means that ESA entitlement is no longer retrospective in Northern Ireland.

Those who are currently on Disability Living Allowance (DLA) but are unsuccessful in their application for Personal Independence Payment (PIP) will retain their DLA for the duration of any appeal. Those whose application for PIP is successful but who lose more than £10 per week as a result of the change will receive a supplementary payment of 75% of the loss for one year, with an extra points allocation to increase the number who will receive this entitlement. As in Great Britain, there will also be transition support for those using the Motability Scheme.

In addition, those receiving the Enhanced Disability Premium of DLA will receive a supplementary payment for one year if they lose out during the transition to PIP. Similar arrangements will exist for those losing the Severe Disability Premium or even the Standard Disability Premium.

The Discretionary Support Scheme is extended to emergency provision in cases of difficulty relating to the introduction of Universal Credit, specifically with regard to those on low wages and most particularly for lone parents. No detail has yet been worked out, but this would be expected to be similar to the Winter Fuel Payment.

There is also a provision in theory for supplementary payments to those losing out as a result of the “Benefits Cap” for up to four years, but it is not envisaged that there will be any in practice.

It is noted that there are two key differences in the Northern Ireland legislation:

  • the maximum sanction that can be imposed in Northern Ireland is lower than in Great Britain, at 18 months; and
  • Universal Credit may be paid fortnightly in Northern Ireland (noting also that payments for rent will be payable directly to the landlord).

In addition to supplementary payments, specific funds set aside for mitigation are:

  • £105m (£35m for three years from 2017/18) for those on low wages receiving Universal Credit (with specifics noted above);
  • £2m per year from emergency payments arising from confusion over transition to Universal Payment;
  • £2.7m as a one-off to assist the voluntary sector tackle food poverty, provide support and advice, and assist credit unions.

Note that the Welfare Reform Act for Northern Ireland will not receive Royal Assent and become law until 1 May 2016.

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Welfare Reform: what next for Northern Ireland?

Today sees the debate on the final stage of the Welfare Reform Bill in the Northern Ireland Assembly. Given the Petition of Concern brought forward by both Nationalist parties (and the Greens), it is bound to fall.

What next?

Firstly, the Northern Ireland Assembly becomes bound to pay for Northern Ireland’s welfare system in its entirety. This will cost £300 million per year extra, plus whatever the set-up costs are for the separate systems (notably IT and general administration) which could run past £1 billion.

Secondly, December’s Stormont House Agreement falls. The UK Government’s enabling of transfers between current and capital spending (including for the voluntary exit scheme for public servants), its allocation of funding for Shared Edcuation and Dealing with the Past, and the passage of the Corporation Tax Bill are all predicated on Welfare Reform proceeding. This also means that agreement with the UK Government on extension of loans and loan repayments will no longer apply.

Thirdly, it becomes impossible to fund Northern Ireland public services based on a Budget predicated on the arrangements of the Stormont House Agreement and the UK Government paying for welfare. The Civil Service would have to take over and could spend only baseline amounts (effectively 90% of last year’s base budgets without any extra resource allocations) – effectively a 28% reduction in current resource spending overall (with welfare costs included).

Clearly, the latter situation is unthinkable.

Other options remain:
– the return of a Welfare Reform Bill to the Assembly under accelerated passage and with priority (it is unconventional for a fallen Bill to return in the same legislative term, but much about Northern Ireland government is unconventional!)
– an amendment to the Welfare Reform Act 2012 in the UK Parliament to extend it to Northern Ireland (again, this would be unconventional without Legislative Consent, but is theoretically possible);
– an amendment to the Northern Ireland Act 1998 in the UK Parliament to add “welfare” to the list of reserved matters (also unconventional, but now surely the most likely course of action). Any of these itself would come with a significant risk. The first could again see the Bill fall; the second would cause (at least feigned) outrage at the UK Government overruling the local representatives without a local mandate; the third would lead to public questioning about whether other things should also be “un-devolved”.

In theory, there is no threat to the Executive and Assembly themselves. Any of these things could happen and it would continue to operate as normal. However, they would lead to further public disenchantment with the Assembly’s ability to make decisions in the real world – given serious concerns about Health reforms, debates over progressive social policy, and gridlock in the school transfer system. It is inevitable that these will at least lead to a reform of the Assembly’s operations (perhaps most obviously the Petition of Concern); it could also lead to a resignation of First or deputy First Minister forcing an election, but it is hard to see how that solves very much. Any “return to Direct Rule” is a remote prospect, literally – it is only feasible after an Assembly Election which fails, for any variety of reasons, to form an Executive.

