Northern Ireland is to receive an extra £142 million (including £134 million for capital projects) up to 2015 following the Chancellor’s autumn statement but may lose £150 million in current expenditure. Those reductions are expected in Barnett consequentials i.e. cuts in UK Government departments being matched by the Executive.

The whole UK is expected to experience lower growth in 2012 (0.7 per cent) with the Government borrowing an extra £111 billion over the next five years.

Critically, the Office for Budget Responsibility predicts 710,000 public sector job losses by 2017, up from its last estimate of 400,000. Public sector pay rises will be capped at 1 per cent after the freeze ends in April 2013. A review of regional pay could result in salary reductions and spending cuts will continue to 2017.

However, several announcements will benefit the Northern Ireland economy.

Fuel duty is frozen until next August (when a 3p rise is due). Local businesses can apply for the National Loan Guarantee Scheme, support from the Business Finance Partnership, and the national insurance exemption (which continues up to April 2013). Belfast is one of four cities to share the £100 million urban broadband fund, designed to achieve 80-100 MBps. Six others will be selected in a UK-wide competition.

Sammy Wilson claimed that there would be no compulsory redundancies but said he did not know how many voluntary redundancies would eventually be made. Wilson expected more invest-to-save decisions by ministers and said these had to be looked at “fairly quickly”.

Conor Murphy repeated Sinn Féin’s view that Northern Ireland had to break its dependency by taking on “maximum fiscal powers” and building a strong all-Ireland economy.

Alliance’s Naomi Long asked the Chancellor for action on air passenger duty on regional flights but was referred to the forthcoming UK aviation strategy. Long had wanted to see reduced VAT on renovations, to help the construction sector, but welcomed the moves to release credit to small businesses. However, she said there was “no serious effort” on pay restraint in company and bank board rooms.

The UUP was supportive and called for realism, but SDLP leader Alasdair McDonnell said that “squeezing” public sector workers “will simply cause pain and hardship for hardworking families and will have a negative impact on businesses here.”

Owen Paterson reiterated his defence of deficit reduction, which was “keeping interest rates lower for longer”. He claimed that the only alternative was “more borrowing and more spending … precisely the something for nothing economics that got our country into this mess in the first place.”

A wider divide opened up between the business and trade union responses.

CBI Director-General John Cridland said the statement “works with the realities of today and provides an imaginative framework”. The CBI in Northern Ireland wants changes in British employment law, including ‘protected conversations’ with older employees, extended to the province.

ICTU Assistant General Secretary Peter Bunting told striking workers that the public sector was “being sacrificed in the name of an ideology which favours the 1 per cent.”

Whatever you think of its estimates, the Office for Budget Responsibility has established its independence as a professional forecaster, according to Robert Chote. agendaNi spoke to him at the Northern Ireland Economic Conference on the first anniversary of his appointment.

“The key thing we needed to do on arrival,” he stated, “was to establish the reputation of the OBR as a source of rigorous, well-explained coherent analysis that people may well disagree with but at least they know it’s not politically-motivated wishful thinking.”

That independence, he comments, has been respected by the Treasury. The office also discloses all meetings with ministers and special advisors online, as well as its forecast timetable.

While many people are “very focused” on the short-term outlook, the medium-term outlook “matters more than anything” to the OBR. Its key task, when looking at the short-term trend, is to work out whether it is “temporarily bad news that we’ll bounce back from” or if it says something about medium-term prospects: “And that’s one of the tricky judgements we have to make.”

Asked to assess the euro zone’s performance, he quipped: “The days when I was a professional commentator on the merits of broadly based currency areas are long behind me.” Again, the key question for the OBR is the impact on the UK’s medium-term outlook, bearing in mind that the euro zone has an impact through export markets, interest rates for government borrowing, and general economic confidence.

More locally, corporation tax is the central policy objective of Northern Ireland’s business organisations and the Secretary of State, although the political will at Stormont is increasingly in doubt.

Chote was pressed for his view on whether corporation tax would be devolved, but replied that it was “not a decision for us to make” and “not for us to say whether this is a good idea or not.”

If the decision went ahead, the OBR’s task would be “relatively limited” i.e. producing forecasts and assessments. “Interestingly,” he added, “we’re having a similar role and similar challenges in Scotland because of the fact that from the Budget of next year, we’ll have to start forecasting Scottish income tax receipts and other areas.”

Scotland is to receive its new income tax powers by 2015 with the first changes taking effect a year later.

“One issue with corporation tax is that, of course, it is one of the more volatile streams of tax revenue,” Chote noted. “It goes up and down more than taxes on income or taxes on spending. It doesn’t make the task of forecasting receipts from it any easier.”

In the absence of lower corporation tax, Northern Ireland will continue to rely heavily on its subvention from Westminster. It was put to him that this dependence increasingly reflects badly on Northern Ireland, as a UK region, but he replied: “I wouldn’t say so.”

