It is a pleasure to follow my neighbour, the hon. Member for Belfast East (Gavin Robinson). This debate is happening in something of a twilight zone, in the sense that we have a twin budget and governance crisis. Frankly, neither is being adequately addressed today.
The Northern Ireland Office is operating in hope, and possibly expectation, that at some point the DUP will return to the Executive of the Assembly. Indeed, there is an overwhelming logic to that. If people want to make Northern Ireland work, then the Assembly and the Executive have to work, and that has to be seen as the overarching issue. Any notion of a democratic deficit that may happen elsewhere pales into insignificance compared to the current democratic deficit that we are facing.
As much as I agree with parts of the analysis given by my neighbour, the hon. Member for Belfast East, around the fact that the Northern Ireland Office is not stepping in on governance, others are not stepping in on governance either. I appreciate that the overall context is difficult—that may not change—but governance is core to solving this issue. We are in a frankly intolerable situation in that regard.
If my colleagues in the DUP are genuine about returning to the Assembly—some optimistic voices expect them to reach that conclusion in the next weeks or months—the longer they leave it, the more damage is going to be done to Northern Ireland. My message to them is, if they are going back, they should tell us they are going back and let us get on with it. If they are not going back, then they should say so and let us put in place alternative governance arrangements. The drift is killing us, both metaphorically and literally.
In terms of governance, the guidance is insufficient and in some ways contradictory. The Government may think it is perfect clearly, but it is evident that the Northern Ireland civil service does not think that. For example,
we have a situation where our guidance is telling civil servants to act in the public interest, not to undermine statutory services or commitments, not to take major public sector decisions and to avoid long-term damage. It is hard to see how taking cuts is consistent with any of those criteria, but that is what they are now being expected to do.
I fear we are, yet again, at something of an impasse. That will lead to two potential outcomes: first, we will see certain decisions being deferred till later in the financial year. If decisions on cuts are taken even later in the year, the pain and impact becomes even sharper than it would be today. Alternatively, we will see a situation where it is impossible for them to live within the spending envelope that has been allocated, and we will see yet another overspend at the end of this financial year, with all the associated complications for planning that will flow from that.
The current situation we are facing is contributing to lengthening waiting lists and will reinforce educational underachievement, block the skills pipeline and compromise our ability to tackle economic inactivity. To date, the civil service approach has been to focus almost entirely on the very narrow ground of what are viewed as non-statutory activities—discretionary spending, in other language—but that is often some of the most effective spending, as it is often aimed at early intervention or prevention, which goes a long way to addressing steeper cost pressures that may emerge elsewhere in the public sector later in the process. For instance, if we do not address mental health in the community, we end up with more people having to be admitted to secondary care, which is more costly, and the same goes for skills and educational underachievement.
I recognise that this is a genuine dilemma for the Government and that we do not want a drift to formal direct rule because of all the implications that flow from that, but I must say to them that the current status quo is unsustainable and something must give. This is not the same context as that between 2017 and 2020, when there was a much more stable financial environment. I appreciate that direct rule is not palatable, and if it does have to happen, there will have to be an Irish dimension to it—people will have to face up to that. I clarify, however, that that is not joint authority, which I consider to be a different concept outside the context of the principle of consent. However, a consultative role for the Irish Government in direct rule has been established going back to the Anglo-Irish agreement, and, again, if people are uncomfortable with that reality, they know the options open to them to stop that happening.
On the finances, I recognise there are major structural problems in Northern Ireland’s public sector and expenditure profile. Some of that has been self-inflicted: the roof has not been mended while the sun was shining in previous years. A lot of decisions around reform have been ducked and opportunities have been missed by previous Executives. At the same time, however, we must recognise that there is a wider context. I do not want to labour this point today, but our current crisis in Northern Ireland is happening in the context of the UK public finances, which took a major hit towards the end of last year, and that has had a ripple effect throughout UK public spending, including the Northern Ireland block grant. We also, of course, have the Barnett squeeze, which I will discuss later.
