Northern Ireland Budget Bill

Stephen Farry Excerpts

2nd reading
Monday 23rd January 2023 Commons Chamber

[Mr Baker]

The Northern Ireland (Executive Formation etc) Act 2022, which we put through, gives civil servants the clarity they need to make certain decisions. We have put those officials in a difficult position to take those decisions, and I put on record now, since the hon. Gentleman gives me the opportunity, my thanks to them for rising to the challenge and bearing with this difficult situation. I am grateful indeed that permanent secretaries and others are rising to the challenge of taking the decisions that need to be made, but it is obviously not desirable that we should be in this position. Ministers should be in post in Northern Ireland doing what needs to be done.

If the Executive are restored in time to set a Budget for next year, the UK Government will of course continue to work constructively with Executive Ministers on a sustainable Budget that delivers for the people of Northern Ireland and supports economic growth.

[Stephen Farry (North Down) (Alliance)]

Will the Minister give way?

[Mr Baker]

I will, but I will then be determined to make progress.

[Stephen Farry]

I thank the Minister for giving way. He will appreciate that in other circumstances the Executive would normally now be considering the Budget for the coming financial year and that it is important to have certainty ahead of the start of a financial year so that decisions can be made, particularly in tough times. If the Executive are not restored very soon, in order to give some degree of certainty to Departments and related agencies, can the Minister give an assurance that the Government will act in the near future to put in place a framework not just for this year’s Budget legislation but for next year’s?

[Mr Baker]

I expect the hon. Gentleman knows that clauses 8 and 9 put in place a vote on account for next year. I will come to that as it is in my notes; if memory serves it covers 65% of the spending, but I will confirm that when I reach that section. That puts in place the spending for next year, but of course we would like the Executive to return to set the Budget for next year. If they do not return, we will have to do the job, and it will be tricky; there is no getting away from that. Without Northern Ireland Executive Ministers in place, it has not been possible to take the difficult political decisions necessary to balance the Budget at this very late stage in the year, and that of course compounds the problem for next year. It is with great sobriety that I stand here and acknowledge that it is going to be very difficult. I for one would be up for the challenge of doing it, but it is not the Government’s position that we as UK Government Ministers do that; we would like the Northern Ireland parties to step up to that duty.

If the Executive are not restored on time, we will continue to work with the Northern Ireland civil service to prepare for next year’s Budget. The Government’s priority for that Budget will be to deliver a fair outcome for all taxpayers and citizens in Northern Ireland. We will work to put Northern Ireland’s finances on a sustainable long-term footing, which means appropriate consideration of a wide range of options including revenue-raising measures, as well as reviewing all spending.

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[Sammy Wilson (East Antrim) (DUP)]

First, I too join the Minister in expressing sympathy on behalf of my party to Alex Easton, one of the MLAs for North Down, whose parents died tragically in a house fire today. Our thoughts and prayers are with him. He has lost both elderly parents today.

[Stephen Farry]

Alex Easton lives in my North Down constituency and, to echo what the right hon. Gentleman has said, the community in Bangor is extremely shocked by what happened overnight. Regardless of politics, the entire community across Northern Ireland will want to give their full support to Alex and his family at this most difficult time.

[Sammy Wilson]

I am sure that feeling will be widespread across the constituency, as Alex—a former member of my party—is well known and loved there.

I share the Minister’s view on at least one point he made at the start of the debate—namely, I would have preferred it if this Budget had been discussed in the Northern Ireland Assembly, and if decisions about priorities and spending had been made there. Unfortunately, that has not been possible because the Northern Ireland Assembly cannot function, because the very basis of the Northern Ireland Assembly has been destroyed. The Assembly has to work on the basis of consensus, but that consensus has been destroyed by the protocol. We hear ad nauseum from the hon. Member for North Dorset (Simon Hoare), who chairs the Northern Ireland Affairs Committee, that we should all be back and we cannot have any more Northern Ireland exceptionalism, but Northern Ireland has been made exceptional by decisions that he has supported—namely, that Northern Ireland no longer remains fully part of the United Kingdom as a result of the protocol.

Furthermore, even though I, my party and our representatives, as Unionists, believe that the protocol is damaging to Northern Ireland’s position in the United Kingdom and to our economy, had we been sitting in the Assembly today, we and our Ministers would have been required to implement the very thing that we say is damaging us, making us exceptional, removing us from the rest of the United Kingdom, causing huge economic burdens—I will mention some in a moment—and being a drain on the Northern Ireland Budget. Yes, we would like to see this legislation debated and these decisions made in the Assembly, but until the basis of the Assembly is restored—that is, until there is cross-community consent for decisions that have to be made—that will, sadly, not be possible and this House will be required to intervene.

