Stephen Farry’s speech on costs of division

At this time, many MLAs and Ministers are quite rightly seized of the need to find efficiency savings in government and public expenditure.

It is interesting to note the increased speculation around the savings being found from changes to the institutions, whether it be from rationalisation of the number of Departments or cutting back on the number of MLAs. These are all worthy, and Alliance has long been committed to reforms in these areas.

However, the claimed saving of £50m only scratches the surface. And even with that, the scale of what is suggested may only be realised not just through direct savings of taking certain costs out of the system but rather through more efficient and effective, and dare I say joined-up, government that comes from addressing underlying cost bases. This is important in light of what I will come to shortly.

Anyone serious about finding efficiency savings in Northern Ireland cannot afford to avoid addressing the huge costs involved within the fallacy of trying to manage a divided society rather than building a shared future.

Alliance has regularly talked about the financial costs of division being in the region of £1bn each year.

The costs of a divided society are apparent in four respects.

First, there are the direct costs of policing riots, other civil disturbances and parades, the distortions to policing that arise from the security threat, and the costs to a wide range of agencies in repairing damaged buildings and facilities.

Second, there are the indirect costs of providing duplicate goods, facilities and services for separate sections of the community, either implicitly or explicitly. This includes: schools, GP surgeries, job centres, community centres, leisure centres, and even bus stops. These costs are borne not just by the public sector, but by the private sector too.

Third, related to the second aspect, there are hidden factors, linked to divisions, which impact upon the cost environment that Departments and agencies have to respond to.

Fourth, there are the opportunity costs of lost inward investment and tourism. While the Northern Ireland economy has performed better in recent years, it is still performing well below its potential capacity.

This is not something that the Alliance Party is made up. It is a major structural problem that has been recognised by academics and other commentators. Furthermore, it has been formally recognised within government circles

The theme was arguably first explored by Jeremy Harbison in the background paper provided to OFMDFM in January 2002 which was intended to be the precursor for a new policy on community relations – what eventually became shared future.

When ‘A Shared Future’ was finally published in March 2005, under Direct Rule (and we must ask ourselves why almost ever progressive move towards a shared society has occurred under Direct Rule), it recognised that there was a strong financial and economic imperative to build a shared future. Indeed, it declared that the concept of separate but equal was unsustainable.

Within the first triennial shared future action plan, launched in April 2006, OFMDFM was committed to commissioning some detailed research into the cost of divide. This led to the Deloitte Report which was finalised in April 2007, just before the restoration of devolution.

I do not want to spend too much time looking backwards but it is a matter of regret that OFMDFM under devolution have essentially disowned this report. They dragged their feet over publication, and it took a freedom of information request to force their hand.

The big headline coming out of the Deloitte Report was the potential for the cost of division to be as much as £1.5bn each year.

Whether it is £1bn or £1.5bn, or something smaller, this is clearly a major distortion within an annual budget for Northern Ireland, in terms of DEL, of around £8bn.

Regrettably, addressing the costs of division is not a theme in the current Programme for Government nor the Budget.

This is not sustainable at the best of time, and is more so in the worst of time, such as a major economic recession and financial tightening from the Treasury looming.

Now, I would be the first to accept the Deloitte Report not perfect, but at the very least it should be used at least inform a conversation, and to signpost further work on the road ahead.

Deloitte reached their figure of £1.5bn on a crude comparison between Northern Ireland and Wales in terms of what would otherwise be the level of public expenditure based around social and economic needs.

On a policy by policy area, their individual analysis did not add up to £1.5bn.

I would suggest that the report was good at identifying the direct costs of dealing with a divided society and also the opportunity costs in terms of lost investment and tourism. However, it was weaker in terms of calculating the costs associated with the duplication of goods, facilities and services, and also the cost pressures that build up from divisions.

No one would suggest that £1bn can be released with one spending round or indeed across several rounds. These distortions may take a generation to be fully unravelled. But it is critical that we do make a start and make a start today.

Given the enormity of the current economic and financial pressures facing Northern Ireland, this start needs to be within the current Budget framework as well as within the next.

I want to highlight a few examples of where work can begin.

Over the next two years, the Northern Ireland Executive has to produce another £123m in efficiency savings. It may be tempting for the Executive to use the additional £116m to be received as Barnett consequentials arising out of last month’s budget. However, these additional resources are supposed to be for boosting the economy, through investing in training and employment, the green economy and social housing.

Rather Alliance believes that over the next two years the Executive should seek to address the £123m in efficiency savings through beginning to address the costs of division.”

Next week Alliance will be publishing our own paper on how savings can be generated from tackling division and segregation in our society.

It will not be easy, and indeed, at times, we will have to invest in order to save. We will have to invest in new shared services and facilities before we can wind up the old ways of doing things but we must make a start.

Also, it is not simply a case of cutting out expenditure, but also addressing the underlying cost pressures.

In terms of duplication, the biggest cost pressure comes within education. Northern Ireland pays a premium of as much as £300m each year to have its sectoral education system.

No one is suggesting moving to a one size fits all system, but all difficult decisions on rationalisation of the school estate will have to be made, and sharing and collaboration between schools pursued more rigorously. Integrated education should be viewed as the apex of a range of options for sharing. It should not viewed as further fragmentation of an already fragmented system, but the most financially sustainable way forward.

There are also duplication issues to be faced by the Departments of Health, Social Development and Employment and Learning.

In terms of pressures upon the cost environment for Departments, DSD facing problems with dealing with the inefficiencies segregated social housing and the opportunity costs of blighted land. DETI has pressures in having to disproportionately invest compared to neighbouring jurisdictions in order to attract inward investment.

I should also stress that Alliance recognises that a significant element of the costs of division identified by Deloitte relate to policing and justice. There are perfectly rational and justifiable reasons for this situation given the circumstances. In the longer-term, differentials with the rest of the United Kingdom will narrow as we normalise. But at present, there are additional cost pressures beyond

The SDLP amendment deletes reference to actually addressing the direct and embedded costs within the system. Something confirmed by the failure to mention anything about the costs of division in their £400m savings proposals.

Apart from adding in a reference to the Programme for Government, I am not sure what exactly it achieves.


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