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Northern Ireland Grand Committee Debates
|©Parliamentary copyright||Prepared 8th December 2010|
Publications on the internet
General Committee Debates
Northern Ireland Grand Committee Debates
Comprehensive Spending Review (Implications for Northern Ireland)
The Committee consisted of the following Members:
James Rhys, Committee Clerk
† attended the CommitteeThe following also attended, pursuant to Standing Order No. 109(4):
The Chair: I remind the Committee that debate may continue for up to two and a half hours. I have no power to impose a time limit on speeches, but brief contributions will enable me to call as many Members as possible.
I am delighted to move the first motion of the first Northern Ireland Grand Committee of this Parliament under your chairmanship, Mr Streeter, and I welcome the opportunity to debate this important subject with right hon. and hon. Members. I am also pleased to welcome my hon. Friend the Financial Secretary to the Treasury, who will be joining us for part of the debate.
There is no running away from the fact that we as a nation face unprecedented times. As a result of catastrophic financial mismanagement by the Labour Government, this nation was brought to the brink of bankruptcy. Labour gave us the largest deficit of any country in the G20 and doubled our national debt. As I have said many times, the UK Government are borrowing £280,000 a minute. We are spending a massive £120 million a day, or £43 billion a year, on paying off the interest on Labour’s debt. That is simply dead money. It does not build a single school or hospital or equip our soldiers; instead, it goes to foreign creditors for them to invest in their own countries. It is equivalent to more than four times the annual departmental expenditure limit of the Northern Ireland Executive. That is this Government’s inheritance from Labour, and it is the background against which the spending review took place.
If we had listened to Labour, our debt would have been almost £100 billion higher by the end of this Parliament, and we would have been paying £4 billion more in debt interest alone by the next election. The choice facing the Government was simple: we could either continue down Labour’s reckless and irresponsible path and head back towards national bankruptcy, or take firm, decisive action to reduce our deficit during this Parliament. We chose the latter, not shirking the tough decisions.
Our actions in the election’s immediate aftermath have successfully taken this country out of the financial danger zone that we were in under Labour. Unlike those of some other EU countries, the UK’s credit ratings have gone up and our market interest rates have gone down. As my right hon. Friend the Chancellor said
Let there be no doubt that my hon. Friend the Minister of State, Northern Ireland Office, and I have been working constantly and extremely closely with Treasury Ministers and the Prime Minister to secure the best settlement possible for Northern Ireland. In so doing, we also secured finance to meet in full the Executive’s bid to address the needs of the members of the Presbyterian Mutual Society. Frankly, the matter was going nowhere when we were elected. My right hon. Friend the Prime Minister made an election pledge to help to secure a just and fair resolution to the crisis with the PMS, and we have delivered. It is now the Executive’s responsibility to finalise their plan to address members’ needs.
Lady Hermon (North Down) (Ind): I am grateful to the Secretary of State for taking such an early intervention. He mentioned the Presbyterian Mutual Society. For the benefit of Committee members and Presbyterians such as me—although, fortunately, I was not a saver in the PMS—how exactly did the comprehensive spending review address the issue of the PMS, as he is boasting it did? How did the comprehensive spending review benefit the PMS?
Mr Paterson: We have delivered exactly what the Executive asked for and it is now down to them to turn that into practical action that will benefit the members. When we came to government, there was a proposal from the previous Government in existence, but it was clear that the Treasury was not working on it. I worked closely with my hon. Friend the Financial Secretary and we had several meetings with the hon. Member for East Antrim, the First Minister and the Deputy First Minister. We have delivered exactly, to the letter, what the Executive wanted, so it is now for them to deliver in detail. I am happy and proud—the hon. Lady used the word “boast”—to have delivered an election promise.
Members of the Committee will be aware that some in Northern Ireland have accused us of reneging on our promise to stand by the £18 billion investment for the period 2005 to 2017. I reject that charge completely. We fully intend to honour the £18 billion commitment. I recognise that neither the previous Government nor this Government have made spending plans until 2017; these will need to be determined at the next spending review. I want to say clearly and unequivocally that on any reasonable assumptions we are on course to meet that commitment.
The Executive’s long-term investment strategy has a number of funding sources, as did the package announced by the then Chancellor in his written ministerial statement on 8 May 2007, and it is clear from both that the capital departmental expenditure limit was only one source of funding for the Northern Ireland long-term investment strategy.
Let me tell the Committee how we expect the commitment to be met. We can reasonably expect more than £11.5 billion in the NIE capital DEL, spending
Sammy Wilson (East Antrim) (DUP): I note what the Minister said about the £2.5 billion to be recovered through RRI borrowing. Given the limit placed on the Northern Ireland Executive by this Government, and by previous Governments, of £200 million per year, how does he get that, through borrowing, the Northern Ireland Executive will be able to raise £2.5 billion over a 10-year period? My maths does not stretch to multiplying £200 million per year over 10 years and getting £2.5 billion.
Mr Paterson: I am glad that the hon. Gentleman has mentioned that as it is exactly what the previous Government proposed—the sums have not changed. This is a spending commitment over the period up to 2017. We are confident that we will get to £2.5 billion. Further to that, there will be £1.5 billion—
Mr Nigel Dodds (Belfast North) (DUP): With greatest respect, the Secretary of State has not addressed the point that was raised by my hon. Friend the Member for East Antrim, who asked specifically about the £2.5 billion, which the Secretary of State said will come specifically through RRI. I respectfully ask him to deal with that point.
Mr Paterson: I am quite relaxed about that. It is £200 million a year over the period of this commitment, which the previous Chancellor and then Prime Minister made. We are happy that we will get to £2.5 billion. On top of that is £1.5 billion from private finance initiative spending and more than £3 billion from other third-party funding, including capital receipts from assets sold by the Executive.
Let me assist members of the Committee who are still adding up by saying that the amounts that I have mentioned total more than £21 billion, so even if all the funding streams are not fully realised, the commitment should still be met. Indeed, more than £9 billion—more than half the commitment—has already been achieved. We are also meeting the previous Government’s £800 million financial package to accompany the devolution of policing and justice.
My right hon. Friend the Prime Minister made it clear in opposition that we would honour the commitment, and we shall. As he said at the Conservative party conference, we will protect the people of our country with every means at our disposal. The Government will always stand by the people of Northern Ireland.
Lady Hermon: Having quickly rushed over the budgetary allocation to the Police Service of Northern Ireland, will the Secretary of State assure the PSNI and its Chief Constable, Matt Baggott, that if the dissident threat, which unfortunately is growing in Northern Ireland, means that the Chief Constable has to call on additional resources from the Treasury, there is a commitment that the Secretary of State and his Treasury colleague will
Mr Paterson: I am again very grateful to the hon. Lady for her most helpful intervention. Emphatically, yes—I reassured the House of Commons at the last Question Time, and if I am given the opportunity, I may do so again next week. I reassured the Justice Minister, Mr David Ford, and Matt Baggott in person that, should there be a deterioration of the security position, we agreed with the proposal made by the previous Government, as part of the devolution of policing, that the Chief Constable and the Justice Minister had the right to come to us with a proposal, given the exceptional security circumstances, and we would then approach the Treasury with a very positive attitude. So the answer is emphatically, yes.
Naomi Long (Belfast East) (Alliance): On the reassurance that has been provided to the Justice Minister, will the Secretary of State perhaps take this opportunity to clarify what has been a confusing situation with respect to the mechanism to make that call on the Treasury if the security situation should deteriorate? Originally it was understood that it would be a direct request from the Justice Minister. Since then, the Secretary of State has indicated on a number of occasions that it would go through the Executive, and that it would be an Executive call first and then go to the Treasury. Will he clarify exactly what mechanism he is referring to for making that call?
Mr Paterson: I am in regular contact with the Justice Minister and the Chief Constable, and I would expect the Justice Minister to come to me, but he speaks on behalf of the Executive, as I understand it, on security matters. I would assume, should he come to me, that he would have the approval of the rest of the Executive—that is, the five-party coalition.
However, the key point is to go back to what the hon. Member for North Down asked about. Emphatically, I can say that if the security situation should deteriorate—we do not underestimate the danger posed by these terrorist groups, although we do not want to overestimate it either—we are quite confident that we will accept a proposal from the Chief Constable, through the Justice Minister, on behalf of the Executive, and take it to the Treasury.
Turning to the details of the spending review, we must recognise that all parts of the UK have to accept their share of the reductions that have been made necessary by the need to tackle the deficit inherited from the previous Government. That said, I have no hesitation in stating the coalition’s firm belief that we have secured a fair settlement for Northern Ireland.
Mr Paterson: Yes, because that was part of the deal as agreed, prior to devolution, by the previous Government, which we have said we will honour. So that is part of it. However, the allocation of funds is down to the Executive. It is the responsibility of the Finance Minister, the hon. Member for East Antrim, to sort out in the Executive how the allocation is carved up. It is not for me to decide; it is for the local Executive to decide.
Sammy Wilson: I am very interested in the point that the Secretary of State has made about capital spending for policing and justice being included in the £18 billion of capital spending during the 10-year period for Northern Ireland. Since that agreement on the £18 billion was made at a time when policing and justice were not devolved and when there was no prospect—my party had yet to get its hands on the reins of power—of bringing forward the devolution of policing and justice, how on earth does he conclude that the £18 billion package, which was formed of devolved functions at that time, would have included capital spending on something that was not devolved and that there was no prospect of devolving?
Mr Paterson: I think that I have listed the items that led the then Chancellor to arrive at £18 billion. That was one proposal from the last Government. Pursuant to that, there was the agreement on devolution of policing. We are confident that we are delivering the £800 million that was part of that deal—we are honouring that.
I will move on to revenue. A 6.9% reduction in the resource budget for the Northern Ireland Executive represents a saving of some 1.72% a year over four years and compares to a UK average of 8.3%. My own Department has to find savings of 25% and I would have been delighted with the settlement that the Northern Ireland Executive are receiving. Having talked to many Northern Ireland businesses over recent weeks, I know that many are taking much larger savings out of their budgets than we are asking of the Executive.
Although it is up to the Executive to decide how to manage its budget, the September CBI report showed that more than £1 billion could be saved by running services more efficiently and by realising assets. In addition, a couple of years ago Deloitte said that savings of about £1.5 billion could be made by tackling the costs of division and pushing on with building a truly shared future. We should not forget that, per head of population, Northern Ireland receives more than any other part of the UK.
Ian Paisley (North Antrim) (DUP): Does the Secretary of State not accept that Northern Ireland’s needs are greater? The most recent figures on those claiming jobseeker’s allowance in Northern Ireland show that of the 10 regions of the United Kingdom where such claiming was at its highest, eight happened to be in constituencies in Northern Ireland. Does he not accept that Northern Ireland has a greater need, for a host of historical reasons?
