Northern Ireland Budget (No. 2) Bill

Stephen Farry Excerpts

2nd reading
Monday 10th July 2023 Commons Chamber

[Chris Heaton-Harris]

I thank my hon. Friend for his question, and acknowledge his long-standing interest in this area. He does great work on the Select Committee. I know that he has read the Institute for Fiscal Studies report published on 21 April, which stated that Northern Ireland spent similar amounts to England and Wales per pupil in 2022-23. Spending per pupil in Northern Ireland grew by 11% in real terms between 2018-19 and 2022-23, after having fallen for almost a decade. I will try to get him the exact details; if I cannot do that by the end of this debate, I shall write to him with them, but we have been following this issue, and he has been prodding us along all the way.

I was talking about the budget’s departmental allocations. As in the 2022-23 Northern Ireland budget, the allocations were developed after extensive, sustained engagement with the Northern Ireland civil service. The Bill will mean that Northern Ireland Departments have a total resource budget available of £14.2 billion, and a capital budget of £2.2 billion. That includes the Northern Ireland Executive block grant, set at the 2021 spending review and through the subsequent operation of the Barnett Formula, and income from regional rates.

I emphasise—I will no doubt state this a number of times, in this debate and elsewhere—that the sum available for this budget would have been the same sum provided to the Executive for 2023-24, if they were in place.

I recognise that the Northern Ireland Departments, in the absence of elected Ministers, will face difficult decisions, but it is necessary to deliver a balanced budget. These decisions rest with the Northern Ireland civil service, but I will continue to work with them to protect frontline services in Northern Ireland.

[Stephen Farry (North Down) (Alliance)]

I fully concur with the Secretary of State about the importance of the Executive being restored. The other point he was making was about ensuring that the Budget is balanced. Does he recognise that there is a certain disjoint between the current guidance that the civil service has and the expectations placed on it in balancing the Budget? They cannot touch the statutory areas, which means that the non-statutory areas are being overly targeted. Also, the Departments are overspending because they cannot live within the budget controls. Unless some action is taken over the remainder of this year, we will see a massive overspend, which will create a bigger hole and a bigger challenge down the line and lead to deeper cuts.

[Chris Heaton-Harris]

The hon. Gentleman makes a wise point, and I know he follows this issue closely. We are working closely with the Northern Ireland civil service on this matter. As he alluded to, when the UK Government took over the responsibility overall, we inherited an overspend for 2022-23. A reserve claim of £297 million was provided to balance last year’s Budget. Despite projections of an overspend throughout the year and the UK’s agreement to the reserve claim, the final budget figures from 2022-23 show a slight underspend of £40 billion, so it came in at £257 million. I know that those big sums of money will still cause great concern over the budgetary issues in Northern Ireland, but it does demonstrate how monitoring rounds and monitoring spending bring about amazing behaviours for budgetary purposes. I would like to think we can work together in this space in the future. However, the one thing I do know—it has been demonstrated time and time again—is that that work would be better done by a locally elected Executive, with Ministers accountable to the people who elected them.

As I mentioned, with agreement from the Chief Secretary to the Treasury, my right hon. Friend the Member for Salisbury (John Glen), flexibility has been granted on the repayment of this reserve claim, which moves the repayment into the next financial year, not this one. Before I conclude, I will briefly run through the Bill clause by clause.

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[Stephen Farry (North Down) (Alliance)]

It is somewhat opportune to follow the hon. Member for Belfast East (Gavin Robinson), as before I talk about the role of the UK Government and the real budget crisis that we are facing, I have to say that, listening to him, the House would almost get the impression that the DUP was not an actor in the current debacle that we are facing and that it is a passive actor or a commentator on the sidelines. DUP Members talk about frustration, people sitting on their hands and nothing moving forward. I remind him that we are now more than four months on from the Windsor framework being concluded, and still we have no Executive and Assembly restored. Indeed, we are more than 16 months on from the Executive being brought down and still we have no progress being made.

I would be the first to recognise that an Executive would not be a silver bullet for our problems—there will still be a major budget crisis whenever an Executive is restored—but having an Executive is fundamental to providing some type of framework, a strategic approach, democratic accountability and transparency and proper scrutiny of what is happening. That allows us to plan ahead. It allows decisions to be taken on a cross-departmental basis. It allows us to protect areas that are crucial for the medium and long terms. Those are all things that an Executive can and should be doing.

