How happy will Peter be when his block grant starts to disappear? (Photo credit: Wikipedia)
The First and Deputy First Minister have flown off to China – and the trip will be paid for, of course, by those of us in the private sector who create wealth. Or, rather, who try to create wealth. From the front-cabin air fares to the luxury hotels to the air conditioned Embassy rooms hosting business delegations – Martin and Peter have high expectations to reflect their international status as international statesmen. Such is public “service” these days.
Government in Northern Ireland – from the bifurcated Green/Orange leadership to the “signature projects” to the bizarre youth employment schemes saps the life-blood out of the economy. At no time in history has UK society been so divided – based on who is employed at public expense versus beleaguered private enterprise. The gap between public sector incomes and private has never been greater.
But it’s about to end. Peter and Martin will be forced to get a grip much sooner than they had expected. The gravy train is coming to a halt.
A report published just yesterday helps to explain why. Published by the Social Market Foundation and the Royal Society of Arts, Fiscal Fallout is based on an analysis of the UK structural deficit – using the Office of Budgetary Responsibility’s own model. The report by Ian Mulheirn, Nida Broughton, Ben Lucas and Henry Kippin argues why the UK economy is in crisis. The government models – and spending plans – assumed growth. There has been no growth. The models also assumed spend levels that were significantly lower than actuality – explained by much greater benefit claims.
The assumption that is made by those on the left is that the cuts are hurting the economy. That’s not really the case. Employment has not slumped. The private side of the social bargain is being kept. The problem continues to be government spending. And the extent to which government spending needs to be curtailed if the UK economy is to be saved from a fiscal abyss, is vast.
The report’s authors argue that if spends on health and overseas aid continue to be ring-fenced, other departmental spends may have to be cut massively. Cuts of the order of £48bn by 2017 – or 23% of departmental spending.
To date the government has not made clear how such spending savings will be achieved. But one thing is certain – the Northern Ireland block grant will continue to come under pressure – much more so than it has to date. Massively more.
The devolved administrations, of course, remain in blissful ignorance of what’s to come. Indeed not even the Whitehall departments yet fully appreciate the gravity of the situation – as the government has yet to make clear how it will achieve the savings it needs to make. Public sector pay will almost certainly have to be cut – not merely frozen. In terms of benefits, the report authors make clear that a 23% cut to the DWP budget would result in a halving on spend on job creation programmes. Policing and justice is likely to lose a third or so of its budget.
Even under the Barnett formula, Northern Ireland’s block grant will almost certainly be cut – and cut substantially.
One wonders if Peter and Martin will be planning how they might cope in such circumstances. I await with interest to hear their ideas.
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