Mr Paterson: That was a timely intervention, as I was about to recite the figures. They show that Northern Ireland receives more per head of population than any other part of the UK: England receives £8,559, Wales £9,597, Scotland £10,083 and, reflecting what the hon. Gentleman said, Northern Ireland £10,662. It is a fair settlement for Northern Ireland, which has done proportionately better than other parts of the United Kingdom.
Some Members may say that the reductions in capital expenditure are larger and will hurt more, but the Government have reduced capital spending by considerably less than the 50% that the previous Government had planned in the Budget before the election. Indeed, when giving evidence to the Assembly’s Finance and Personnel Committee, Mr Neil Gibson from Oxford Economics said:
“The amount of money that comes into Northern Ireland… even by the end of the four-year period, should still be more than enough to run world-class public services. Most other countries and certainly other regions of the UK, would be delighted to have that level of revenue.”
Ian Paisley: Does the Secretary of State not accept that no other region of the United Kingdom has come out of 40 years of terrorist violence, and that no other region has been asked to rebalance its entire economy, away from the public to the private sector, as a result of trying to make up for those 40 years?
Mr Paterson: I am fully aware of that. Indeed, that is why Northern Ireland receives this exceptionally high public expenditure per person. I began using the phrase “rebalancing the economy” about three years ago. I have been emphatic in stressing that it can be done only over time, suggesting that it would take 25 years. I think that the hon. Gentleman is hinting that if we try to move too fast, or too precipitately, that would destabilise things. We also have the option of doing nothing, but I shall come to that in a moment.
Every family knows that it is difficult to make do on less, and I am not saying that Northern Ireland will not face difficult choices, but we are all in this together. Only together can we reduce what we owe on the national credit card. It is not for me to tell the Executive what to do. I believe in devolution and will always scrupulously observe the devolution boundaries. However, as Northern Ireland’s representative in the Cabinet, and as someone who passionately fights Northern Ireland’s corner, I believe that is time for the Executive to set the budget. The Assembly voted unanimously for that. Northern Ireland has to play its part in addressing the deficit.
Mr Dodds: The Secretary of State will know better than most the difficulties of working within a coalition, because he has a place in the Cabinet. However, he may not be as au fait with the difficulties of working within a
Northern Ireland has made tremendous progress despite all those difficulties. It is worth acknowledging the progress that has been made on financial and other matters, given the great problems that exist. We have to operate in a system that is not of our choosing, but one that he and the previous Government have imposed on Northern Ireland.
Mr Paterson: The right hon. Gentleman makes a perfectly fair comment. Obviously, Northern Ireland has made great strides. Our party always supported the moves made over recent years by the previous Government to set up the institutions. We know that they are new. I do not underestimate the difficulties of trying to get an agreement out of a five-party coalition, and he makes a perfectly fair point on that. I was out in Craigavon with the right hon. Member for Lagan Valley yesterday—
Lady Hermon: As well as businessmen becoming angry on the street, students are becoming very angry on the street. I urge the Secretary of State to announce that if there is a vote on Thursday in favour of increasing tuition fees—I will certainly vote against that—he, as the representative of the Cabinet for Northern Ireland, will ensure that additional funds are made available, as has been announced by the Secretary of State for Business, Innovation and Skills, to attract young people from low-income families so that they are not disadvantaged in Northern Ireland. Will he confirm that additional funding will be given to the Northern Ireland Executive to fund that group of needy people?
Mr Paterson: We have just been praising the establishment of devolution, and this is a devolved issue. It is up to the hon. Lady to talk to her former party colleague, Mr Kennedy, who is now the relevant Minister.
Sammy Wilson: I am surprised by the Secretary of State’s response because he knows as well as me that if additional funding is made available for schemes to alleviate hardship for low-income students in the rest of the United Kingdom, there should be a Barnett consequential for spending in Northern Ireland. I hope that he is not suggesting that that Barnett consequential is going to be denied to the Northern Ireland Executive so that they, too, can put in place some kind of fund for low-income students.
Mr Paterson: Certainly not. If that is what Committee members understood, I apologise. The detail of Barnettised transfers is down to local Ministers to decide, as has always been the case. Obviously, if there is a Barnett consequential, it will be transferred, but it is for Mr Kennedy —the local Minister—to fight his corner on how the money is carved up.
Mark Durkan (Foyle) (SDLP): At a more fundamental level, has the Secretary of State established from his Treasury colleagues what exactly is the Barnett consequential that would flow from the reduction in Government funding to universities in England under the Government’s proposals? What will Northern Ireland lose out of the Barnett formula, or has that already been factored into the CSR?
Mr Paterson: All the Barnett consequentials have already been factored in to the revenue settlement which, as I said, is 6.9% over the four years, which is only 1.72p in the pound. That is part of the settlement that has already gone through.
I have said before and I will say again that we need to be clear that a settlement is a settlement. Northern Ireland now needs clarity and certainty, and I trust that the Executive will move quickly to set their budget.
According to one survey, 77.6% of GDP in Northern Ireland is dependent on public spending. That is unsustainable and simply has to change. As we argued strongly at the election, Northern Ireland’s economy has to be rebalanced. I think that we will all agree that this simply has to happen to secure Northern Ireland’s long-term economic future. It will not be easy, and the Committee will be aware that my right hon. Friend the Chancellor announced in the Budget that we would be issuing a paper for consultation on these matters, including on the question of addressing possible mechanisms for giving Northern Ireland a separate rate of corporation tax.
Ian Paisley: The Secretary of State is absolutely right that he made a point of that during the general election, but will he clarify the issue? As far as he is concerned, is the term “enterprise zone” interchangeable with the term “corporation tax”, or are they two distinct and separate tools to affect the economy in Northern Ireland? Does he regard them to be interchangeable mechanisms?
Mr Paterson: Bluntly, the term “enterprise zone” was an umbrella under which I was able to go about Northern Ireland for the past three years, visiting businesses and enterprises every week and asking them what measures would really help them to transform their businesses and encourage private enterprise to grow in a long-term and sustainable manner across Northern Ireland. Corporation tax and planning, which is now very much in local hands, were the two main issues that came up time and again—almost every time I spoke to businesses.
The idea of an enterprise zone is to create an environment that makes Northern Ireland the most attractive place in western Europe to do business. Part of that might be through devolving the power to set corporation tax to the Executive, but there will also be a range of other measures, such as planning. I hope that the Executive Ministers—the hon. Member for East Antrim and his
Mr Laurence Robertson (Tewkesbury) (Con): As my right hon. Friend is well aware, the Northern Ireland Affairs Committee is conducting an inquiry on corporation tax. He mentioned the consultation paper that he hopes the Treasury will publish shortly, but does he have any further guidance on when the time scale will begin and how long it will be?
Mr Paterson: No, I am grateful for my hon. Friend’s work on this. I think that it is splendid that the first thing the Northern Ireland Affairs Committee has done is to look at that issue, because everyone knows—I have been quite open about it—that I am a great enthusiast for it and have been for more than three years. I do not think that any measure would galvanise the private sector so much, not just for existing businesses, but also to bring in fresh investment.
To answer my hon. Friend’s question, the work is well advanced, and my hon. Friend the Exchequer Secretary hopes to be able to share a draft of the paper with Executive Ministers shortly, because we want their ideas and input before the paper is published for public consultation. The paper will set out both tax and non-tax options for promoting growth in Northern Ireland.
Mr Paterson: It will be a Treasury paper, but we want to consult local Ministers before it goes to the public. The Executive also propose to publish their own paper which, obviously, will be concerned mainly with devolved matters.
Sammy Wilson: I know that the Secretary of State is keen to produce the report, and we do not wish to see any delay, but the answer he has given the hon. Member for Belfast East surprises me, because the terms of reference were very clear that the paper would be drawn up jointly with input throughout the process from both the Minister for Enterprise, Trade and Investment and the Department of Finance and Personnel in Northern Ireland. It seems that the goalposts have again been moved, as the Secretary of State says we are to be presented with a Treasury paper. I remember sitting in a room with him discussing the terms of reference, and they were certainly different from what he is describing today.
Mr Paterson: I am sorry that that is the hon. Gentleman’s interpretation of what I have just said. We agreed that it would be a Treasury paper and that we would consult him and his ministerial colleague, which is exactly what
Naomi Long: This is an important point. If it is not a joint paper, surely it can refer only to those matters that are not devolved. It will therefore not represent a full package of measures to create an enterprise zone, but will instead refer only to those tax-varying powers to which the Secretary of State has already referred with respect to corporation tax. Will he provide more clarity on whether it will be a single-issue paper with respect to corporation tax, or whether, as I think most of us were expecting, we will see a much broader paper encompassing a wider range of proposals?
Mr Paterson: This goes back to the question posed by the hon. Member for North Antrim. The paper will address a range of proposals to galvanise the private sector. We promised—and the terms of reference said this—that we would consult the Executive. We made a manifesto commitment and a coalition commitment to publish a Treasury paper, and that is the agency that will publish it. I have met the hon. Member for East Antrim and his ministerial colleague, and we have always said that we would consult them carefully before the paper is finally made public. As soon as we are happy with it, we will get it to the Executive. There will then be consultation within the Executive, who will come up with proposals, some of which, as the hon. Lady rightly points out, might well be devolved.
I mentioned planning, which is a big issue for many businesses. There might be a prize for business on planning, but that is entirely down to the Executive to decide. This will be a team effort. However, the simple question was, “Who will publish it?” The Treasury will, but having consulted closely with the Executive, and particularly the main economic Ministers. That is vital, because we want their ideas and input.
The Northern Ireland Executive are preparing their own economic strategy. Our aim must be for both papers to dovetail with each other. We are not in competition. As I have said, it is a team effort for Stormont and Westminster. If possible, we should make the whole greater than the sum of the parts. Although I do not want to prejudge the outcome of the paper, the business community in Northern Ireland, like the political parties, undoubtedly increasingly supports the devolution of corporation tax. My views are extremely well known, but I believe that devolving powers on corporation tax could play a major role to attract significant new investment into Northern Ireland and, over time, to reduce its dependence on the public sector. The issue is, of course, complex, but I assure the Committee that we are approaching it with determination. Ultimately, it is for the Executive to decide whether they want to use the power if corporation tax is devolved.
Mr Paterson: That is a perfectly legitimate question, given the circumstances. People questioned what we were going to do. We made it clear that if we were approached by the Republic of Ireland, we would like to help. It is a huge market for us. As has been said on many occasions, we export more to the Republic than to China, India, Brazil and Russia combined. Obviously, Northern Ireland’s economy and banking system are closely enmeshed with those of the Republic. We decided that it was massively in the UK’s interests to have a prosperous and stable Republic of Ireland with a sound banking system, and all parties in Northern Ireland were sensible about that.
