NIPSA Responds to Draft NI Budget 2011-15

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16 February 2011

General

While NIPSA welcomes the opportunity to comment on the draft budget 2011‑2015 announced by the Finance Minister Sammy Wilson on 15th December 2010 we believe the consultation process is severely deficient for a number of reasons.  Firstly on such an important document we take the view that a full 12 weeks would have been more appropriate to enable adequate consideration to be given by the consultees to its content.  Secondly the draft budget is sparse on detail and while we understand the processes involved including the separate consultation on the content of departmental budgets, the NI Draft Budget does not lend itself to proper analysis and comment.  Furthermore we would point out that the four requirements of proper consultation mean that it must be undertaken at a time when proposals are still in their formative stage, include sufficient reason for proposals to be given intelligent consideration and response, adequate time for this purpose and conscientious consideration of the response when final decisions are being taken.  It is our view that none of these requirements are met within the proposed timescale for consultation.

It is clear to everyone and indeed it is recognised in the Minister’s Foreword that the public expenditure envelope has placed unprecedented pressure on our public services and that the NI Executive is faced with an invidious task.

The parties in the NI Executive whilst stating that Northern Ireland has been dealt a very poor hand nonetheless has too readily accepted the block grant allocation for the next four years and has now positioned itself to implement cutbacks in order to live within the allocation from the UK Government. Although there has been much publicity in Northern Ireland about the NI Executive’s criticism of the UK Government’s spending plans and allocations.  It is our view that much more could have been done to pressurise the UK Government on the unacceptable spending allocations.  We recognise that some joint work was progressed on this front with the other UK devolved administrations most significantly the Joint Statement from the three devolved administrations signed by the First and Deputy First Ministers as well as the Finance Minister in Northern Ireland.  However we are concerned that the political mileage and clout that the devolved administrations possess could have and still can be harnessed to build a real momentum of pressure on the UK Government to change its course on its deficit reduction programme.

In particular we believe if the Executive is to properly represent the interests of the people of this area it should have articulated its support for an alternative strategy by the UK Government which addresses the deficit in a way which does not harm public services and employment in Northern Ireland.  Indeed it is our view that on such important a matter the UK Government should have consulted with the devolved administrations and the NI Executive should have insisted on such consultation.  This is particularly relevant when the UK Government decides to implement economic and fiscal policies which did not feature in either of the election manifestos of the two parties in the UK Coalition Government for which there was no mandate.

A significant number of eminent economists have taken a deeply critical view of the rationale behind central government’s strategy.  The declared opposition of the NI Executive to the UK Government’s strategy on dealing with the deficit would have been more meaningful if the Executive developed an alternative strategy based on the needs of the people of Northern Ireland; a strategy which placed the emphasis on growth, the creation of jobs and the introduction of a more progressive taxation system across the UK as a whole.  The experience of the deflationary measures adopted by the Government of the Republic of Ireland reinforces the widely held and respected view that cutting government spending in order to escape a recession is likely to be unsuccessful.  NIPSA takes the view that it is still not too late to develop an alternative narrative behind which the peoples of the devolved areas can rally.

The Irish Congress of Trade Unions has in a number of publications highlighted the damage inflicted on public finances by the levels of tax avoidance, evasion and uncollected taxes.  Research has pointed to a loss to the public purse across the UK of over £120bn per annum.  This does not include the funds lost to the UK through the reliance of many corporations and businesses of off shore tax arrangements relating to registration of private sector companies. The significance of this point is that if the missing tax was to be recouped, or even a significant proportion of it, then the Barnett formula application would ensure that sufficient additional monies would flow to the Northern Ireland block grant and as a consequence there would be no requirement to cut departmental budgets and impose the cuts in jobs and services that are planned.

While the NI Executive might regard this an extraneous matter outside its powers the Executive should be aware of the anger that such practices generate among ordinary working people who pay their taxes.  There is no reason why the NI Executive could not, along with their devolved counterparts, lead a campaign in the UK to have this disgraceful situation reversed.  If these issues were tackled in a serious and resourced fashion the “need” for the levels of cuts being enforced by Westminster could be substantially reduced or removed completely.