In Northern Ireland, the frustration is not over the pace of what is happening and whatever fix awaits us around the Windsor framework; it is over the absence of an Executive. The business community—every single business organisation—trade unions, the community and voluntary sector, health professionals and education sector people are all saying that they need an Executive and an Assembly back, and the DUP is sitting in defiance of that strong message from those people at the coalface. Every time they say, “Here’s what the Children’s Law Centre are saying” or, “Here’s what the education sector are saying”, they are selectively quoting because all of them are saying, “Get back round the table and work together for the good of the people of Northern Ireland.”

There is a real danger here. The DUP, in its own terms, is out there to try to save the Union because it believes that the Windsor framework undermines it. That is not my opinion; that is the DUP’s analysis of the situation. In trying to save the Union, in its own terms, it is in danger of killing the Union. It is saying, “We need to restore devolution only when there is a solid foundation in place.” Through its boycott of the Assembly, it is shaking Northern Ireland’s very foundations to their core. It is in real danger of doing real long-term damage not just to its own cause of the Union, but to the social fabric of Northern Ireland—our ability to have a functioning economy, to have a proper functioning health service that delivers for people and to have a proper education system. That is what is at stake at present. I urge the DUP to reflect seriously on its current route.

I turn to the UK Government. It has to be said that there is a certain air of unreality to what we are discussing today and indeed to the Bill. I recognise that it has fallen to the Secretary of State to intervene with both the written ministerial statement and this legislation, but we are not on a viable and sustainable pathway in terms of our public services and economy, budget management or governance. Something has to give and give very soon. The cuts themselves are illogical and counterproductive and they will bring long-term damage. We need to see reform and investment, but what we see is a spiral of cuts and a burning platform.

Northern Ireland is falling behind on a range of indicators. Members regularly highlight problems in the health service across Great Britain, for example, problems with waiting lists, access to GPs and access to dentists. Northern Ireland is struggling on every one of those issues and not just a bit more—it is significantly worse. We are falling behind on educational attainment and productivity. Whenever we look at the context on the island of Ireland, the contrast is ever stark. Life expectancy in the Republic of Ireland is now two years ahead of Northern Ireland; 20 years ago, it was the other way round. Things like that are happening through this decline.

On budget management, we see a major mismatch between what the guidance under the Northern Ireland (Executive Formation etc) Act 2022 says and the expectations that the Government are placing on civil servants. It is limited and contradictory. The civil service cannot initiate new policy and cannot tackle areas that are statutory responsibilities. That means that non-statutory areas have been disproportionately targeted, with cuts on things such as early intervention and prevention: actions that are vital not just to address opportunities for people but to avoid much steeper costs downstream that will have to be picked up in due course. Those costs may be with us for many years to come thereafter.

The Departments cannot live within the current control expectations placed on them. The Northern Ireland Departments collectively are overspending to the tune of £100 million a month. So one of three things will have to happen over the next few months. We may see the status quo continuing, which will lead to a massive overspend by the end of the financial year, which will be kicked into next year or subsequent years and become an albatross around Northern Ireland’s neck for many years to come.

Alternatively, we may see the Government recognising that this is unsustainable and intervening through a more formal version of direct rule, trying to balance the budget over the remainder of the year. That will mean even deeper cuts because trying to manage cuts over a six-month window is much more difficult than over 12 months—and doing it over 12 months is bad enough. If they go down that route, that will bring major carnage. By far the most benign scenario involves the Government and Northern Ireland parties agreeing on some form of a national package linked to a restored Executive. Of course, that negotiation would be much better done from the place of a functioning Executive, but whether it is before, after or during that reformation process, that discussion has to happen. I dare say that, from the Government’s point of view, the prospect or reality of a restored Executive will be a precondition for anything moving in that regard.

I welcome what the Secretary of State has said about the Alliance party’s proposals. We are talking about a process of stabilisation, which can become a platform for wider transformation. We cannot make Northern Ireland sustainable from that burning platform. So we have to invest to save and we need a genuine, multi-year plan. A certain degree of discipline from all the Northern Ireland parties over many years will be required to ensure that they abide by a programme for Government, if that is to be delivered. I imagine that there will be a degree of conditionality in what the Government will say in that particular regard. My party is certainly up for those discussions over the next few weeks. We welcome what the Secretary of State has said today and look forward to engaging with him over the next few weeks in that respect.

We also have the governance crisis, which I already touched upon. We need the Executive and Assembly back to provide that coherent structure for managing the situation. With a functioning Executive, we will be in a much better position to have those discussions around not just the financial package but the Barnett formula and addressing that squeeze.

