Newton Emerson: Cynical self-interest may be the making of Stormont

There was a pleasing symmetry at Stormont on Monday when new Sinn Féin Assembly speaker Alex Maskey welcomed British prime minister Boris Johnson.

Maskey has a conviction for stealing a sum of cash some 40 years ago. Johnson turned up with less cash than expected.

It is a testament to how badly Sinn Féin and the DUP wanted back into office that they agreed to the New Decade, New Approach deal without pinning down how much money was on offer.

Northern Ireland’s parties, so used to stretching talks deadlines, found themselves tricked into last-minute haggling with London.

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The new approach in New Decade, New Approach is being presented by the DUP and Sinn Féin as fresh acceptance of their shared interest in making the North work

The Stormont Executive was anticipating an extra £5 billion over the course of the current Westminster parliament. It now appears it will get £2 billion, half of which it would have received anyway through planned UK-wide spending increases, with perhaps another quarter carried over from unspent pledges in previous deals. Its annual budget will rise from just over £10 billion to just under £11 billion.

Subvention

Stormont's budget is almost exactly the same as the so-called subvention, the net cost of Northern Ireland to the UK exchequer – total public spending minus total taxes.

This is a coincidence but it has crystallised in the public mind the idea that Stormont represents Northern Ireland as a burden and an economic basket case.

In truth, the North is not exceptionally expensive in UK terms. Its subvention per head compares with Wales and the northeast of England, which have worse economic indicators. It is more correct to say the UK has a regional problem than that Northern Ireland has a unique problem.

However, the cost of the North has a unique political aspect. Everyone is aware of its constitutional significance, although nobody can quite agree on what it means, even among themselves. You can see this in how Sinn Féin tells people in Britain that Northern Ireland costs too much, people in the Republic that a united Ireland would cost hardly anything and people in Northern Ireland that Britain is not subsidising us enough.

At least Sinn Féin is matching its message to its audience. Unionists vacillate between denouncing republicans for wanting Northern Ireland to fail and gloating that the Republic could never afford to take it on, as if that is an honourable basis for the union.

The public in Britain have shown remarkable forbearance towards the subvention, despite the DUP’s high-profile waving of the begging bowl and persistent attempts by unionism’s opponents to use it against them. But as the subvention keeps growing and Stormont’s demands become more audacious, there could easily come a time when resentment takes hold.

The economist David McWilliams likes the tell people in Northern Ireland 'the subvention makes you poor'

The new approach in New Decade, New Approach is being presented by the DUP and Sinn Féin as fresh acceptance of their shared interest in making Northern Ireland work. They have both said this before, but this time they supposedly mean it.

There is genuine cause to believe they do mean it, albeit through cynical self-interest, because they both made Northern Ireland dysfunctional and were punished for it at the polls. Their new commitment refers mainly to healing social divisions and restoring public services. However, growing the economy is an important part of the deal and naturally extends to recognising prosperity as serving unionist and nationalist aspirations.

Over the past few months, Sinn Féin and the DUP have made similar calls for a new industrial strategy, aimed at reducing dependence on UK subsidy. While this will be essential, it is to some extent a platitude. Of course, the ideal way to obviate the subvention is to become so rich we pay enough tax to offset it. But that is a project of decades – tax revenues would need to almost double.

To sustain such an effort, there will have to be a complete change in political and economic attitudes within Northern Ireland, distinct from constitutional views. The cargo-cult mentality behind this week’s haggling at Stormont will have to end, as Johnson made clear when he linked financial support to “leadership” and “reform”.

Perverse incentives

The renewable heat incentive (RHI) scandal revealed that ministers, officials and businesses viewed money from Britain as free money, to be spent as lavishly as possible.

They had no conception of it as creating perverse incentives for the public and private sectors, let alone a higher sense of duty to reduce the subvention. New Decade, New Approach promises accountability and transparency to prevent another RHI but it is a far greater challenge to reverse the ingrained mindsets that led to it, so that ‘free money’ might be seen not as a good thing to be more carefully managed but as a bad thing in itself.

The economist David McWilliams likes the tell people in Northern Ireland “the subvention makes you poor”.

We are still light years away from grasping the arguments behind that thinking.

There is now at least the hope that if we ever do, we might all agree on their worth.