Chote continued: “It’s not our job to look in regional areas but I mean, clearly, if you think that we’re engaged in a fiscal consolidation at the moment and significant cuts in public expenditure, then those parts of the economy that are more dependent on the public sector are going to see more of a direct effect from there.”

A region in that situation will “need to be thinking about policies that will allow the public sector to rebalance” but he concluded: “It’s not unique to Northern Ireland and it’s a challenge for everybody.”

While still keeping the economy as first priority, the draft Programme for Government offers few radical solutions for the province’s problems.

As expected, the economy is described as the Executive’s first priority but its aims are considerably less ambitious than before. This reflects the recession but also the risk-averse influence of the Civil Service.

Closing the productivity gap with Great Britain (a major goal for decades) is not set as a firm target. The previous programme aimed to halve the difference with the UK average (excluding South East England) by 2015. Instead, the draft Economic Strategy calls for private sector GVA growth to exceed the UK average.

As of June 2011, almost a third of employees (31.3 per cent) worked for government. The public sector workforce stood at 218,000 while the private sector employed 481,910 staff (with both figures seasonally adjusted). This compares to 221,980 and 487,790 respectively in June 2010.

Northern Ireland’s unemployment rate stood at 7.3 per cent of the workforce (63,000 people) between July and September. A further 51,000 economically inactive people want a job but fall outside the official definition, which in practice brings the unemployment total up to 114,000.

The programme claims that the same number of benefit claimants will be moved into employment by 2014 through welfare reform. No estimate of the inevitable decrease in public sector jobs is included.

Against that, the Executive promises to “support the promotion” of over 25,000 new jobs (5,900 from foreign direct investment) by 2015. Promoted jobs are those expected to be created by Invest NI-supported projects. A total of 15,565 jobs were promoted between 2007 and 2010, although statistics do not show how many still exist.

A call for the “timely and affordable” devolution of corporation tax is contradicted by Sammy Wilson’s prediction that no cut will happen before 2015. Separately, the Executive will lobby the European Commission for the “best possible outcome” for regional aid after 2013.

The regional rate is pegged to inflation. Industry will be encouraged to achieve 20 per cent of electricity consumption from renewables, which depends on adequate grid reinforcement.

Irish Government A5 funding was cut just before the draft Investment Strategy was published. Its specific goals include Belfast rapid transit (construction due from 2012 onwards), the Lisanelly campus, the Desertcreat training college, electronic prescribing in hospitals and a regional library.

Ministers expect tourist numbers to reach 3.6 million by 2013 (generating £625 million), with the help of the Titanic centenary and Derry’s status as UK City of Culture. The 2009 totals, for comparison, were 3.29 million visitors (1.92 million from outside Northern Ireland) and £529 million in revenue.

The SME liquidity scheme was publicised as a £50 million loan fund, although the maximum in this Assembly term will be £30 million.

Ninety per cent of large scale investment planning decisions should be made in six months by 2015. However, 100 per cent was promised immediately in 2008. The modest interim target is 60 per cent in 2012-2013 and 57 per cent was achieved in 2010-2011.

The value of manufacturing exports (currently £5.1 billion) is to be increased by 15 per cent over the next four years. Exports fell by 0.6 per cent in 2010-2011.

DCAL’s creative industries innovation fund would support 200 projects. DEL plans to fund an extra 540 places on STEM courses. The creation of a new food strategy board recognises farming’s strong economic contribution.

Living standards

Two overlapping chapters cover quality of life, officially termed “Creating Opportunities, Tackling Disadvantage and Improving Health and Wellbeing” and “Protecting Our People, the Environment and Creating Safer Communities”.

Practically, this would involve building 8,000 social and affordable homes and the full double glazing of Housing Executive stock. The house-building total is to be expected given that 2,104 were started by housing associations in 2010-2011.

The SDLP and UUP contend that the £80 million Social Investment Fund could go to community groups linked to the DUP and Sinn Féin, a charge denied by both parties. A separate Social Protection Fund, similar to the December 2008 hardship payment, will receive

£20 million per annum. Child poverty is to be reduced, using both funds.

The promise of one year’s pre-school education (from 2013) does not guarantee a nursery school place. Around 90 per cent of children currently have places and the Department of Education already aims to provide one-year places to all parents.

Forty-nine per cent of young people from disadvantaged backgrounds should achieve five GCSEs A*-C by 2015, including in maths and English. The 2009-2010 figure was 31.3 per cent and that target is in keeping with the current annual increases. The same percentage for all young people should increase to 70 per cent, up from 59 per cent in 2009-2010.

Legislation to ban age discrimination in goods, facilities and services is to be drafted next year but only enacted in 2014-2015. To deal with the legacy of the Troubles, OFMDFM also promises to launch a dedicated ‘victims and survivors service’ in 2012-2013.