I welcome what the Chair of the Public Accounts Committee, the hon. Member for Hackney South and Shoreditch (Dame Meg Hillier), said about the Northern Ireland Audit Office. What she said reflects the importance of respect for the independence of that body. I would add that the same points and logic extend to the Northern Ireland public service ombudsman. I concur with what the Scottish National party spokesperson, the hon. Member for Gordon (Richard Thomson), said about the Government’s response to clarify section 75 duties and exactly how they have been taken forward in relation to the Budget.

Although I have perhaps said a few harsh things, there is a positive future for Northern Ireland if we can get this right. Northern Ireland is a great place, but it needs a Government to deliver. With a coherent Government, and with parties genuinely committed to working together, we can push ahead with invest to save. We can see what opportunities lie on the island of Ireland for certain economies of scale. On a purely economic and social level, we can do things without entering into the wider political and constitutional debate. We can address the cost of division—the duplication that comes from running parallel services. We can potentially see the reform of the Barnett formula, which will give us a proper needs-based platform from which to proceed. We can invest in prevention and support our community and voluntary sector.

Over the next few weeks, there are important decisions to be made. If people do not step up and if we do not get this sorted, the future of Northern Ireland will be bleak. If we can get it right, the future is hopeful. I want to optimistic about that future.

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[The Minister of State, Northern Ireland Office (Mr Steve Baker)]

I am likewise most grateful to hon. and right hon. Members for their contributions this evening. I am most grateful, too, that the House again recognises that a Bill such as this is a responsible, but regrettable, step that we need to take as the UK Government to ensure that the delivery of public services can continue in Northern Ireland.

There are no easy decisions in the budget for anyone—not for us as the UK Government, not for Northern Ireland civil servants and not for a future Executive. We recognise that and we know that those decisions will not be going anywhere when an Executive returns.

It has become apparent to me that I and my right hon. Friend the Secretary of State may have been misunderstood on this point, so I want to be perfectly clear: on their return, an Executive will face this stark budget and the difficult decisions that follow from it. But we are also perfectly clear that the right people to be taking those tough decisions are locally elected Northern Ireland Executive Ministers. It should not be the UK Government or civil servants plugging the decision-making gap. It is only through the return of Ministers in Northern Ireland that the vital reforms that so many hon. Members have referred to can begin to take place to put public services on a much more effective, efficient and sustainable basis, fit for the demands and opportunities, and indeed the previous advancements in technology, particularly in medicine, of the 21st century.

Let no one mistake what is needed: reform to the health system, to make the most of decades of improvements in healthcare through specialisation; reform to drive down the waste that comes from a divided education system, perpetuating divisions that would be unlawful once children moved from education into work; and reform to foreshorten the shocking delays in Northern Ireland’s justice system and its appalling cost to taxpayers at turn after turn. Only through reforms and more will the public have the services they need and deserve.

What is the prize? In this debate, if I may say so, we have heard two competing visions for Northern Ireland: a vision of Northern Ireland standing with its hand out to the Republic of Ireland for subsidy, and a vision of Northern Ireland standing with its hand out to Great Britain for subsidy. This Government have a better vision than that. We have a vision for a strong and confident Northern Ireland standing on its own two feet, with a balanced budget, underpinning sound public services that have been reformed and are effective, and—yes—are properly audited.

We want to focus on the great, rich tradition and heritage of Northern Ireland’s industrial spirit, on the great commerce of Northern Ireland and on Belfast, one of the great industrial cities of this great United Kingdom. We want private capital flooding into Northern Ireland. We know that the great people of Northern Ireland are entrepreneurs who care about place and community. We know that there is goodwill all around this world for people to invest in Northern Ireland, but they are put off investing by the absence of an Executive.

[Stephen Farry]

I very much share the vision that the Minister is setting out, but, leaving aside the language around handouts and subsidies, will he at least recognise that to get from A to B the restored Executive will need a partnership with the UK Government to ensure that we can take forward those reforms?

[Mr Baker]

The hon. Gentleman makes a good point, and I shall come on to it in a moment, but I want there to be no mistake about this, either: as far as I can see from my vantage point, there is a pretty close correlation between poverty and paramilitarism in Northern Ireland. Leaving a primary school surrounded by razor wire in Shankill, I was struck by some of the murals I saw in that housing estate, commemorating and celebrating people who ought not to be celebrated. If I go to other areas of Belfast and elsewhere, there will be murals celebrating the other side.

It is time for Northern Ireland to be moving on. It is time to lift people out of poverty so that they have a better hope than the commemoration of a past that should never have taken place. No more looking back to a past that never was; it is time to look forward to a better future, founded on prosperity and sound public finances. Call me old school, Mr Speaker, but I like a balanced budget. Let us move forward.

