Saving & spending
Finance Minister Sammy Wilson talks straight with Peter Cheney about the fiscal challenges ahead for Northern Ireland, cutting the number of public bodies and his views on EU membership.
A gentle learning curve over the quiet summer recess gave Sammy Wilson some “breathing space” to ease into his new post. Despite its tough reputation – “battle” with the Treasury is in the job description – it was clear that Wilson was approaching the finance portfolio with the same verve as his previous posts.
“People make a job,” he quips. “If you set out to enjoy a job, you’ll enjoy it. If you set out to be miserable in a job, you’ll be miserable in it. That’s how I’ve found life, to be quite truthful, and I wouldn’t have taken a job on if I hadn’t wanted to do it.”
That does not diminish the “immense” challenges with the end in sight for the Barnett formula and as the consequences of borrowing loom large for devolved regions.
The job also gives a “great oversight of the whole area of government”, as all public services require some form of funding: “From that point of view, it’s actually a privilege to have a job like this because I suppose I am getting a unique picture of Northern Ireland that not very many other people will get.”
Wilson comes to the DFP after a year as Environment Minister, one which he also “really enjoyed” but proved controversial with environmentalists. This war of words, he maintains, was also in the public interest to balance up the debate over climate change.
“I really enjoyed the Department of the Environment,” he surmises. “I mean, first of all, I had a huge interest in planning. Secondly, I just had a great time annoying the greens over all their climate change stuff and challenging all their sacred cows. That was fun as well as, I also felt, carrying out an important public duty, and that was looking at something which could have a massive impact on the economy and yet to me there hadn’t been a great deal of public debate about.”
Asked what spending items the recession has put on hold, he says that it has not had a huge impact yet. For a start, the Programme for Government’s main priority is growing the economy which requires changes in procedure but not necessarily spending a lot of money.
Efficiency savings built into the three-year Budget have cut costs but departments have had to “make the money work harder”. Some capital projects have been put in place as quickly as was originally thought, as seen by the re-profiling of the waste management infrastructure budget in the DoE.
“By moving money around like that, we probably have been able to keep most of the projects we wanted to do in place,” he remarks. “The big challenges will come after the next election when it is quite clear that there will be a step change in the level of public spending.”
Replacing Barnett
There are “always dangers” in changing any spending formula and Wilson has been following the debate over the future, and likely replacement, of Barnett. As agendaNi has explained, three reports – in Scotland, Wales and the House of Lords – have recommended major changes; the status quo is no longer an option.
Wilson notes that the Lords committee found that Northern Ireland was probably underfunded by Barnett and he sees some merit in a new system.
“If, as has been suggested by both Calman and the House of Lords, disputes were to be looked at by an independent body – whoever that might be – and the formula itself would be reviewed every five years, that might actually advantage Northern Ireland but I don’t see the Treasury giving up that degree of control.”
A Conservative government, he predicts, would not favour Northern Ireland financially. General election results from 2005 show that 92 per cent of Tory votes were English – compared to 84 per cent for Labour. Of the 198 Conservative MPs elected in 2005, just four won seats outside England.
“And I must say if there’s a Conservative administration in the United Kingdom after the next election, given that most of their support would come from England, I can’t see them making a massive redistribution of resources towards Northern Ireland,” he continues.
The Scottish Parliament can vary the basic income tax by 3 per cent but the DUP remains resolutely against taxvarying powers, advocated by nationalists and the Alliance Party. It was put to him that varying taxes could help to fill a fiscal gap but Wilson pours cold water on the concept, partly out of experience.
“I know that we did make the case, on a very limited basis, for tax-varying powers in relation to corporation tax. That has been rejected. It’s a battle which I don’t think is going to be worth fighting in the future,” he remarks.
He is wary of the two edges to having that control as the Treasury could then suggest that Northern Ireland starts to raise its own money. Increasing taxes would put businesses at a disadvantage and contradict the Programme for Government’s aim to grow the private sector.
“We’d be setting Northern Ireland back if we took on tax,” he cautions.
Conservatives and Ulster Unionists have accused the DUP of ignoring the public debt crisis and suggested that serious fiscal decisions will be put off until after the next general election, when the consequences could be blamed on a Tory Treasury.
Wilson dismisses that criticism, pointing to warnings “even before this recession hit” from him and his predecessor Nigel Dodds on the need to prepare for lower public spending in future. He traces his defence back to the Programme for Government’s emphasis on growing the private sector, which would therefore reduce the public sector’s share of GDP. This is accompanied by efficiency savings imposed on departments and a focus on ‘hard’ infrastructure, training and skills, to assist businesses.
In his view, it is important not to overreact to the situation as future UK spending plans have not yet been published – either by Labour or the Conservatives – and making reductions prematurely could suggest that Northern Ireland has money to spare.
“It’s a balancing act here. And I think that that’s the important thing – not to stick your head in the sand but equally not to stick your head over the parapet and allow it to be knocked off too early.”
Wilson has no ideological opposition to PFI but adds that some schemes have not been delivered as quickly as was hoped. In education, there has sometimes been a six or seven year gap between the announcement and work starting on the ground. Road projects, in contrast, are faster.
Lower construction costs in the recession will help to keep projects ‘on-line’.
He wants to look at what policy areas are most suitable for PFI investment and how contracts can be made simpler: “The procurement exercises for many PFI schemes have not been as smooth as what we had hoped, and if we are going to go down that route then we’ve got to make sure that we’re not putting ourselves into a system that is very, very slow in delivering.”
Reform
With widespread reform under way in the public sector, he wants to see that firstly completed – to release savings to front-line services – before moving on to cutting the number of quangos and departments.
He cites planning as one issue where fewer departments could make a difference; responsibility is currently split between regional planning at the DRD, development control at the DoE and regeneration at the DSD.
“The number of public bodies in Northern Ireland never ceases to amaze me,” he remarks “and ‘how much contribution some of those public bodies make?’ or ‘how much duplication do those public bodies provide?’ is debatable. Successive governments have promised that they would reduce the number of quangos – it hasn’t been done – and I think that’s the next big thing we need to tackle.”
Europe: better off in or out?
Wilson supports the ‘Better Off Out’ campaign, run by the right-wing Freedom Association, which calls for the UK to withdraw from the EU. Asked whether he would miss the £500 million coming to Northern Ireland, from European funding up to 2013, he replied that withdrawal would free up more money for the UK – and possibly the province.
“I think that, first of all, if you look at the United Kingdom’s contribution to the EU, we are net contributors and net contributors to a massive extent. If those funds were not going to Europe, then they’d be available for internal distribution within the United Kingdom,” he said.
“So I don’t think it’s the case of that ‘if you were out of Europe, you’d lose that £500 million and you’d be worse off.’ If you were out of Europe in fact, if anything, public finances in the United Kingdom would be significantly better.”
Due to the UK’s trade deficit, he expects European countries would continue to benefit from British customers outside the EU and would therefore not put up tariffs.
In 2008, the UK’s gross contribution to the EU was £12.6 billion and the net contribution was £3.3 billion after the rebate and European funding to the public sector was deducted.
“There are many benefits to the UK from EU membership, with 3.5 million jobs being directly or indirectly linked to the export of goods and services to the EU and 57 per cent of UK trade being with the EU,” a Treasury spokesman said in response.
“As the Prime Minister has made clear, our belief is that it is right for us to share the burden of enlargement of the European Union along with other net contributors such as France, Germany and Italy. We support enlargement, which we know will be good for Britain, creating new trading opportunities and jobs with the new accession countries so that every part of the European Union can look forward to prosperity in the future.”