More chronic condition patients should be able to take up programmes to help them manage their own conditions from 2014-2015. The Health and Social Care Board will co-ordinate existing programmes and roll these out across the province. £7.2 million is set aside to tackle the growing obesity problem.

Environmental commitments include the plastic bag levy, a 35 per cent cut in greenhouse gas emissions over 1990-2025 (compared to 42 per cent by 2020 in Scotland) and 45 per cent of household waste being recycled by 2015.

For criminal justice, a 3 per cent reduction in violent crime is set as a target. PwC Chief Economist Esmond Birnie commented that the draft programme was “aspirational but lacks substance as well as the necessary milestones and stretching targets.”

He added: “Transformation to a new, prosperous, internationally competitive and socially inclusive Northern Ireland can’t even begin till we’ve defined what it might look like.” Consultees, Birnie said, should not miss the opportunity to become persuaders for a more radical document.

Draft Investment Strategy breakdown (£ million)

*includes the Assembly and minor government organisations

Financial crises and recessions are nothing unusual. There were 195 stock market crashes and 84 depressions between 1860 and 2006. However, the 2007 crisis marks a turning point in that for the first time the entire world was affected. The trigger was the collapse of Lehmans, which called into question one of the unspoken assumptions of global finance: some banks are too big to fail. This assumption was based on a double guarantee. First, big banks had enough assets to cover potential losses. Second, if not, the government would step in. Both guarantees proved to be worthless for Lehman’s, but when the entire financial system threatened to implode, states acted quickly to restore the second guarantee.

Governments committed $11.4 trillion to saving the system, the equivalent of the 2007 GDP of Japan, the UK, Germany and France combined. That represents a worst case scenario, and includes guarantees that may never be called on or the cost of purchasing assets and equity, whose value may go up. Supporting the banks is a work in progress, so the final cost won’t be known for years. What is certain, is that the initial crisis led to the sovereign debt crisis we’re seeing now. And in addition to shorter term concerns, the legacy of sovereign debt could interact with increased pressures on public finances caused by population ageing.

At the other end of the age scale, there are fears that the crisis could create a ‘lost generation’ of alienated, marginalised young people, given how long it usually takes employment to get back to pre-recession levels. For example, it took the US job market seven years to recover from the previous recession.

Even lost generation scenarios assume that the recovery will be relatively long lasting, and the social unrest and other consequences of frustrated hopes will be relatively circumscribed. But ‘Make Markets be Markets’, by (among others) Robert Johnson of the UN Commission on Financial Reforms, argues that the economic system is in the grip of a “doom cycle”: banks behave recklessly during the boom, confident in the knowledge that during the bust the state will clean up.

Although sound corporate governance and a strong risk management culture should enable banks to avoid excess leverage and risk taking, there will always be players eager to push complex products and trading beyond the needs of the real economy. Indeed, such activity is once again driving the rapid profit growth of some banks, with little learned from the past.

Critical links

The crisis shows how some aspects of the world economy can be both positive and negative, notably interconnectedness. Global linkages help the world to grow richer, but they also facilitate the spread of shocks. Securitisation for instance distributed risk across a larger number of players, with two major consequences. First, it increased interconnectedness among financial institutions themselves, and of these institutions across countries. Second, it gave the impression that risk had diminished. It hadn’t, but individual shares in the risk and responsibility for managing it had become diffuse, creating a false sense of security.

The financial crisis spread rapidly to the real economy, with stock market collapses, decreases in business and consumer confidence, a credit crunch, a sudden contraction in international trade, and a sharp drop in investment.

However, the BRICs (Brazil, India, China, Russia) fared better than most. Their emergence as new global players will transform the geopolitical landscape, with impacts potentially as dramatic as the decline of the European empires and the rise of the United States. How they exercise their growing power and whether they relate co-operatively or competitively to other powers in the international system are key uncertainties.

The one major certainty is that there will be other shocks, with three characteristics. The fact that a few people such as financial market traders can provoke major disruptions reveals an aspect of today’s global socio-economic system that will grow in importance: asymmetry. Another example would be the panic caused by the fear of a small country like Greece defaulting on its debt. The reason is that the interconnectedness mentioned earlier can amplify relatively small, local problems (such as sub-prime mortgages) into systemic risks.

In addition to asymmetry and amplification, a third ‘A’ is likely to become more important: asynchronicity, for example lags between economic activity and commodity prices or decoupling of countries from swings in the global economy. Asynchronicity undermines the case for global solutions to a number of problems.

The Great Recession was due to the unravelling of tensions in the system. These tensions were not reduced thanks to any government policy, but built up until they exploded into a systemic shock that caused misery for billions of people and would have destroyed the financial system if states hadn’t pumped trillions of dollars into the economy. Is pay up and hope things improve the best we can do?