As we know from the past month, nothing is predictable!

Stormont hits the iceberg – what now?

As Northern Ireland’s devolved institutions shudder, where now for welfare reform, corporation tax and political stability?

First Minister Peter Robinson and Enterprise Minister Arlene Foster had been planning to head to the United States this weekend to celebrate St Patrick’s, complete with a story of political stability and a pending reduction in corporation tax to 12.5%. The intention was to start on the West Coast, with industrialists there, and then cross over to Washington DC. They would perhaps have said a few words about improved working relationships, seeing off doubters, and even the power of compromise. Oh dear.

What has happened is probably a lot simpler than many are trying to make it – from its point of view, Sinn Fein negotiated very badly ahead of the Stormont House Agreement. In return for Welfare Reform (which it had presented as “Tory cuts”), there would be “£2 billion extra spending power” (none of which consisted of truly new money under the Executive’s sole competence) and “an all-Ireland corporation tax”. This was always going to be a hard sell ahead of key elections, and at the weekend’s Ard Fheis it proved impossible to sustain.

Welfare Reform

The Welfare Reform Bill was due to pass Final Stage this week, and would probably have received Royal Assent mid-month. The reason for the speed was to get it implemented as soon as possible, thus avoiding the repayments (commonly but erroneously referred to as “fines” or “penalties”) due for running a different system from the rest of the UK under “parity“.

The Bill is almost identical to that passed by the UK Parliament for Great Britain in 2012.

However, Sinn Fein’s stated intent to use a Petition of Concern, backed by the SDLP and Greens, would have seen it defeated – thus, the Bill would have fallen. DUP Minister Mervyn Storey thus opted not to move it (i.e. remove it from the schedule), leaving the Bill stalled (but not fallen) pending negotiations.

Quite what this means is anyone’s guess.

It is well to be prepared for just about anything, but currently we would not expect to see the Bill back before the Assembly this side of the UK General Election on 7 May.

Corporation Tax

The passing of the Welfare Reform Bill through the NI Assembly was directly and deliberately linked in the Stormont House Agreement to the passing of a Corporation Tax Bill through the UK Parliament for operation potentially as early as the 2017/18 financial year.

The delay on the former means the latter – implementation of a reduced rate of Corporation Tax in Northern Ireland as per the draft – will surely not now proceed in time for 2017/18. We have remained of the view all along that it is unlikely ever to proceed, as public opinion was already shifting against (in a way to which Sinn Fein and other parties would be likely to respond).

Institutions

The Ulster Unionists have suggested the Welfare Reform Bill was necessary to the Stormont House Agreement, and the Stormont House Agreement was necessary to Stormont itself remaining in operation. This is the same logic as past statements from the DUP leadership.

Certainly, the first part of this is true – the Stormont House Agreement did hinge on a resolution to Welfare Reform, and that resolution has now unravelled. Thus, in effect, the Agreement no longer applies unless it can be put back together by a further deal (in practice between the DUP and Sinn Fein) on Welfare Reform. Whether the devolved institutions depend on the Agreement is more debatable.

The more immediate problems are financial. Without a deal on Welfare Reform, the Assembly Budget, which was the immediate reason for crisis last autumn, is no longer correctly assessed. The 2015/16 Budget assumed implementation of Welfare Reform halfway through the financial year and removal of repayments for breaking “parity” from then (an effective saving versus the previous year of between £40m and £57m); this is no longer the case. However, it also assumed a significant fund for “mitigation”, which presumably will not now apply either (this would go about halfway to addressing the balance).

In the longer term, the unravelling of the Stormont House Agreement may mean the removal of all the UK Government’s commitments – on spending on Shared Education and the Past, on higher borrowing limits, and even perhaps on switching money from current resource to capital to pay past debts. The most obvious victim of this would be the Voluntary Exit Scheme through which 10% of Northern Ireland’s public sector workers are being encouraged to leave service in return for a pay-out; this would no longer be viable without the borrowing and permission to use capital spending.

Politically, there is the suggestion that the institutions will now collapse, causing an Assembly Election to coincide with the UK General Election on 7 May. This is unlikely as, strictly, the timescale does not allow it even in the event of immediate resignation. 

