Northern Ireland facing ‘significant’ long-term pressures – finance secretary

Northern Ireland is facing “really significant long-term fiscal pressures”, the permanent secretary at the Department of Finance has warned.

Neil Gibson also said revenue-raising measures are a “tool in the toolkit” but money should be taken from people and businesses with the “greatest reluctance”.

Mr Gibson was speaking at the Northern Ireland Fiscal Council’s first annual conference in Belfast on Monday.

The event hosted economists, civil servants and MLAs to discuss Northern Ireland’s public finances.

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The budget for Northern Ireland was set by Secretary of State Chris Heaton-Harris in the absence of an Executive, with a number of Stormont departments reporting shortfalls in the hundreds of millions.

The Assembly and Executive have not been functioning for more than a year due to the DUP’s ongoing boycott of powersharing as protest against post-Brexit trading arrangements.

Due to the absence of elected ministers, permanent secretaries and civil servants are having to make decisions about how budget cuts are enacted.

Mr Gibson said the financial pressures mean civil servants are having to make decisions on “reining in spending”.

“There’ll be many pressures that have been coming at a time when we have this very well-called ‘governance gap’ where we don’t have political decision-makers in place to make some of the very tough decisions that might be needed to find a way to rein in some of that spending,” he said.

The permanent secretary said that, as well as political deadlock, Northern Ireland is experiencing “really significant long-term fiscal pressures”.

“Governance gaps are a big part of it, but there’s a fundamental long-term challenge here,” he said.

Mr Gibson said the rate of increase in spending required, particularly in health and education, shows that a transformation of public services in the region is needed.

“A 5% increase in resource spending for the health service is about £365 million. Now, to put that in context, the money that the central government gets from domestic rates is about that,” he said.

“So you would need to double the amount that we, central government, take from the rates base, from domestic citizens, every year just to keep up with health service and patient pressure.

“So that number, that one figure – I can do plenty more – in itself tells you why a transformation is essential.”

Mr Gibson said a “system-wide transformation” is required.

“Transformation across the system is not simply a question of saying ‘Can you transform how you deliver services?’ – you have to transform how people pay, what people expect of it, how you govern them, what way you audit them, what expectations you set of them,” he said.

Mr Heaton-Harris had asked the Civil Service to produce information on possible revenue-raising measures that could be introduced to help manage public finances and decrease overspend.

Such measures include water charges, prescription charges and university tuition fee increases.

Mr Gibson said harm will be done by raising revenue in this way, but that it is a “tool in the toolkit”.

“Obviously you’re taking money off someone to raise revenue, so there will be harm done by that.

“So, if you’re taking money off citizens in Northern Ireland, lower income region… if you’re taking it off businesses who are just about now getting into a more profitable phase from decades of not being in such a position in Northern Ireland…” he said.

“So there is a cause, it is simply a transfer of money. You’re taking money off private and giving it to public. So, yes, it is possibly one of the tools in the toolkit.”

He added: “The most important thing we do is make sure that you look people in the eye and say you’ve done everything you can with the money you’ve got before you start asking for any more.

“I would never like to see it as a game-changer in the sense that, if we thought it just needs more money, it might take the focus off the kind of transformation and change that we need to do.

“We need to take people or businesses’ money with the greatest of reluctance, but I do think it’s a conversation we at least need to have, so that we know all the levers that we can pull, and then it’s for our politicians to determine which one to pull and how hard.”

Mr Gibson said Northern Ireland’s proficiency with administering rates offers an argument in favour of devolving more tax powers, but ultimately it would be up to political leaders on how they decide to use such powers.

“We should have a conversation about what powers we need. Would it help to have more devolved taxes that we can do things with? And that’s a debate, a political debate,” he said.

“And, again, that debate normally focuses on, well, if you’ve an Executive that’s in and out a little bit, would you devolve more powers to that?

“And the only rejoinder I have to that is rates.”

He added: “We do have one devolved tax and we run it very well, in my view, and, in fact, other regions and other countries come to look at how we do it.

“So, actually, I think there is a mechanics of actually administering, there’s the political choices about what to do with those powers.”