Profile Patrick Love

Patrick Love is Senior Editor with OECD Publishing and the author or co-author of five books in the OECD Insights series, including one on international trade and one on the economic crisis. He is currently working on the OECD Green Growth Strategy and the OECD project on future global shocks. Patrick blogs at www.oecdinsights.org

In 2007, the electricity market in Northern Ireland joined forces with its counterpart in the Republic of Ireland to form the Single Electricity Market (SEM).

The SEM as a young dynamic market already faces a number of challenges, notably regulatory change driven by both local and European authorities. The UK Government’s current Electricity Market Reform (EMR) proposal, involving the creation of a carbon price floor, is something which Northern Ireland must give due consideration to, so as not to disadvantage Northern Irish generation vis-à-vis RoI generation in the SEM.

EU issues such as greater cross-border integration of markets, due by 2014, and the implementation of environmental legislation, namely, the Industrial Emissions Directive, will also impact on a number of existing generators.

Moving forward, it is important that the Executive and the Northern Ireland Authority for Utility Regulation (NIAUR) continue to work closely with Department of Energy and Climate Change (DECC), Department of Enterprise, Trade and Investment (DETI) and the SEM regulators in the Republic to identify clear proposals around the implementation of the Electricity Market Reform. This will help to create a stable regulatory framework for both equity and debt investors. Providing such confidence to investors will assist the government in achieving its 2020 renewables targets.

Given the complex operating environment faced by energy based companies, it is vital that they choose a banking partner who understands the market, has strong recent experience and is abreast of pending market developments.

Barclays has recently funded key transactions in the energy market, cementing its position as a market leader in the sector.

In September 2011, Barclays Corporate refinanced Kilroot Power Station in Carrickfergus with an innovative £38 million funding arrangement. One of the largest non-gas generators in the market, the station is an essential tool to assist the market operator in managing system demand and security. The financing incorporated sophisticated solutions for FX and carbon allowances and involves Barclays transacting all of Kilroot’s operational banking going forward.

In relation to grid infrastructure, Barclays is a leading funding partner of the system operators. In 2009, we provided acquisition finance facilities to EirGrid to fund its acquisition of SONI. In 2010, we arranged finance for EirGrid to construct and operate the €600 million East-West Interconnector between Ireland and Wales.

Barclays is a key funder in renewable energy, having financed over 400MW of large scale wind generation. In 2010, we arranged finance for the largest development wind farm transaction in Northern Ireland. The 20MW Screggagh wind farm in County Tyrone will provide power to over 10,000 homes.

Barclays is actively funding offshore transmission networks in Britain which are required to facilitate the build-out of off-shore wind generation and we look forward to the upcoming tenders in Northern Ireland.

As a leading corporate and investment bank, we also have the capability to raise finance in the capital markets for clients, opening up alterative funding sources. Within the last few years Barclays has raised corporate bonds for ESB (which owns the NIE’s transmission and distribution network) and Bord Gáis (which owns Firmus), In addition, we arranged finance for the Scottish Northern Ireland Gas and Belfast Gas pipelines, whilst also providing liquidity lines for the Moyle interconnector.

The Barclays team has substantial knowledge of the energy sectors across the island of Ireland and is able use this expertise and experience to structure innovative banking solutions that meet client’s needs. Our recent deals in the energy sector are good examples of the type of strategic and sophisticated transactions we are supporting despite difficult market conditions. It serves as a clear indication that Barclays is open for business for quality transactions within the energy sector.

To find out more contact Niall McInerney, Associate Director Infrastructure and Structured Finance, Barclays Corporate, on 028 9088 2929 or email niall.mcinerney@barclays.com

Palliative care is provided by five voluntary organisations in Northern Ireland: the Northern Ireland Hospice, Marie Curie Cancer Care, Macmillan Cancer Care, Foyle House Palliative Care and St John’s House Southern Area Hospice. They offer inpatient beds, respite care and bereavement services free of charge to patients referred by their GP or hospital.

Children with life-limiting illnesses receive nursing care and therapy from the Northern Ireland Children’s Hospice which has one 10-bed facility (Horizon House in Newtownabbey) where families are allotted day and respite stays and care in the home. Horizon West, a facility that will provide respite for four children and two families at any one time has been built at Killadeas, County Fermanagh, but will not admit patients until it has raised a further £500,000 for operating costs

(£1.2 million has been raised to date). Other charities work throughout the province to raise money for the treatment and support of children suffering from illnesses such as cancer or heart disease.

The five bodies received £5.58 million from the DHSSPS in the last financial year. The rest of their operating costs must be raised through fundraising campaigns. The only specialist palliative care beds in Northern Ireland’s health and care system are the 12 in Antrim Area Hospital’s new palliative care unit. A joint project between the Northern Health and Social Care Trust, Macmillan Cancer Support and the department, it cost £5 million. Other hospitals have contracts with the voluntary bodies.