Capital investment for a safe return from investors around the world, the rule of law, good government—the conditions are set. We have an entrepreneurial population, great skills, comparative advantage in financial services, cyber-security, advanced manufacturing and more. Crucially, we also have an institutional arrangement that, if people would only see it, is unique in all of the world: access to the UK as of right and to the EU as a privilege, UK services law and access to the UK’s free trade agreements. That is a unique set of institutional arrangements to promote Northern Ireland’s prosperity for the long run and deliver just the transformation that is needed.

It is true, as hon. Members have indicated in relation to the Windsor framework, that that comes at the price of a difficult compromise, with some EU law still in place. I confess it is a difficult compromise for me, as I have said in the past. However, we have to choose from available futures. At the moment, Northern Ireland’s future looks bleak indeed unless we get behind the reforms that are needed to balance the budget for the long run. I believe that if we do that, if we come together in unity for our good purposes for Northern Ireland, we can achieve great things.

On the quantum that is available, the hon. Members for Foyle (Colum Eastwood) and for Belfast East (Gavin Robinson) seem to be united in the idea that the budget is some sort of punishment. The hon. Member for Foyle suggested it was a tactic. I say to him that that is categorically not true. This spending envelope is the spending envelope that the Northern Ireland Executive would have faced had they not collapsed. It is not the case that we would be punishing people in the way that has been set out. To listen to the debate—

Northern Ireland Budget (No. 2) Bill

Stephen Farry Excerpts

Committee of the whole House
Monday 4th September 2023 Commons Chamber

[Stephen Farry (North Down) (Alliance)]

At the outset, may I join in paying tribute to the outgoing shadow Secretary of State, the hon. Member for Hove (Peter Kyle), and in welcoming to his new role the right hon. Member for Leeds Central (Hilary Benn)? We are going to miss him on the UK Trade and Business Commission, on which he has had a very keen interest in recent years in Northern Ireland and the fallout on it from Brexit, which has had major ripple effects through our politics—not least, as we can hear this evening, on the subject of this debate.

It is six weeks on from Second Reading and it is fair to say that the situation in our politics has not improved. There is no sign of any return to devolution; indeed, the response from the right hon. Member for East Antrim (Sammy Wilson) to the Minister of State illustrates the lack of realism about the choices that face us collectively in Northern Ireland, and the choices that face Unionism in ensuring that Northern Ireland works for everyone. That is in everyone’s interest, not least the interest of Unionists.

With the public finances, I would argue that the situation is indeed much worse than it was six weeks ago, because the Northern Ireland budget is on an unsustainable trajectory. The budget that was set, as others have said, was not sufficient—it was inadequate—but there is a second layer to this, because the guidance to civil servants in the Northern Ireland (Executive Formation etc) Act 2022 does not allow them to take the decisions necessary to live within the measly budget that has been granted.

As the hon. Member for Belfast East (Gavin Robinson) has said, we already have a situation where it is projected that Northern Ireland will overspend by at least £500 million, which is greater than the overspend from the last financial year. That is more than £500 million of public pay pressures before Northern Ireland can even have parity with the settlements that have taken place elsewhere in the United Kingdom. Something is going to have to give. Either an Executive come in with a financial package and can begin to address some of those pressures, or the Government are essentially going to take it on the chin and accept that Northern Ireland will overspend.

That begs the question of what will happen with that overspend in future years. Will it be an albatross around our neck for years to come? Will people be expected to make cuts, or will the Government make cuts in-year to try to balance the budget? I would suggest that trying to do that in-year is now impossible, not least because so much of our budget is linked to salaries. We would lose people, and even if we did we would have to have redundancy payments for them. The only way anyone could possibly balance the budget at this stage is through stopping services completely, which is utterly inconceivable and untenable.

The point has been made that the budget situation is bad and will always be bad, and that having an Executive does not make any difference in that regard. I am not suggesting for one minute that a restored Executive will be a silver bullet, but I suggest to my colleagues who perhaps are dismissing the relevance of devolution at this point that every single stakeholder, when they are asked to comment on the budget crisis, stands up and says, “We want to see an Executive in place.” Whether we are talking about healthcare professionals or people who work in the education sector, the business community or the voluntary community sector, all of them are saying with one voice, “While it is no magic solution, we do want to see the Executive back in place.”

That reference to a restored Executive leads me on neatly to the point I really want to stress regarding a financial package: we need to see a twin-pronged approach to addressing Northern Ireland’s financial needs. Of course we need to address the lack of financial parity and the fact that Northern Ireland is not funded based on need. There is a structural problem of underfunding there, so things are not more generous in Northern Ireland than elsewhere.

