Executive outlines timetable to deal with spending cuts
Details have emerged of measures being considered by the Northern Ireland Executive to prepare for the huge public spending cuts expected to be announced by the Chancellor in the autumn.
The Comprehensive Spending Review on October 20 will lay out expenditure plans between 2011 and 2015.
The NI Executive has already had to cut hundreds of millions of pounds from its budget in the wake of the economic downturn and the massive fiscal deficit.
However, the spending reductions to be announced in October are likely to be even more severe and the Executive has already set out a timetable of preparations it has put in place.
It was outlined by an official from the Department of Finance (DFP) at a public information session for the community and voluntary sectors organised by the Northern Ireland Council for Voluntary Action (NICVA).
- Identifying spending pressures in government departments. Each department will then bid for resources, according to what it believes are its own needs. This part of the process was completed at the end of July.
- Between July and October, the Executive will establish plans to deliver savings across its departments.
- Ministers will hold a series of meetings in August to discuss both their spending needs and where they might be able to save money in their individual departments.
- The Chancellor of the Exchequer will announce the details of his Comprehensive Spending Review on 20 October. This will set out both how much the UK will spend over the next four years. It will also indicate how much less departments in Whitehall and the devolved administrations will have compared to their current budgets.
- By the end of October, the Executive will publish both its draft budget and documentation to explain where it will be spending its income and where it will be making savings.
- There will be a public consultation on the proposals in November and December.
- The revised budget until 2015 will then be published around the end of December.
The extent of the expected cuts is evidenced by the Chancellor's plans to cut public spending as a proportion of GDP from about 47% now to 40% in 2015-16.
This amounts to billions of pounds and means the NI Executive will most likely have to find savings of hundreds of millions of pounds as well as potentially finding ways to raise money.
Mike Brennan from the Central Finance Division of DFP told NICVA delegates that its options include increasing income through three methods.
Options for increasing income
- Increasing regional rate - one of only a few ways the Executive can raise revenue directly from its citizens, this may prove politically unpalatable for parties at Stormont.
- Asset sales - a way of raising lump sums quickly, some may accuse the Executive of selling off the family silver at a time when property prices are low.
- Domestic water charges - like a rise in rates, this would potentially raise tens of millions of pounds a year. However, politicians at Stormont fought the last election campaign with a promise to fight such charges. They have recently begun to row back on that commitment but the public reaction may not be favourable given the existing pressure on household budgets.
He also laid out ways in which the Executive can save money over the four-year period.
Options for additional savings
- Reducing bureaucracy - a favourite of politicians and civil servants at a time of spending cuts, it implies that there are some savings to be made which will have a minimal effect on employment or public services. Many economists have argued that the public sector in Northern Ireland is too bureaucratic but also add that the scale of these spending cuts will not be achieved merely by removing waste.
- Improving efficiency - similarly, there will be those who believe that improving efficiency is a worthy goal but will doubt how much impact it can have, given the size of the cuts involved.
- Prioritising services - this could involve ring fencing certain departments' budgets, for example health and education, at the expense of others.
If the Executive does decide to ring fence certain services, then some fear that the impact on other departments will be massive.
A recent study carried out for NICVA by Oxford Economics suggests that the NI budget cut could be about £1.2bn over the next five years.
If the budgets of all departments were cut equally, so-called "salami slicing", that would mean a cut to each department of about 8.4%.
Ring fencing of health, which accounts for almost 50% of Northern Ireland expenditure, would mean cuts in other departments would shoot up to about 15%.
Protect both health and education and the cuts to other departments rocket to 22%.
The fact that the public sector in Northern Ireland employs nearly a third of all workers compared to a quarter in the rest of the UK means that the forecast here is especially gloomy.
So dark in fact that the Oxford Economics report countenances a consequence that politicians in Northern Ireland have largely attempted to avoid - that wages will fall and jobs will be lost.