It is quite right that the Minister has taken a decision. I do not criticise him for leaving it so late, because he could not have done it before. Indeed, this Budget crisis originated not in October last year, but at the very start of that year—ironically, when the Assembly was fully functioning, and we had a Finance Minister in place, an operating Executive and Ministers who could make decisions about priorities—when, for the second time, Sinn Féin failed to present a Budget that could have the support of any party in the Assembly. There have been only two Sinn Féin Finance Ministers, Máirtín Ó Muilleoir and Conor Murphy, and neither has ever been able to bring forward a successful Budget. There is this idea from the Chair of the Northern Ireland Affairs Committee that these things would be resolved if only the Assembly were functioning—but the Assembly was functioning, and this was not resolved.

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[Stephen Farry (North Down) (Alliance)]

The Bill is essentially about giving legal effect to the Budget policy statements and the allocations made by the Secretary of State back in November. In practical terms, there is relatively little that we can do retrospectively tonight about what has already happened, but this is an opportunity to make wider points about funding, and to look ahead.

These decisions come late in the financial year, and in the absence of a formal Budget statement from a devolved Executive, bodies are essentially operating in a vacuum. That has led to some very unfortunate overspends, and has inhibited the capacity of Departments and agencies to plan ahead properly, and to use their scarce resources with maximum efficiency and effectiveness. That has real-life consequences. It is certainly my contention that having an Executive very much matters to the wellbeing of those in Northern Ireland, and to our finances. The notion that it does not really matter whether we have an Executive is a major fallacy.

Obviously, the lack of an Executive is linked to the protocol. I promised myself that I would not mention the protocol, but as it has come up, I will make a few comments on it. My party recognises that the protocol brings a degree of economic friction. It creates a new interface within these islands, and it interferes with some sense of identity in Unionism. We recognise the problems of the protocol, but my frustration is that people charged ahead with Brexit without really considering the implications for a shared, interdependent Northern Ireland, but we are where we are. As for the way forward, we want a pragmatic solution. If we turn the protocol into a constitutional test, I fear that we will not find a way forward. For us, the key issue is maintaining dual market access—access to both the wider UK market and the European Union market. There has to be some recognition that that means adherence to certain aspects of EU law and ultimately, in some respects, being in the jurisdiction of the European Court of Justice. That aside, we are extremely open-minded about where we go; as long as solutions are mutually agreed with the European Union, legal, sustainable in the long term, and work for the business community, we will give any outcome a warm welcome.

There has been reference made to the moneys involved in the trader support service. I would rather that the money was not spent on it, but it is recognised that the money does not come from our block grant; it is money that the UK Government are spending, so there is not a trade-off between that spending and what we can do ourselves in Northern Ireland.

There are clear implications for Northern Ireland from the current lack of a budgetary framework, most particularly for health. Night after night, healthcare professionals call for an Executive to be put in place to provide a framework for decisions. Everyone recognises that there is no silver bullet, and no magic money tree, but an Executive would at least provide a framework for decisions to be taken, and provide for some degree of planning, which is crucial when resources are scarce.

Reference was made to education, and the almost impossible task of finding £100 million of savings with two months to go in the financial year. I am the first to recognise that there are massive inefficiencies in our education budget, but they should be unlocked over time. Finding those savings in a short period will not work at all.

In a different universe, a devolved Executive would continue to function in Northern Ireland, and it would now be considering its Budget policy for 2023-24, rather than tidying up the end of 2022-23. Indeed, the 2023-24 Budget would be part of a multi-year Budget that allowed for longer-term planning and clarity on available resources. Furthermore, that Budget could be linked to a programme for Government, and fully aligned with a range of strategic objectives for the transformation of Northern Ireland. That alignment is highly desirable at the best of times, but is absolutely essential at times of financial stress and struggle. There is a clear example in the Department of Health, in which we all recognise that there has to be some degree of transformation. In particular, we need to invest in building up certain staff teams, to tackle the issue of waiting lists. However, if the Departments and the trusts are only getting their allocations quite late in the year and do not even know what they will get next year, they do not have the confidence and clarity to make those investments. That is just one example of a massive opportunity cost in not tackling those waiting lists, which I stress are the worst in the United Kingdom: we hear a lot about the health crisis across the UK, but on all those indicators, Northern Ireland is that bit worse.

While this Bill does include a vote on account, which allows Departments to spend legally at the beginning of the incoming financial year, it does not give clarity on what they will have to spend over that 12 months, so they cannot make longer-term allocations or plan properly. We need to see a Budget decision-making process for the next financial year, taken—preferably—by a functioning Executive that is restored in the near future, or by the Government, if they have to do that instead. That has massive implications for where we are going and for our governance, but at some point we have to recognise that that is the price we pay for not having functioning devolution, to provide some degree of certainty for those in our public services who are trying to do their best on behalf of all the people of Northern Ireland.

