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The UK government is set to outline plans for a financial package to steady Northern Ireland’s public finances at a meeting with political parties on Monday, despite the lack of a deal to restore the region’s executive.
Analysts have estimated that Northern Ireland, which is funded via a £15bn annual grant from the British government, needs at least £1bn extra this year to get back on to a stable footing. A nearly two-year political crisis has led to catastrophic overspending and swingeing budget cuts from London.
“The likelihood is we’re heading for an overspend of up to £1bn,” said Esmond Birnie, senior economist at Ulster University and member of the Northern Ireland Fiscal Council, an independent oversight body. “Things are so bad an upfront payment [now] is almost unavoidable.”
But analysts said a long-term vision was needed to end a cycle of short-term “bungs” from London to plug funding gaps.
Northern Ireland has secured £3.44bn in such additional funding in a range of deals since 2015, but volatile politics have complicated the region’s ability to manage its finances. Stormont has been on hold for some 40 per cent of the time since power-sharing was established in 1998.
The talks at Hillsborough Castle on Monday are separate to months of negotiations between London and the Democratic Unionist party, which has collapsed the Stormont executive and assembly in a row over post-Brexit trading arrangements.
Chris Heaton-Harris, Northern Ireland secretary, said those talks were in the “final, final” stages, but the DUP said Monday’s meeting was not a sign that a resolution was any closer.
Northern Ireland’s biggest unionist party wants changes to the Windsor framework, including legislation to copper-fasten the region’s place within the UK and its ability to trade with Great Britain.
But with Westminster rising for Christmas on December 19, there is little time left before the holidays.
One person with knowledge of the talks said the DUP’s demands remained unclear and kept changing. “It’s like darts being thrown in the dark at a moving dartboard,” the person said.
In a weekly message to members, DUP leader Sir Jeffrey Donaldson cautioned against “getting over-excited by this meeting [on Monday]”. However, he said it was a “step forward in that the government seem to be . . . accepting the case we have been making . . . that Northern Ireland is underfunded”.
In the party’s separate Brexit trade talks with London, “more work is required to conclude that process”, he said.
In the talks on Monday, one big tussle will be over how much money Northern Ireland really needs and the strings attached to any bailout.
Heaton-Harris has complained that the region gets 21 per cent per head more than other parts of the UK but spends it inefficiently. He has launched public consultations on traditionally unpopular ways to raise more revenue, such as introducing water rates.
Local politicians have countered that Northern Ireland, already one of the poorest UK regions, receives less money than it requires. They say a “floor” must be put under the allocation from London, as is the case in Wales, to ensure funding does not drop below the level of need.
“It’s clear that if you’re overspending significantly every year it can’t all just be because you can’t meet your own budgets,” said Cathy Gormley-Heenan, university provost at Ulster University and a member of the Fiscal Commission NI. Set up by Stormont, the group last year concluded its work examining the case for London granting Northern Ireland more revenue-raising powers.
“They’re going to have to raise a bit of revenue, cut a few costs, agree an agenda to transform public finances and try to set a fiscal floor,” she added.
“On Monday, it’s not a one-off payment that Northern Ireland requires. It’s an utter reappraisal of how Northern Ireland is funded,” Gavin Robinson, a DUP MP who is also deputy leader of his party, told BBC Northern Ireland.
Birnie said funding to transform public services should be “ringfenced”. One of the main problems is the NHS: health spending gobbles up half the region’s annual grant from London but Northern Ireland has the longest waiting lists in the UK.
Because Stormont is on hold, London has set tough cost-cutting budgets, which are being implemented by civil servants in Belfast against mounting public frustration at the strain on pay and key services.
Northern Ireland faces a wave of bus and train strikes before Christmas after recent walkouts by teachers and health workers.
With the UK likely to be heading into an election year, officials are keen to secure a spending deal before the holidays. The DUP has declined to say whether a financial deal would get it to return to Stormont, but Gormley-Heenan said: “It could be part of the choreography.”