RHI official now controls all public spending in Northern Ireland

The inability of Sinn Fein and the DUP to agree to form an Executive means that David Sterling is now in charge of public spending of more than £9 billion – with no democratic accountability.

Mr Sterling, who is now the permanent secretary of the Department of Finance, has taken charge under an emergency provision because the last Sinn Fein Finance Minister, Máirtín Ó Muilleoir, did not bring forward a budget before the Assembly collapsed.

Under the contingency arrangement now being operated, Mr Sterling can only spend a maximum of 95% of last year’s budget. Factoring in inflation, that means a real-terms cut of around 7% – something which will be increasingly felt by the public sector and users of public services if it persists throughout the financial year.

However, in reality it is thought impossible that the current situation could continue for more than a few months.

Civil servants are believed to be operating on the understanding that the drastic cuts which would be required if the emergency measure persisted for 12 months will not happen because by that stage there would have to be direct rule if an Executive could not be formed.

Yesterday the Secretary of State indicated to Sinn Fein and the DUP that if they cannot agree to form an Executvie then direct rule will be the consequence – although he did not say so explicitly.

In fact, James Brokenshire said that he was already working on legislation to allow for rates bills to be sent out and would bring that to the House of Commons in about a fortnight – effectively direct rule by stages.

Mr Sterling was not personally responsible for designing the RHI scheme, something which was done by the Energy Division within DETI, but he was ultimately responsible for their actions (as was the minister, Arlene Foster) because they were working under him.

When pressed in December by Stormont’s Public Accounts Committee about his role in the scheme, Mr Sterling stressed that he could not know every detail of every project within the department.

But the senior civil servant went on to say: “I am not trying to pass the buck to others. I will accept full responsibility for any failings that happened during my time, and I am absolutely clear about that.”

The area which is likely to be most adversely impacted by the current crisis is the health service.

‘Health inflation’ – the amount of additional money which the health service needs to just stand still – is currently about 6% each year, due to an aging population and expensive new treatments.

Yet the civil servants are constrained from any radical decisions about removing funding from other parts of the public sector in order to find that huge sum for a department which already receives about half of the entire budget from Westminster

It is believed that civil servants may be able to give health additional money, in the region of a 3% increase in cash terms – but in real terms (taking into account inflation), that is just over 1%.

Strategic health reforms, such as centralising some hospital services, will – yet again – be delayed because they involve major up-front investment, even though in the long run they should be beneficial, both medically and financially.

Yesterday the civil service moved to attempt to reassure the public sector and the wider public about what will now happen in the absence of a budget.

In a statement, Mr Sterling said that he will use the emergency powers under Section 59 of the Northern Ireland Act 1998 “to release cash and resources to departments from April 2017 until a new administration is in place” – effectively making clear that public spending will not come to a sudden halt despite the absence of a budget.

That legislation which becomes effective from Wednesday 29 March, limits the amount that may be approved to 75%, of the previous year’s budget, up to the end of July (in reality, departments would only need less than 40% of their annual budget up to that point).

Then, if a Budget Bill is not in place by the end of July, the amount which Mr Sterling has at his disposal will be 95% of last year’s budget.

The Department of Finance highlighted that the financial administrative made by Mr Sterling “do not represent a budget”, something which it said “will be for an incoming Executive to agree”.

Mr Sterling said: “While the legislation limits the amount that may be approved to 75%, of the previous year, up to the end of July and 95% thereafter, this does not mean that departmental budgets for 2017-18 will be reduced by 25% or even 5%.

“Rather the powers available are simply an interim measure designed to ensure that services are maintained until such times as a budget is agreed and a Budget Act passed, at which point departments will have access to the full level of funding available.

“These Section 59 measures enable cash to continue to flow to maintain the provision of public services and will provide a degree of certainty to departments.

“They are not a substitute for a Budget agreed by an Executive. Indeed we are very clear that the prioritisation and allocation of financial resources is a matter for Ministers. There is also co-ordinated engagement between departments to ensure that key stakeholders are fully informed about these interim financial measures. Departments are currently writing out to community and voluntary bodies to confirm interim funding designed to maintain the ongoing integrity of the key services they provide until an agreed budget is in place.

Mr Sterling also said that all capital expenditure – mainly infrastructure spending, such as new roads or schools – “will be honoured into 2017-18”.

Departments will write to all government-funded groups in the community and voluntary sector by the end of this week advising them that money will continue to flow during the period without a budget.

Farmers will also receive their Common Agricultural Payments (CAP) as usual.

The Ulster Unionists rounded on Sinn Fein over the budgetary crisis. UUP MLA Steve Aiken said that Gerry Adams’ party should “realise that much more is at stake as a result of the developing budgetary crisis than their own belligerent pride”.

He said: “This week the immense ramifications of the DUP and Sinn Fein being unable to produce or agree a budget are beginning to become clear for all to see.

“Thousands of staff across community groups and the wider voluntary sector are facing great uncertainty and there is an immediate threat to the delivery of key public services.

“The crisis is now so severe that schools are warning they will not be able to balance their budgets and patients are coming to harm as a result of the spiralling waiting times. There is no public service that will be untouched by the current budgetary impasse.”

“Sinn Fein are in the ridiculous and blatantly contradictory situation of claiming that the absence of the budget is having no impact whilst at the same time claiming, as Michelle O’Neill did during the election, that a budgetary allocation is urgently needed to stabilise the situation in the local health service.”