Financially, it is a marginal problem for 2015/16 which can probably be address in Monitoring Rounds. In the longer term, it is a more serious problem, although even then limited by the fact that much of the vaunted “£2 billion extra spending power” was not really extra money. There is a real risk, however, that the “Voluntary Exit Scheme” will be abandoned, replaced by “natural wastage” and surely, in some specific instances, compulsory redundancies.

Current position

The Assembly’s plenary sessions have been suspended, but the Assembly itself has not. The party leaders met within hours of Sinn Fein’s announcement, as they are collectively responsible for implementation of the internal side of the Stormont House Agreement.

In theory, life goes on as normal, just without a Welfare Reform Bill (or, in practice, the financial deal agreed at Stormont House). In practice, it is likely that the British Labour Party’s call for the UK and Irish Government to reconvene talks will be heeded, with Secretary of State Theresa Villiers now coming to Stormont, although quite how much time the UK side would wish to put into it within two months of a General Election is dubious.

Stormont is rarely dull – even if sometimes we may wish it were!

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“Stormont House” deal – financial/political implications

As in Scotland, five parties have been locked in negotiations for weeks in Northern Ireland and have now reached a deal which impacts on finances and the political institutions. This is a brief, immediate, overview of what has been agreed.

Welfare Reform

The Welfare Reform Bill will pass the Northern Ireland Assembly by the end of February 2015, to be implemented by the end of March 2016.

The faster implementation proceeds, the lower the “deduction” from Northern Ireland’s devolved budget will be – if it takes the whole of the 2015/16 financial year, it will be £114 million.

The NI Executive agrees to pay the administration and costs for anything it does differently – it has already been agreed this would cost around £17 million to avoid the so-called “Bedroom Tax”.

Finance

The Financial Deal effectively means that money may be relatively freely passed between Capital and Resource (current) budgets.

The £650 million of “new and additional funding” in fact covers only those things which are partly the responsibility of the UK Government (e.g. Commissions on the Past, Identity, Historical Inquiries and Implementation) or which have to be agreed with the UK Government (essentially for Shared Education campuses).

The £350 million of increased borrowing for Capital projects is over four years, and is effectively to cover for the re-allocation of other money from Capital budgets.

The £900 million of resource re-allocation over four years essentially allows money from Capital budgets to be used for:

  • paying for a “Voluntary Exit scheme” to reduce the size of the Civil Service and public sector at large (£700m);
  • payment of this year’s UK Treasury loan (£100m); and
  • payment of any deductions for breaching parity on welfare (up to £114m).

Additional Tax Powers

The deal allows for the devolution of landfill taxes, aggregate levy, stamp duty and most notably Corporation Tax (specifically on trading profit) by mid-2017. The last of these is additional to those powers proposed for Scotland; on the other hand, income tax powers are not proposed for Northern Ireland.

Institutional Reform

The most surprisingly advanced section of the deal is perhaps that on institutions, which essentially allows for the creation of an Official Opposition from the next Assembly Election (2016).

The proposal is that instead of forming the Executive automatically “by d’Hondt” (the mathematical formula which determines the number of Ministers for each party and order of choice of Ministry), parties which would be entitled to a place in the Executive would meet to agree a Programme for Government and any party not in agreement would be entitled to opt to go into Opposition instead, with appropriate allocations of speaking rights and research funding.

The Deal also agrees:

  • reduction in the number of Executive Departments from 10 to 7 (plus OFMDFM and Justice) from 2016;
  • reduction in the number of MLAs from 108 to (likely) 90 from 2021;
  • some changes to the operation of Executive meetings;
  • changes to protocols around the use of the “Petition of Concern” (although these are not expanded upon); and
  • re-establishment (in effect) of the Civic Forum.

The Departments are not expanded upon, but it is likely that in effect Culture, Regional Development and Employment/Learning will be merged into others (most obviously Education, Environment and Enterprise respectively).

New Public Bodies

There will be new Commissions and various other bodies on Identity, Oral Archives, Historical Investigations, Information Retrieval and Reconciliation.

It is proposed that Parades be devolved, effectively to OFMDFM.

Conclusion

Much of what was supposed to be agreed during last year’s “Haass Talks” remains unresolved, mainly handed over to new bodies.

There is clear agreement to proceed with Welfare Reform and institutional reform (to allow formation of an Opposition).

There is some flexibility over finance, but really very little clearly new. Most notably, current budgetary pressures are not significantly helped.

Pensions/Welfare: what is “parity”?

The Public Sector Pensions Bill is currently making its way through Stormont.

