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Northern Ireland – the most affluent part of the British Isles?

A recent report from the All-Island Research Observatory reached the surprising conclusion (to its authors at least) that Northern Ireland is “significantly more affluent” than the Republic. There is a note of caution on that, as it focuses partly on employment levels which happened to be particularly bad in the Republic when the research was carried out. Nevertheless, it reflects an obvious point to visitors and locals alike that the wealth gap between the two jurisdictions does not seem to match some of the statistics (which would appear to give the Republic a marked advantage).

Obviously, despite this, Northern Ireland could not possibly be more affluent than England, Scotland or Wales. Or could it…?

Let us, for the sake of this comparison, just use the crude numbers.

Output

The EU likes to use GDP per capita as its usual determinant of output (often taken to mean income or even wealth) in any given country or region. This does cause a problem within countries, however, as often GDP is assigned only to a company or agency headquarters (frequently in that country’s capital city). Internally, the UK uses GVA per capita, effectively taking out taxes and subsidies.

Either way, it’s much the same. The ONS has GVA figures for 2013 and Eurostat GDP figures for 2010 showing Northern Ireland at around 77-78% of the UK average (around €21,000 against €27,000) – a long way behind Ireland, whose GDP/capita is actually 16-19% ahead of the UK’s even post-crash (although we’ll come back to that).

Northern Ireland's economic output (versus UK average)

Northern Ireland’s economic output (versus UK average, 2013)

So how could Northern Ireland even conceivably be the most affluent part of the UK?

Wages

GDP is not necessarily a great measurement, as it assesses only output within the region – for example it includes profits repatriated elsewhere or activity involved in clearing up disasters, but excludes unpaid (but highly valuable) care work.

So what about wages? The Department of Enterprise, Trade and Investment tells us about these every month (here is last month’s summary), showing that weekly earnings in Northern Ireland in 2014 are £367, versus £417 in the UK overall (thus 88%); full-time earnings are £460 versus £518 (89%).

Northern Ireland's average wage (versus UK average)

Northern Ireland’s average wage (versus UK average, Nov 2014)

That puts Northern Ireland in line with most of the northern UK, but it still hardly equates to the “most affluent part of the British Isles”, surely?

Household income

The measure of income and affluence preferred in the United States is Median Household Income, which reflects all the income brought into the median household before tax (though housing costs may or may not be included, as explained below).

The most recent NI Poverty Bulletin from the Department of Social Development (for 2013, summarised here) shows that the Median Household Income in Northern Ireland is £395/week before housing costs, which is 89% of the UK average – in other words, what we would probably expect from wage levels.

However, after housing costs this figure becomes £358 – which is suddenly 96% of the UK average. Compulsory housing costs are of course much higher in the rest of the UK (for a start, the combination of Council Tax plus Water Charges sets the average household back nearly £2000 per year in England, versus the average Domestic Rate of £713 in Northern Ireland).

Northern Ireland's average (median) household income after housing costs (versus UK average)

Northern Ireland’s median household income (versus UK average, 2013)

This is remarkable – the median household in Northern Ireland is in fact, after housing costs, only 4% worse off than the UK average despite economic output being more than 20% lower. That still hardly justifies the term “most affluent”, surely?

Consumption

These figures from 2012, again from Eurostat, tell a rather different story about living standards, because they demonstrate how different “output” is from “consumption”.

Countries with high outputs sometimes have quite low consumption (not least those like Ireland, the profit of whose “output” is often based on foreign investment and thus repatriated). Countries with relatively low outputs can have quite high consumption (not least those like the UK, where there is significant old wealth). Thus, Ireland ranks third in the EU for output but falls right down below the EU average for consumption; the UK, on the other hand, ranks third for consumption but only tenth for output.

Within the UK, the Office for National Statistics has published household spending figures for 2013 – it is worth opening the table rather than relying on the headline figures. They show that, excluding taxes, insurance (of any kind) and savings/pensions, average weekly household spending by UK country (with percentage of UK average in brackets) is:

  • England £505.40 (102%)
  • Northern Ireland £484.70 (98%)
  • Scotland £449.00 (90%)
  • Wales £438.00 (88%)

This may be what we expect from the weekly household income figures, but here is the thing: they include household taxes/costs, which are either effectively taxes or are dependent upon property prices (you cannot live in wealthy London and the South East, after all, without paying that premium).

Once we exclude household taxes and net rent/mortgage, we arrive at:

  • Northern Ireland £440.50 (104%)
  • England £427.30 (101%)
  • Scotland £388.60 (92%)
  • Wales £383.10 (91%)

Suddenly Northern Ireland’s higher take-up rates for pay TV, or higher ownership of tablets, or higher spending on beauty products and clothes begin to make sense…

Northern Ireland's average household consumption (versus UK average)

Northern Ireland’s household consumption (versus UK average, 2013)

So there you have it – once they have paid their taxes and their shelter, households in Northern Ireland actually spend (or “consume”) 4% more than the UK average, and more than in any other country of the UK.