Palliative care is defined as “the active, holistic care of patients with advanced progressive illness.” It aims to ensure a good quality of life from diagnosis to death for adults and children who will never reach adulthood. While each trust has access to palliative care beds, it is accepted that this is not always the most appropriate setting and that most people would prefer to die in their own homes.

A five-year palliative care strategy was released by then Health Minister Michael McGimpsey in December 2009. It aimed to develop a better knowledge of palliative care, identify the patient’s holistic needs and plan care so that a patient can die at home if they wished.

Over 6,000 outpatients were helped by hospital palliative medicine teams in 2010: 4,086 in hospitals in the west, 1,101 in Belfast City hospital, 810 in the six northern hospitals, 386 in the southern area and 26 in the Ulster hospital. Changing demographics (see pages 90 and 91) mean that people are living longer and often with one or more chronic condition.

Heart disease accounted for 31 per cent of deaths in Northern Ireland last year, cancer for 29 per cent and respiratory disease for 13 per cent.

“It’s a real challenge to keep the services running safely for the families who need it,” commented Tina McCrossan, Director of Children’s Services for the Northern Ireland Children’s Hospice.

Day care sister at St John’s House, Newry, Marianne Barry, has explained that “many of the patients come simply to avail of the company of others who understand what they and their families are experiencing.”

When challenged as to why the DHSSPS cannot fund all palliative care, a spokeswoman said that the £4.3 billion health budget provides “a wide range of critical services, all of which are rightly important to the public”. She cited an expected £800 million shortfall by 2014-2015 caused by price inflation and more demand on services which will make it difficult to maintain the current level of services.

Bruce Robinson has been at the forefront of efforts to transform the Northern Ireland Civil Service over many years. Before getting the top job at NICS he was involved in economic development, starting in the IDB and then as Permanent Secretary at the Department of Enterprise, Trade and Investment.

Looking back on the change programme you led over the past few years, what are the highlights for you?

The major achievement has been to create the shared services and the effective running of the 12 departments from single platforms. That those key share services are now fully operational and embedded is terrific.

NI Direct is an excellent platform to take the further development of government services, delivered to the citizen, forward into the future. This will mean considerable change. There is no doubt that NI Direct has been a success and there is a next generation of service delivery to be done through that. The potential to keep service delivery both highly effective for the citizen and also highly efficient for the tax payer.

What are the difficult aspects of leading large scale change projects?

On large scale change projects a lot of hard work goes in before you start to see the benefits, so the challenge is on the one hand to recognise it’s a long-term process and, if you like, hold your nerve and on the other hand not to be insensitive to the feedback you are getting.

We did change things mid-stream in a number of areas. More around how we sought to engage staff in the process and we were very open to that and often you are doing that with incomplete feedback.

One of the toughest pieces was having the conviction to hold off on implementing HR Connect in the summer of 2009. It was due to go live in July and we held off until January [2010] and that was a tough call. We did get it right when we did launch, although it was very difficult and was only possible because of the testing validating we had done in the interim.

How have these investments changed the delivery of public services?

[There is] a greater sense of service-wide approach to issues now. Previously there was a departmental focus on how things happen. There is now a greater appreciation of doing things on a service-wide basis. At the core of that is, I have always felt, that our system is far too small to be able to justify investment in technology and systems at a departmental level – only at a NICS level.

The quality of service delivery to the citizen, I was convinced, needed the technological platforms and the support and infrastructure to deliver a really high quality public service.

I didn’t see any way of doing that without significant investment, not just in technology but also in our people. It seemed to me that any step change in the quality of service required investment, and that could be self-financing by improving the effectiveness and efficiency of what we are doing. It didn’t have to come at a significant price. Both of these goals were attainable.

How has the partnership with the private sector worked in delivering the projects?

We always had a vision of what we were trying to do and in that sense we were able to convince our private sector partners. We were ambitious and they felt we were committing significant resources to the programme. I do look back on it with considerable satisfaction.

Why did you undertake should a huge change programme when perhaps there wasn’t the obvious driver? Particularly as times were good.

I guess it comes back to some sort of sense of desire to see services in Northern Ireland to be as good as anywhere else in the world [and] a professional pride in seeing things done exceptionally well. I also felt there was an opportunity to create a Civil Service that people would be proud to serve in.

Over the past decade there has been a huge challenge around cost efficiency in service delivery in government systems.

On a large scale sets of projects such as these, at a particular point in time you may not be making as much progress as you would like but I do think over the five-year time frame we have seen substantial improvement in virtually all of the metrics. Certainly the investment has been justified.

