Nigel Dodds interview: controlling the public purse

As Northern Ireland’s purse-strings draw tighter in the wider economic downturn, Owen McQuade discusses the state of public finance and public sector reform with Finance and Personnel Minister Nigel Dodds.

While the Craigantlet Buildings, headquarters for the Department of Finance and Personnel, sit discreetly on the Stormont Estate, they are at the heart of the fiscal decision-making that keeps the province running. agendaNi met Nigel Dodds in his ministerial office three days after Chancellor Alastair Darling pledged to borrow £394 billion up to 2013 in his pre-Budget report.

As an issue, public finance has moved centre-stage as the economic crisis deepens and tax revenues fall. It presents Finance Ministers, national and regional alike, with difficult choices as they try to balance the books.

The one option that Dodds will not consider in the current situation is doing nothing. Northern Ireland, he points out, will benefit from the Chancellor’s VAT cut, as well as increases in the state pension and child benefit, and the deferment of the corporation tax rise for small businesses.

“In particular terms, it [the report] does mean that we have £24-£25 million extra expenditure in terms of resource and the ability to bring forward some £86 million from future years, which I think is extremely helpful to us in the current circumstances,” he states, pointing to the construction industry’s calls for capital projects to be speeded up.

“If I’d have been Chancellor of the Exchequer, perhaps some of the tax changes I might have done slightly different or targeted in different ways, but in terms of Northern Ireland it is far better to have a fiscal financial stimulus at this time than simply do nothing.”

More specifically, the previous week’s financial talks between the Executive, the Prime Minister and Chief Secretary to the Treasury Yvette Cooper, resulted in an extra £400 million to defer water charges and a further £100 million to tackle a range of issues, including the back-dating of Civil Service pay.

On the same day as the interview, the Executive backed the Titanic signature project with £43.5 million investment as part of its own economic package. Dodds is determined that the devolved Ministers do whatever they can to help families, companies and the economy.

“We are operating within the constraints of a block allocation of money. Therefore we don’t have the freedom of manoeuvre in terms of what a national government would have,” he explains.

He is keen to emphasise the Executive’s track record to date, in taking some “fairly bold decisions” such as freezing the regional rate from 2008 to 2011, capping industrial rates at 30 per cent, and freezing business rates in real terms. Free prescriptions and free public transport for over 60s have also been introduced.

“Now, the question is can we do more?” he comments. Two of the key challenges now are helping householders in fuel poverty and delivering on the Investment Strategy. Other departments are being asked for their ideas on what the rest of the package should involve.

“We hope to proceed as quickly as possible and that was one the reasons why we wanted to bring forward the in year monitoring statement to before Christmas so that we could get action taken early to help people and that people would know what is happening as quickly as possible.”

Infrastructure

There is no doubt that the credit crunch has affected progress on the Investment Strategy, especially as the money released by capital realisation will now be less than what was previously expected. This accounts for around 10 per cent of Investment Strategy spending but the sale of surplus assets was a major priority in the Executive’s first Budget.

“The cost of borrowing is increasing at the same time as the cost of assets and property is declining. But overall, the biggest impact of the current situation is the fact that property prices are down. But that’s something that we have been proactively managing as we go along,” he remarks.

“You could take the view that you just put everything on hold and wait to see what happens. I’ve taken the view that it’s important to continue with our Investment Strategy, managing the situation, putting some money aside to cover some of the pressures that will be there.”

To overcome this problem, the Executive has been negotiating “aggressively” with the Treasury.

A considerable amount of spending is being rolled out and DFP’s task is to make sure that infrastructural improvements are delivered on time so that departments do not end up with large under spends at the end of the financial year.

And “where possible” the Executive wants to make sure that projects which have not yet started are speeded up.

“Some of these projects have long lead-in times and it’s not always possible to speed them up as quickly as next week or next month, but we will do what we can where we can. I think it is important to bear in mind that there is a great deal going on already.”

The new Public Record Office, which received planning permission in six weeks, is one example of ongoing work.

He notes that 40 per cent of construction work in Northern Ireland is related to the public sector, and this is set to benefit from £5 billion by 2011, £900 million of which is in housing alone.

“So when people talk about let’s kick start infrastructure, there’s a considerable amount happening,” he adds, “and there are many regions of other parts of the United Kingdom that are in a worse position as far as their construction industry is concerned.”

Public-private partnerships are still part of the procurement mix for the Investment Strategy but, given falling property prices and the cost of borrowing, Dodds says that procuring some projects “may be more cost-effective” through the normal government procurement process.

“The bottom line,” he emphasises, “is ‘what is the best value for money option for the tax-payer?’”

Procurement for Workplace 2010, the programme for improving the Civil Service office estate, has been suspended until early 2009 as both private bidders are considering a merger. Driving forward efficiency in the Civil Service, though, remains a high priority for the Finance Minister. He describes its importance as “absolutely critical”.

“In a time when there’s pressures on public money, we must ensure that the machinery of government is working as efficiently as it possibly can,” Dodds continues. “In terms of efficiency generally across government, it’s absolutely vital that the money we put in brings about results and outputs that provide value for money for the tax-payer and they can see tangible results.”