Disposable income

Almost anyone who lives in Northern Ireland has heard it – “I enjoyed London, but you know, even on two thirds of the salary you can live a better life here because of the cost of living“. It turns out there is a large degree of truth to that! Once they have sorted their tax and their mortgage/rent – the necessaries, in other words – households in Northern Ireland do actually spend more than in any other UK country.

There is an obvious health warning here, of course, beyond the normal “lies, damned lies and statistics”. In the same way GDP is not a perfect of real wealth and quality of life, nor is “consumption”. In fact, there is increasing evidence that Northern Ireland households are spending more but also becoming indebted more.

Nevertheless, the figures do present us with a fascinating story. Despite significantly lower economic output, a combination of UK-level public sector pay, low property prices and low household taxes leaves the average Northern Ireland household with a disposable income effectively higher than much of the rest of the UK.

But, whatever you do, don’t tell anyone…

We must stop electing people who refuse to govern

The failure of the Northern Ireland talks is being presented, particularly on UK-wide media, as a financial crisis. It isn’t. It is a democratic crisis.

The crisis is simple. With rare exceptions, the people of Northern Ireland vote, at election after election, for people who do not want to govern.

What happened on Friday was that the DUP and Sinn Fein (both parties who, in the past, had told the UK Government to stay out and let them get on with it) confirmed their refusal to govern Northern Ireland on the terms agreed in 1998 and amended in 2006 with effect from 2007 – the terms they themselves negotiated.

It so happens that one of those terms was finance. They would be allocated a budget alongside revenue-raising powers which they could choose to allocate and raise as a they saw fit. They have failed to do so – running out of money despite the only real “savage cuts” being applied to community relations budgets. They tossed away hundreds of millions on fantasy roads, security infrastructure they had been given to use, and refusing to implement reforms – as well as a few hundreds of thousand into their own pockets through “expenditure claims”. Faces unreddened, they then went and asked for more!

Another of those terms, however, was improved community relations – including parades and symbols. Another, implicitly, was dealing with the past. In no case was either “side” going to get exactly what it wanted.

Government is about tough choices. It is about re-allocating priorities, compromising on certain issues, and providing a clear sense of direction. It is easy to blame the populist politicians who refuse to do this – but we elect them!

We are not alone, of course. Populists in England threaten to make the UK effectively un-governable in 2015; similar will happen in Ireland the following year. They long ago made Italy and Belgium un-governable. In 2014 it was Sweden – yes, Sweden! The United States had to close down its government too. All again, because people are choosing to elect people who refuse to compromise and, thus, who refuse to govern.

As ever, in Northern Ireland we are the extreme example, with populists utterly dominant. As ever, it is finance which makes the crisis look apparent to everyone, as jobs go and pay is cut. As ever, however, this is not a financial crisis – it is a democratic crisis. It is up to us the people to stop electing people who refuse to govern.

Irish Language Acts and debating things which don’t exist…

I had a short cameo on Tuesday’s BBC Talkback programme concerning the case for an “Irish Language Act”. My point was that the whole discussion is somewhat pointless as we don’t know what would be in such an Act! There is a world of difference between, for example, the Gaelic Language Act in Scotland (which more or less confirms services already provided for Irish in Northern Ireland) and the Welsh Language Act in Wales (which places all kinds of requirements even on private businesses).

I would have added two more things, given time. Firstly, the Sinn Fein MLA on the programme said that an Irish Language Act was a “core demand of the Nationalist community“. This may be, but it is exactly that sort of phrasing which plays into the instinctive majority view among Unionists and indeed probably even Progressives that there should be no such Act because it would be ostensibly sectarian. It was also suggested by the POBAL representative, who was otherwise very reasonable, that an Act would mean “more jobs for Irish speakers” - something which is really problematic, at least at this stage of development, for all kinds of reasons (not least that it would favour one “religious background” given the segregated nature of our schooling).

Secondly, I was very concerned as several callers saying that they wished only to speak English “because we’re in the UK and we’re British“, a line I hear alarmingly often. I was concerned because it shows a deep ignorance about what it is to be British, which itself I think touches the core of why so many Unionists are so insecure about their identity. Britishness is an innately multi-cultural identity, by definition – you have to be “British-and”, you can’t just be “British”. The development of the Welsh language, albeit from a much stronger position that Irish (or for that matter Gaelic of Scots) is in now, is one of the best examples of minority language promotion in Europe – by the UK. There was an MSP on BBC Talkback explaining how his Gaelic linguistic identity in no way contravened his Scottish and British national identity. It is an utter nonsense for so many Unionists to cling to a singular “British” identity when everyone else who claims that identity recognises immediately and obviously that it is multi-cultural and diverse.

(It was, after all, the UK which signed the European Charter and gave Irish additional protection and support – Ireland, out of interest, is not a signatory.)

As for an “Irish Language Act”, I’ve always instinctively favoured a “Languages Act” confirming the UK’s and Northern Ireland’s Charter obligations and adding rights for those who wish to speak Irish in education and broadcasting. This would still, by my reckoning, be cost-neutral. What’s not to like?!

Welfare “debate” still shrouded by myth and fantasy

My response to an article on Slugger O’Toole describing welfare reform as the “horror show”.