The right hon. Gentleman is right that it is a significant loan, on which I hope we will make money when it is repaid. However, in our discussions, I strongly supported the idea that the Republic should retain its right to set its own taxes, particularly corporation tax—other countries in Europe were applying pressure to grab the opportunity to push it up again—because I believe firmly that the only way for it to get out of its difficulties, which are graphically shown all over the television this afternoon in coverage of its Budget, is by trading out.
What is interesting is that absolutely the last thing that the Republic was willing to let go of was its right to set corporation tax, which shows how incredibly important that has been to the growth of its economy over the past 10 to 15 years. Through our paper, with my colleagues in the Treasury, I hope to come up with a range of measures, one of which might well be corporation tax, to help to make Northern Ireland as competitive.
Ian Paisley: I am sorry, Mr Streeter. You will forgive me for being a new boy who is not totally familiar with all our elaborate procedures. Of course, I would never flex the rules in any way—or try to.
Through you, Mr Streeter, may I ask the Secretary of State to spell out to the Committee how the coalition Government can give a multibillion pound loan to the Republic of Ireland, which I understand has to be given, yet at the same time seem blasé about the Republic of Ireland using that money to acquire assets in Northern Ireland and then bolting them on to utility assets in their own jurisdiction and indicating publicly that they will sell those assets over the next year or so to the highest bidder? Will he tell us that the money will not be allowed to be used for such a purpose?
Naomi Long: The Secretary of State mentioned banking specifically. I want to probe whether that will form part of the paper that is due to come out, particularly given the reliance of small and medium-sized enterprises in Northern Ireland on available lending, which has been restricted in past years. Is the Treasury actively exploring that area to try to support small businesses and growth?
Mr Paterson: I think we can say that there will be a two-month consultation period. The hon. Lady is welcome to chip in on that consultation, once the paper has been published. The Treasury already has an ongoing consultation on the banking system’s impact on small business, so she might like to liaise with the Financial Secretary at the end of the sitting and see how she could get involved in that. If she and her constituents have concerns, I would be delighted if they make contributions.
David Simpson: Further to the previous question, the Secretary of State will have heard yesterday in my constituency of Upper Bann that small businesses that have been penalised heavily by the banks are gravely concerned that the banks are using draconian measures against them.
Mr Paterson: I thank the hon. Gentleman for organising the visit yesterday because we learned a lot. What his constituents said was very much what mine are saying. Many Committee members are concerned about the banks, and that is why my colleagues in the Treasury are working on this matter at the moment. The appropriate people to talk to are Treasury Ministers, perhaps after this sitting.
Naomi Long: The specific point that I was raising was not the general issue of banking in the UK—I am aware of the consultation that the Secretary of State mentioned—but the restricted markets in Northern Ireland and the fact that many Northern Ireland banks are directly affected by bad debt through the National Asset Management Agency in the Republic of Ireland, which has caused a constriction much greater than that in many other regions. I was hoping that the Secretary of State would deal with that specific point in terms of the Treasury paper.
The Secretary of State said earlier, with respect to fiscal devolution, that he could envisage a situation in which there could be differential rates of corporation tax within the United Kingdom. Will he confirm that he actually said that, or did I mishear him?
Mr Paterson: Absolutely. I have been talking about that for three years, and if the hon. Gentleman looks up the Azores judgment, he will see that the European Commission permits that. However, the issue must be handled by a democratic Assembly with entire control of its own geographical area, so Westminster could not legislate unilaterally for a beneficial arrangement for one part of its geographical area. The power must be devolved to a local Assembly, as the Portuguese did with the Azores. That is what we are studying and it is something on which the paper will elaborate.
I am conscious that other hon. Members wish to speak and I have taken many interventions, so I shall rattle quickly through how the measures that we have taken across the piece in the UK will help business. We are cutting the main rate of corporation tax from 28p to 24p over the next four years. The small business rate will come down from 21p to 20p. Last week, my right hon. Friend the Chancellor of the Exchequer announced a new corporation tax rate of 10% on products derived from UK patents. We saw on yesterday’s visits that that could be of real benefit to one of Northern Ireland’s most successful businesses.
Our plan for the next three years to waive national insurance contributions on the first 10 jobs created by a new business could benefit more than 15,000 businesses in Northern Ireland. Our decision to reverse the most damaging part of the planned increase in employer national insurance contributions—Labour’s jobs tax—by raising the threshold by £21 a week above indexation will lead to a saving of about £80 million in Northern Ireland.
In addition to tackling the deficit and promoting economic growth, the spending review has a third theme of promoting fairness, a key element of which is welfare reform. That is particularly important in Northern Ireland. Reports in today’s local papers in Northern Ireland state that one in 10 people is on disability living allowance, and that figure rises to one in five in some parts of Belfast. Long-term unemployment is estimated at 40% of total unemployment. More than half those claiming income support have done so for more than five years, and 14% of all children live in workless households.
Jim Shannon: The right hon. Gentleman has clearly outlined the issue with benefits, but I ask him to take on board the fact that Northern Ireland has a larger proportion of people on DLA because those people need to be on DLA. It is totally wrong to bring in changes that will have an adverse impact on those people by taking away their benefit and pushing them further into poverty.
Mr Paterson: I wholly disagree. The figures that I have given are from the think-tank of my right hon. Friend the Secretary of State for Work and Pensions—the Centre for Social Justice. He has been working on this issue right across the UK for three years. Our measures will be radical and compassionate, because there is nothing progressive about paying people to stay at home on these benefits. There are large numbers of people who would benefit if we could get them back into work, so I wholly refute the criticisms that the reforms should not apply to Northern Ireland. They will particularly benefit large numbers of people in Northern Ireland—
Unemployment in Northern Ireland is, at 7%, below the UK average of 7.7%. I am absolutely certain that we secured the best settlement deal that we could for Northern Ireland in the spending review, following representations at the highest level. I pledge again my desire to work in partnership with Executive Ministers not only to help to rebalance the economy, but to be an effective voice for Northern Ireland at the Cabinet table.
I recognise that the reductions will be difficult for us all, but let us be mindful of the example of Greece and the Republic of Ireland, and also recognise that as a result of the spending review, Northern Ireland will still have more spent on it per head of population than any other part of the UK. I commend the motion to the Committee.
Mr Shaun Woodward (St Helens South and Whiston) (Lab): I, too, welcome you to the Chair, Mr Streeter. Obviously, it is a pleasure to see the Financial Secretary to the Treasury sandwiched so neatly between the Secretary of State and the Minister of State this afternoon.
We have heard a lot of words this afternoon, but I am not sure that we learnt anything at all. There was very little clarity about the Government’s precise proposals. During the last few weeks and again this afternoon, it has been regrettably clear that when it comes to understanding the consequences of the financial settlement announced in the CSR, the Secretary of State—however well intentioned he may be—is either living in a parallel universe to those Members of the Assembly and in the Executive of Northern Ireland, or simply does not want to recognise the risks that this settlement might have,
Indeed, in Northern Ireland, history teaches us that we cannot will the end unless we will the means. It is the means that we are discussing this afternoon and not the end. We need clarity about resources; clarity about the consequences if those resources are not adequately provided for, and the consequences for economic stability and political stability if promises made by previous Governments and, indeed, by the Conservative party when it was in opposition, are now not kept or not kept in the good faith in which they were made and agreed.
Mr Woodward: I am very happy to talk about what we would have done in government, but the fact of the matter is that we have had a speech lasting nearly 46 minutes from the Secretary of State in a two-and-a-half-hour session. If the hon. Gentleman really wants to enter into that kind of political point scoring, I honestly think that, for the benefit of other Members of the Committee, he and I can do that at another time.
The stability and the future of Northern Ireland depends not only on politicians but on the people of Northern Ireland continuing to be held by those articles of faith—faith from them and faith from the British Government. So, for clarity, let me be absolutely plain. As long as the Government continue to adhere to the principles and promises made in Belfast, at St Andrews and at Hillsborough castle, and as long as they keep those principles and abide by them, the Secretary of State will continue to enjoy our full support in his vital work. He knows well that bipartisan support is essential and I thank him for all the support that he gave us when we were in government; but he also knows, on the same principles, that that support cannot and never should be taken for granted.
The Secretary of State needs to listen very carefully to the arguments that are made, not only by the Opposition here in Westminster but—crucially—by all the political parties in Northern Ireland. The Government must be fair and even-handed. He does not need to be reminded of the difficulties that arose as a consequence of his alliance with one political party in Northern Ireland and I say this to the right hon. Gentleman: he must be careful with issues such as a Bill of Rights to ensure that he is even-handed and not high-handed.
When it comes to the CSR, the Secretary of State needs to be careful, as when he went through his rhetoric at the beginning of his remarks today, that he does not simply parrot his right hon. Friend the Chancellor, but demonstrates that he actually understands why Northern Ireland is different from other parts of the United Kingdom. It is different principally because of the
I agree with the Secretary of State that it will take a long time—perhaps 25 years—to transform the vitality of the private sector in Northern Ireland so that it catches up with the rest of the United Kingdom. However, it fell behind not out of choice, or because people did not want to work hard, or because they only wanted to stay in the public sector, but because the troubles blocked investment, blocked entrepreneurial ventures and too often blocked opportunity. To generate a strong private sector, Northern Ireland requires not only peace, but investment and help from the Government.
I know that the Secretary of State genuinely shares a vision of a strong economy for everyone in Northern Ireland, but the danger is that the consequences of his cuts to the public sector now will go too quickly and too deep for the private sector in Northern Ireland to flourish alongside the wounds that will be opened up by those cuts. It is not so much a scalpel, making precise incisions, as something more akin to bordering on an amputation. His words are right: radical, yes—but compassionate? We will see.
Mr Robertson: Will the right hon. Gentleman be clear? Is he suggesting that he would have preferred a real-terms increase in the Northern Ireland budget? That is a perfectly legitimate position to take. Is that the one he is taking?
Mr Woodward: If the hon. Gentleman is patient, he will see where I go with this. The Secretary of State needs to be clear about what he thinks the impact will be on the 36,000 or so people who are destined to lose their jobs in Northern Ireland. The crucial question is: will that pain be shared fairly across the communities?
Brandon Lewis (Great Yarmouth) (Con): I want to be clear. The argument the right hon. Gentleman has put about the cuts seems to be the same one that the Opposition have put against all of the changes to the budget, but the Government’s position has been proven right by the economic results we have had since the Budget and the CSR. I am not sure where he thinks they would necessarily be different in Northern Ireland. He is talking about “savage cuts” but the difference is about 1.7p in the pound. That does not sound particularly savage to me. Does it to him?