This is essentially parallel legislation with the 2013 Act which has already gone through Westminster. As it falls under welfare, it is subject to a process known as “parity”. This has led to a lot of misunderstanding (some of it, frankly, intentional).

“Parity” was a deal brought in at the time of the beginning of the Welfare system between the UK Treasury and the Government of Northern Ireland. The basic principle is that everyone in the UK should be subject to the same welfare provisions (including pensions); the deal itself is that, although welfare (including pensions, out-of-work benefits and so on) is devolved to Northern Ireland, the UK Treasury will make up any shortfall in the funding of it provided Northern Ireland enacts the same policies.

This is entirely separate from the “Barnett Formula”, which dates from the Callaghan Government. That was a formula, meant to be used on a temporary basis, whereby funding (i.e. public spending allocated to what are now devolved institutions) for Scotland, Wales and Northern Ireland would go up or down proportionately depending on how it goes up and down in England in a way devised to ensure everyone in the UK enjoys the same standard of living (on average in each country). So, for example, if health spending rises in England, it rises by the equivalent amount in Northern Ireland – however, for example, Northern Ireland could choose not to allocate this to health, but to education or transport or whatever. Likewise, if spending decreases in England, it decreases by the equivalent amount proportionately in Northern Ireland.

Because pensions fall under welfare and thus under “parity” (not “Barnett”), the deal is simple: Northern Ireland enacts the same legislation as the UK Government has and the UK Government will make up the shortfall (roughly ₤250 million per year). However, if Northern Ireland does not enact the same legislation, the UK Government will not make up the shortfall – Northern Ireland would therefore have to find extra money to pay for the pensions under the current arrangements and additionally make up the shortfall itself from existing budgets in other departments, effectively taking ₤250 million each year from health, education, transport, justice, business support and so on.

Some parties are making great play of “standing up for public sector pensions” and that is their right; however, they also have to explain to the rest of Northern Ireland where they are going to take the money from firstly to pay for the existing system (which is unaffordable under current arrangements) and secondly to cut ₤250 million from other public services delivered by Stormont. Those are the facts of the matter.

Where is NI’s Welfare Reform Bill?

The choreography two weeks ago was clear – Social Development Minister Nelson McCausland noted that agreement had been reached on most aspects of Welfare Reform in Northern Ireland; Committee Chair Alex Maskey chimed in with similar sentiments. Since these represent the two largest parties in the Assembly, it looked like a Bill was imminent. Yet the Bill has still not been introduced.

There are two main areas where Northern Ireland is seeking differentiation from Great Britain. The difficulty is, it must pay for this differentiation from its own budget. The first is the “Bedroom Tax” (actually the “new under-occupancy rules” which include a withholding of benefit for houses with unoccupied room); and the second is fortnightly payments (i.e. paying the new Universal Credit every two weeks or twice monthly, as opposed to once monthly as proposed in Great Britain).

All five parties in fact seem politically united that these are both worthwhile differentiations, even at a combined cost of around 42 million each year. It would appear, however, that when Ministers were asked to find that money collectively, some were unwilling. Thus the source of the 42 million is not obvious.

Order papers now exist to the end of May with no sign of the Bill, despite the fact it has nominally cleared Committee. We live in frustrating times!

Welfare Reform good to go in NI

The final hurdle for the Welfare Reform Bill in Northern Ireland will be passed on 4 February, with a majority report from an ad hoc committee of the Assembly confirming there are no specific human rights or equality grounds on which to delay it.

Politically, this suits all sides. Unionists and Alliance had long cautioned Nationalists against delaying the Bill on the basis of “parity”, which would cost several hundred million pounds to the Northern Ireland bloc grant annually if it were not applied; Nationalists recognise this, but will nevertheless have been seen to push as hard as they can.

Welfare Reform has been a hot topic in Northern Ireland, but somewhat too late – “parity” always meant legislation applying to Great Britain was likely to be applied across the UK; and the basis of the legislation was established in a Green Paper from Great Britain’s Department for Work and Pensions three years ago.

The issue now is implementation, and how to manage Northern Ireland’s significant opt-outs (such as on “Split Payments”).

What will Theresa Villiers bring to Hillsborough Castle?

Theresa Villiers

New Secretary of State for Northern Ireland, Theresa Villiers

Theresa Villiers has been appointed Secretary of State for Northern Ireland, replacing Owen Paterson. Mr Paterson was widely liked in Northern Ireland, and many will be sad to see him go to DEFRA.

