BELFAST BRIEFING: Business groups and economists have raised doubts about budgetary provisions

NORTHERN IRELAND’S draft budget is beginning to look like a blushing bride that may yet be stood up shortly at the Stormont altar.

She has had no shortage of suitors, but the chances of the Northern Ireland Executive actually witnessing her tying the knot are getting slimmer every day.

As always, the funding for the budget comes from the UK Treasury in the form of a block grant.

But Budget 2011-15 has to incorporate £4 billion of spending cuts imposed by the UK’s coalition government as part of its comprehensive spending review.

Minister for Finance Sammy Wilson says the “reduced public expenditure envelope” will result in “unprecedented pressure” on public services in Northern Ireland.

The executive has had “the invidious task of managing a significant real terms decrease in our budget”, he says.

It will result in a drop in current spending of 8 per cent and a 40 per cent reduction in capital spending. That will mean some major cuts for key departments.

Total current annual expenditure by the Northern Ireland Executive will fall to an average of between £10.3 billion and £10.4 billion from now until 2015. The current draft budget includes public sector pay freezes for civil servants earning more than £21,000.

It also proposes certain revenue-raising options which could include a new 15 pence charge for plastic bags, selling government assets such as buildings and car parks, and a multimillion-pound local levy on Belfast Harbour.

But what the North’s draft Budget 2011-15 specifically rules out, to the surprise of many business bodies, is the introduction of water charges.

In contrast to the rest of the UK, where water and sewage services are primarily funded by consumer charges, in Northern Ireland the service is funded via the public expenditure budget – up to £800 million in the four years to 2015.

On borrowing, the draft budget foresees the executive having to tap £175 million under a government-sponsored scheme in the UK (the Reinvestment and Reform Initiative) to fund the proposed rescue package for stricken Presbyterian Mutual Society savers.

But there is growing concern about the ability of the executive to agree the budget by the end of this month, as required.

There is a growing band of politicians – mainly in the SDLP and the Ulster Unionist Party – business groups, trade unions and charities who believe that, in its current form, the draft budget “may not be deliverable”. The Irish Congress of Trade Unions has blasted it as “unworkable”.

The Northern Ireland Council for Voluntary Action commissioned PricewaterhouseCoopers (PwC) to review the spending plans.

According to PwC’s chief economist, Esmond Birnie, the draft budget simply does not add up.

“Our calculations suggest that, in the absence of information not currently available to consultees, there is a cumulative shortfall that could exceed £2 billion by 2014-15”.

The agency’s chief executive, Séamus McAleavey, is urging the local executive to show “a unity of purpose on spending or risk economic stagnation in the North”.

This theme is echoed by the Northern Ireland Chamber of Commerce, which is concerned about cuts to the Department of Enterprise and Trade budget.

Chamber president Francis Martin said if Invest Northern Ireland loses the ability to woo potential investors because its funding has been cut, the budget “is not taking a strategic view”.

Perhaps the most damaging criticism has come from the Economic Advisory Group – an organisation set up by the Minister for Enterprise to provide independent advice.

It believes that the budget should be “economy proofed” and that the executive should direct resources at certain departments, such as Enterprise and Employment and Learning, and not cut their budgets.

“The executive cannot realistically hope to stem the continued rise in unemployment if funding to the main economic departments has been targeted for reductions,” it warns.

Like a proud father, First Minister Peter Robinson continues to back the proposed budget, but he should not be looking forward to a warm wedding reception for it just yet.