I think the article itself was excellent, in the sense that it gave an entirely fair commentary of many of the opinions held on welfare reform (albeit limited to a particular, often unrepresentative sector). However, most of these are based on scaremongering, if not pure fantasy. It is worth noting that this applies to all sides of the “debate”.

A few of the myths, therefore…

The ‘mitigating measures’ agreed for NI had not previously been laid out

In fact, they had often been discussed in the Assembly – both in Committee and plenary (particularly during questions).

The previous Minister Nelson McCausland had clearly stated a preference for covering the cost of not implementing “Bedroom Tax”, and estimating this cost at £17 million. Some thought had also been given to implementing “Split Payments” (i.e. fortnightly Universal Credit payments) at £24 million, although the issue there was that they do not actually put more money in people’s pockets (so there was more wariness). There was also an acceptance that childcare is different in Northern Ireland and thus different arrangements would not necessarily be penalised.

This was all on the record – to those with a keen interest in the subject, it really shouldn’t have been news! It is a matter of concern that some professing deep interest or even expertise in the subject had not been following the debate on it in the Assembly.

Households will lose £6,000 in a ‘welfare disaster’

The article left it unclear, however, why people would lose £6,000. I have checked with those present who confirm that this was not established. We do have to ask why absolutely no one in attendance sought to establish the precise facts around this figure, and merely took it as read. It is indicative that stances on welfare reform had already become entrenched, and there is no willingness to explore it in meaningful detail.

There is a serious issue in all policy areas with debates around welfare which focus on random figures being raised without explanation. Speaking of which…

Welfare Reform will take £750 million out of the NI economy

Most of this was actually already accounted for under Labour’s reforms; we don’t actually know how much welfare will cost under the new arrangements (by definition it is designed to meet a defined need, it is not a budgeted expenditure); and actually that figure did not account for large aspects of the reform likely to work out positively (not least because they make access to benefits more straightforward and limit bureaucracy). Even NICVA now accepts the figure is nowhere near that, and that it cannot be precise about what it is.

What is more, the “research” upon which the figure is based looked solely at the public money spent on welfare and not, for example, at the positive outcomes of people entering or returning to the workplace – outcomes which go well beyond income (now enhanced by the rise in personal allowance meaning you can work part-time on just short of the NI average wage and pay no income tax at all) and include improved social networks, improved self-esteem and thus improved health, improved educational opportunities, perhaps even further job creation.

Therein lies the problem. Anyone with a predetermined political viewpoint can shape statistics to suit their own case. Frankly, academics can be more likely than anyone to do this. Worse still, they sought to turn the debate into one purely about financial allocations rather than about people’s qualify of life and the serious scourge of entire communities trapped in poverty. That is scandalous.

Welfare Reform has the reverse effect from that intended

It would be foolish to dismiss this possibility. However, it does not look likely.

The suggestion is that welfare reform in Warrington led to increased indebtedness, abuse and food bank use.

Yet in fact, levels of indebtedness have grown faster in Northern Ireland than anywhere else in the UK since 2010 (see Julian O’Neill’s recent BBC report for more). Charities have had to set up food banks even in supposedly “prosperous” South Belfast. The evidence is indeed that indebtedness, abuse and food bank use are increasing – but they are increasing right across the UK and, if anything, more so in Northern Ireland where welfare reform has not been implemented (and, in fact, nor have significant public sector spending reductions).

The UK was in fact 16% poorer in 2013/14 than it expected to be in 2007/8. This dip is about twice the rate of average industrialised countries – in fact beaten only by Ireland, which has a particular effect in Northern Ireland given the importance of cross-border trade.

In other words, the negative effects which are being put down to welfare reform (and indeed “austerity”) are actually down to the general negative effects of the Great Recession. This was something which was in the end broadly accepted at the NICVA conference, but not given enough exposure. The fact that the Great Recession proved so calamitous for people at the bottom end is if anything yet more evidence that the previous welfare system wasn’t working – and, in Northern Ireland, still isn’t.

The 1% rise in working-age benefits is particularly harmful

Actually the 1% rise in working-age benefits is particularly harmful – but that is not part of Welfare Reform, but rather a later populist financial decision taken by the Chancellor.

The Chancellor’s justification was that people on benefits should not see their income rise faster than people in work. This is a false parallel, as any real supporter of Welfare Reform would point out. Welfare Reform is about helping people into work precisely because once you are in work your options and flexibility for earning income increase.

Put another way, I am self-employed and if my income decreases (which it most certainly did during the Great Recession) I can use my past professional experience and flexibility to take on more, or different, or varied work to cover at least some of that decrease. Someone on benefits (even if not entirely dependent on them, in fact) is restricted in their potential to do this – particularly pre-reform where in many cases, outrageously, taking work can actually mean financial loss rather than gain to the individual. Thus the parallel between fixed benefits income and flexible work income is false. Proponents of Welfare Reform fully accept this – which is why they (with me among them) spoke out against the 1% cap.

Why introduce something that’s not working?

