The Stormont budget cuts which began last week are only the beginning of years of financial pain if welfare reform is not swiftly agreed, the finance minister has warned.
Painting a bleak picture of continued budget cuts over the next two years and then a cataclysmic £1.5 billion black hole in two years’ time, Mr Hamilton said that last week’s £78 million cuts were only the start of years of financial penalties from the Treasury if the benefits system is not changed.
In an interview with the News Letter yesterday just over a year after taking over from Sammy Wilson, the DUP minister said he believed that Sinn Fein will come under increasing pressure over its stance on welfare reform as the cuts become deeper.
He said: “You’ve got cuts now to deal with penalties and that’s really hard; it’s extremely challenging. But it’s not as bad as some of the things that are coming down the line.”
He said there would ultimately be a “complete divergence” between the mainland UK and Northern Ireland welfare systems, ultimately putting at risk the jobs of 1,400 people in Belfast and Londonderry who administer benefits for the south east of England.
Then, once the welfare reforms are implemented in full and the Whitehall computer system is switched off in two years’ time, Stormont will have to either buy the 25-year-old computers currently in place — which Mr Hamilton describes as “knackered” — or invest in its own IT apparatus, at a cost of about £1.5 billion.
The length of time required to build such a critically important system and the astronomical expense of paying for it means that there is the “real possibility” that in 2016 Northern Ireland recipients of benefits will have to be manually paid, something he said would lead to errors and the necessity for an increased workforce.
He added: “It gets more and more horrific the longer it goes on. You’ve got to, I suppose, hope that either now or in a short while nightmarish scenario filters through to Sinn Fein and they realise ‘actually, we’ve got to make some progress on welfare [even if] we mightn’t like it’.”
Sinn Fein has argued that it is standing up to wealthy Tory ministers’ cuts to the benefits of the vulnerable people, But the Strangford MLA dismissed that, arguing that those people who claim benefits are now simply losing out through cuts to other public services.
Mr Hamilton said that although he believed some ministers were exaggerating the effect of the cuts on their departments, front line services will be affected and he has “incredible sympathy” for ministers whose budgets were suffering : “This moment was coming. There was a day of reckoning coming in terms of our budget — we already had pressures and departments had individual pressures and then on top of that all you had welfare reform penalties, I’ve been warning that if you didn’t deal with that you were going to have a situation where these types of tough decisions were going to have to be taken by ministers.”
He believes that next year the Province stands to lose about £150 million in planned Treasury reductions and about £114 in welfare reform fines. Mr Hamilton says that even aside from the issue of welfare reform, Northern Ireland’s budget stands to lose up to another £1 billion over the following three years, although it could be less if the Government decided to protect the education and health budgets.
Officials rewarded for their bright ideas
Since taking up office just over a year ago, Mr Hamilton has repeatedly spoken about the need for public sector reform in Northern Ireland.
As part of that process he has attempted to harness the ideas of 27,000 civil servants and 180,000 public sector workers in the Province by setting up an ‘Ideas Engine’ which incentivises officials whose ideas lead to savings.
The project has been running in his department, with more than 60 responses already, and he now hopes to see it rolled out across the public sector. He has also set up a “public sector innovation laboratory” to take those ideas and see if they could work.
He said: “You’ve got people who work very hard but in the course of their day-to-day job they are seeing things that maybe don’t work right or are wasteful or where a slight tweak or change could improve things. But there isn’t always the mechanism for them to pass that information through to the people who could do things differently.”
He said that he came up with the idea after one mid-ranking civil servant had told him that her boss was near to retirement and uninterested in fresh ideas while another official told him that if she gave her boss her best idea “he would steal it and use it to get promotion”.