What will the impact be on those who are genuinely in need of welfare or housing? The Secretary of State will know the role that housing has played in the history of the troubles. Is he confident that the Executive will be able and will have adequate resources to manage fairly the community consequences of his Government’s proposals? It may only be a matter of 1% or 2%, as the hon. Member for Great Yarmouth says, but 1% or 2% in a very delicate balance in Northern Ireland may make all the difference in some communities.
No one is claiming that Northern Ireland should not take its fair share of pain in dealing with the consequences of the global recession, and the First Minister and the Deputy First Minister both recognise that; but Northern Ireland is a special case, and the previous Government relentlessly recognised that. It will remain a special case for a long time to come. So a fair share of the pain—yes. We are all in it together—yes. But an appropriate fair share for the special circumstances.
Perhaps when he winds up, the Minister of State can tell us precisely what work and what consultation was done in Northern Ireland to establish the impact of these inevitably very large cuts—at this time and with this speed—to the Executive. Perhaps he will also set out whether it will genuinely be possible for the Executive to create a budget that will still be able, with the resources given them, to share the pain fairly and—of course not intentionally, but none the less as a consequence—not disproportionately?
The problem of the dissidents continues to challenge us all. The Secretary of State must continue to ensure that the Executive, the Justice Minister and the Chief Constable have the resources they need to counter effectively the real threat and the dangers posed. The dissidents must continue to know that there is no future in their activities and that they will be faced down, and that there are no successes and no gains for them. We must ensure that they are never able to build support in the community. That means the community must not only see but feel the successes of the peace: the jobs, the houses, the hospitals, the schools, the capital projects that are signals of the success of politics.
There will never be a stronger advocate than I of ensuring that the dissidents fail, and that they face the full judicial consequences of their demented and psychotic mission, but success will come because we address the future of Northern Ireland not only as a security issue, but as a political one. Make the politics work. Let people experience the dividends of peace: their children doing well at school, well resourced and well provided for; better health care; better housing; good and well paid jobs. That shared across the community divide will be the greatest weapon we have to defeat the men whose only call is one of violence.
Mr Woodward: The point that I am making is about the delicate balance that has been achieved by the Executive and the Assembly. The question that I am putting to the Minister of State—I hope that he will address it fully when he winds up—is: what consultation the Government conducted and what work they did to ensure that the areas that they were planning to cut would not disproportionately hurt the various communities in Northern Ireland or the overall budget.
Politics is the only way ahead in Northern Ireland, but for politics to succeed it must be resourced and promises kept. The Secretary of State must fight Northern Ireland’s corner hard with the Treasury. Capital projects matter in politics—not only schools and hospitals, but specific projects such as the new prison at Magilligan and the new police college, which a promised Patten reform. The last Government promised those and, indeed, when in opposition, the present Secretary of State promised support for those Hillsborough Castle agreement commitments. He must ensure that they are honoured, specifically and in the promised time scale. He says that he wants to do these things and believes that they can be done within the time scale, but it became clear to us during the work leading up to the Hillsborough Castle agreement that these two specific projects must happen, and that there must be no prospect of them being jeopardised. The right hon. Gentleman says that he is on course. The problem is that many of us cannot quite see where the course might take him, as we heard through interventions by the hon. Member for East Antrim and the right hon. Member for Belfast North.
The Secretary of State has rightly decided to focus on rebalancing the economy. He has chosen to use a lot of his personal political capital in the expectation that he will be able to give some kind of parity in Northern Ireland, so that it can compete with corporation tax rates in Dublin. Whether that seems quite so wise in the light of events in Dublin, we shall see. None the less, we await his paper on rebalancing the Northern Ireland economy and on the proposed corporation tax changes. I believe that he promised it for September, or autumn.
Mr Woodward: Well, it is nearly Christmas. We had hoped that, like Santa, he would be delivering it, perhaps this afternoon, but it seems more likely to be an Easter offering. Either way, we look forward to the paper sooner rather than later.
We know that the timing has slipped, but has the right hon. Gentleman fully considered the consequences of what he proposes? He speaks of the Azores judgment, but he will also know of its consequences for the Government involved. Let us have some clarity. If he is minded to push for a cut in corporation tax, he will already know that the immediate cost to the Executive will be several hundred million pounds, which the Treasury will be obliged to deduct from the block grant. Will he set the record straight and make it absolutely clear that, if he proceeds with it and is minded to exercise that one of his options, the Northern Ireland Executive will not be penalised in the short term—by which I mean five to 10 years—if he obliges the people of Northern Ireland to bear the burden of this hobby horse? We know that he likes his horses, but everyone needs to win this race, not just him.
Mr Woodward: The right hon. Gentleman is on the money. The Financial Secretary is salivating at the prospect of the money that he may be able to deduct from the block grant, and the Secretary of State will know that the Azores judgment would oblige him to do that. It seems incumbent on the Secretary of State to give us some sense of the course that he is taking.
Mr Paterson: This is all deeply depressing statist thinking. The facts are clear: the Azores judgment requires the Government that devolves the power to deduct the forgone tax from the block grant. The block grant is about £10.2 billion and the last figure we have from Varney is £310 million, so that would have to come off the block grant. It would be about 3%. Talking to businesses yesterday with the hon. Member for Upper Bann, we heard that some were taking out 10% in one year from their costs, and I would hope—[Interruption.]
Mr Paterson: I hope that Members of the Assembly and the Executive see that, if they were given this power, they would not have to take the tax all the way down to 12.5%. The decision will be theirs to take, and if they do, I hope they will be bold, because that would be an investment in the future. In the time that the Republic reduced its corporation tax, public spending on public services increased by 220%, but at the same time, under the Labour splurge, public spending here increased by 120%.
Mr Woodward: Well, Mr Streeter, I think that we have a bit of clarity now and a sense of where this horse is going. We have a real sense that the Secretary of State is about to drive the Northern Ireland Executive on to the rocks.
The Secretary of State has said this afternoon that he will allow his colleagues at the Treasury—I am sure that they are pleased—to be enabled to deduct £300 million from the block grant. Of course, he has failed to say that there is no prospect of £300 million being brought into the Executive from those changes to corporation tax in that year. This is actually a proposal to cut the block grant to Northern Ireland further, by £300 million year in, year out. Sir David Varney thought that it would be at least 10 years before we would get to the moment when it might balance, yet he is not remotely proposing to set out what on earth he expects the Executive to do.
There are members of the Executive here this afternoon who must be pretty shocked by what they have heard, because I think that they thought the Secretary of State had come up with his hobby horse, with a proposal, learning from the work done by Sir David Varney. Yet again, most of the work has already been done. Most of the things that the Secretary of State talked about were paid for when the previous Government were in office,
Mr Paterson: That is a ludicrous, irresponsible caricature. If we agreed to make this proposal and if the Treasury agreed, and if it was voted through, the Executive could do nothing. They could continue to raise corporation tax at the same rate, which is to decrease from 28% to 24%. Nothing would change. But the right hon. Gentleman has to ask why the Republic fought so hard to keep this right. One business in development said yesterday said that the measure would increase its turnover by 50% over 10 years. Why did another small engineering business say that he would increase his business by 100% over 10 years? Why did one of Northern Ireland’s most dramatically successful high-tech companies say that it would increase its turnover by 100% over the 10 years after we did this? They would grow the cake—
Mr Woodward: I suspect that we will hear quite a bit from other Committee members, and members of the Executive, about their real fears about what has been put on the table. We had the opportunity this afternoon to discover the Secretary of State’s course in respect of this issue and to ask for a little bit of clarity. We have some clarity and some sense of the course. I do not question the Secretary of State’s motives. He wants to help the economy; that is not the issue. I do not question the sincerity with which he has approached this matter; that is not the issue. I do worry, however, about the way that he has decided to approach it, because I cannot see that the Northern Ireland Executive will be able to manage the course that he is suggesting that they should take.
The remarks we have made this afternoon are not complaints about cuts. They are genuine questions about the consequences of following through a rhetoric, a storyline and a narrative from the Treasury that may be justified in the Secretary of State’s eyes and his coalition friends, although I would disagree. However, the fact is that Northern Ireland is different. Its politics and stability are different, and risks are involved in even the smallest cuts if they are made in the wrong place at the wrong time. I say to the Secretary of State that if the Government go too far, too quickly or unfairly, they will hurt stability. In Northern Ireland, he should exercise a little less bravura and a little more caution.
Sammy Wilson: At the outset, I must make clear my stance on the comprehensive spending review, where we are and the general principles behind it. As a Unionist, I understand the national issues facing the United Kingdom
We understand that there is a deficit. We understand that there are benefits to welfare reform. I do not wish people to live in state dependency all their lives. I believe that it is much better for them to be in work, earning far more money than they might on benefits and having the dignity of work. I am not opposed to the Government’s objectives of reducing the debt, getting people back to work and rebalancing the economy in Northern Ireland; those are laudable objectives. However, the Secretary of State has failed to recognise that there is no one-size-fits-all policy for the United Kingdom. Different parts of the United Kingdom have different economic circumstances.
Northern Ireland, as the shadow Secretary of State pointed out, has come out of 40 years of turmoil during which a lot of resources were rightly devoted to the security situation, rather than being invested in infrastructure. Northern Ireland therefore has a massive infrastructure deficit. That will be important when we come to discuss the £18 billion of capital spending, to which I will return in a moment.
Because of our situation, we are also in a different part of the economic cycle. Although the rest of the United Kingdom has started to experience tentative growth, that has not yet happened in Northern Ireland, partly due to our proximity to and many of our industries’ dependence on the Irish Republic. That dependence has been much heavier than in the rest of the United Kingdom, and the recession there has affected our economy. Also, many of our businesses are small, so the recession hit them much harder and they could not absorb the impact.
We depend much more heavily on the public sector, so public sector cuts at a time when we are in a different part of the economic cycle will have a different impact on Northern Ireland. We also depend much more heavily on banks that are basket cases due to what happened in the Irish Republic. Much more lending takes place through banks based in the Irish Republic that offer services in Northern Ireland, and many of the major UK and UK-based banks do not have a significant presence there.
All those things mean that any reduction in Government spending or tightening of the fiscal purse strings will have a greater impact on Northern Ireland. As a result, we have argued that what the Government have done nationally is probably too quick and too deep for our particular economic situation, and no allowance has been made for that situation.