Welfare Reform is a generational thing. Just like Beveridge in the first place, it is about establishing a system to stand the test of time for at least a generation. Since most of it has not been put in place in Great Britain, and none in Northern Ireland, we simply cannot yet say whether or not it’s working.

What we can say, definitively, is that the old system inherited by the Coalition in 2010 absolutely does not work. It simply does not do what the system is supposed to do – provide a buffer for those who fall on hard times. It does do what it is not supposed to do – trap people and even entire communities in poverty.

NICVA had no right organising a conference

NICVA has every right to organise a conference, but I cannot help but think it organised the wrong conference – and not just because the gathering had no proponents of Welfare Reform present, to the extent that no one was even prepared to question the detail of claims made from the floor.

One of the core problems with what passed for “debate” on tackling poverty (which is ultimately what this is about) is that it focuses on tackling the short-term symptoms rather than the long-term causes.

It is easy to quote a few people likely to face significant difficulty – after all, by quoting the idea of an old woman living on her own in a big house she inherited, rich people were able to mount a campaign which means people in mansions pay a third of the rates comparatively that the rest of us pay (due to the rates cap) – something which appeared reasonable when presented with a short-term symptom, but is actually a long-term political, social and financial outrage!

Many voluntary organisations do exist to help such people, particularly during transitions, but they need to understand that is a case for short-term action and intervention on specific issues, not broad long-term policy making. For recommendations to deal with longer-term causes of poverty, including the role in it of the welfare system, we really need evidence-based think tanks who take a broader view. We are sadly short of these, which is why so much policy “debate” proves unsatisfactory and ends up a competition of interests rather than ideas.

In other words, conferences like this are ultimately all about managing poverty (and those who experience it) rather than tackling and overcoming it. The latter is a long-term objective – and, by necessity, Welfare Reform is a long-term solution.

Binary politics a scourge everywhere

Another one from Slugger O’Toole…

Of all people, it was perhaps Jeremy Paxman on his retirement from BBC Newsnight who put his finger on the problem causing such disillusion with politics – it is the nonsense that all politics is binary. He said in an interview that it was utterly ludicrous to suggest the Conservatives have all the answers to the country’s woes and Labour has none of them; and equally ludicrous to suggest Labour has all the answers and the Conservatives none – and everyone knows it!

Thus, electoral politics has become a complete facade. The UK will have a Conservative or a Labour Prime Minister, but both are presenting an outright lie – that they have all the answers and the other hasn’t; that their party has a near unblemished record in government and the other is at fault for all the country’s woes. It’s nonsense. And we all know it’s nonsense.

There is another problem with this that we know in our hearts to be true even if we don’t like to admit it: the politicians we elect cannot possibly have all the answers to our problems. We have zero say, at the ballot box at least, about the likely defence policy of the next President of the United States, or the next financial move of the Chinese Communist Party, or the next decision on Quantitative Easing by the European Central Bank; yet in a globalised world these things may all matter more than any decision made by people we ourselves elect.

Of course, the decisions which affect us may not be made by politicians at all. Big oil companies, vehicle manufacturers or even gadget firms (like Apple or Samsung) make decisions which have far-reaching consequences for all of us – made by Board members or Executives we don’t know in places like Fukuoka or Ingolstadt or Cupertino that we’ve never heard of.

There is a degree to which we are comforted by the notion that David Cameron or Ed Miliband will have it all in hand; by the idea that some geniuses somewhere are running the show and they know what they are doing. This is why conspiracy theories still predominate about the assassination of Kennedy, for example – a world in which some random mad man can just shoot dead the “Leader of the Western World” is too crazy to contemplate, so we go to extremes to deny it is possible. Yet in our hearts we know that it is, in fact, a crazy world – and that the next move of Islamic State will likely have as big an effect on us as who wins the next UK General Election.

Move this to devolved level, of course, and the political farce becomes even more obvious. The notion that the Unionist world view and historical narrative is 100% correct and the Nationalist 100% flawed, or vice-versa, is very comforting but we know at heart that it’s nonsense. From the very outset, therefore, again there is a lie at the heart of the binary system – yet anyone caught exposing that lie is deemed a traitor to their own side.

We see this even on single issues. Never mind a detailed analysis of how best to tackle poverty in a post-industrial setting struggling with the legacy of conflict – are you for or against welfare reform? Never mind a detailed assessment of how best to tackle low wages in a peripheral public-sector dominated region after the Great Recession – are you for or against the Living Wage? Never mind a detailed view of how best to promote business in the context of the rise of China and the East – are you for against reducing Corporation Tax? We like to comfort ourselves that stopping reform, or introducing the Living Wage, or reducing Corporation Tax will prove the magic bullet to all our economic and social woes. Anyone suggesting it’s a little more complex than this straightforward binary option is deemed a “typical politician, ignoring the question”; yet anyone who does stand out and suggest it may be a bit more complex than that is right – and at heart we know they are, even though we probably won’t vote for them…

We are not alone. In Germany a two-and-a-half party system is rapidly becoming a five-party system (with the half replaced entirely by a populist bloc challenging everything Germans professed to believe about Europe). In Denmark and Canada the centre right has been completely restructured (and the latter is now working on restructuring the left too). In Ireland civil war politics is being replaced by outright populism. In the United States party membership is declining and people are becoming increasingly disenchanted by the gridlock delivered by an entrenched, binary system.

