In June 2000, during a debate over departmental funding from Westminster, a former MLA gleefully remarked that the “injustices of direct rule were over” and that, with the Assembly now in control of its own affairs, local politicians “no longer [had] to go cap-in-hand to Northern Ireland Office Ministers, as so often in the past”. Some twenty-six years on, the MLAs present in the chamber that day may lament how little has changed.
With a recent RaIse briefing paper describing the Assembly’s revenue-raising activity as ‘the lowest in the developed world’, and the UK Government determined to disprove the allegation that the ‘Treasury always chickens out’, difficult financial decisions may now prove unavoidable.
Putting the prospect of a Westminster bailout to one side, revenue-raising is Stormont’s only realistic hope of tackling a £400m+ overspend and generating the financial capital needed to lend departments’ transformation agenda any degree of seriousness. The outgoing Health Minister’s attempt to place a greater focus on prevention is an example of good transformation practice, but it isn’t enough to try to shift the wheels left, when the car won’t start.
So, where does the money come from? While the Treasury’s Open-Book Review estimated that measures within the Assembly’s remit could generate in excess of £3.3bn in spending power, several options appear counterintuitive, and the remainder would create significant political risk and opposition from unions and the public.
The introduction of prescription charges would generate approximately £24m annually but with prescribing rates consistently higher than in Britain, such a move may risk exacerbating poor health outcomes by disincentivising patients to undergo treatment, generating higher long-term costs in return for a relatively modest financial uplift. Likewise, charging air passenger duty (APD) on long-haul flights would pocket £3m annually but would be unwise given the risk of route cancellations and reduced connectivity arising from Belfast’s competition with Dublin Airport, the major airport on the island which also does not charge APD. A UK Treasury suggestion of raising the criteria for the Concessionary Fares Scheme by five years to over-65s (netting £13m annually), is now likely to have a minimal revenue-raising footprint given Translink’s projected £47m loss for 2025-26. Indeed, this shortfall can itself be seen as a consequence of the Department for Infrastructure’s failure to revenue-raise appropriately (E.G by reversing fare freezes) to ensure service viability.
Regardless, these choices are insignificant in comparison to the Executive’s £400m black hole — I would argue that only three revenue-raising levers can realistically claw back the funds necessary: water charges (£357m) tuition fees (£237m), and the abandoning of pay parity (£200m if based on this year’s expenditure). These measures, all deeply unpalatable to the public, would require clear communication and rationale for their implementation, likely by making a direct link between the additional cost and the consequential benefit in service delivery made possible by the increased funding.
Taking water charges as an example, research indicates that our inadequate wastewater infrastructure is preventing the construction of 50,000 social homes, squandering 2,500 jobs and £270m investment in the local economy. Rather than imposing water charges as an additional form of taxation, the Executive should instead take the initiative and frame the public burden as a ‘cost of transformation’, which, according to a report by the Wastewater Infrastructure Group (WIG), could be lower in the long-term than the cost of inaction, with the economy estimated to be £10.9bn smaller by 2040 (£2,750 less per household), if we fail to take action now. If Stormont ringfenced a portion of the income from water charges to address our wastewater crisis, it could unlock housing, jobs and boost the local economy, whilst simultaneously easing budgetary pressures in the short-term.
I suggest that a similar approach be applied to tuition fees and pay parity, using a section of the investment to fund Ulster University’s stalled Magee campus in the former case, and to address pressures within the health service in the latter, with the remainder used to fill the current financial vacuum. Of course, these choices have real consequences for families, and there is a case to be made for the Assembly availing from additional fiscal powers under a Burnham Government flirting with greater devolution: particularly taxation and borrowing powers for the NI Housing Executive. However, this argument is somewhat impaired by the Executive’s unwillingness to use the powers currently available. This aside, if ministers can show intent towards ensuring Stormont operates within its means, Westminster might be more willing to provide additional funding to partially reduce the current budget deficit, particularly in the event that parties agree to institutional reform.
Finally, with schools and public infrastructure frequently duplicated to serve individual community designations instead of population need, ministers should now work together to grasp the enormous economic opportunity to tackle the cost of division in our society, estimated at over £400-800m per year, the entire size of the current budget shortfall.
If we want to transform public services and escape our death spiral of budget instability, there is only one solution: our politicians on the hill must admit that we have to foot the bill.