I do not want to be seen as pleading a special case for Northern Ireland, or saying that we should be exempt from the disciplines that exist in other parts of the United Kingdom. That is why, on the determination of the budget in Northern Ireland, I have argued that what has happened to the block grant as a result of the Barnett consequentials—the Secretary of State talked about it being a good deal, but actually it is not a particularly good or bad deal; it is the kind of deal we would have expected to get, given the settlements that
However, on the point made by the hon. Member for North Down, I note that the Government have even anticipated some of the Barnett consequentials. In a response from the Treasury to a written parliamentary question, I was told that the consequences of the proposal, which will be debated in the House of Commons on Thursday, have already been passed on to the Northern Ireland budget.
Naomi Long: Does the hon. Gentleman share my concern that the fact the timetable for changes to the university funding arrangements in Northern Ireland is likely to lag behind the changes made in England and Wales by about a year could leave us with an additional gap in our budget for funding universities?
Sammy Wilson: I was coming to that exact point—I hope the hon. Lady will remind me of other matters, too. The whole point is that, in passing those Barnett consequentials on ahead of this proposal, and given the work that has to be done by a devolved Administration, even if we wish to mimic and mirror the changes here, we will have to carry the consequences probably for another year.
Let us leave aside the block grant and the issue of whether it is a good or a bad deal—it is just the deal, because that is how the computer works it out, once the Departments in England have had their allocations. There are parts of the budget for Northern Ireland that the Government had discretion over and that they could have used to reflect the circumstances in Northern Ireland, yet on every occasion when discretion could have been used it has been used to make the situation worse.
Let me go through some of those occasions. The first relates to end-of-year flexibility—in other words, money that was allocated to Northern Ireland and that rightly, because of the rules that existed, we held over. For example, schools and further education colleges would have done that, perhaps because there were huge items of expenditure that they could not finance in one year, so they held the money over. There was £316 million of end-of-year flexibility funding. However, changes in the Treasury rules meant that that money disappeared. That end-of-year flexibility—the money that was held over—was far greater than the money held over for any other Administration across the United Kingdom. Allowance could have been made there, but it was not. Even when the Government had the opportunity to recognise the particular circumstances of Northern Ireland, they did not do so.
Let us turn to a second issue: the application of the Barnett formula. The rules were very clear: when devolution of policing and justice arose, the deal that was agreed when the right hon. Member for St Helens South and Whiston was Secretary of State for Northern Ireland would be honoured; indeed, the Conservative party
We recognise that when policing and justice were devolved they would be covered by the Barnett formula for spending in Northern Ireland, but the agreement was that that would not happen until, according to the Treasury’s statement of funding policy, after the beginning of this CSR period. But in June, when preliminary cuts were made, the Barnett formula was applied ahead of the Treasury’s own rules. It was not even a case of discretion being used; had the rules been followed, the policing budget would have been £23 million better off—£23 million disappeared from the policing budget, and the consequence is that for the next four years the baseline for the policing budget has been reduced by £23 million. That is a total hit—one that could have and should have been avoided, and which the rules say should never have been applied—of £115 million on the policing budget. That goes against a promise made by one of the partners in the coalition that the policing budget would be honoured, as it was agreed when devolution of policing and justice was discussed.
Jim Shannon: Does my hon. Friend agree that an example of that is what Matt Baggott, the Chief Constable, has stated in the press in the past few days? He needs an extra 1,000 police officers, and cutting back the quota means that he cannot achieve the policing in the streets that he needed at the time of dissident republican activity.
Sammy Wilson: There will of course be an impact, but I want to illustrate—I am not going to complain about the Barnett formula—that the way the spending rules could have been applied have been changed to make Northern Ireland less well off. Another example is the £18 billion capital spending agreement, which the Secretary of State made heavy weather of. That international agreement was discussed at St Andrews, and the Irish Government were part of the agreement. The Secretary of State did not mention this because it is not convenient, but part of that £18 billion was to come from the Government of the Irish Republic for road schemes in Northern Ireland.
Despite all the economic difficulties in the Republic, its Government have stood by that commitment, but we have seen the Secretary of State wriggle regarding that part of the £18 billion commitment that should have come from the Westminster Government. I accept that some of that was to be raised by borrowing in Northern Ireland, and that some was to come from capital receipts and some from the block grant to Northern Ireland. Even there, the issue has been fudged. The £18 billion has been whittled away in a number of ways. First, the Secretary of State has now included in the £18 billion capital spending that was attributable to policing and justice in Northern Ireland, but that was never part of that agreement. As I said earlier, policing and justice was not even devolved at the time of St Andrews, and there was no prospect of its being devolved. Only because we succeeded in getting Sinn Fein to move on in terms of their commitment to supporting the police and the rule of law did we ever get to that point.
Let me explain the magnitude of the issue. If the policing and justice element had been excluded until now, £9 billion of the £18 billion would have been spent, but according to the Northern Ireland Office and the Secretary of State, £9.8 billion has been spent. Therefore, by including capital spending on something that was never a part of the agreement, some £800 million has already been taken out of the capital budget in Northern Ireland. If we then add on the capital spending for policing in the future, that reduces it further. The capital spending on the prison and on the police college was again supposed to be outwith the £18 billion, but it has now magically materialised into it. The most ludicrous thing is that the Secretary of State makes assertions but not arguments on this issue.
Part of the £18 billion was to be raised by the Northern Ireland Executive through loans, which they would then be responsible for paying back, along with the interest. A limit was put on the amount of the loans that could be obtained. Over the 10 years, the Executive were to be allowed to borrow £200 million a year. I do not care how bad the Secretary of State’s maths is—I am sure he still recognises that 10 times £200 million does not equal £2.5 billion. If he wishes, I will give him a calculator so he can check the figures. Yet again, we have an example of money being removed, by this Government, that should have been available to Northern Ireland to deal with the legacy of under-investment in capital.
I want to emphasise that it is important that we play our part in the United Kingdom, but the Government have a duty to recognise the different circumstances and not to employ tactics that make the reductions in spending in Northern Ireland even worse. Add it up: the changes in the policing budget as a result of the application of the Barnett consequentials—
Mr Woodward: I wonder whether the hon. Gentleman might consider allowing the Secretary of State to intervene so that he can explain his maths and why 10 times £200 million comes to £2.5 billion. Perhaps the hon. Gentleman should allow him to clarify that.
Mr Swire: Perhaps I can clarify the situation for the shadow spokesman and the hon. Gentleman. The £200 million is not over 10 years; it is £200 million over 13 years from 2005 to 2017, which makes it close to £2.5 billion.
Sammy Wilson: Of course the spending was over a 10-year period and not a 13-year period. If it has now been extended to 13 years—and even it had been over a 13-year period—his maths is still wrong because 13 times £200 million is £2.6 billion and not £2.5 billion.
Mr Swire: The hon. Gentleman is getting over-excited. Let me repeat what I said. I said “close to”. I think that £2.6 billion is quite close to £2.5 billion.[Interruption.] That is a lot to me, but perhaps not so much to others.
Sammy Wilson: If we extend it to a 13-year period rather than a 10-year period, then of course the answer is £2.6 billion, but that was not the period of the capital settlement. If it is now to be extended over that period of time, that is a change in the arrangements.
Let us look at the change in the Barnett consequences for the police, the end-of-year flexibility, and the inclusion of capital spending that should not have been included in the capital settlement for the 10 years. The Secretary of State has made a great play of the fact that the reduction in the Northern Ireland budget is only 2% a year—2% a year on current spending is 40% in capital spending over the CSR period. When the other consequences are added in, the reduction is much higher. In real terms, once inflation is included, the reduction is significantly higher than that, so rather than an 8% reduction in current spending over the period, it becomes a much higher figure.
On top of that, of course, the Secretary of State answered glibly on rebalancing the economy and the cost of the corporation tax proposal. I have to say that he missed the irony of the point that my right hon. Friend the Member for Belfast North was trying to make. We have been supportive of the stance that the Government have taken on the problems in the Irish Republic and we recognised the Prime Minister’s saying that the situation there has consequences for Northern Ireland. That was one reason why the Government took the view that they did.
The irony is that the Irish Government are keeping their 12.5% corporation tax, which gives them a competitive advantage over the Northern Ireland economy, and according to the Secretary of State the Government are prepared to make a loan over 25 years—the Secretary of State can correct me if I am wrong—but in Northern Ireland, another part of the United Kingdom, where he is keen on balancing the economy, the cost of the reduction in corporation tax is not spread over or deferred for 10 or 25 years but hits immediately, and a further 3% reduction, or close to that, in the block grant will be the price attached to that.
On top of the spending cuts as a result of the CSR and discretionary changes that the Government have made, we would also have a 3% reduction, or thereabouts, in the block grant as a result of the Secretary of State’s proposal to give powers over corporation tax.
Mr Robertson: I am grateful to the hon. Gentleman for giving way and for his evidence to the Select Committee. As he has heard, the likelihood is that if there were a proposal, it would be to devolve the decision making on corporation tax, so his colleagues in Northern Ireland would decide that. If they decided that a hit of x million initially would be too much to take, they presumably would not make that decision. That is devolution, is it not?
My point is that the Secretary of State is holding this proposal out as a massive boost for the Northern Ireland economy and a way out of its economic problems, and as a way of rebalancing it, yet he ignores the fact that the cost will fall on us immediately. However, that is not
A number of points have been made that the Secretary of State has failed to address in interventions and he needs to do so in his summing up. In conclusion, I want to put something on the record; I hope that the message goes out in Northern Ireland as well. Despite all that I have said, the responsible thing to do as part of the devolved settlement is to recognise that devolution means that we have to govern in the bad times as well as the good times. We cannot just have devolution when things are easy and there is plenty of money to spend; we must also have devolution when things are a bit more difficult. It is imperative that the Assembly of Northern Ireland determines a budget quickly and gives some confidence to the economy. That does not mean that we will not be coming back time and again to the Secretary of State on issues in respect of which we believe that we have been sold short, which will exacerbate the problems that we have to face and which will have an impact on people in Northern Ireland.
I hope that we will not simply have thrown back at us assertions with no arguments behind them, comments that are not thought out and figures that do not stand up, because that is no way to conduct a debate on a very serious issue such as this.
Mark Durkan: I want to cover a number of points. Some have already been touched on, and I am conscious of the time. In relation to the impact on the overall budget of the Executive, I want to underline the point made by other hon. Members that although the Secretary of State may be able to say that the impact in Northern Ireland compares favourably with the adjustments being faced by some Whitehall Departments, the situation and the demands and pressures facing the Northern Ireland Executive make it a difficult settlement. Whatever the settlement is, the Executive will have to work with it. We need to find ways of ensuring that the Executive can better engage with the Treasury in relation to the details of the Barnett formula. I am talking about what is counted in and what is not counted in.