What is the solution to all of this? I have no idea! To move towards a solution, I know only two things for sure: politicians are elected by the electorate and they bring with them to their office all the foibles and hypocrisy of that electorate; and that it is therefore for that electorate, for us humble citizens in other words, to participate and deliver a democratic alternative which recognises the world is complex and that binary options will no longer suffice.

Sorting NI’s public finances – update

I was very interested in the response to my “modestly provocative proposals” for fixing Northern Ireland’s public finances. Generally, I was encouraged by the willingness of many respondents to pay their way. If that willingness is representative of the public, it would indicate that as with political realities during the 1998 negotiations, the public are ahead of our politicians on the financial realities during the 2014 negotiations.

It cannot be denied, however, that this is also political. It is not merely a matter of balancing the books as an objective accountant, but making political choices. So I thought it worth responding to some queries based on the principles which underlay my proposals.

Re-distributive Revenue Raising

There was some debate around Prescription Charges. I understand why. However, their re-introduction would punish the sick, particularly those with long-term conditions. That is not re-distributive and it is fundamentally not fair.

On the other hand, I proposed the introduction of motorway tolls to pay for road-building: vehicle drivers pay for the roads they drive on. That is fundamentally fair. To some under my proposals extent Eastern drivers do pay for new Western infrastructure, that is true, but that is to even up a historical anomaly. That is also fundamentally fair.

I also proposed the raising of household rates. This means people who pay rates pay a little more; those who do not, do not. It is a wealth tax. It is fundamentally fair.

I also proposed the introduction of a public sector levy. This would see public sector workers taking home the same disposable income as everywhere else in the UK – a reverse ‘London weighting’, if you like; it would also see the highest paid workers contributing a little more for a short period. That is fundamentally fair.

Greener Transport

In addition to the above re tolls, there was some debate around what is, essentially, a general proposal that more commuters should use public transport. Some suggested public transport simply couldn’t cope. Others said it was already bad enough with ‘Belfast on the Move’.

To respond simply, I would stand over the view, but I accept it is a political one, that fewer people should commute by car and, particularly, fewer between around 7am-10am and 4pm-7pm.

I would add, as a matter of fact, that headlines suggesting reports had shown Belfast to be particularly ‘congested’ were inaccurate. In fact, those reports suggested not that Belfast was particularly congested during peak hours, but that it is notably uncongested by the standards of a typical UK city during non-peak hours.

I would contemplate, in fact, operating the motorway tolls only during those hours (or having higher tolls at those times, similar to the Dublin Port Tunnel).

Motorway tolls at the gateways to Belfast, perhaps only during peak hours, would be preferable to a ‘Congestion Charge’, in my view. Such a Charge would make the City Centre even less accessible during non-peak hours, causing economic damage.

Administrative Simplification and Jobs

One respondent wanted one Health Board and one Education Board. Effectively, we now have that.

However, I do propose the simplification of structures, particularly around overall devolved finance management and OFMDFM.

My proposals notably do not involve compulsory redundancies in:

  • Teaching – school mergers do mean an overall reduction in teaching posts, but I do not believe any compulsory redundancies would be necessary (it would be necessary, however, to train fewer teachers in the first place, one reason for a Teacher Training College merger);
  • Social Security Agency – I am unclear why DSD is proposing these, other than just general budget pressures, but my proposals do not envisage them;
  • Health Units – under my proposals there would be no loss of staff in the Health and Social Care Service beyond those envisaged in ‘Transforming Your Care';
  • the Arts – my proposals do involve merging the Department of Culture into other departments, but this would merely release a current administrative burden to enhance bodies such as the Arts Council; and
  • Neighbourhood Renewal – there is no reduction in Neighbourhood Renewal necessary under my proposals.

My proposals do involve a voluntary redundancy scheme which would specifically see removal of grades and, specifically, a reduction in Finance staff, and the effective abolition of OFMDFM.

Timing

There was a suggestion that raising revenue should follow the appropriate administrative savings, to demonstrate value.

I quite like that idea.

Nevertheless, it is noteworthy that most of my proposed revenue raising takes place towards the back end of the next Assembly Term. Arguably, therefore, my proposals achieve this.

Electability

A number of respondents noted that my proposals would be ‘electoral suicide’ or similar.

I’m unsure, from other respondents, that it would. Nevertheless, that this point is raised was my underlying reason for doing this.

Fundamentally, my proposals do offer a way to balance NI’s public finances. Furthermore, they do so in a way which is absolutely redistributive. They are fundamentally fair.

The suggestion, therefore, is that the voters won’t vote for something which is fundamentally fair. What do readers make of that suggestion?!

Sorting NI’s public finances

UTV this evening runs what promises to be a fascinating programme on what three experts would do to address Northern Ireland’s public finance deficit – around £600m give or take, assuming some sort of deal on Welfare Reform and taking into account Barnett consequentials.

I am not an expert, of course, but merely a humble citizen. But, for the fun of it, here are some thoughts on what I personally (writing in a purely personal capacity) would do.

