NI Executive must be prepared for tough decisions

Ulster Unionist finance spokesperson David McNarry MLA has called for changes in how the Executive operates, if it is to guide Northern Ireland through trying economic times.

The most urgent issue facing the United Kingdom is reducing the budget deficit. The most urgent issue facing Northern Ireland is how we are going to achieve our share of that reduction in a way that ensures the Executive delivers more for less and protects jobs and front line services. A day before the Budget and only months before the next Comprehensive Spending Review, the Ulster Unionist Party does not believe that the Northern Ireland Executive is prepared to make the tough decisions or to change the way it does business.

HM Treasury and the coalition Government have published a Spending Review Framework which charts how the Government intends to tackle the budget deficit whilst improving productivity. The coalition Government is prepared and the public are informed about what they intend to do.

The Northern Ireland Executive on the other hand is working from its outdated Programme for Government, continues to make serious and costly errors and has the unchanged mechanisms to manage fiscal change - in short the Executive is still dysfunctional. As we enter into what will be the most difficult period of public spending in a generation the Ulster Unionist Party believes this has to change.

To ensure that Northern Ireland emerges from this difficult period in a stronger position the Executive needs to make three significant changes:

· Revise the Programme for Government.

· Set out a Framework for Managing Budget Reductions and Increasing Productivity.

· Increase Transparency and Accountability.

The Ulster Unionist Party believes that taking these steps are crucial if Northern Ireland is to emerge from the next Comprehensive Spending Review in a stronger and more united position.

The size of the Task

The national deficit is currently running at some £903 billion. Equivalent of 62.2% of GDP.

In 2010 the interest on the national debt will cost £42.9 billion a year. It has been estimated that debt interest payments will climb to £73.8 billion by 2014/15. To put that in perspective, when the UK went bust in 1976 it was running a budget deficit of 6% of GDP. In 2010 that deficit is going to top 11%.

The new Westminster Government is committed to halving the national debt over 3 to 4 years, this will necessitate spending reductions in the region of £60bn. If the Executive intends to continue to defer water charges the Executive's share of these reductions could be £1bn or more by 2013-14.

We already know that the UK Government has demanded savings from the Stormont Executive of £128 million in the initial tranche of £6.2 billion of cuts.

This is on top of a locally generated deficit in the Stormont budget of £370 million, the "black hole" in the budget which the Ulster Unionist Party warned about consistently for over a year despite denials that it existed by two successive DUP Finance Ministers.

Tomorrow's budget will start this process, it will be followed by the Comprehensive Spending Review in the autumn - the question is, is the Executive ready?

The obstacles to delivery

£250+million of cock-ups

Going on evidence to date the answer is clearly no. The Leading parties in the Executive have a record of cock-up and lack of leadership.

The list of mistakes is long and includes:

· The stalled review of local government costing the taxpayer £9 million;

· The stalled Education and Skills Authority (ESA) costing the taxpayer over £7 million;

· The stalled Maze stadium project costing the taxpayer £12·5 million;

· The failure to collect £138 million in rates arrears;

· The serious miscalculation of the Crossnacreevy project costing in the region of £195 million;

· The Department of Agriculture has just been fined a net £31 million by the EU because of maladministration, and more fines are on the way;

· The Northern Ireland civil service is paying out £21 million a year in sick pay. Clearly, the system is also sick and needs a remedy;

In addition to this litany of cock-ups, the DUP Environment Minister continued to recruit planning staff- staff who have now to be redeployed - despite warnings about the size of the Stormont black hole and the obvious fall-off in planning applications.

This pattern of failure is primarily caused by the failure of the Executive to act as a corporate body, making joint decisions. Ulster Unionist Ministers have been warning about this dysfunctionality for the past two years.

The carve-up politics practiced by the DUP and Sinn Fein has undermined the ability of the Executive to operate corporately. Yet it is only through corporate decision making that the scale of cuts demanded by the Westminster Government can successfully be addressed.

How to tackle the Problem

Rewrite the Programme for Government

The Programme for Government was written in 2007 in markedly different economic and fiscal circumstances. This means that a significant number of the priorities and targets are no longer achievable or as creditable. In reduced and very changed circumstances the Executive must reprioritise to ensure that we deliver the services and economic policies that are essential to the people of Northern Ireland and our economy. The refusal by Sinn Fein and the DUP to even contemplate a revision of the Programme for Government is putting Northern Ireland's stability at risk and illustrates the silo mentality at the heart of our Government.

Setting a Framework for managing budget reductions and increasing productivity

In the First Trust's most recent Economic outlook and business review, Victor Hewitt stated: "it is clear that the Executive is struggling to deal with a deteriorating fiscal position". The Ulster Unionist Party believes that unless the Executive can agree to a more co-operate framework of decision making they will continue to struggle and this could have serious consequences.