As a former Minister of Finance and Personnel, I had that experience myself with the Treasury. The Treasury just made up its own rules. It is the Treasury; it does not need a reason, and any excuse will do. One factor of spending is counted into Barnett; another factor of spending is counted out, and the Department of Finance and Personnel can be left chasing the Treasury for some time to try to find out exactly how calculations have been made. That needs to change and improve further, particularly in the context of the settlement on offer from the Government.
We need to consider what the impact will be for an Executive whose responsibilities now include all aspects of justice and policing, the costs associated with those, the projected costs associated with implementation of Patten and so on, and all the commitments that were made. Clearly, many people feel that the Government in London are resiling from commitments that were previously made. I have much sympathy with that view. Unfortunately,
I was in Downing street on 1 November 2006, when the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) announced that instead of a £16 billion package of capital expenditure over 10 years, there would be £18 billion, but over an additional two years. That is where the issue has come in about the miscount and all the rest of it. There was an extra £2 billion, but over an extra two years.
When I had the inconvenient audacity to question how much in the figures that the Prime Minister was spewing out at us at the time was new money, he first said, “All of it.” When I said, “Surely it can’t all be new money,” he said, “Well, £2 billion at the end.” When I questioned what exactly that covered, the Prime Minister frowned and Gerry Adams intervened and said, “Look, people don’t want to know the detail. People are outside; there are cameras outside. People just want to know the good news that we have here. We can deal with the detail on a different day.” That was the way in which things were being conducted then, because it was close to tea-time and yes, the cameras were outside and all the rest of it. That was an all-party meeting, an all-party group. Yes, I was part of it, and it was not satisfactory, so I am not having a go at anyone else who was there when I was not there. Those were the terms in which things were conducted then.
Many of us assumed that some of those things would have been better nailed down, but unfortunately perhaps not, and that is where some of the confusion arises. We must be honest about that, but no matter what the confusion about that, there can be no confusion about the fact that the Executive are being asked to make very difficult choices. Within that, there will be positive choices that they have to make, setting out clear ambitions for our region. They will have to be supported in that. It is not for us here to venture into questions about why the Executive have not produced a budget yet. Again, as someone who was previously in the Executive, I know that these things are not easy, and I am talking about times when we were getting significant uplifts. The circumstance is very different now. It would not be right for any of us in this House to transgress into the theatre of devolution and start making points or speculating too much one way or the other about decisions within the devolved budget. We clearly need to recognise that there are implications for devolved Ministers individually and the Executive collectively, as a result of decisions made in relation to the CSR. One of those that has been touched on already is higher education. While Northern Ireland as a devolved region will be able to make its own choices in theory, it will only be able to do so within the very limited envelope that has now been set as a result of the CSR, and the decisions made by the coalition Government in respect of Lord Browne’s recommendations. Notionally, the Executive have the independence of choice, but not the independence of means that they need to resource those choices.
In a different way, there are the implications for welfare reform, because it is not affected directly by changes to the departmental expenditure limit—DEL spending—but comes under AME, annually managed expenditure. Notionally, the social security agency in Northern Ireland is separate, as social security is devolved,
We do have some discretion, I suppose, by way of administrative and delivery mechanisms. Given the way the Government have set out their case in relation to welfare reform, our concern is that some of those discretions may be limited as well, as part of implementation. There might be the introduction of more envelope management in relation to AME than has been the case in the past. I hope Ministers can give us some assurances on that. People are concerned, not just about the immediate implications of what they hear in announcements, such as yesterday’s about the disability living allowance, but about the direction of travel, not just for them individually but for Northern Ireland collectively.
As for corporation tax, the Secretary of State told us today in his intervention on the shadow Secretary of State, that all he is talking about in relation to the openings that we might be offered in corporation tax would involve taking a first-day, face-on significant hit to the Northern Ireland block. Those are not the terms on which many of the people he has reported as giving positive feedback understood the offer. That is something that we need to debate. Those of us who want fiscal discretion argued for it when we were negotiating the Good Friday agreement—when nobody else was interested, except in fairness the Alliance party, which was solely interested at that stage in the Scottish 3p in the pound tax variation, but not in anything else. Everybody is now a convert to fiscal discretion. We recognise that there will have to be choices made. The terms in which this choice is coming seem very uneven, unfair and do not carry the political or economic incentive for the region that we would want.
Gavin Williamson: I am listening with great interest to the hon. Gentleman talking, especially about corporation tax. I am sure he is aware that it is obviously not a matter of choice of when one moves that money away from the Assembly. It is a legal reality; whether we like it or not that is where we are.
Mark Durkan: I heard what the Secretary of State said about that. There are ways of addressing the Azores agreement. One, as we know, relates to the overall workings of the Barnett formula, as the hon. Member for East Antrim and I have mentioned, because the Treasury has a fairly free hand in what is counted into the Barnett formula and what is counted out, so hard shoulders can be provided for us to go along, and that should be considered.
Mr Swire: The hon. Gentleman must understand that that is about state aid rules, which is what the Azores agreement was about. Is he suggesting that a way round the Azores agreement in the state aid rules would be to reconfigure the Barnett formula to make up for any perceived shortfall in the first few years?
I am sure that other Members will want to refer to banks and lending, as has already been touched on in the debate. All Members, wherever they are from, will be aware of the serious pressures that businesses face in getting support from the banks and getting credit at a reasonable price, not full of traps and burdens, but in the Northern Ireland context we must look not only at the banking of business, but at the business of banking in the longer term. As the right hon. Member for Belfast North has mentioned, we have a different banking model from other regions. We have one bank that is pretty much owned by the British Government as a wholly-owned subsidiary of Royal Bank of Scotland, namely Ulster Bank, and two banks that are National Asset Management Agency related and in essence subject to ownership by the Irish state. That adds to the matrix of uncertainty and difficulty that business and others have in relation to banking, and it creates fundamental question marks within the banks themselves. The banking community has serious questions about its situation and its motivations, so there are issues that need to be addressed about the business of banking in Northern Ireland in the longer term.
The Secretary of State has restated his ambition, which we all share, to rebalance the economy and achieve a better balance between the public and private sectors. We want a more balanced region so that the regional disparities in Northern Ireland can be reduced and mitigated. Along with the public and private sectors, however, we should not forget that there has been a strong and important third sector in Northern Ireland. It played a vital role during the difficult times of the troubles and an important and positive role during the life the peace process, providing many of the lateral supports that helped to move us forward. It provided many of the partnership models, partly using EU funding, that first involved many politicians in partnership working and partnership arrangements. It perhaps became a parable for some of the subsequent political developments and arrangements that people should engage in.
The spending pressures that will now be felt by the Northern Ireland Executive and their Departments will probably mean that choices will be made that reduce some of the funding and some of the contract opportunities that the third sector has enjoyed. It is already under pressure because of cuts in the past few years as a result of efficiency savings, because Departments have a habit of starting with others, not themselves, when it comes to savings and efficiencies. The slippage money that people have had before has already been drying up and is certainly likely to disappear in future. We need to take account not just of the private and public sectors, but of the voluntary sector.
On a wider issue emerging from the spending review, the Chancellor made a big play of the green investment bank. I hope that steps will be taken—the Secretary of State always makes the point that he is Northern Ireland’s person at the Cabinet table—on the plans for the development of the green investment bank to ensure that that will be accessible and available to businesses in Northern Ireland and that they will not be precluded from accessing any opportunity by virtue of the fact that their project may be cross-border. That has happened to date with, say, the renewables obligation certificates.
Under measures introduced by the Government to encourage and incentivise development of renewable energy, projects in Northern Ireland are disqualified from getting ROCs on the same terms, because they have a cross-border character. It would be natural and proper—not just in a constituency like mine, which sits on the border—for people to take account of market opportunities and environmental circumstances, and for many projects to be cross-border in character and to have cross-border funding, even from banks, in the difficult situation that we face. I hope that the Secretary of State will ensure that the mistake that was made with ROCs will not also be made in relation to the green investment bank.
David Simpson: It is good to sit under your chairmanship, Mr Streeter. I will be brief. First, though, may I put on record my appreciation of the Secretary of State’s visiting my constituency of Upper Bann yesterday? He made a slip in saying that it was Lagan Valley. He will know that my constituency is much more prestigious than that of Lagan Valley, and we are currently the second largest manufacturing base in Northern Ireland.
The Secretary of State is correct in saying that we met a number of companies of all sizes yesterday, from retail right through, and we paid a number of visits, one of which, I am glad to say, was to what will be one of the largest Tesco stores not only in Northern Ireland, but in the Republic of Ireland. It is due to open in February next year with an investment of some £35 million. That is a big investment in my constituency, with some 400 jobs. It was a good visit during which we had some good discussions with the business community, which we will perhaps touch on in a few moments.
I understand that time is short and I want to be as brief as possible to let other Members in. We acknowledge that some 90% of Northern Ireland’s funding comes from Westminster. Only some 10% of its funding is generated by activities that the Assembly deals with. The CSR announcement has been made and it is close to what the Democratic Unionist party predicted during the summer.
I ought to apologise at this point, because when campaigning in the Westminster election the DUP suggested that some £2 billion in cuts were destined for Northern Ireland. It is not often that a politician makes an
I feel that it is only fair that I offer a heartfelt apology. In the run-up to May, we were wrong about that figure. The DUP did not get it right about the cuts when we said during the election campaign that the Tory-UUP alliance would introduce £2 billion in cuts. That was wide of the mark, and I acknowledge it. It was not £2 billion; the real figure was £4 billion in cuts, with an additional £1 billion in VAT hikes and welfare reductions. The Government have disputed those figures, but it will be interesting to hear during the winding-up speech how the Secretary of State proposes to address the issues put before him.
It remains the case that if Northern Ireland delivered every year for the next four years the services and capital spending that it has delivered this year, the cumulative impact of the budget cuts, allowing for inflation and taking into account how much extra we would need each year to deliver the services delivered this year, would be about £4 billion. In the final year alone, it would be just short of £1.5 billion.
By far the greatest concerns involve the reduction in capital spend. Over the next four years, it will be reduced by 40%. The cuts will have a serious impact on the day-to-day lives of many thousands of ordinary men, women and children. The construction industry in Northern Ireland, as in the whole United Kingdom, has been severely hit by the economic downturn. A 40% reduction in our capital spend will undoubtedly have a tremendous negative impact on many families. Construction firms will certainly go to the wall, as has happened in my constituency in recent days, and small family-run suppliers and subcontractors will too. Homes will be lost and people driven on to benefits.
