Reform: the next phase

Peter Cheney examines the Executive’s plans for restructuring the public sector, which also include fewer MLAs and a cut in government departments.

Public sector reform in Northern Ireland to date has mainly involved streamlining structures within government rather than reducing the size of the state. The proportion of the workforce employed in the public sector (29 per cent) is only slightly lower than it was when devolution was restored (31 per cent). For comparison, the public sector accounts for 21 per cent of UK-wide employment and 20 per cent of employment in the Republic.

As of last September, Northern Ireland had 210,060 public sector employees. That number had decreased from a peak of 225,560 in June 2009, when many former private sector employees were finding temporary work with government departments and agencies.

Two-thirds of public sector employees work in health, social services and education. The Northern Ireland Civil Service has 27,814 staff and a further 4,009 civil servants work in the region for the UK Government (e.g. HMRC).

Since 2010, public sector employment has decreased by 3.5 per cent compared to 10 per cent cut across the UK. The Republic’s public sector has undergone a smaller cut (6 per cent) due to a greater emphasis on pay restraint.

The Executive is now preparing to reduce its workforce’s headcount by 20,000 over the next four years, preferably through recruitment freezes and voluntary redundancies but compulsory redundancies will be considered if progress is slow.

In theory, the alternative to job cuts on this scale would be a 10 per cent pay cut for all public sector employees. As the annual pay bill is around £5 billion, that cut could save £500 million if implemented in one year although this would result in major industrial action and be partly offset by income support claims by lower paid staff.

Under the Stormont House Agreement, the Executive can borrow up to £700 million to fund the voluntary exit scheme. Exact details have not yet been finalised. As expected, the unions have strongly opposed the proposal but the business community is supportive.

The rebalancing of the economy will depend on how many jobs can be created by the private sector or through self-employment. Private sector employment rose by 9,070 posts over the course of 2014 but job creation also has to account for school leavers, graduates and employees moving between businesses.

Many public sector employees have used a redundancy package to innovate and set up a new business. The recent growth in self-employment (up by 7,300 jobs between 2013 and 2014) suggests that entrepreneurship is an increasingly viable option.

Departments

The number of departments will drop from 12 to nine in time for the 2016 Assembly election.

Direct rule was delivered through six Civil Service departments based on the core functions of finance, health, education, agriculture, economic development and the environment. This was expanded to 11 in 1999 – to allow for balanced representation between the main parties – and 12 in 2010 on the devolution of policing and justice.

Under the Executive’s current plans, the following core departments would effectively remain intact:

• OFMDFM;

• Education (renamed Education and Children);

• Finance and Personnel;

• Health, Social Services and Public Safety (renamed Health and Well-being); and

• Justice.

The main parties appear to have reached a consensus on merging the other departments under four new remits:

• Economy and Skills – DETI and employment and skills policy from DEL;

• Agriculture, Environment and Rural Development – DARD and the Northern Ireland Environment Agency (from DoE);

• Development and Infrastructure – planning, transport and water policy from DoE and DRD;

• Social Welfare, Communities and Sport – mainly DSD and DCAL.

Scotland and Wales have abandoned the concept of departments altogether and their civil services work as single organisations with directorates for different policy areas. This is relatively easy in a single-party administration but would prove more difficult in Northern Ireland’s mandatory coalition system.

The size of the Assembly often attracts public criticism but only a small proportion of the Budget goes into Parliament Buildings. The Assembly will have a budget of £42 million in 2014-2015: just 0.2 per cent of total public spending.

There is still a widespread impression that 108 MLAs is too many. A cut in the number of members will take effect at the 2021 Assembly election, when each constituency will return five instead of six members. This would result in 90 MLAs if the province still had 18 constituencies – the number of which is decided by Parliament. The Welsh Assembly, for comparison, currently has 60 members but the Silk Commission on the future of Welsh devolution has suggested an increase (potentially to 80 members).

If reform is successful, the coming years could deliver a more efficient system of administration. However, progress is not just dependent on the Executive’s plans but also on UK Government fiscal policy and the private sector’s performance.

Both will determine how money and jobs are distributed in the regional economy.