In the above paragraphs an emphasis has been placed on the position of the NI Executive and the alternative strategies which could be adopted by the UK Government to bring the UK out of the recession and protect public services and employment.

Against this background, inviting the public in Northern Ireland to respond in any detailed way on the specifics of the departmental allocations is akin to asking which limbs they consider should be amputated and which should be saved.  As a trade union representing workers who deliver public services across a range of important services and functions to the community in Northern Ireland we do not see it as our role to identify which services should be cut and which should be saved.  Whatever the political “necessity” and justification for managing the block grant the trade unions have a responsibility as independent organisations of workers to defend the economic interests of its members and their families, not only in the context of employment but also in respect of access to public services.  In addition, while we are familiar with the debate about the relative size of the public versus the private sector the latter should not be grown at the expense of destroying the former.

We are more than content to highlight the disastrous consequences of the reductions in public spending but we are not in the business of proposing that one service should be provided with additional resources at the expense of other important services.  Any specific comments therefore must be considered against this position.
Sources of Funding for Public Expenditure

Regional Rates:  The trade union movement was critical of the previous decision to freeze the regional rate during the period 2008-11.  We also expressed opposition to the cap on rates which meant that people with greater assets would be paying proportionately less than the less well off.  We therefore accept the proposal to increase rates in line with inflation but we would strongly recommend that the cap on rates be removed.  We would contend that consideration should be given to lifting the baseline to what it would have been had the freeze on rates not been introduced in 2008.

Water Charges:  The position of NIPSA and the trade union movement generally on the issue of water rates is well known.  We welcome the statement that the introduction of water charges will be deferred.  However we would go further and reiterate our view that the introduction of water rates should be disregarded as an option for the funding of the water service which we believe should cease to become a Government Owned Company and be brought back fully under public control and accountability with governance arrangements which are appropriate and rigorous, in order to deliver the service that the community deserves.

Revenue Raising Options:  We would comment on a number of the revenue raising proposals and in particular on the underlying assumption that the revenue identified is taken into account by individual departments in setting their spending plans, priorities and programmes.  It is clear however that no consideration has been given to the reality of meeting these revenue targets and departmental programmes and thus services will be affected detrimentally if they are not met.

NIPSA has made it clear that it favours the retention of the Port of Belfast in the public sector and we have made the case previously that Belfast Port should be given full commercial powers.  We agree that arrangements should be agreed to utilise some of the surpluses that the “Port” generates for public sector infrastructure programmes.

Public Sector Pay:  NIPSA fully understands that the pay of the vast majority of public servants is determined by national bargaining units whether in the NHS or Local Authorities.  NIPSA supports these parity arrangements and will oppose any attempts to interfere with them.  We are opposed, as are the trade unions in Great Britain, to the two year freeze on the pay of public servants and we will be cooperating with our colleagues to pressurise the UK Government to rescind this policy.  We do however welcome the statement at paragraph 3.34 of the draft budget document that in mirroring the pay restraint exercised by the UK Government that civil servants should receive scale progression, similar to their colleagues covered by the UK Pay arrangements, and that those civil servants earning less than £21,000 should receive a further annual award of £250. This is of course without prejudice to our opposition to the UK wide pay freeze imposed by the Chancellor of the Exchequer.

Protection For Health:  NIPSA welcomes the protection for the health budget outlined at paragraph 3.42 but would express concern that with an integrated health and social care approach adequate resources must also be allocated to the social care sector otherwise investments in the health sector itself will result in additional pressures and costs.  While the “health” budget rather than the health, social services and public safety budget has been ring fenced the responsibilities of the DHSSPSNI are broader covering social care and public safety and the Department would be placed in an invidious position if it was not able to deliver fully its social care responsibilities or only partly deliver its responsibilities in health and social care.  We appreciate fully the consequences for other sectors and services but it is essential that additional resources are allocated to the DHSSPSNI.  This should be done in a way which does not “rob Peter to pay Paul”.  We understand that in the region of £200m per year for the four year period is required by DHSSPSNI and serious consideration needs to be given to where funding can be secured from the allocation without creating a detrimental impact on jobs and services in other sectors.  We are therefore not proposing that the budgets of other departments are “raided” to meet this demand.