I remember an interview that the Prime Minister gave some time ago, during the election campaign. He named Northern Ireland as an area liable to feel the full force of cuts. In that interview, he made another telling comment. He was asked by the interviewer, Mr Paxman, about the legacy of Lady Thatcher, who I believe did many good things and for whom I have great respect, although she did get it wrong on the Anglo-Irish agreement. However, that is for another day.
David Simpson: Yes. Time is short, Mr Streeter, and it is difficult to name them all, but I thought that I could get the Anglo-Irish agreement in. Lady Thatcher did many things that were necessary and beneficial, but in
I must also point out that the Government have done some fairly shady fancy footwork on the £18 billion. Perhaps the Secretary of State will address the points raised by my colleagues. That £18 billion was agreed by the outgoing Government as part of the settlement in advance of the devolution of policing powers. That money was to be used on building up infrastructure and on the Executive’s plan to rebalance the economy by placing greater emphasis on the private sector.
I do not want anyone to think that I or my party have no sympathy with the coalition. That is not so. We understand that we are going through a very difficult time. We can justifiably point the finger at the banks—like other Members, I have done so in the past—but we must keep it in mind that the deficit is due not only to the banking crisis. With the greatest of respect to the Labour party, we cannot forget the fact that over the past 10 years the Labour Government spent substantially more than they brought in, which meant that the deficit increased significantly.
We have a lot of work to do. Northern Ireland is a special case in that it suffered the difficulties of 40 years of the troubles. Again, I want to put it on the record that I greatly appreciate the discussions that I had with the Secretary of State. Time does not permit me to go into much detail, but I am sure that, in the not too distant future, we will have yet more discussions.
Naomi Long: First, let me put on record the fact that we want to take a realistic approach to the cuts. We are not saying that Northern Ireland should be immune to the difficulties that are faced by the rest of the country, and we have been honest and open about that. We also accept that the deficit needs to be cut, and I do not think that anyone whose economy is so intertwined with that of the Republic of Ireland could argue otherwise, so there is no denial of reality. However, in the context of Northern Ireland, we have concerns about the speed with which the cuts have been implemented and about the depth of the cuts that we are experiencing. Our fundamental fear is that a fragile economy such as Northern Ireland’s, which has not demonstrated the same sort of recovery that has been seen in other parts of the UK, could be pushed into an even deeper recession. However, we have responded positively, and I hope that the hon. Member for East Antrim agrees that when we get our opportunity at the Executive, we respond positively to the challenge that has been laid down by the cuts. We have tried, with others, to set a budget. It is important to do so to create certainty, because uncertainty is everyone’s biggest enemy. Once people know the extent of the cuts and their effect, we will be in a much better
There are opportunities for us to look for savings. For example, the Secretary of State mentioned one that is close to my heart: tackling the cost of division. However, we must recognise that such an opportunity may require investment to release those savings, because we would be dealing with deep and embedded structural issues in Northern Ireland that need to be overcome. That is, by no means, an excuse to leave things untouched, but it is something that requires some sensitivity.
I do not think that any of us would disagree with the Government’s argument that the public sector makes up too large a proportion of the Northern Ireland economy and that that needs to be rebalanced. I say that for the simple reason that we are suffering from—and are much more vulnerable to—cuts in the public sector because we are so reliant on that sector. We have all our eggs in one basket, and that is not a healthy place to be. If we had a more diverse economy, the impact of public sector cuts would be somewhat alleviated. Our over-reliance on the public sector means that the cuts are being felt more acutely in Northern Ireland. The private sector is affected, too, because it is reliant on the disposable income of those involved in the public sector.
We need to find ways in which to support the private sector to encourage innovation and growth. I also want to put on record that it is not good for Northern Ireland to be reliant; it is not what any of us wishes. Psychologically, it is not good for us to feel that way. We need to be confident and competitive, and to feel that we are making a positive contribution, which is what all elected representatives from Northern Ireland wish. That is important not just for society as a whole, but for individuals.
The Secretary of State outlined that he has spent about three years on his enterprise zone proposal. I think that it was promised for the autumn. We had rather a lively debate in the Northern Ireland Affairs Committee last week about the definition of autumn and whether it includes December. However, even the most generous definition does not include January, so I hope that when the Secretary of State says that we will see proposals soon, they are imminent—for this month.
I was disappointed by some of the responses to my interventions, but it seems that we have focused on one measure: corporation tax. I believe that the measure has the potential to bring about a step change in our economy, but it will have little impact on support for small and medium-sized enterprises, for which banking is critical. The Secretary of State told me to raise banking matters directly with the Treasury. I assure him that I have—I will continue to do so—but I would like him to champion such matters for us in Cabinet. He has the ear of the Treasury, so I hope that he will raise specific points about banking on our behalf.
I shall touch briefly on a few of the remarks made about the welfare system. No one would argue that welfare reform is, of itself, a bad thing, nor that Northern Ireland should be immune from it. However, it is entirely reasonable for people to disagree with the nature of the proposals. It is also reasonable to take issue with the insensitivity of some of the debate about the subject. The Secretary of State referred to the fact that about 10% of people in Northern Ireland claim disability
I am sure that we would all agree that it is good for people to work and that it is good to support people into work. It is good for their health, well-being and self-esteem, as well as being good for society. Let us be clear that none of us would argue for a charter for idleness, but we are rightly concerned that something like disability living allowance should appear on the radar purely because we have slightly higher rates in Northern Ireland. It is worth noting that if we want to support people back into work, we will need employment, but unemployment in Northern Ireland is growing. We need to be conscious of that when we consider how to support people back into work, which we all aspire to do.
Lady Hermon: Does the hon. Lady acknowledge that although Northern Ireland has a high number of DLA claimants, that is mainly because we also have a good and active voluntary and charitable sector? For example, citizens advice bureaux tell people how to claim DLA. It is that which accounts for the high rate, not that people in Northern Ireland are spongers or people who can bend the system, as has been perceived.
Naomi Long: I absolutely agree that it is not the case that people in Northern Ireland are malingerers. There are valid reasons why there are higher levels of disability, and the factual element of the argument should be considered more sensitively by Ministers when they make statements about disability.
I turn briefly to capital expenditure and how we should deal with the infrastructure deficit in Northern Ireland which, as a former civil engineer, is a subject close to my heart. The main effects were touched on by the shadow Secretary of State when he spoke of the tangible benefits to the community of the peace process, which should not be underestimated. However, I believe that infrastructure development and capital expenditure stimulate the economy in two key ways. It happens most directly through job creation in the construction sector, which would be valued when the economy is in difficulty, but infrastructure investment is also necessary if Northern Ireland is to be internationally competitive. That is relevant to direct foreign investment, as well as helping the economy more generally. It is important that we do not miss out on opportunities for capital expenditure, and my party has proposed to the Northern Ireland Finance Minister that we should consider re-profiling some of our revenue into capital so that we allow that to happen.
In closing, I want to touch on the question of justice. I do not wish to repeat what other Members have said, except to agree with the point about the police training
Finally, I wish to talk about dealing with the past and its legacy. Almost all the responsibility for that seems to fall on the Historical Enquiries Team in the PSNI, which is a major call on resource in Northern Ireland. The Government at Westminster have a responsibility to deal with the past and its legacy—it is not a devolved matter. I believe that if a comprehensive package was to be brought forward—[ Interruption. ] The Secretary of State’s hand gestures make me think that he is thinking about the victims issue being devolved. However, dealing with the past and its legacy, and driving forward a package of measures to deal with those issues, is the responsibility of the UK Government, and I believe that if such a package was to be taken forward, it could alleviate some of the pressures that dealing with the past is placing on the PSNI. I would appreciate it if the Secretary of State addressed some of those issues.
I want to express concerns on behalf of the people whom I represent, which include unemployment and the bills that they face. Our consideration of the comprehensive spending review gives us the chance to say clearly how worried we are.
I know that the Secretary of State was down in Newtownards before the election and I understand that he had a very good time in the east of the town. At that time, we heard in a discussion in Newtownards—from the candidate himself—that while the private sector would be built up, the public sector would not be touched until that had happened. I will clearly be worried if the public sector is decreased but the private sector is not given the opportunity to try to create jobs.
I also want to comment about the benefits system. I am concerned about the changes proposed to the tax credits system, and to child benefit in particular. Since I became an MP, I have consistently spoken about benefits, so I have very clear thoughts about those issues. I am worried about a situation in which both parents who work, each earning £43,000, will not lose a penny, but a person who earns more than £44,000 will suffer an impact.
The Secretary of State and the coalition put forward ideas about changes to jobseeker’s allowance, but we have to remember that Northern Ireland’s unemployment rate stands at about 6.6% and that the working age employment rate is well below the UK average. Whenever we talk about changes to JSA, their impact on Northern Ireland will clearly be greater than anywhere else.
I do not believe that we can just take a broad-brush approach to Northern Ireland. I had the opportunity to speak at the citizens advice bureau in Newtownards today. The people there expressed their concern, given their work load, about the proposed changes to DLA. Those changes will impact upon those who need it
Another concern has been expressed to me about those who sit in an office and decide whether a person should receive DLA. Are those people experts in their job? I do not believe that they are, so I think that that issue has to be considered.
I shall make a last point, because I am conscious of the time limit, about small and medium-sized enterprises. In the Chamber recently—I think that it was the week before last—I spoke about the scheme that was proposed for SMEs across the water, including a £2,000 bonus for new-start businesses. I asked whether one of the pilot schemes could be in Northern Ireland. That is not happening, but such a scheme would give SMEs in Northern Ireland the chance to create jobs and opportunities. Arlene Foster, our Minister of Enterprise, Trade and Investment, has said her hands are tied over some of the budget proposals coming from the coalition Government, and I am ever conscious of that.
I leave you with those points, Mr Streeter, and I look forward to the Secretary of State’s response. I invite him to come to Newtownards next week to speak to some of the people who are on DLA—those who deserve it; the people he is trying to take it away from.
Stephen Pound: It is a pleasure to serve under your benevolent chairmanship, Mr Streeter. If I have one regret this afternoon, it is that the right hon. Member for Lagan Valley is not present, not just so that he could respond to the comparison of the beauty of his constituency and that of Upper Bann, but because it is his birthday—a date he shares with the Countess of Limerick. I hasten to add that there is no other connection. As you will be aware, Mr Streeter, the Countess of Limerick is approximately 76 years old. Perhaps the right hon. Member for Belfast North will take this tie and, I am sure, the best wishes of everybody here in the Grand Committee to the right hon. Gentleman.