I want to pick up on the comments made by the Secretary of State at the weekend to the British-Irish Association in Oxford. The conference is held under Chatham House rules, but I want to comment on what is in the public domain, as released by the Northern Ireland Office itself. In that speech, the Secretary of State was very negative about the concept of a financial package. He talked about money being thrown at Northern Ireland and Executives having squandered financial packages in the past—and there might be an element of truth to that. He said that the Executive need to stand on their own two feet—and, again, that is a worthy aspiration. But I stress that the notion that Northern Ireland can run a balanced budget, invest in public services and drive the economy from a burning platform will never happen. We will see more cuts flowing from budget cuts, and we will end up with decline and more decline. We will end up in a downward spiral in which Northern Ireland becomes ever more dependent, and we will see activity stop and more and more young people leave. That is not the future that I hear the Government articulating in their vision for a prosperous society in Northern Ireland, but what they are doing in terms of the budget belies their very worthy aspiration.

I ask the Minister of State or the Secretary of State to clarify in winding up that something will potentially be on offer when we seek a financial package. I appreciate that that is something that the Government may wish to do solely in the context of a restored Executive rather than up front, but it is important for any financial package to be based around transformation, a proper strategic plan and a programme for government for a restored Executive. That Executive must have clear targets and milestones, and a very clear idea as to how investment can turn Northern Ireland around. That is something on which a restored Executive can work in partnership.

[Mr Steve Baker]

The hon. Gentleman has just hit the nail on the head: a restored Executive could work in partnership with the Government. But I just emphasise to him that the sum available in this budget is the same as would have been provided were an Executive in place. Just to take further his point about reform and so on, he will know that since 2014, we have put £7 billion into Northern Ireland on top of the block grant. Various commitments to reform have been given in different agreements over the years on various fronts, including education, but it has not happened. I think we are all now getting to a point where we are terribly frustrated on all those fronts. He has hit the nail on the head: we need a restored Executive and then to work in a positive way together to make Northern Ireland function for its people, and that is what we are very willing to do.

[Stephen Farry]

I am very grateful to the Minister of State for his comments. I largely agree with him, but I will point to a certain disagreement on some aspects. I fully recognise that there have been past financial packages and problems with reform not being fully realised, particularly around integrated education, which is a clear example. We have to do better in that respect. From where we are, I do not see any alternative to trying to do that once again and learning the lessons from what happened in the past. I recognise that we have seen additional funding packages from the UK Government—obviously, we had a major uplift in support to deal with covid and its side effects on the economy, and that support was very welcome—but the fact is, as other Members have said, that our expenditure per head is not based on our need, and that fundamental point has to be recognised.

[Gavin Robinson]

I think it is helpful to emphasise at this point that, although the Minister indicated that this budget is exactly what an Executive would have been allocated were they in place, last year it was £322 million less than what an Executive would have needed, this year it is £431 million less than what an Executive would have needed, and the projection for next year is £458 million less. So in saying what he said, has the Minister not confirmed the real problem at the heart of this?

[Stephen Farry]

Indeed. I think we are talking to two separate points in that regard. Yes, the block grant would have been based on the current policy approach from the Government towards the Barnett formula and the assessment of need in Northern Ireland, but what we on these Benches are all saying is that we need to reassess the whole basis of how that is reflected. That is a conversation to be had. I would also take the point a bit further by saying that, if we had had an Executive in place, or indeed if we get an Executive in place shortly, that would be the form by which we could make this case much better to address both the fiscal squeeze and the negotiations on a financial package for Northern Ireland.

To give a human flavour to the scale of the crisis facing our society, I will close with one example of an area of crisis in Northern Ireland: special educational needs. There is a real crisis happening in that regard: the funding available is not meeting the levels of need. As I think all Members appreciate, this is one of the most sensitive areas, and one where Government has a duty to invest in children and ensure that their rights are properly protected. As we meet this evening, that is simply not the case in Northern Ireland. There are multiple failures to provide for children; the academic year has now started, but scores of young people still have not been allocated suitable special educational needs places. That has a major toll on parents and families—mental health issues and financial and career pressures—and on the children themselves, particularly a lack of opportunity, health and safety issues, a risk of regression and a lack of social inclusion. I appeal to Members, from whatever perspective we look at this—the Government in terms of setting the financial parameters, and also those who are still holding out for an Executive—that we need to get back to addressing those types of issues. That is what the coalface is like, and that is what we should be prioritising.