This applies only to what is known as Departmental Expenditure (currently almost exactly £10b) – it does not refer to Annually Managed Expenditure (c. £8b) or UK Treasury spending in or for Northern Ireland (c. £5b).

Revenue Raising

I outlined the case for Revenue Raising two weeks ago, but should be clear I would not actually do all of it personally. Also, I would set out a five-year strategy for raising revenue, not just one, so that households and businesses could be prepared; and I would be specific about where the money so raised would go.

Personally, I would be inclined to do the following:

1. Remove the Rates Cap and Raise Regional Rates by 7% for 2015/16 and inflation plus 3% for the four years thereafter to raise £50 million in year one and another £100 million over the next Assembly term.

This would be allocated to the Health Budget, specifically to ensure the availability of cancer drugs.

2. Introduce Motorway Tolls (at levels similar to the Republic of Ireland) at M1 Ballyskeagh, M2 Ballycraigy [i.e. the new service stations] and A2 Dee Street to raise £75 million per year.

This would be allocated to the Capital Budget, specifically to ensure the construction of key freeflows and expressways along the A1, A6 and A2, with extra specific benefits:

  • assurance to the hard-pressed construction industry that projects will proceed;
  • improved connections for the North West and improved safety;
  • greater use of public transport by commuters (to avoid tolls) thus alleviating the funding problems in that area; and
  • in the longer term, it is easier to apply to the European Investment Bank for loans for tolled roads than not.

3. Introduce water charges, but deferred by one year (the year of the most significant Regional Rates increase) and not brought in fully until the 2019/20 financial year to raise £100 million in 2016/17 rising to £250 million in 2019/20.

The would be allocated to the Capital Budget aimed primarily at the upgrading of water and sewerage infrastructure, but also perhaps to more general infrastructure projects such as the North-South electricity pipeline, thus securing sufficient power and water even in emergencies in preparation for the closure of the Kilroot power station in 2021.

(See also my note on a Levy in Indirect Savings below.)

Not Revenue Raising

Note that the above means, at least initially, I would not re-introduce Prescription Charges (the amount so raised simply isn’t worth it and I fail to see why people with progressive conditions should pay a particular penalty in effect simply for having them); nor would I introduce bin charges or fire call-out charges.

The Regional Rate even if it added Water Charges would remain the lowest household charge in the UK even at the end of the next Assembly term (meaning Northern Ireland would retain its status as the UK’s “lowest taxed region”, all else being equal).

It is possible that pressure would come to have income tax and aggregates levy devolved to Northern Ireland, as will now be the case in Scotland. In principle, I support this (as I support a Federal UK and thus the same powers for Scotland, Northern Ireland and Wales). In practice, however, I would leave them unchanged either way.

Direct savings

I am sure there is a technical term for this, but what I mean here is “government give-aways” which should be re-assessed.

1. I would be inclined to leave tuition fees alone, but would contemplate raising them slightly during the next Assembly term if the DEL (or successor department) budget remained tight – raising them is a progressive taxation move as they are only paid by graduates upon earning a certain amount in any case, but I would be wary immediately of imposing further financial problems (even if long-term) on young people (even if confined to a particular group).

2. I would restrict concessionary fares (i.e. those for over-60s and Translink’s own staff and families) on public transport to non-peak hours; it may not then be necessary to raise the qualifying age to apply only to pensioners. It is hard to say precisely what this would save, but it may be in the region of £20 million annually initially, and rising.

Anything so raised would be reallocated to public transport to secure new routes and maintain fares at roughly the current level. It would also have the benefit of increasing train capacity during non-peak hours (and probably reducing it slightly during peak hours).

Indirect savings

Even with all this, I have only saved about a quarter of the £600 million gap in Year One (which exists even with Welfare Reform implemented and the Treasury’s October loan paid off), and in practice with pressure on Health budgets and the immediate requirement to invest in infrastructure, I am probably still only treading water with subsequent rises. We still need close to half a billion from somewhere!

1. I would be inclined towards a voluntary public service redundancy scheme aimed primarily at Health and Education administrators and Civil Servants. Some suggest this would save £300m, though I am not so sure in the current jobs climate. Let’s guesstimate half that – £150m.

2. I would run a fundamental Public Sector and Assembly Reform Programme over the next Assembly Term, including:

  • reduction in the number of Departments to six (Education, Economy, Environment, Health, Justice, Treasury);
  • abolition of OFMDFM and its replacement by a small Executive Office (which no longer requires Junior Ministers);
  • removal of the Finance Unit from all Departments, with all payments made directly from (and indeed to) the NI Treasury;
  • removal of two Civil Service grades;
  • legislation to ensure local Councils take on only functions relevant to them (no more “European Officers” and such like); and
  • reduction in the size of the Assembly to 90 members and reduction in Office Costs Allowance for Ministers and the Speaker.

I have no idea what this would save, frankly! However, it would have extremely positive long-term effects not just on reducing the cost of government but also on improving cooperation/efficiency and simplifying access to information and services for citizens.