We have heard a great deal this afternoon, but I am not sure we have learnt a great deal. I have considerable admiration for the Secretary of State. From the time he was given this portfolio, he has been assiduous in his visits to Northern Ireland; he has spoken across the six counties and done an immense amount of work. However, sadly, still he cannot the resist the temptation to fall back into those tired clichés, such as “We’re all in this together” and “It’s all the fault of that dreadful previous Administration.” He has the reins of power in his hands now and is in a position to do something.
One of the comments about financial allocation to Northern Ireland was unfortunate. The fact that, as we have heard from the hon. Member for Belfast East, 10% of the population there claim disability living allowance should not be seen as a bonus that is handed to the people of Northern Ireland. That is not something given to someone as a present; it is not optional. It is a matter of life and death in many cases. In no other part of the United Kingdom do we see the same degree of
The Secretary of State talked about being radical and compassionate. The previous Government tried to introduce fitness-to-work tests and various others. It is extremely easy for those on the Treasury Bench to make such comments, but it is extremely hard when looking someone in the eye, to say, “No, you are not entitled to these payments and benefits.” I am worried by the assumption that the people of Northern Ireland are getting something to which they are not entitled—something more than those in other constituencies. Such provision is part of a civilised society and I do not think any Government of any colour would wish to renege on that.
When I heard the hon. Member for East Antrim give another bravura performance, I regretted that I am far too old to have been a student sitting before him when he was an economics lecturer. I have made up for it since, and I am sure his pupils then were as grateful as I am now. He revealed the extraordinary reality that there is a new member around the coalition Cabinet table: Mystic Meg has been smuggled in. When it comes to the Barnett differential, we now know what is going to happen the day after tomorrow, because the coalition made assumptions a week ago based on what is going to happen in two days’ time. That is marvellous. I am not a gambling man, but if the Secretary of State would like to advise me on the purchase of a lottery ticket, I will take up his offer.
Stephen Pound: I have known the hon. Gentleman for many years, even before he came to the House. He seldom tempts me as he has done this evening, but when it comes to “Barnettising” the decision on Thursday, he knows the answer as well as I do. It is unlikely that a rebate will be offered.
We heard yet another remarkable speech from the hon. Member for Foyle, who was at the meeting that concerns so much of our business today. The hon. Member for Upper Bann argued about the precise figure, which leads neatly to the hon. Member for Belfast East who, in an excellent contribution, put her finger on one of the problems that hangs over this Grand Committee sitting and the population of Northern Ireland. It can be summed up in one word: uncertainty. There is terrible uncertainty. We may argue about angels
It is almost impossible to accept that the coalition Government could move away from what was locked in at the St Andrews agreement, when specific commitments were made to preserve peace and stability. If, as could happen elsewhere in Europe, a large number of people suddenly become unemployed in Northern Ireland and directed their resentment again the paymaster capital city, Northern Ireland would have the perfect storm in terms of peace and security. Large groups of disaffected youths would gather on street corners, blame London for what is happening and look for the easy nostrum, and one person could raise a flag, come up with a powerful slogan, and inspire and lead those people to damnation—not just theirs, but ours.
Whenever this Grand Committee discusses the situation in Northern Ireland, we must remember that it is not as other places are. Things are different there. This is not special pleading, but recognition of reality. The present situation is of unparalleled delicacy and sensitivity, and I weep when I think of the impact on that community of the sort of cuts that we are talking about this afternoon.
I have some specific questions for the Minister. I understand that the hon. Member for East Antrim recently met the Chief Secretary to the Treasury to discuss end-of-year funding reserve access. Is the Minister aware of those discussions, and can he give us any information about the possibility of agreement being reached between the Chief Secretary, his coalition colleague, specifically in relation to the EYF reserve access?
I would be interested to know, as would others, when in this new elastic coalition calendar in which autumn stretches beyond Advent and probably to St Stephen’s day, we will see what we all anticipate keenly—the Secretary of State’s report on rebalancing the economy. I have confidence in him—others may not—and I believe he will do that. Today is an opportunity for the Minister to give us the date, time and place.
I would also like to hear specifically about Magilligan prison. A commitment was made, and we must know where we are. Most importantly, we must know about policing and justice—not just the new police college, but fleet renewal, IT support, and civilian staff. We must be told today that those areas will be protected and that the PSNI will be given the tools to do the most difficult job in the United Kingdom. We must not let the PSNI down, because it has never let us down.
Mr Swire: I am delighted to respond to this important and lively debate. On behalf of the Committee, Mr Streeter, I thank you for your excellent chairmanship of our first Grand Committee. I only wish that I had a bit longer in which to wind up. I will try to respond to as many of the points raised by right hon. and hon. Members as I can within the allotted time.
The shadow Secretary of State asked what discussions we had had with the Executive before the Budget and what the implications were. He asked whether the Assembly
There was some confusion about corporation tax and the Azores agreement. That is not something that we necessarily wish for, but it is a fact of life. The agreement is about state aid, and there is no way around it; those who suggest that there is are wrong. It is quite impossible to reconfigure the Barnett formula, as someone suggested, to give a back-door bung to make up any shortfall in the first few years. That could not be done.
I think that Northern Ireland should see this as an opportunity and regard the money that it will not get in the first year or two as an investment. That money will begin to flow as we achieve greater inward investment.
The hon. Member for Ealing North and the shadow Secretary of State, the right hon. Member for St Helens South and Whiston, asked about the prison and the police training college. We believe that the capital budget set in the spending review, together with the £800 million financial package, should be sufficient to meet those capital priorities. The right hon. Gentleman also talked about the bilateral loan. I should point out that our support for the Republic of Ireland is a repayable loan and not a grant to Ireland, and that if corporation tax is introduced, there will be no reduction in the overall resources. The tax and the block grant go together. I hope that that answers his question.
The hon. Member for East Antrim was characteristically energetic and passionate. He introduced an issue on which there has been tremendous debate throughout these proceedings: the amount of RRI. I intervened on him to say this, but I will reiterate it: it is not £200 million over 10 years, it is £200 million over 13 years between 2005 and 2017. That is close to £2.5 billion. As he said, it is £2.6 billion, but we will not split hairs. He also mentioned the lack of infrastructure spending in Northern Ireland. The £200 million a year provided to Northern Ireland through the reinvestment and reform initiative is not available elsewhere in the United Kingdom. It is also open to the Executive to move money from DEL expenditure to fund capital projects. I reiterate that the 13-year time frame is meant to fit in with the Northern Ireland Executive’s investment strategy, which started in 2005 and runs until 2017-18. The then Chancellor of the Exchequer said after the St Andrews agreement that it would be
The hon. Gentleman is simply wrong about coalition policing and justice spending and the £18 billion investment commitment. We have not included capital spending on policing before devolution in the £18 billion package. He will know that officials from the Treasury and the Executive continue to work to resolve differences in our approach to the figures. I confirm again that we believe that spending is on course to meet the £18 billion commitment, which we stand by.
The hon. Gentleman and the hon. Member for Ealing North asked me about end-of-year funding. The Treasury has agreed with the Northern Ireland Executive the draw-down of £273 million in end-of-year funding for 2010-11. In addition, we have agreed as part of the financial package that the Northern Ireland Executive may carry forward to next year any underspend of this year’s Department of Justice budget, and any planned underspend of the rest of their budget notified to us this year.
The hon. Member for East Antrim mentioned Barnett consequentials in respect of the recently announced English student support, which has apparently already been passed on to Northern Ireland. He asked how that can be. It is simple: the package announced in the past few days will be funded out of money already allocated to the Department of Business, Innovation and Skills in the spending review. Northern Ireland already had, under the Barnett formula, funding reflecting the relevant part of the BIS allocation. It is for the Executive to decide whether they can find funding for a similar package of support, if that is what they want to do.
The hon. Gentleman asked about the balance between and the treatment of Northern Ireland and the Republic, and the corporation tax rate in the south. I emphasise again that a loan is being made to the Republic that will be paid back with interest. Northern Ireland will have to reach its own decisions on corporation tax. That is the freedom that we would like it to have and we reiterate that we believe that a cut in corporation tax could bring Northern Ireland great advantage in future. Many in Northern Ireland believe that that would be an excellent investment, but the Executive and the Assembly would have to make their own decisions about dates and rates. Hon. Members will understand that, under EU law, as I have already said, it would have to absorb the effects of the tax forgone. The shadow Secretary of State was wrong when he said that the Treasury would be licking its lips at the extra money, because it would receive none.
The hon. Member for Foyle mentioned higher education funding. I understand that the Minister for Employment and Learning in Northern Ireland is discussing this matter with his counterparts in London. He has asked for a 2008 report on higher education funding provided for the Executive to be updated. The hon. Gentleman also asked about the green investment bank, which is intended to be a UK-wide vehicle. Precise details will be announced next year.
The hon. Member for Upper Bann talked about £46 billion in cuts, not £26 billion. There are not £46 billion in cuts. The DEL and AME budgets announced in the spending review totalled £16 billion in 2010-11 and £16.4 billion in 2014-15, in cash terms. I refer the hon. Gentleman to table 2.22 on page 70 of the spending review White Paper, where he can check those figures for himself.
The hon. Member for Belfast East talked about the banks. It was a pleasure to hear her speech. Her points were well made and more persuasive as a result of their moderation, but what she said about banking is well understood. The points that she raised were raised recently when the Financial Secretary visited Belfast, and we shall ensure that they are followed up. The Government consulted the Executive on the recent Green Paper on access to finance and we fully appreciate particular circumstances of lending, or the lack of it, in Northern Ireland.
“There are 184,000 DLA claimants here, one in 10 of the population, a rate twice that of the UK average. In west Belfast, the rate is one in five of the population and nearly the same in north Belfast.
It is true that 30 years of conflict have left physical and mental scars which can account for a higher claimant rate, but the scale is so disproportionate that ministers and officials at the Department of Work and Pensions find arguments defending our claimant total as scarcely credible. Indeed, they may counter that genuine
The hon. Lady mentioned employment and unemployment in Northern Ireland. The number of persons in employment was estimated at 778,000, which is unchanged over the quarter, but up 26,000 over the year. The employment rate for persons between 16 and 64 was estimated at 66.1%, a decrease of 0.2% over the quarter, but an increase of 1.8% over the year. The Northern Ireland employment rate remains well below the UK average of 70.8% and is the lowest of the 12 UK regions, and of course we are acutely concerned about that.
The hon. Lady rightly mentioned the Historical Enquiries Team. We believe that the team is doing an excellent job. It is worth saying that its projected spend to 2011 is £32.5 million. Compare and contrast that with the cost of the Bloody Sunday inquiry at £191.5 million, the Rosemary Nelson inquiry at £45.5 million, the Robert Hamill inquiry at £32.4 million and the Billy Wright inquiry at £30.4 million, and Committee members begin to see what good value for money the HET is. We fully support it.
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