For the past 24 years, School Employer Connections has worked hard to close the skills gap in Northern Ireland by helping young people in disadvantaged areas gain work experience.
But the charity, which derives three-quarters of its funding from the state coffers, has been sunk by the growing budget crisis in the region. It will close at the end of this month, one of many casualties of austerity forced this year by the projected deficit of more than £1bn.
“Preparing the future workforce is our mission,” said manager Owen Crozier in his office in the northwestern city of Londonderry, also known as Derry. “The problem there is the word ‘future’ – (officials are trying) to just deal with the present.”
More than a year of political crisis in Northern Ireland has not only led to fears of irreparable damage to struggling public services in one of the UK’s poorest regions, but has also highlighted how volatile politics is undermining its ability to manage its finances. to manage has undermined.
While the region has better economic prospects than other parts of the UK because it retains unique access to both Britain and the EU’s single market, Brexit caused a political meltdown and ensuing budget collapse.
The Northern Ireland executive in Stormont was torpedoed in February last year when the pro-British Democratic Unionist party withdrew its prime minister from the power-sharing executive in a dispute over post-Brexit trade arrangements.
Caretaker ministers stayed on, but with no budget or stimulus for spending restraint. By the time they were forced by law to resign in October 2022, they had overspent £660 million. In the absence of an executive branch, officials of the region were put in charge. Under pressure from London, they cut the 2022-2023 deficit to £297 million, which was covered by a loan from the UK Treasury.
But despite a hard budget for 2023-2024 imposed by the UK government, the gap is widening again as officials are unable to make the political choices necessary to keep spending within London’s borders.
“We are certainly in a situation where we are on a path to overspending, which, if not corrected by early fall, will become irreversible,” said Conor Murphy, the nationalist Sinn’s treasury secretary. Féin party in the final executive. told the Financieele Dagblad.
“I think you’d be talking about £700 million by then.”
Meanwhile, the DUP has vowed to continue its Stormont boycott until its financial and Brexit demands are met.
The Northern Ireland Fiscal Council (NIFC), an independent watchdog, says departments should look into it about £800 million to balance the books this financial year, but political parties are already discussing whether to ask London for a whopping £1bn as part of a deal to get Stormont back.
Like other devolved countries, Scotland and Wales, Northern Ireland receives an annual block grant from the UK Treasury – for Northern Ireland that’s worth £15 billion a year. Under the Barnett formula, a mechanism devised in the 1970s to avoid annual financial dramas on the verge of collapse, the devolved countries also receive extra money to offset increases in government spending in England.
But Westminster has ordered that over the next two years any additional Barnett allocations to Belfast be diverted to paying back the £297m Treasury debt. It says Northern Ireland gets 21 percent more money per head than other parts of the UK, but it has “failed” to protect public finances and provide services.
The region has the fastest growing population, greatest financial needs, worst productivity and lowest revenue generating forces compared to Scotland and Wales. More than half of the block grant is gobbled up by the health service, which has the worst waiting lists in the UK.
Not only does Northern Ireland need more money than other parts of the UK, but the amount it needs is increasing, according to the NIFC. The council calculated that delivering the same quality of public services as England would require 24 percent more money per capita.
But a three-decade-long conflict that ended in 1998 left Northern Ireland with a fragile government. Ideological opponents – nationalists who want to reunite Ireland and pro-British trade unionists – are forced to share power and if one side withdraws, the government collapses.
The solution “cannot just raise money to plug holes. You need to think about how you spend what you have and transform the system as a whole,” said Cathy Gormley-Heenan, university chaplain at the University of Ulster, who was a member of the Independent Fiscal Commission for Northern Ireland, set up to assess giving. Northern Ireland more powers to generate revenue.
In his final report last year, the committee recommended giving Northern Ireland additional powers to levy taxes. Meanwhile, London has floated the idea of charging for water or raising university tuition fees, which are lower than in England, ideas unpopular in Northern Ireland.
“The will has to be there on all sides to have a conversation about how we are funded,” Gormley-Heenan said.
Ad hoc payments from London have often helped Stormont bounce back from political crises, but they have clouded the funding picture.
“The trend in the underlying amount of money received by Northern Ireland through the Barnett formula was somewhat obscured by these one-off payments,” said Alan Barrett, head of the Economic and Social Research Institute in Dublin and a member of the NIFC.
“We are at that transition point where the block subsidy per capita will fall below the need. That is why there is now so much attention for this subject.”
Northern Ireland is stuck in what economist Paul Mac Flynn, of the Nevin Economic Research Group, a think tank, has called a “doom loop”: The region needs reforms to keep spending under control, but needs more money to get there reform to advocate.
Ultimately, “you can spend your money differently, generate income, or request a review of the generic grant and thereby the Barnett formula,” Gormley-Heenan said.
“It’s probably a benchmark for all of them. There is no silver bullet.”