Given all I have said, it is true that this year’s budget allocation will more or less be along the lines set out, regardless of whether an Executive were in place. It is, however, utterly disingenuous to say that the presence of an Executive is irrelevant in that regard. The governance gap fundamentally matters: without an Executive there is not a process for managing the pressures as efficiently and effectively as possible. That matters much more in the context of a crisis than when there is a surplus. It is like when a business is falling apart and running out of options and all the finance directors and the managing director have left their posts and others are trying to make do as the situation develops. The impact of cuts will be sharper without an Executive, because there cannot be early decision making on difficult decisions—I have made that point in relation to the civil service guidance. Some decisions cannot be taken because the governance structure is not sufficient, while other decisions will be deferred, and there will be a lack of strategic approach. Also, early intervention and prevention in particular are being targeted for cuts given the absence of a wider programme for government and a strategic framework. We will be storing up even greater problems in our public sector for subsequent years; the legacy of what is happening at present may be with us for a generation unless we swiftly get a handle on it.
We have long since lost the opportunity of a three-year multi-year budget, where we could have had planning from one year to the next and had some degree of stability and certainty in finances, allowing some long-term decision making. Crucially, with an Executive in place we would be in a much better place to go to the Treasury and ask for a financial package, and indeed make the case in relation to the Barnett squeeze. But in the context of a vacuum, all we will be looking at is cuts after cuts and decline and more decline, lost economic opportunities and damage to our public services.
In terms of our economy, this comes at a time when people want to do business with Northern Ireland. We have had the Good Friday agreement 25th anniversary, and I commend the Northern Ireland Office on its contribution to that, alongside many others, but people are now talking about a prosperity decade lying ahead, and the Government have welcomed that. We are having a trade conference in Northern Ireland in September, and Joe Kennedy III, the US economic envoy, has offered to bring a trade mission to Northern Ireland. All that is sitting there for us, but unless we have political stability and are investing in our skills, infrastructure and research and development, we are not going to be able to take advantage of those opportunities. They will not last indefinitely: there is a sweet spot at the moment and we must seize this opportunity. Instead we are seeing some of the key economic drivers being cut and undermined and, rather than taking opportunities, we are going in the opposite direction, and things are going to be getting even worse.
We must look to ways in which we can break this cycle, and all of this requires an Executive to be in place, but for us there are three ways in which this can be done. First, we must look for an invest-to-save transformation package for Northern Ireland. Most people recognise that we need to transform our public services to invest in our economy. There will be a lot of scepticism around this, and I have heard, for example, the comments of the hon. Member for North Dorset (Simon Hoare), Chair of the Northern Ireland Affairs Committee, about
previous packages. We will have to learn the lessons from previous interventions and we will have to accept a lot of conditionality if that were to come. But unless we escape the cycle of cuts and the platform we are on, we are not going to transform our public services and invest in our economy. So we need to have that conversation. My party has put forward some proposals to the Government and I hear other Members talking in similar terms. We need to come together as political parties, ideally with a devolved Executive, to make this case. If that is to happen, it will need to be tied to a plan, which we have in place, including reform, that we stick to over multiple years.
The second area is inefficiency in our economy. That includes the cost of managing intervention in society and looking to other areas such as what we are doing on the health service. There are counterproductive, knee-jerk reactions to the budget crisis. For instance, the more we use agency workers, the more expensive that becomes, rather than investing in long-term staff, which is much more cost effective—that is counterproductive in terms of costs. Domiciliary care is necessary to take people out of hospital beds, which are more expensive, but, again, that will be sacrificed in a difficult budget setting—so, again, it is very counterproductive. In education, there is duplication between what happens in post-16 school settings and in further education. That is not sufficiently streamlined. We estimate that there is potentially £70 million in duplication there, which could be addressed with a proper 14-to-19 plan.
Finally, there is the Barnett squeeze issue. There must be an assessment in the work of the Fiscal Commission; much more work needs to be done on that, but we need an Executive to be batting for us with the Treasury to make that case for a different approach.
For me, the budget crisis is by far the biggest political issue facing Northern Ireland. With respect to my colleagues, it is a far bigger issue than the Windsor framework. I regard the Windsor framework as now being a done deal, and I welcome it: it is a progression from the original version of the protocol. There are issues to clarify on the margins, with more detailed guidance, but the fundamental structure is in place and we need to move on. To some, the issues being debated are relatively abstract and pale into insignificance compared with the impact on people’s everyday lives in terms of health and education.
Again, I say to Unionist colleagues: the best way to secure the Union is not through a narrower and narrower circle, based on defending an abstract notion of sovereignty; it is by making Northern Ireland work. The Union is based on the principle of consent. That lies in people seeing Northern Ireland working, and without an effective Executive and Assembly, they are getting the message that Northern Ireland is not working. From their perspective, that narrative needs to be turned around very quickly, rather than continuing the stand-off on the increasingly narrow ground of the Windsor framework.
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