The Ulster Unionist Party is proposing that we need a strategy for prioritising programmes, spending and efficiencies in order to meet revised Programme for Government targets. We envisage placing every government programme across all Departments on a common weighted scale, with relative weights for politically pre-prioritised factors, such as healthcare, job creation and social need, which are intrinsic to those programmes. This would be pre-determined and it would be a more professional and transparent way to tackle the problem.

The current system relies on departmental decision making on reductions as opposed to overall objectives. This mechanism is, at best, destabilising to the entire system. It also lacks transparency and has the potential to create a situation which the public would not understand where, for example, a football club might get a new ground while a hospital ward might be closed simply because separate Departments happen to administer those areas.

Our new common priority scale would be a more professional and more corporate way to handle the new climate of cuts that we face as a regional Administration. The emphasis on that point is that we face the cuts as a corporate regional Administration and we should deal with them in a corporate manner.

Corporate decision making and the proper functioning of the five party coalitions are not options in this climate of cuts. They are necessities.

However, dealing with the forthcoming reductions should not be solely an exercise in deciding what to cut. It must also be a fundamental appraisal of how we approach service delivery, efficiency savings, productivity and value for money. For example the most recent progress report showed that 50% of planned savings for 2010 -11 are considered "on track with significant risk" or "not on track". In short we must think innovatively about productivity and the role of government.

Increasing Transparency and Accountability

The Coalition Government has made a commitment to increase the 'quality, transparency and accountability of financial information'. The Ulster Unionist Party believes the Executive must make a similar commitment to ensure that the Assembly, the public and interest groups are properly informed about their decisions.

International experience shows that if the public understands why certain reductions or changes have to be made they are more likely to accept those decisions. We must learn from this experience.

At present there is a significant lack of transparency at the heart of the Executive's financial management. The Ulster Unionist Party has particular concerns about:

· The role and output from the Department of Finance and Personnel in monitoring and evaluating Departmental Efficiency Delivery Plans.

· The role and output from the Department of Finance and Personnel and OFMDFM in monitoring and evaluating performance delivery against Programme for Government targets. No robust evaluation of productivity.

· The reporting mechanisms and therefore the delivery of the 3% cumulative efficiency savings by all Executive departments.

· Lack of information about how the Executive will handle further in year reductions whilst maintaining service delivery.

The Ulster Unionist Party also recognises that the standards of financial scrutiny in the Assembly also need to improve. We therefore support that the Assembly set up a Financial Scrutiny Unit in its research and support services to enhance the Assembly's ability to examine the fine detail of government spending proposals. This would mirror practice in Scotland initiated last year.

The Ulster Unionist Party has also called for an Assembly Budgetary Review Committee to help to build consensus and to make decisions based on a joint vision, rather than on what we have now, which is haggling and bartering between Ministers.

Conclusion

Northern Ireland has come along way in ten years. Devolution has been placed under many stresses. However, the period we are entering into will be unlike any that we have known. The national Government has been formed out of a coalition of two very different parties. However, they are prepared to put aside their differences for the good of the nation. In Northern Ireland we need a similar level of maturity to ensure that we come out the other side of this period in a stronger position. This will take maturity and commitment, however, it will be greatly helped if the Executive puts in place a corporate framework for decision making and reform. This is not just about money - it is about how the Executive carries out its business. This needs to be both corporate and transparent. This is what the Ulster Unionist Party is demanding today.

Evidence of the need for change…

Sir Reg Empey MLA Fri 12 June 2010 : on the way the Executive works

Only last week our Party Leader Sir Reg Empey had to leave a meeting of the Executive before it ended because the DUP and Sinn Fein had gone off for extended private negotiations during the meeting. Sir Reg said that the "usual routine" of side room DUP-Sinn Fein talks had left himself, fellow UUP health minister Michael McGimpsey and the SDLP's Social Development Minister Alex Attwood alone around the executive table for protracted periods. As the DUP and Sinn Fein negotiated in private about the repeatedly stalled plan to create 11 "super councils", the two UUP ministers eventually had to leave because of prior commitments, Sir Reg said. "It was the usual routine where they clear off and leave us."

David McNarry MLA Budget Speech 15 June 2010 : new cross-departmental prioritisation of programmes

"This Minister will appreciate that I could not allow yesterday's press reports about his recent Executive paper on the cost to other public services of postponing water charges to pass me by. Those stories reportedly included a table with calculations based on the assumption that full water charges would be available to the local Administration from 2011-12. It was also reported that his party leader, the First Minister, demanded that the document be withdrawn and redrafted. Will he confirm the accuracy of those press reports? For the sake of the House, will he also confirm whether Sinn Féin shared the First Minister's view and also rejected the paper?