Presbyterian Mutual:  The question does arise as to whether the treatment of this issue should conform with the standard approach that the UK Government has taken to the bail out of other financial institutions with the totality of the assistance coming from HM Treasury rather than the Reinvestment and Reform Initiative borrowing and the NI Budget allocation.

Current Capital Switch:  We understand fully the impact of the recession on the construction industry and the employment consequences of this. We would caution however about establishing any policy precedent with such a move.  The private sector in Northern Ireland is heavily dependent on public spending, both capital and current with the construction industry particularly dependent on capital spending.  If the NI Executive is committed to this transfer it would need to be proportionate, avoid any detrimental consequences for public service delivery and be targeted in a way which maximises legitimate employment in the sector and which reduces the amount that would be realised as profit by private sector companies.  There should also be some flexibility for departments to switch from capital to current spending where a strong case is made for the protection of services and jobs.  It makes no sense to redirect resources to the construction or any other sector to create jobs if the consequence of this results in a loss of both jobs and services in public services.  The question also arises as to what if any impact the switch from current to capital will have on the subsequent baselines for current expenditure.  A specific response on this query is required.

Green New deal:  There is a strong case for more resources to be invested in this initiative in order to both create jobs and conserve energy with the accompanying savings especially for those sections of the community condemned to fuel poverty.  However a case should be made that the UK Government should provide additional funding for this initiative.

Administrative Costs:  NIPSA welcomes the setting aside of the administrative costs controls that have been operated over this last number of years.  These have been portrayed as efficiency savings in “bureaucracy” and have been arbitrary in their application and impact.  The bearing down on administrative costs while ostensibly targeting “bureaucracy” impacted in a negative way in many cases on important work necessary to support the delivery of services.  The term front line services needs to be defined as widely as possible to include the logistic administrative and other services which enable staff in direct contact with the public to concentrate on this activity without themselves being overburdened by administrative tasks performed by other staff.
Proposed Departmental Budget Outcome

In line with previous comments above we do not intend to propose variations in the departmental allocations because we do not believe that one public service should suffer because of the relative importance given to the services provided by departments.  That is a matter for the NI Executive.  As the draft budget document itself recognises, the public expenditure settlement for Northern Ireland is inadequate to meet the needs that all departments have identified as necessary for the well being of the community.

NIPSA will be responding to the departmental consultative exercises on their draft budgets and we will be highlighting the inadequacy of the allocations that have been proposed for each department.  We will however be expressing our opposition to any forms of privatisation or externalisation to public services including any attempts to pass on the delivery of existing services to the voluntary and community sectors.  The primary way in which the voluntary sector can deliver services more cheaply is through a reduction in pay rates and other important terms and conditions of employment including pensions and employment levels.  This would create a race to the bottom which is unacceptable.

Chapter 5 Equality, Anti Poverty and Good Relations:  Research by the House of Commons Library in 2010 into the impact of the UK Budget demonstrated that the cuts in public spending would be borne disproportionately by women, as users of public services, as public sector employees and as benefit recipients.  It is reasonable to conclude that the out workings of the budget in Northern Ireland will have no less a discriminatory outcome. This Northern Ireland budget will have to be tested against these and related concerns and consideration to appropriate public consultation and action will need to be addressed.

Specifically there has to be a central equality impact assessment of the NI Budget not just on departmental proposals. The indication is that it is for each department to carry out its own impact assessment from an equality perspective but the impact of the overall reductions in funding and the impact upon the Section 75 categories very clearly necessitate a separate overarching EQIA.  Indeed if this was progressed in a rigorous and robust way the conclusion could be utilised by the NI Executive to press the UK Government to provide additional funding in the block grant.

Public Private Partnerships:  It is clear that a significant amount of the block grant is already allocated to repayments to the private sector consortia which are involved in the public private partnership/private finance initiative projects in Northern Ireland.  With a reducing budget these payments will come to represent an even greater percentage of the funds available to deliver public services.  NIPSA would oppose any further projects being initiated in Northern Ireland using the PPP/PFI financing model.  Furthermore we would ask what if any negotiation has taken place with the private sector consortia involved in existing schemes to reduce the levels of repayments in line with the UK Government’s June statement that it was advising departments to renegotiate better value from private sector contracts.

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