On Tuesday the 26th of May, Sinn Féin, the SDLP and the Green Party of Northern Ireland placed a Petition of Concern on the Welfare Reform Bill, a clause in the Stormont House Agreement which would cut benefits and attempt to reform the system. Now, Stormont is facing an imminent collapse in Northern Ireland due to an inability of enforcing the Stormont House Agreement. So what are our options? Are there alternatives to the reforming of welfare and indeed, if Stormont collapses, what will be the UK Government’s and HM Treasury’s response?

In terms of context, these cuts have come under the newly formed Conservative majority government, in an attempt to cut the deficit and balance the books. Rebalancing Barnett has meant cutting the Bloc Grant (Northern Ireland currently receives slightly more than its needs under the formula). Currently within Northern Ireland, we have higher benefits per capita than the rest of the UK (arguably as a direct result of the Troubles). This comes with clear problems of immigration from Britain for instance into Northern Ireland as a result, and there may indeed be instances where the benefits system is abused.

However, the current bellicose rhetoric against those who use benefits is wholly unacceptable. The very purpose of benefits is to act as a safety net when people are in unemployment, or in situations where people can’t work due to severe mental/physical illnesses or impairments. Everyone is in agreement that nobody wishes to act as a symbiont on the State and public services – in the long run it doesn’t do the Welfare State justice – but to proclaim that ALL people on benefits are ‘lazy spongers’ is a completely asinine and unwarranted statement.

Indeed, because our ministers in Stormont don’t have a mechanism to hold people to account, borrowing a phrase from their lexicon, it is ironic that they talk of ‘economic illiteracy’, when too much money is being spent on bureaucrats and on government officials. For instance, Special Advisers (SPADs) in Northern Ireland receive £90,000 per annum. What’s surprising about this, is that this is even higher than the highest pay package a SPAD in Westminster receives, despite our lower population and smaller land.

Those operating the Stormont gravy train are more than happy to support welfare cuts if it means that they keep their high-end pay packages. On top of this, people who are in work at the moment, actually need to use benefits to stay afloat in addition to their wages. Surely we must also address the inefficiencies of the private sector as well?

Simon Hamilton, the previous Finance Minister for Northern Ireland, pointed out that one-third of our workforce is in the public sector, and they produce two-thirds of our GDP, this means there is an obvious issue with private sector efficiency due to our weak productivity in the workforce.

In conjunction with this, Corporation Tax is on the verge of being devolved to Northern Ireland and has been hyped up by the executive in creating ‘thousands upon thousands’ of jobs within the private sector. Stormont may attract some sort of FDI, but this is offset for many reasons. For one, £300 million has been put aside in compliance costs for a tax which will not prove beneficiary for a minimum of 5 years. Secondly, taking money out of the budget and giving it to firms and multinationals does not promote Foreign Direct Investment in Northern Ireland’s case. This is because we have an excess of a low-skilled labour force and because confidence in our government is at an all time low.

Besides the usual suspects for brass plating and profit shifting, what sort of company would want to invest in Northern Ireland when they can go down to the Republic of Ireland for a cheaper and better deal, or London where business thrives?

Due to Northern Ireland sharing a border with the Republic of Ireland, it is very likely that this could promote ‘race to the bottom’ economics, by creating regional competition between Corporation Tax packages at the cost of reducing public services further. Land taxes and scrapping Air Passenger Duty for instance, have had a greater effect due to their immobility – the latter has helped due to our booming tourism in Northern Ireland.

It is very likely, if not certain that within the next two or three weeks, we will see fiscal powers being transferred back to Whitehall, whereby the cuts imposed will be even greater than those laid out under the Stormont House Agreement, on top of a fine for refusing to incorporate these cuts. An embarrassing scenario for Northern Ireland will mean that our legislative institutions within Stormont will remain in place, and business will continue as usual, while all fiscal powers are given to the UK Government, thus rendering Northern Ireland to the status of a mere vassal state or a ‘client kingdom’.

This is the worst possible outcome in many ways; not only will it mean the continuation of the Stormont gravy train, but those who are most vulnerable will be hit very hard by these cuts while it’s all ‘business as usual’. Recently, it was announced that the parties have until the 31st of July before the assembly collapses under failure to implement reforms.

There is still some time left for Stormont to get its house in order however, the official deadline is most likely around mid-June but given the current status quo, there are several possible outcomes:

1) A ‘last gasp’ deal attempt, as dubbed by commentator Alex Kane, whereby a quick fix deal is made at the last possible second to keep this flawed system going.

2) A ‘brand new’ deal agreed over time with HM Treasury? (Very unlikely given the circumstances).

3) Stormont collapses, Westminster retains power over ALL matters, heavy cuts will take place and Northern Ireland will be once again under direct rule.

4) Northern Ireland is reduced to vassal status.

We are now entering a vicious cycle in Northern Ireland, whereby Westminster gives back powers to Stormont and asks its politicians to ‘prove they can govern’. Being unable to do so under the GFA, these powers are subsequently removed and placed back into the hands of Westminster ad infinitum.

 

Sources:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/390672/Stormont_House_Agreement.pdf  – The Stormont House Agreement in full
http://www.bbc.co.uk/news/uk-northern-ireland-32946024 – Investors’ view of Northern Ireland?
http://www.belfasttelegraph.co.uk/opinion/debateni/blogs/welfare-reform-bill-time-to-suspend-this-farce-31256264.html – Alex Kane’s piece
http://www.ippr.org/assets/media/images/media/files/publication/2013/01/funding-devo-more_Jan2013_10210.pdf?noredirect=1 – Alan Trench’s ‘Funding Devo More’ a compendium on devolving different taxes to regions within the UK and how they can benefit / cost the Government.