There is now a new set of challenges and a new environment. Some very significant changes such as welfare reform, and the project management skills are there to deliver such changes.

Reflecting on your time in IDB and then DETI, what sticks out as regards developing the local economy?

The definition of an optimist is to have been involved in selling Northern Ireland as an investment location in the 1980s and 90s. It certainly had its challenges but selling here will always have considerable challenges.

There isn’t a significant local market, so therefore in your suite of attractions, you are missing quite a valuable one. For example, if you thing of investments in India or China, they are as much about the thought they are going to become highly significant markets for any products. Whereas we can never really offer that sort of opportunity.

This is about, and always has been about niche marketing and understanding what the customer is after and us being flexible to do that. The short lines of decision-making are our competitive advantage.

[I am] disappointed about one thing. In the late 1990s and early 00s we seemed to be closing the gap in terms of GVA [with GB]. It was about ’93 to 2000 that we did start to close the gap for about five years. There was a bit of a credit crunch around ’97 which didn’t happen here because I guess our property prices had not really gone out of line. I would really [have] liked to understand better what was really happening during that period and I did have a strong sense that a significant build in exporting across a number of sectors was behind that.

Fundamentally that is what we have to see. We have to build our international competiveness and the drive to improve efficiency is relentless. I was always very struck by companies during that period, companies like AVX, who were facing

10 per cent per annum reductions in selling prices year-on-year as manufacturers of electronic components and they were able to cope with that over a very sustained period. The challenge is right across the economy and it is not just for the private sector but also for government and its cost base.

Do you have any strong views on the corporation tax issue?

The issue is quite complex and one of the difficult pieces on corporation tax is that it is going to be quite costly and I think there is no law of gravity here that says inevitably the benefits will outweigh the costs. It is likely to be quite a reduction in public expenditure and that will definitely happen and it is not as clear cut that the public sector growth will outweigh that. In principle it has quite a considerable potential but there is quite a tough bit in playing that out and that’s what makes it a tough call politically.

How has the nature of public sector changed since you first joined it?

I joined at 30, which was comparatively late and unusually because of this I had two years’ probation to do. There have been two big changes. One as a result of devolution, with local ministers, has been a very significant and a very positive change. Devolution is a much more responsive system. The other big change is the development of professional skills within the Civil Service and that has been too long in coming. That’s not the case now and I think we have become much more professional.

How has leading a public sector organisation changed?

Leadership is more difficult nowadays because of a bigger spread of complexities. There are more demands around cost of delivery that wouldn’t have been the same in the past. One of the hardest things in the public sector is to understand what to stop doing and that is a really difficult area. Helping ministers understand what is a priority is always difficult, particularly in the present financial climate. That is the nub of any resource allocation discussion and decision. In today’s climate it’s inescapable.

Looking to the future, what do you think is the biggest challenge facing the public sector?

The economic situation is by far the biggest challenge. Public expenditure is going to be under pressure for quite a period of time and it’s evident now that the economic prospects for at least the next 18 months are quite flat. In this context the pressures on elected representatives are going to be very significant.

I also think some of the changes the Coalition Government are introducing are going to be very demanding, particularly with welfare reform. There are significant professional reputational risks in implementing huge technological and systems changes.

A viability audit within six months will identify schools experiencing difficulties in enrolments, standards and financial feasibility, following an announcement by the Education Minister.

Schools will be judged against the six principles in the sustainable schools policy which have not been implemented rigorously to date: quality education, a stable environment, a sound financial position, strong leadership, strong links to the local community, and stable enrolment trends. This overhaul comes as the region faces “the most challenging budget settlement in modern education history.”

In the absence of an Education and Skills Authority (delayed due to political wrangling between Sinn Féin and the DUP), the strategic planning of the schools estate cannot be put off any longer. Therefore, John O’Dowd has commissioned the five area boards and the Council for Catholic Maintained Schools (CCMS) to work together on a strategic exercise that will shape the future pattern of education delivery. They will look at the post-primary sector first. The CCMS’ post-primary review and previous reports by the boards will contribute to the exercise and it will be completed in six months.

As schools identified in the audit could close, proposals on safeguarding the education of children at those schools will also be made in six months.

The region has 85,000 spare places; one- third of the 863 primary schools have less than 100 pupils and that one-fifth of 217 post-primary schools have fewer than 400 pupils. However, O’Dowd said this was “not a numbers game.”

He quoted the 2006 Bain report which stated that Northern Ireland’s education provision is both educationally and financially unsustainable.

On oversubscribed schools, O’Dowd said they would be allowed to grow, only if they “accept the responsibility to provide a curriculum that meets the needs of all the pupils it accepts.” He added that pupils being asked to leave schools because they don’t meet the needs of a school is “untenable”. Future provision would be dictated by the needs of the 21st century i.e. “an economy that requires a diverse, educated workforce with an array of skills.”