3. I would be inclined towards what would no doubt be a highly controversial but temporary Public Sector Levy (not totally dissimilar from the Pension Levy introduced in the Republic of Ireland six years ago).

The point is this: average earnings in Northern Ireland are roughly 88% of the UK average, yet average household income is 96% – the gap is made up partly by slightly higher welfare receipts but mainly by our lower “household taxes” (most obviously a Regional Rate averaging about £800 versus Council Tax+Water Charges averaging about £1900).

Public Sector earnings in Northern Ireland, however, are 99% of the UK average meaning that households with earners in the public sector are in fact considerably better off than they are elsewhere in the UK (a household with two public sector workers will on average be £600 better off).

The levy would be designed, therefore, to make up for that differential. It would probably decline over the course of the Assembly Term (as Regional Rates rose and Water Charges were introduced) and would likely initially be introduced at 2% of pre-tax income – on all public sector workers by a loose estimate this would raise (save) £120 million, although I would be inclined to exempt direct service positions (like nurses or teachers).

Cuts

We are nearly there – with a voluntary redundancy programme, a reform programme and a temporary levy, I have probably mustered another £300 million. I am three quarters of the way there!

It is worth noting, however, that I have done this without implementing any actual “cuts”.

1. I would remove the exemption of Education from efficiency savingssaving £70 million.

These would predominantly have to be found at administrative level, for example by sectors having to share services. However, there is no doubt further school mergers (ahem, closures) would follow. This would be initially painful, but in the long run makes for a sensible rationalisation of the school estate.

2. Further to the above, I would integrate Teacher Training.

This does, in effect, mean the closure of the site at St Mary’s or Stranmillis (likely the former). That is the way it is; we cannot afford such duplication.

3. Further to that, I would introduce further integration of facilities.

For example, it may be possible marginally to reduce funding to local government (i.e. allocating a larger share of the Rates bill to central government) in the expectation that they would invest in shared leisure centres.

4. I would streamline planning.

Further to the rationalisation of Departments above, the Planning System remains a burden. It causes delays, frustrates investment and can so much as double infrastructure construction costs versus Continental Europe.

5. I would “invest to save” in improved management of public services.

Currently decision making takes too long, involves (in particular) too many meetings, and consists of terms such as “framework”, “strategy” and “collaboration” which have frankly lost all meaning!

Conclusion

I think I am just about there!

As can be seen, it is not easy. I have introduced motorway rolls, radically streamlined government, introduced extra charges and levies, and I have closed some facilities (and I had assumed the introduction of Welfare Reform minus “Bedroom Tax”).

Yet, interestingly, I have secured better medicines, introduced better infrastructure, and brought in more efficient government. It is not all bad!

I have left some things untouched too. I have not taken the scythe to the voluntary sector; I have left arts and minority languages funding in place; I have not introduced Prescription Charges.

Of course, no one reading this will agree with every item. As I’ve long said, compromise is a good thing – so over to the readers here and the panellists on UTV tonight!

Labour’s sickening attitude to immigration must be punished

“[We are] reforming our country to make work pay, and ensuring that our system is built on British values of fairness and contribution.

[And] there the values that we apply to controlling immigration… I also believe we have to listen to the real concerns that people have about how immigration is being managed.”

There we are, a direct link between the welfare system and immigration, tying into the widespread (but utterly factually inaccurate) notion that immigrants come to the UK to abuse its welfare system.

If this had come from Iain Duncan Smith, trendy lefty liberals would be incandescent. But actually these are the words or Rachel Reeves, his Labour opposite number!

She went on! She would extend the period EU jobseekers need to live and support themselves in the UK to two years before claiming out-of-work benefits – the  notion that a hard-working Pole who works and contributes for 23 months would be less entitled than the Briton who has never worked at all is disgraceful and, by the way, almost certainly illegal.

And there was more! She would end the practice of EU migrants claiming child benefit for children outside the UK - which is already been done and is expecting to save a whopping £10 million (the UK’s welfare spending is £222 billion).

Not content with that, she will look at in-work benefits - implicitly suggesting that two people in the UK could do the same job at different wages purely on grounds of nationality.

As John McDermott in the Financial Times writes, what next? “Curbing access to condiments, the Paddington Bear movie or Caffe Nero loyalty cards?

There’s only one party in England left to trust on immigration – the Liberal Democrats should probably say rather more about it…

Time for an Integrated public transport system

All being well, I am travelling this weekend to Cologne. Unsurprisingly, therefore, I have a airline ticket from Dublin to Cologne. Slightly more surprisingly for those of us in the British Isles, perhaps, is that my flight actually goes from Dublin to Frankfurt. From there, strikes permitting, I will get a train from Frankfurt to Cologne (which, by the way, will cover the distance of Belfast-Dublin in less than an hour) – on the same ticket.

Likewise, I arrived at the superb 24km Oresund Bridge from Malmo to Copenhagen by car a few years ago en route to Hamburg. Immediately at the Bridge I was asked by the attendant for my final destination, and I was handed a ticket to Puttgarden in Germany, including the ferry over from the Danish island of Lolland.