"When I last spoke on the Budget, on 15 February, I did so in anticipation of major public sector spending cuts. The first tranche of those cuts has arrived, and Northern Ireland's share is some £128 million. That is on top of the £393 million of locally generated cuts that the Finance Minister is already imposing on all the Northern Ireland Departments, which are due to the black hole that he denied existed for a year and a half. That gives a running total of some £521 million of cuts for the current year. That is before the main body of cuts to our block grant arrives as part of the pain that the Prime Minister and others have said we will have to share with the rest of the United Kingdom. I mention that because, at the time of the last Budget vote, I asked the Minister to look at establishing a new method of managing and prioritising all government programmes in Northern Ireland, across all Departments. I hope that more frequent in-year monitoring rounds might be possible, given the increasing sophistication of financial management information systems. That would enable a more robust, flexible and speedier response to emerging situations than has previously been possible."

"It remains my view that we may have to move towards a more sophisticated common overall priority system, based on a common scale for all government spending programmes. That would place every government programme across all Departments on a common weighted scale. Pre-agreed ratings would be applied for key pre-agreed substantive elements of all programmes, with relative weights for politically preprioritised factors, such as healthcare, job creation and social need, which are intrinsic to those programmes."

"Those weightings could either be on a numerical scale or on a system of banding so that discussions on spending cuts could be taken and be seen to be taken on a fair and equitable priority basis across all Departments. That system would prevent the political nightmare scenario that can emerge under the current system and which must be devilish for the Minister. The current system relies on departmental cuts as opposed to overall cuts that are imposed suddenly in a blaze of publicity in a headline-grabbing announcement by the Minister. That mechanism is, at best, destabilising to the entire system."

"The system that I propose would avoid a situation arising that the public do not understand, in which, for example, a football club might get a new ground while a hospital ward anywhere in the country might be closed simply because separate Departments happen to administer those areas in such a way. In such a scheme, the Health Minister would be able to convince ministerial colleagues that health is a spending priority and of the merits of sustaining spending. It would be a more professional and more corporate way to handle the new climate of cuts that we face as a regional Administration. The emphasis on that point is that we face the cuts as a regional Administration."

David McNarry MLA Vote on Supply 14 June 2010 : the costs of cock-up

"While we refuse to plan how to reduce public spending at the same time as increasing productivity, we continue to preside over waste and logjam and are accumulating a litany of our own errors. Rates arrears stand at millions of pounds; the stalled review of local government may well, depending on the discussions today, cost the taxpayer £9 million; the education and skills authority (ESA) has cost the taxpayer over £7 million; the Maze stadium project has cost £12·5 million; and the most serious of all miscalculations was the Crossnacreevy project, which cost £195 million."

"If there have been errors, we must come clean because we need to deal with them. How many more potential economic disasters and examples of wasteful and silly spending are sitting on Ministers' desks? How many more times will the public feel that they have been let down by the Executive? There is a clear reason why the Finance Minister tells the other Ministers to come to him so that they can all work together. He is worried that there may be some issues that we do not yet know about. However, when we are being hit from all directions, the last thing that the Assembly can afford is more surprises."

"For over a year before the Minister of Finance and Personnel finally recognised that there was a home-made hole in our Budget, the Ulster Unionist Party had been giving repeated warnings about it. Successive DUP Finance Ministers ignored those warnings, and they point-blankly denied that there was such a problem, which made this Minister's job more difficult. --- The way in which the Minister dealt with them was, in my party's opinion, rushed, and it bore no resemblance to a coalition Government working together to deliver on their Programme for Government."

Professor Mike Smyth University of Ulster

First Trust Bank Economic Outlook and Business Review

Prof Smyth points to the fact that the £6bn cut in public expenditure for 2010/2011 announced by the Con/Lib Coalition Government, will have a serious impact on the Northern Ireland economy.

"In money terms this translates to a £128m cut in the Northern Ireland block grant, which when added to the £393m efficiency savings already announced by the Minister of Finance, the total in-year cuts stand at half a billion Sterling.''

He added: "The economic situation in Greece has been reported widely however at present Northern Ireland's budget deficit sits at £7.3bn or 26 per cent of GDP - the budget deficit in Greece is 14 per cent of GDP. This position has largely gone unchallenged; not least as in the past the deficit has been propped up by various fiscal transfers. This so called economic 'free ride' must surely be coming to an end, and in fact the June 22 budget may very well be the trigger that spurs the Northern Ireland electorate to face up to its economic reality".

Mr Smyth argues that now is the time for Northern Ireland Executive to investigate ways of doing more for itself and suggests a number of policies to help lower levels of public expenditure including a public sector pay freeze or even pay cuts; cuts in the public capital investment and expenditure programme; assets sales and / or privatisations and also tax / revenue raising initiatives.

Victor Hewitt

Director of the Economic Research Institute of Northern Ireland (ERINI)

"What is clear is that Executive must act, and act sooner rather than later. The time for talking about hard choices is over, the time for making hard decisions has begun".