At first glance, what the Conservative-DUP deal means:
1. The Conservative Government can now rely on a majority in the House of Commons not just for the Queen’s Speech, confidence votes and the Budget, but also on Brexit related legislation and legislation related to national security. Assuming the Government can keep its own backbenchers in line and the agreement is faithfully implemented, there is every chance that this majority can be sustained until the end of the Parliament. After days of uncertainty and drift the Government will likely regard this as a satisfactory outcome when the alternative was to face into another general election.
2. For the DUP this is also a very good outcome. At a single stroke they have managed to;
- play their part on the national stage by securing a Conservative government and ensuring there will not be another election.
- at a UK level ensure their manifesto prevails by securing a commitment that the government will not proceed with controversial policies such as ending the triple lock on pensions or a universal winter fuel payment.
- at a Northern Ireland level securing an upfront commitment to £1 billion extra spending for Northern Ireland frontloaded in the next two years.
- establish a process for dealing with other financial asks later in the Parliament in relation to Corporation Tax, APD, and VAT on tourism along with a series of other issues which were flagged in the DUP 2015 Plan for Northern Ireland.
- establish a role in decision making through the co-ordination committee created to implement the agreement.
3. For Northern Ireland – A genuinely meaningful financial package … In the past financial packages from the Government to the Northern Ireland Executive have often been made up of a combination of repackaging of old commitments, an increase in the ability to borrow, funding in areas which were priorities for the UK Government and not the NI Executive and technical flexibilities. They were often quoted by reference to the increase in spending power as opposed to new cash which was available to be spent. This package has a very different balance. There would appear to be £1 billion pounds of entirely new money – mostly over the next two years including £550 million of infrastructure investment. Though not explicitly stated this deal appears to be the first two-year installment of a five-year deal. In addition to the new cash significantly there is considerable increased flexibility in relation to the £500 million (£50m per year for 10 years) relating to shared future projects. It is not clear what exactly this flexibility will mean in practice but it is likely to be meaningful as the Executive has struggled to find a way to spend this money in the last two years. Perhaps the most surprising allocation of all is the £50m per year for two years to deal with health and education pressures. This will be very significant in addressing the Executive’s short term growing financial pressures and will allow the health and education sectors at least some breathing space.
4. For the restoration of devolution – that’s anybody’s guess. It may make a deal more likely but it’s unclear if the remaining issues can be resolved in advance of the 29 June deadline. However, this deal gives the Executive significant additional spending power in terms of both infrastructure and health/education spending. It also creates a significant incentive for Sinn Fein to reach an early agreement to ensure that they have some say in how the money is spent and Northern Ireland is governed.
Other points of note…
- Quantifying the financial benefits of any such deal is more of an art than a science however at an absolute minimum this can be described as a £1 billion package with additional spending power of up to £1.5 billion. As this is primarily a two year package it is not unrealistic to expect that the final outcome could be in excess of the much derided £2 billion figure quoted in the press. It should be noted while these are significant figures in a NI context over a five year Parliament they are not particularly material at a UK level.
- It’s hard to see how the Treasury were happy with this package. Not so much because of the quantum involved but because this package appears to be outside the normal arrangements for funding the devolved administrations. However, it should be stated that ‘Barnett bypass’ arrangements are not unusual for Northern Ireland deals or for Scotland or Wales for that matter – consider city deals arrangements. While most of the spending can be justified on the basis of circumstances which are unique to Northern Ireland a small proportion is clearly regular resource spending and this minor aberration is compounded by the assertion that this funding may be allocated for any other purposes as agreed by the Executive.
- If delivered the two key infrastructure investment projects will leave a very significant legacy. The York Street Interchange has been NI’s most economically important project for many years and will make a major contribution to the local economy. The ultra fast broadband funding is likely to benefit people right across NI and make it the leading region in terms of connectivity not just in the UK but across Europe.
- The agreement does not appear to address any of the most contentious issues relating to the political talks in Northern Ireland leaving them to be resolved at Stormont or any of the controversial social issues which were highlighted by opponents of any arrangements.
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