It is an incredibly straightforward thing, yet in Northern Ireland (and I suspect in the UK and Ireland broadly) we cannot even manage it at a local level. For example, if I want to get by public transport from Jordanstown to Groomsport, I have to get one ticket for the train to Bangor, and then another for the bus to Groomsport. As there is no way of knowing how many people on a train arriving in Bangor want to go to Groomsport (or Conlig or wherever), the bus timetable makes no attempt at connecting and the driver will stick to the bus timetable ignoring any trains. It’s ridiculous!

We’ll see how it goes, but if my flight to Frankfurt is delayed, I don’t expect any difficulty with the train – Deutsche Bahn will know not to expect passengers from the Dublin flight on time, so will easily transfer us to a later journey. Yet if my train from Jordanstown to Bangor doesn’t connect with the bus to Groomsport, even if it’s on time, that’s tough luck.

To be clear, Translink doesn’t deserve much of its bad press – it runs a comfortable and punctual service for the most part (although certain bus routes clearly require some work!) and it has made significant advances (such as free WiFi). However, the whole point of a single public transport operator should surely be to integrate services easily.

It’s not just in education that a bit of integrated thinking would help matters!

This is no “expenses scandal”

As the title says, what was revealed on Spotlight is no expenses scandal. As the Justice Minister rightly implied, it is in fact systematic fraud which needs to be dealt with by the criminal justice system – and also, to an extent, by the electorate.

There are numerous points here to do with:

  • the distinction between potentially criminal activity and legitimate if questionable claims;
  • the distinction between corrupt MLAs (and parties) and fundamentally honest ones;
  • the inability of the political system to function while moral depravity (of which this is a symptom) lies at its core; and
  • the inability of politicians to act to restore order to public finances while they themselves are – in limited, specific but serious cases – abusing them.

Firstly, the distinction has not satisfactorily been made between legitimate if somewhat questionable claims (say for two iPads but also for thousands of stamps) on one hand, and blatantly fraudulent behaviour (claiming for journeys which were not made on behalf of someone else) rising to straightforward tax evasion (paying sums above the VAT threshold to a company not registered for VAT). Questionable claims are not ideal of course, but they are legitimate and any expenses system will have loopholes – there is a question of honour here, of course (as a Councillor I didn’t claim everything I was “entitled” to if I didn’t feel the entitlement was truly justified), but that is to be assessed by the electorate. Fraudulent claims are a different thing as they lie outside the rules and are an indication that the rules (regardless of what they were) were being blatantly ignored, and this is to be assessed by the courts.

As such, this is a very serious challenge to our political and legal institutions. We are about to find out whether we live in a true democracy or in a mafia-like state where some people are above the law. 

Secondly, it is an understandable but deeply and seriously flawed reaction to suggest MLAs are “all the same”. They are not. The very point of having elections is to boot out the ones who are corrupt, dishonest and incompetent. To opt out of elections, as seems to be the widespread view, is in fact to leave the corrupt, dishonest and incompetent ones in place. The voters have not only a role but a duty here to inform themselves and get to the polling booth to make a choice. That’s what democracy is – it is harmed when people opt out of it, and replaced by mafia-like behaviour ranging from incompetence right up to outright violence.

We in Northern Ireland should be more than aware of the penalty for not cherishing democracy – we must participate, campaign, vote and, frankly, elect the good guys (and gals). 

Thirdly, we should now quit the blethering about “talks”. You simply cannot negotiate with outright liars – the ludicrous notion, for example, that one party did a deal with the Assembly Finance Department to allow it to engage in tax evasion is one such lie. This comes on top of outrageous, uncivil and plain nasty behaviour from the “extremes” on each side (in inverted commas because they are central to politics currently) which had already dripped too much poison into the process. The two Governments, who seem to have forgotten they are guarantors of the Agreement which disallows such uncivil behaviour, need to forget about negotiations and start setting some ground rules while calling out bad behaviour for what it is.

And actually, you know what, if we want to “make it work” as the excellent campaign suggests, we must accept we are going to need different political leaders. That, again, is down to the electorate. 

The most serious short-term problem is the shocking state of Northern Ireland’s public finances. The scale of the mismanagement there is already staggering. Yet now we are beginning to see why some parties in particular are unwilling to implement any cuts or consider any revenue raising – they actually can’t, without obvious questions being alsed back about their own behaviour. Most stunning of all, frankly, was an MLA on my own Twitter feed suggesting “cuts” would not be necessary were it not for tax evasion – when all along his own party was evading tax! This renders the necessary financial interventions practically essential but politically impossible. It is a very serious conundrum with no obvious answer.

This isn’t an expenses scandal. It is a fundamental democratic crisis with real implications for jobs and services. We all, each one of us, need to grasp that.

To be clear, there’s no point in calling for “reform of the rules” when the issue is that the rules were ignored; there’s no point calling for an “independent inquiry” when we already know who was outright cheating, who was a bit dodgy, and who was basically honest; there’s no point negotiating when there is no trust and no justifiable basis for any; and there is no point opting out of the system if that merely rewards those who are blatantly abusing it.

Citizens and voters of Northern Ireland – it’s over to you in May!

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