What the NIO should do now…

What should the Northern Ireland Office do to resolve the current impasse with the Northern Ireland institutions?

Easy, actually. Implement the Smith Commission proposals. Here! Now!

The link gives the details, but we can run down specifically what that would mean:

– Memorandum of Understanding for managing different tax/welfare structures (this enables differentiation if that is the route Northern Ireland chooses);

– devolution of Income Tax (on earned income), Aggregates Levy alongside Air Passenger Duty (if Northern Ireland doesn’t want “austerity”, it now has all the tools to raise taxes to make up the difference itself, and stand or die by these decisions at Assembly Elections);

– assignment of first ten points of VAT to the Northern Ireland budget (this has the effect of promoting policies favourable to value-added economic activity, as much of this will add to the NI budget);

– non-devolution of Corporation Tax (as Northern Ireland has not fulfilled the obligations of the Stormont House Agreement, some penalty should be paid);

– reservation (i.e. un-devolution) of pensions and benefits to do with parenting or low income alongside tax credits (it makes sense to do these across the UK anyway);

– reservation (i.e. un-devolution) of equality laws (it has taken too long for Northern Ireland to tidy up its equality legislation and so makes sense to share best practice across the UK);

– maintenance of devolution of disability benefits with removal of ‘parity’ requirements (this is Nationalists’ key concern apparently, and they now have the aforementioned tools to raise the money themselves from their own voters to pay for any differentiation, including the administration of a different system, without having to pay for the entire system);

– representation of Northern Ireland interests by Northern Ireland ministers directly to European Union (this is particularly important in Northern Ireland given our land border); and

– replacement of cross-community Assembly votes with two thirds super majorities (also now used in Westminster for certain specific votes under the Fixed Terms Act).

The Barnett formula and ‘consequentials’ would of course be maintained, and logically the baseline for welfare payments would be set within it (this would most sensibly be done at the New Year 2012 level, before the Welfare Reform Act, effectively adding £300 million to the NI Executive’s annual budget – a politically feasible amount for the Treasury). This means that Northern Ireland starts from a baseline position of public spending at around £2,000 more per head than the UK average plus an extra welfare subsidy – but if it chooses to move any of that up or down, that is its choice, and it pays for or gains from that as appropriate. The welfare ‘crisis’ would be resolved – some powers would be withdrawn, but others would be maintained and ‘parity’ in effect ended.

So, problem solved – because as a package, I suspect this would find support among the Northern Ireland parties:

– Nationalists can claim victory by securing abolition of parity (with a £300 million welfare subsidy), ‘devolution of economic control’ and ‘more power in Irish hands’ (they could hardly turn down the chance to deliver on ‘no one loses out’ by maintaining DLA as is, having now been handed the fiscal tools to raise taxes to pay for it…);

– Unionists can claim victory also for the welfare subsidy and for ‘protecting the Union’ by securing directly equivalent devolution models (and the DUP would no doubt relish the opportunity directly to pursue its low tax model, albeit with the obvious consequent reductions in public spending…); and

– Progressives would also welcome the effective removal of ‘designations’ (they may remain but would be irrelevant, with protections now offered by super-majority votes) and may then pursue the logical progression of a government/opposition model using that super-majority protection.

Most importantly than any of that, the public would now see the Assembly as much more transparent. It would have to raise money from the public directly if it wished to raise public spending or welfare protections; but it would also have the opportunity to offer reduced taxes if it wished to encourage public sector efficiency, private consumption and tackling of individual/corporate debt. The public would be better informed, civic society would be challenged, and political debate would become meaningful (Scotland would even act as a direct comparison).

Real politics, I believe it is called… that is why I strongly believe the NIO should do this, and do it now!

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5 thoughts on “What the NIO should do now…

  1. Very interesting and feasible package, Ian. While no one gets all they want, every party gains and it progresses Northern Ireland as a whole forward. Every crisis an opportunity eh.

    BTW I agree in retaining disability benefits within powers devolved to Northern Ireland; the implementation of Personal Independent Payments (PIPs) in England has been disastrous and the assessment method deemed inhumane.

    • Yes, everything like this has to be done as a package.

      If you narrow down to a single issue, you have no chance.

      I strongly support PIPs in principle, by the way. Severely disabled people are actually better off. But I entirely take your point about the practice. We can do it better here.

  2. The Listener says:

    Well Ian, by how much do you think the average earner will pay extra in Income Tax, and possibly VAT to sustain this overspend?

  3. […] wrote about what the NIO should do the other […]

  4. […] own preference was outlined here a month ago – I believe strongly that devolving economic control would work politically and would be the […]

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