Tag Archives: welfare reform

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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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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