Balancing the books
The Finance Minister remains optimistic about Northern Ireland’s prospects but warns that MLAs must make a budget quickly and be prepared to take a hard message to the public. Peter Cheney caught up with him after the announcement.
“It’s dead easy to be gloomy and doomy, and despair about the future. We’ve got to get some balance in this.” Sammy Wilson was keen to put across a more measured story from the headlines on
21 October, when he spoke to agendaNi.
The Finance Minister appreciated that tough times lie ahead but was still the optimist on Northern Ireland’s long-term economic prospects. DFP’s estimates were similar to the end result, he said. The same “quantum” of cuts had been predicted in a paper presented to ministers in early September.
“We thought that the split between capital and current spending might have been a bit different from what it is but the overall ‘global’ figure would be around what we would have got,” he commented.
The capital spending cut was clearly a disappointment but Wilson saw several ways to boost the figure.
Firstly, the Reinvestment and Reform Initiative allows the Executive to borrow up to £200 million per year from the Treasury.
Asset realisation is the second option, though “probably fairly difficult” in the current climate.
“What you would have to do,” he explained, “is pick your targets fairly cleverly so that you’ve assets which would not be sold at a knock-down price and there would be some interest in.” Most of those assets will also come with some revenue-raising power.
Two examples to sell off stood out: Northern Ireland Water and the Port of Belfast. Both had “huge” earning potential but the former would, he expected, result in “massive political resistance.”
Wilson reflected that the Executive will have to look at increasing some charges, thus raising money for either capital or current funds. Only a major increase in the regional rate, though, would cover the capital shortfall.
The final option was switching money from current to capital spending. Departments would therefore have to accept less money for running costs.
Budget speed
Many people, it was put to him, would doubt that the Executive was up to the job of drawing up a budget after the logjams over council reform and the ESA. He conceded that, with two elections approaching within the year, nobody wanted to “stick their hand up” for a budget containing difficult and hard decisions.
“I don’t see that there’s any alternative,” Wilson stated.
Over the last five months, he had met with a wide range of business leaders, permanent secretaries, public sector managers and community groups. The only message he heard from them was: “You can’t leave us high and dry without any indication as to what the spending plans for 2011-2012 are because we have to plan ahead as well.”
A construction firm with a public contract would need to know whether it could buy machinery, take on apprentices or lay off its workforce. For a voluntary group, the challenge revolved around whether its grants would come through and, if so, how much would be paid.
“They need to have some warning and especially at a time when you’re reducing the amount of money which is going to be available to people,” he continued. “And that’s why I think if we’re going to have any credibility as an Executive, I don’t believe that we have any alternative than to get a Budget and to get it done quickly.”
Ministers had already received planning assumptions, on which to base saving plans and work out their priorities.
“On the basis of the discussions I’ve had, and the information and intelligence which my officials have been able to glean by talking to other finance officers in other departments, we’ll take a paper to the Executive saying what we think the budget split should be.”
After that meeting, due as agendaNi went to press, haggling and fighting were sure to follow, but Wilson stressed the urgency of making a quick decision. The Executive’s agreement would then be presented to the Assembly and its committees, and subsequently published for eight weeks of consultation. Early January was the earliest date for a final budget announcement.
Focus
Wilson’s three key messages to the public aimed to calm fears about cuts and also explain what they can expect from the state in future.
“We’re not about to implode,” he firstly states. “There’ll still be a lot of things we’re capable of doing.” Despite the “fairly horrific” morning headlines, the Executive will still be spending £11 billion per year.
“This recession isn’t going to last forever,” the Minister adds, so the Executive needs to plan ahead and grasp opportunities for economic recovery. Spending must again be focused on economic growth. Infrastructure, training and attracting inward investment are natural priorities.
“If you’ve got a constrained budget, that means you have to spend less on something else,” he continued. Ministers will have to say that they can’t spend money on “socially desirable” spending programmes that “don’t have that kind of hard-nosed economic impact”.
His third message is one for personal purse-strings. People will face a choice between simply letting a service be cut or, if they value the service, dipping into their pocket to pay towards its costs.
“We don’t have a magic wand where we can do all of this painlessly but we can make intelligent decisions about these things,” he added.
Society as a whole had to accept tough decisions and also realise its role in creating the problem. If those choices were made, the Executive would still be able to reshape the economy and improve Northern Ireland as a place to live.
There was an argument that we all benefitted “from the years of easy credit” when the banks were “handing out money to every Tom, Dick and Harry.” Much of the high public spending we also enjoyed was borrowed money.
“We’ve had the party. Now we’re going to have to suffer the hangover. To that extent, we all have some culpability in it.”
New political skills
Grasping hard decisions will not come easy to MLAs used to generous cash flows. Wilson wants ministers to be “a bit more relaxed” and let some unaffordable spending items go. Then, the real challenge is to sell the results to voters.
This is the Executive’s first year with less money to spend than before.
“It’s a new job for politicians, that,” he remarked, adding that politicians “love to throw all the goodies out to people and the people like it.” Wilson surmised that going out to defend hard decisions “requires a whole different set of skills”.