I tend to agree with the Minister that previous Executives have squandered opportunities to reform our public services, but that is not the entire story. It is also important to recognise that, as the hon. Member for Belfast East (Gavin Robinson) has set out, the size of our block grant in Northern Ireland is set to be squeezed in real terms over the years ahead, not only through the Barnett squeeze, but due to the fact that our basic allocation is being reduced because—for reasons that I will not labour at this stage—the wider UK public finances are in a difficult situation. We heard announcements from the Chancellor of the Exchequer in the autumn about how that would be managed over the coming years, but we are part of that wider framework and suffer as a consequence.

While recognising that our finances are unsustainable, I will highlight one area that my party has been keen to stress: Northern Ireland is wasting a lot of resources, which could otherwise be spent on investing in our economy and improving public services, on managing a divided society. There are many good reasons to overcome the segregation and division and to build a shared and integrated society, but finance must be one of them. Various estimates and reports over the past years have put the cost of trying to manage a divided society at between £400 million and £800 million per annum. That comes with major opportunity costs, as I have said.

Those costs occur in four particular areas. First, there are the direct costs of policing riots, other civil disturbances and parades, distortions to policing from the security threat and repairing damaged buildings and facilities. Secondly, there are costs associated with the duplication of goods, facilities and services implicitly for separate sections of our community. That includes most clearly what happens with schools in different sectors, but also the spatial distribution of GP surgeries, jobcentres, community centres and leisure centres.

Thirdly, there are hidden costs, which impact on the environment in which Departments and agencies operate and include pressures on the housing sector, for example, from demographic imbalances and a sense of territory, with various implications for people’s mobility depending on where they are housed. Fourthly, there are lost opportunities for economic activity and tax revenue and for investment in tourism and job creation.

Beyond those costs, there is a compelling case for transforming health. The Northern Ireland Fiscal Council produced a useful report on that in the past year, which people should read and consider. Obviously Northern Ireland has higher health needs than other parts of the UK, so health spending will always be higher in Northern Ireland than elsewhere, but none the less the report points to inefficiencies in how our health sector is run and operated. There is a challenge for a returning Executive to genuinely tackle that and, in doing so, to improve health outcomes. This is not about cuts for the sake of cuts; it has to be about rebalancing how we spend our Budgets to get better outcomes.

Another clear example is the scandal of double funding between schools and further education, which amounts to scores of millions of pounds every year. Given that Northern Ireland does not have a proper 14-to-19 framework, we end up with schools trying to retain pupils post-16 by offering a whole range of vocational courses, even though the further education system is a much better place to offer such courses. Schools also get two years’ worth of funding per student in years 13 and 14, but if a student is not performing sufficiently well in the school’s eyes, they are asked to leave rather than stay and bring the school’s results down in the artificial league tables, so they end up going into the FE sector and effectively repeating a year. That is just one example of money needlessly being spent when it could be better invested elsewhere.

My wider fear is that public finances in Northern Ireland are on a burning platform. Some retired civil servants have talked openly about the fact that £1 billion-worth of pressure is building up in the system, but our Budgets are shrinking and the longer-term trajectory is smaller, smaller, smaller. Without the time, space and opportunity to reform and transform, all we will see is cuts, cuts, cuts. That means that we will end up with worse health and education systems, we will not invest in skills and, indeed, we will not meet our obligations to invest to mitigate climate change. What we will see, essentially, is managed decline and stagnation, and that simply lets Northern Ireland down.

We have to find some means of breaking this vicious cycle. I know that we have had past packages in relation to Stormont House, including Fresh Start and New Decade, New Approach. Some very searching questions and challenges have to be raised as to why those have not been properly addressed and why promises have not been fully delivered. I am not directing that at the Government; the question why that has not been the case is also one for the Northern Ireland parties. I appreciate that there will be a certain degree of scepticism in the Treasury whenever I say this, but I do not think we have any alternative but to think through how we can talk about the development of a longer-term plan for Northern Ireland, involving a restored Executive and the Treasury, and how over the next five to 10 years we can make Northern Ireland a financially sustainable society and, in the process, improve our public services and economy.

I am conscious that we are coming up to the 25th anniversary of the Good Friday agreement in a couple of months. That agreement has transformed Northern Ireland in many respects and we are very grateful for that, notwithstanding the current problems and controversies. Many people have reflected on the fact that perhaps Northern Ireland has not been transformed fully in terms of social and economic opportunities and in terms of investments. People are talking about looking forward to some form of prosperity decade; we need to think about that.

There is an opportunity, if we can get ourselves past the immediate blockages, for the Government, the parties and a restored Executive to try to work in partnership to hammer out some sort of plan and break the cycle. I believe that there is a compelling overarching argument for doing that. I am keen for myself and others to elaborate on that over the coming weeks, and it is important that we use tonight as an opportunity to set out our initial thoughts on the potential way ahead. This will be based on investing to save; we cannot unlock and change Northern Ireland without some investment coming in from the outside. Others will be entitled to hold us to account for all of that. With that cheery thought on what could be an exciting future for us if we can get past the hurdles, I will end my comments.