By Niall Fields, Client Manager
What’s happening locally?
In a normal year, the end of summer brings with it the return of MLAs to Stormont. In the ongoing absence of the Executive and Assembly, however, local power-sharing remains in cold storage over the DUP’s boycott of the institutions over the NI Protocol.
Moves are starting to be made to circumnavigate the boycott, however. Earlier this week, Department of Finance Permanent Secretary Neil Gibson used emergency powers to take control of Stormont’s finances in the absence of an agreed budget. Using Section 59 of the Northern Ireland Act 1998, the senior civil servant will now have the power to set out the cash and resource limits for public sector departments.
For most departments this new authorisation has been set at approximately 60% of Departments’ provision for the 2021-22 financial year. This will be reviewed at the end of October 2022. Mr Gibson, however, will not have the power to fund new policies in the absence of a fully functioning Executive. This means that he cannot distribute more than £400m of unallocated funds which Northern Ireland has received from the Treasury since the draft budget was published in March.
Health Minister Robin Swann has already warned that his department is facing a £400m overspend this year and has written to fellow ministers to outline the position. Economy Minister Gordon Lyons told BBC’s Good Morning Ulster that he thinks "that the UK government will have to step in at some stage and put a budget in place.”
The SDLP, as Stormont’s new official opposition, has called on caretaker ministers to convene a cost-of-living summit to collaborate and deliver solutions which can assist households. Parties, conscious of the difficulties which are sure to shock hundreds of thousands of workers this winter, are now keen to deliver solutions and supports which can help households.
This comes in the wider context of a growing wave of industrial action across almost every section of the economy and rapidly rising inflation, which some experts predict may peak at 18% in the new year. Local councils, nurses, teachers, postal workers, and other key public sector workers are all either threatening to strike or have taken industrial action in recent weeks.
However, in the ongoing absence of proper local decision making, little meaningful support can be delivered to households or businesses to ease the pressures of rising bills. Parties are set to meet with the Head of Civil Service Jayne Brady next Thursday, with the crisis set to top the agenda.
The return of the Executive appears no closer than it did at the beginning of the summer, with the DUP sticking rigidly to its boycott. Political insiders have intimated that February 2023 may be a possible date for return, however it remains a guessing game.
Key dates ahead
The final months of 2022 across Stormont, the Dáil, and Westminster will be heavily influenced and punctuated by four key dates – 5th September; 27th September; 28th October; and 15th December.
The first is the culmination of the Tory Party leadership race. The current polls have Foreign Secretary Liz Truss ahead of her challenger Rishi Sunak, promising to slash taxes to stimulate economic growth and tackle inflation. Ms Truss has so far promised little specific action on the cost-of-living crisis, however there are rumours she may deliver a targeted emergency budget to tackle the crisis.
Campaign insiders told the Financial Times this week that she is planning to take emergency action without an accompanying economic forecast soon after becoming Prime Minister, putting her on a collision course with fiscal watchdog, the Office for Budget Responsibility. The Sunak campaign has accused Truss of fiscal irresponsibility, however, by refusing to involve the OBR. Both candidates have also promised to retain the NI Protocol Bill which will disapply large swathes of the post-Brexit trading arrangements.
The second date, 27th September, is the Irish Government’s budget for 2023. Brought forward by a few weeks due to the cost-of-living crisis, ministers have been asked to get their requests into the Finance and Public Expenditure Ministers this week. The latter, Michael McGrath, has been keen to manage expectations, telling his colleagues that “not everything can be a priority”. One certainty to be included, despite Mr Donohoe’s concerns, is a windfall tax on energy companies to support households with spiralling bills, after Green Party Leader Eamon Ryan let the cat out of the bag in a now-deleted tweet.
Ministers and officials have been engaging with independent TDs to secure their support ahead of the Budget to ensure it passes. However, with minds focused on the pressures hurting workers, will cross-border initiatives like the Shared Island Fund receive less generous allocations than in previous years?
Longer term, Finance Minister Paschal Donohoe has expressed his concerns about the State’s overreliance on corporation tax and has tasked officials with carrying out a review on Ireland’s reliance on such tax as well as solutions to easing this burden. Other bones of contention include welfare increases, green measures like scrapping VAT on retrofitting and cutting excise on petrol and diesel, and a new income tax rate, potentially of 30%.
28th October is the date by which an Executive must be reformed and a First and deputy First Minister must be nominated. If this date passes without progress, Secretary of State Shailesh Vara is obligated to call another Assembly election, something all parties (and voters) will be keen to avoid, especially with local council elections scheduled for May next year already.
Previous Secretaries of State have ignored these deadlines in the past to give the parties more space for negotiation in the hope that a deal can be agreed. It remains to be seen also whether Mr Vara will still be in post by the end of October, with paper rumours this week that the Sunak-supporting Secretary of State will be replaced by former Chancellor Sajid Javid if Ms Truss becomes Prime Minister.
And finally, 15th December will see the reins of Taoiseach handed over to Fine Gael Leader Leo Varadkar again. Micheál Martin’s term will end just before Christmas and will bring with it a likely reshuffle of ministers across the coalition’s government. Reports in the south have suggested the Fianna Fáil leader could take either the foreign affairs, business and enterprise, or finance portfolios. This would put Fine Gael supremos Simon Coveney and Paschal Donohoe at risk of being shunted out to a lesser department.
Other reports have suggested that Paschal Donohoe will remain as Finance Minister to ensure he keeps his powerful position as President of the Eurogroup, the grouping of Eurozone finance ministers. Might Micheál Martin, as reported by the Irish Daily Mail, be offered the presidency of the European Council? The longevity of the three-party coalition remains under strain having recently lost its working majority with the removal of the whip from Donegal TD Joe McHugh. The resignation of Junior Minister Robert Troy has used up even more political capital of both Varadkar and Martin who defended the minister to the hilt and claimed he had no reason to resign.