Ms Villiers is a surprise appointment, moving over from Transport, but her keen interest in Cypriot affairs may have been a consideration. She has long campaigned for a single sovereignty and citizenship on the island, divided between Greeks and Turks since a Turkish military intervention in 1974.

She grew up in North London and is a barrister by profession.

Welfare Reform

Mr Paterson had sought for some time to promote Welfare Reform directly in Northern Ireland, as a past PPS to Iain Duncan Smith. Villiers is less likely to take such a direct interest in the subject, which is in any case theoretically devolved.

Economy

Ms Villiers is a past Shadow Chief Secretary to the Treasury, so may bring some significant economic interests to the post.

It remains likely, however, that a change of incumbent merely means a swifter dropping of the notion of a separate Corporation Tax for Northern Ireland alone. Mr Paterson had personal capital built into the idea, for Ms Villiers this does not apply.

Transport

Ms Villiers moves over from Transport which, while mainly focused solely on England, includes UK aviation. It is possible that she will use the role to highlight NI’s aviation issues, particularly the airports’ quest for new destinations.

Trivia

By coincidence, her constituency is the same as that held by Reginald Maudling, a past Home Secretary with responsibility for Northern Ireland.

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What has happened to the Welfare Reform Bill in NI?

Northern Ireland’s Welfare Reform Bill was due to be published before Assembly recess earlier this month. Ultonia Communications’ Ian James Parsley asks where it has gone.

One of the peculiarities of devolution is that it operates subtly differently – both in theory and in practice – in different jurisdictions. One area where this is most obvious is social security, and thus Welfare Reform.

In the UK social security is, in theory, devolved only to Northern Ireland. However, a long-standing principle of “parity” – aimed at guaranteeing the same level of social security and welfare support to all citizens regardless of where in the UK they live – means that any shortfall in funding for social security in NI will be met by the UK Treasury provided NI retains roughly the same social security system. Precisely what this means, however, is open to debate.

Already there are areas of welfare provision which are done slightly differently in NI, usually due to different systems elsewhere – for example, as NI retains rates where the rest of the UK has moved to Council Tax, housing support is necessarily different. In NI, the system is also administered slightly differently, run as it is by the Department of Social Development (DSD) in Belfast rather than the Department of Work and Pensions in London. Although in practice DSD uses many of the same systems (IT, management etc), in some areas practice and outcome are subtly different (for example, DSD has in fact been significantly more successful in tackling fraud).

Welfare Reform would necessarily involve some differences in NI, where areas such as childcare provision and government-sponsored training are markedly different – thus, some of the assumptions behind welfare reform in Great Britain do not necessarily apply to NI. There is a legitimate debate about whether this requires NI to come more into line in areas such as childcare and training, or whether it provides reasonable grounds for a difference in welfare reform policy (still falling within the spirit of ‘parity’ on the grounds it ultimately seeks the same outcome).

For all that, Great Britain’s Welfare Reform Bill achieved Royal Assent on 7 March. “Parity” dictates that roughly the same reforms are necessary in NI, and thus that roughly the same legislation is necessary, and according to all Assembly scrutiny on the subject (most notably in the Social Development Committee), this was due at least to have been published by the end of June. Why wasn’t it?

Ultonia Communications makes great play of understanding not just the structures but also the culture of the devolved institutions, and therein lies the answer. Ultimately the NI Executive is driven by two parties – the DUP and Sinn Fein – and things only happen once they agree. However, as one correspondent puts it: “There is no ‘bank of goodwill’ between the parties“. In other words, decisions can only be made which may be seen to favour on party’s position at the same time as a decision favouring the other party’s position – regardless of the issues involved or even whether they are remotely consequential. Hence, earlier this month, we saw decisions announced on the Maze Regeneration and the Victims’ Commissioner at the same time, with the rest (including welfare reform) relegated to a sideshow – or, specifically, to a trade-off at a later date.

This “culture” does not just impact on NI’s Welfare Reform Bill (which cannot be delayed too long otherwise NI will be left with a huge tab to pick up, likely running into billions, for social security). It will also surely come to impact implementation by the Health Minister of Transforming Your Careimplementation by the Education Minister of the two Education Bills (and broader reforms), and a whole host of other policies. Welfare Reform has been delayed by the lack of a “Bank of Goodwill” – and, in public affairs, it is always worth having contingencies in case the same happens in other areas.

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