Targeting social need is not sufficiently considered in the current funding scheme, and a major review will be undertaken. Its recommendations will be implemented before the 2013-2014 school year.

Criteria for new build projects will be outlined soon and will be based on the sustainable schools criteria. New school builds will need to be part of an area- based plan, agreed by the sectors and approved by the department. A new process for capital planning will be put in place and all proposals for new builds, including those in the investment delivery plan, will be assessed accordingly. The Minister clarified that schools could consider amalgamations and must remember that “we simply do not have the resources for a new build solution on every occasion.”

The impact on teachers’ jobs will be discussed at a later date, O’Dowd claimed, however, a “flexible school workforce” will be a necessity.

The entitlement framework will be phased in because of Budget constraints. From 2013 it will be put on a statutory basis and schools will be required to provide between 18 and 21 courses. This will rise to24in2014andto27in2015.

Alliance education spokesman Trevor Lunn noted the absence of a reference to segregation, claiming it is “the elephant in the room [that] must be addressed.”

SDLP’s spokesman Conall McDevitt claimed that 380 schools “face the axe”, which the Minister denied.

DUP MLAs Mervyn Storey and Jonathan Craig called for fairness when deciding closures. The Minister replied that he has made CCMS and the boards work together because he wants a concise policy across the board which will ensure “equality of educational provision for young people regardless of what sector they attend.”

The way ahead for health and social care in Northern Ireland will be marked out over the next two months as a comprehensive review of the system approaches its deadline. The review was announced by Health Minister Edwin Poots in June and is due to report back to him by 30 November.

Poots selected John Compton, the Health and Social Care Board’s Chief Executive, as its chair due to his extensive experience but he is assisted by five independent advisors (see box).

The BMA questions the short timescale but Poots says “it is important that clarity is provided urgently”.

Media attention will focus on the future number of hospitals but several services can be provided in primary care centres instead. At present, Northern Ireland has 11 acute hospitals (three in Belfast) and five local hospitals.

Remit

The review should take account of the Minister’s own vision and strategy for health and social care (see issue 48, pages 8-11), existing policy and strategy statements, the system’s structure, staff terms and conditions, and the resources allocated by the Assembly in the 2011- 2015 Budget.

In a frank brief to the review, Poots states: “It will be necessary to stop doing what does not work, become more assertive in challenging out of date practices, and acknowledge that some of today’s services and their current design are no longer fit for purpose.”

Best practice on providing safe and effective services will be considered, including guidance from the National Institute for Health and Clinical Excellence and the Social Care Institute for Excellence.

Studies for analysis include the McKinsey report (2010) and the two Appleby reports (2005 and 2011). The latter Appleby report found that the health and social care system required an extra £1.1-1.5 billion to catch up with England.

The review must provide a “strategic independent assessment” across all aspects of services and produce a specific implementation plan containing proposals for specialities and major hospital sites.

Two major factors are outside the review’s scope: organisational structures and funding.

OFMDFM is reviewing all arm’s length bodies accountable to the Executive, including the health structures. The DUP has manifesto commitments to merge the Public Health Agency into the Health and Social Care Board, and review the Business Services Organisation and Patient Client Council.

Since April 2007, the system has saved £49 million and shed 2,259 administrative, clerical and support jobs.

The DFP’s Performance and Efficiency Delivery Unit (PEDU) is investigating the scope for further savings. For perspective, the DHSSPS was allocated £4.31 billion to run health and social care services this year: 42 per cent of the whole Executive’s total current expenditure. Elected representatives are best placed to make spending decisions.

Pressures

The case for reform is clear from three statistical indicators. In 2010-2011, 674,400 new cases went through A&E and hospital admissions stood at 583,599. New cancer diagnoses stood at 56,286 in 2009-2010, the most recent statistical year.

This means that, over a four-year timespan, new A&E attendances were up by 35,900, hospitals took on 27,602 more admissions, and 4,250 new cancer cases were confirmed.

Initial A&E cuts at Lagan Valley and Belfast City hospitals would increase pressure on the Royal Victoria, Ulster and Mater units. To help reduce the resulting pressure, Poots wants an end to “time wasters” turning up at A&E departments. If all patients with minor ailments went to their GPs, casualty staff could focus on treating strokes, heart attacks and major traumas.

Over the next five years, the Belfast trust wants to establish the RVH as the ‘major trauma site’ whilst retaining smaller A&E units at the City and Mater.

Collectively, the public sector unions have agreed to organise “a co-ordinated campaign of industrial action”. They expect “a prolonged period of industrial strife … where specific services and jobs are under immediate threat.”

Poots’ announcements are expected in early 2012 and will be among the most significant ministerial decisions in the 63- year history of the Health Service.