DFP’s Performance and Efficiency Delivery Unit (PEDU), which is based on the Prime Minister’s Delivery Unit under Blair, has started work on how to make the Planning Service efficient and aims to help departments deliver on the Budget and Programme for Government.

“If we can get more value out of every pound we spend and get quicker results, that will release money then to be spent on more front-line services. That’s what it’s all about.”

Treasury battles

The department is also Northern Ireland’s link with the Treasury, a relationship which is “always tough” and can at times be “difficult”.

“One of the aspects of this job is to ‘do battle’ with Treasury on behalf of the Executive, on behalf of Northern Ireland, to get the resources we need. And obviously our officials are in constant contact with Treasury.”

Dodds is, though, keen to emphasise how the negotiations in November achieved a “very successful” outcome for Northern Ireland, including the water charge deferral and the extra £100 million allocation.

As explained, part of this amount will go towards paying back-dated wages owed to up to 9,000 civil servants. Two sets of negotiations are taking place on the “very complex” issue: between DFP and the trade unions, and between DFP and the Treasury. As the pay gap started during direct rule, Dodds considers it a “legacy issue” for Whitehall to resolve.

His experience as an MP is something he finds “invaluable” in his role as Minister as he can use his contacts within the House of Commons and learn from how government is handling similar policy issues in Great Britain. On the previous day, he had attended a Commons debate on compensation for people living with the lung disease pleural plaques, an issue that DFP is currently consulting on.

“I think actually in the current situation where you’re at Westminster and known to and known by the leading people – Yvette Cooper and the Prime Minister – it’s very useful to be able to have every Wednesday or every Tuesday night [in Parliament],” he explains.

“So sometimes when people criticise the double mandate thing, they don’t realise actually the access you have and the ability you have to talk to people. And in the tearooms and in the dining rooms and in the corridors, that’s sometimes very much where the real work is done in terms of politics at Westminster.”

Since 1978, Northern Ireland’s share of the UK’s finances has been determined by the population-based Barnett formula, which gives the non-English parts of the UK higher per capita spending in England. Now, 30 years on from its introduction, some analysts are questioning its relevance to the modern United Kingdom.

Asked whether Barnett will be reviewed, Dodds says that nothing is on the agenda at the moment. He would also be “very cautious” about discussing the formula as the Treasury may see that as an opportunity to reduce public spending in the province.

“It’s one of those formulae that every time someone goes to look at it, they sort of withdraw because they say: ‘Whatever comes thereafter could be more difficult and problematical’,” he comments. “From Northern Ireland’s point of view, we have always got to remember that the subvention that we get from Westminster [is] very, very important to Northern Ireland and we would have to look very, very carefully at the ramifications of a review of the Barnett formula.”

< h4>The cost of sectarian division in Northern Ireland is a defining feature of the debate about how the province’s finances should be handled. The Alliance Party, in particular, claims that division costs Northern Ireland £1 billion per year. Dodds takes a long-term view on this problem, and says that a quick solution is wishful thinking.

“My agenda, my aim, hopefully shared by colleagues, is to get the best possible value for money for the taxpayer in everything we do and that’s the overriding, over-arching principle,” he stresses.

“I don’t know there’s anybody who goes out of their way to say: ‘We must segregate’. The fact of the matter is we’ve had a very, very divided community. We still have divisions, difficulties, problems, legacy issues which can’t be wished out of existence.”

From his own experience as MP for North Belfast he says that communities on both sides of the divide are working hard on dealing with division “but it will take time to work away through these issues and we can’t do it just overnight”.

Profile: Nigel Dodds MP MLA

Nigel Dodds grew up in Fermanagh and was educated at Portora Royal School, Enniskillen. He went on to study law at St John’s College, Cambridge, and returned to finish his studies at the Institute of Professional Legal Studies at Queen’s University Belfast. Between 1981 and 1983, he practised as a barrister.

Having become involved in politics at Queen’s, he worked with Ian Paisley in the European Parliament from 1983 onwards. His association with North Belfast started in 1985, when he was elected for the Castle ward. He was elected to the Northern Ireland Forum for the constituency in 1996 and as an Assembly Member in 1998. In 2001, he won the Westminster seat.

After “years of neglect”, he is pleased to see “real progress” in the area as its quality of life improves.

In the first Executive, Nigel Dodds was Minister for Social Development from 1999 to 2000 and from 2001 to 2002. Before taking up his current portfolio, he was Minister for Enterprise, Trade and Investment from May 2007 to June 2008.

He spends his free time with his family and enjoys travelling abroad, especially to the USA and Europe. “I think America is an exciting place where people can achieve anything they set out to do within reason as illustrated by the election of Barack Obama. And only in America could that happen.”

While the province is now more peaceful, the spread of international terrorism does trouble him: “It’s such a random thing. It just makes you thankful that in Northern Ireland at least we have now moved out of that era to a large extent … If you think of where we used to be compared to where we are now, we’ve made enormous strides.”