Capping student fees at £3,465 will cost the Executive £85 million over the next three financial years: £15 million in 2012- 2013; £30 million in 2013-2014; and £40 million in 2014-2015. The recurring shortfall will then be £40 million.

The Department for Employment and Learning will contribute £41.5 million. This will be matched by the Executive by ‘top-slicing’ the budgets of eight other departments (health, education and justice are exempt). Overall, DEL must save £150 million by 2015, when previous budgetary commitments are factored in. This will be done through better estate management, controlling staff vacancies and travel and subsistence, according to Employment and Learning Minister Stephen Farry. In practice, this means managing vacancies as they arise, leaving posts unfilled and less office accommodation.

Barriers

Students from Northern Ireland will be more inclined to study here as opposed to the rest of the UK now that student fees won’t be increased. The number of students from Great Britain studying in the province (1,530 in 2009-2010) is expected to decrease because they will not be eligible for that fee. Instead, they will be charged up to £9,000.

Parliament voted in December 2010 to allow English universities to increase their fees from £3,375 to up to £9,000. This was in response to the economic crisis and a review of higher education funding by former BP Chief Executive Lord Browne.

In spring this year, English, Scottish and Welsh universities announced how much they would charge students entering from September 2012. However, the Executive only announced its decision on 12 September; UCAS applications for 2012 entry were due to begin in mid- September.

Alliance had prepared for the prospect of increasing fees by stating in its manifesto that it would resist increases to the levels in place in England. However, the decision was essentially taken out of its hands by the DUP, which continued to oppose an increase in tuition fees and Sinn Féin, which pledged to block any attempts to increase fees.

The Scottish Parliament decided to retain free fees for Scottish students and Welsh students will pay fees up to £4,000 but their universities will charge up to £9,000 for others.

Students from other EU countries (including those from the Republic) can’t be charged any more than local students in each jurisdiction due to the EU Directive on the free movement of citizens within member states.

Students from Northern Ireland studying in the Republic are subject to the €2,000 registration fee and this is paid for by DEL.

The consensus in the Assembly is that keeping fees at £3,465 will ensure participation from students from poorer backgrounds and that the future workforce will be up-skilled. The UUP and DUP have clashed, with the former accusing the latter of parochialism by protecting local students at the expense of other UK students, which could weaken the union. DUP MLA David McIlveen claimed that this was “a good deal” for local students, who otherwise would have been “saddled” with excessive debt after leaving university.

Farry contended that he wanted to “protect the market for local students” by avoiding a flood of English, Welsh and Scottish students. Losing the opportunity to upskill local graduates and encourage them to work in the Northern Ireland economy would have been “absolutely catastrophic,” according to the Minister.

An English public interest lawyer is brining a legal challenge against the Scottish Parliament, claiming that its decision to charge UK students while Scottish and European students get free fees is discriminatory. When questioned about whether he has taken legal advice on this anomaly, the Minister said he has been assured that DEL’s actions are legal. The department does not expect a large influx of students from the outside the UK because their fees are largely paid for by their governments.

DEL’s savings

Farry assured the Employment and Learning Committee on 14 September that the £40 million funding gap in 2014- 2015 will be met. When pressed by Jim Allister, the department’s Permanent Secretary, Alan Shannon, conceded that the overall shortfall from 2012-2015 is £85 million.

The Minister explained that “the reason why we talked about a gap of £40 million is, in many respects, about trying to explain the gap as simply as possible.” As students will enter university in 2012- 2013 and work their way through, “the pressure will build up over the next three years.”

He added: “That £40 million pressure, in essence, will roll forward through the system as a recurring pressure.”

The following departments will face cuts in order to match the amounts coming from DEL: DARD, DCAL, DETI, DoE, DFP, DRD, DSD and OFMDFM.

If these cuts had not been agreed, the shortfall would have been left to the universities, resulting in further staff cuts and course closures.

The Executive has also agreed to provide £1 million in 2012-2013, £2 million in 2013-2014 and £3 million in 2014-2015 to create a number of extra student places. These are estimated to be “in the low hundreds” and only in STEM subjects.

Savings made following a review of education maintenance allowance are expected to between £4 million and £5 million.

Future student flows will highlight the impact this decision has had. The department will continue to fund loans for local students who wish to study in Britain but this could be reviewed in the future.

Queen’s Pro-Vice Chancellor Tony Gallagher has welcomed the freeze as a “spectacular success.” He said the university will have certainty for the next number of years and can get on with plans to provide “a quality student experience and make the best possible contribution to the economy of Northern Ireland.”

University of Ulster Vice-Chancellor Richard Barnett also welcomed the decision, saying: “This is leadership. Let’s be clear, if we had direct rule our students would now be facing fees here of up to £9,000.”

He also called for the Minister to “make a positive announcement” on the university’s bid to replace its Magee campus in Derry, considering the expected high demand for places.