Foreign Perspectives

Archive for the ‘Politics’ Category

Despite a very misleading campaign led by Alex, he still lost which just goes to show that there are quite a number of people who mainly feel British rather than Scottish. What would have been interesting is to have been able to analyse the breakdown of voting by age as, going by the media reports, it would appear that there was a much higher “yes” vote from the younger voters which, of course, is why Alex wanted the voting age reduced to 16.

Although the “no” vote won, what’s clear is that there are an awful lot of people in Scotland who think of themselves as more Scottish than British and their needs will have to be addressed in the years to come. The various parties have made committments to do just that by devolving a lot more power to the Scottish government in the fairly near future. What’s becoming apparent is that the Welsh and Northern Ireland governments will want similar powers granted to them as well as indeed will areas within England. That’s going to make life in the UK a whole lot more complicated in the years to come if local changes are allowed in taxation and welfare provision.

Will it, for example, move to more of a federation of local governments than a union of kingdoms? If so, how local would those local governments need to be? London seems to be aiming towards it’s own governing structure but if that’s granted, what about the other major cities?

If nothing else, it’ll certainly be an interesting period with the multiple negotiations going on. Already the Northern Ireland and Welsh assemblies are holding discussions as to the way forward for them and perhaps other major regions will join in that discussion in due course.

Peter Robinson wrote an interesting summary of the situation with politics in Northern Ireland last week.

For those that don’t know, the government in Northern Ireland is a mandatory coalition that requires agreement on major issues. That agreement is proving to be impossible to get in the very central area of welfare reform which poses particular difficulties as Peter pointed out.

Welfare is a major proportion of the overall Stormont budget so any adjustments required to the welfare budget tend to involve large sums of money. Historically Northern Ireland has mirrored any changes in the welfare system on the mainland and the problem now is that they’re moving to universal credit and putting a cap on the benefits that a family can receive but Sein Fein don’t agree with that as they say that it imposes cuts on vulnerable sections of society. To an extent, they are correct if you take the assumption that people living on benefits are by definition vulnerable. However, to pay people what is in some cases considerably more than the same family could gain through working seems fundamentally wrong. Also worth noting is that average salaries in NI are lower than in the rest of the UK so it can pay people not to work.

In that the rest of the UK are cutting benefit payments, they are reducing the amount paid to NI by the amount that they estimate that welfare reform would save. As noted above, these are big numbers and without welfare reform these reductions are having knock-on effects in the public services provided by other areas of government in NI so, for instance, the reduction in payments to the Department of Regional Development means that they can’t afford to maintain all the street lights anymore.

However, a bigger problem is that the computer system which makes the payments is in England and supported by IT staff in England and both are in the process of being wound down as those benefits transfer to universal credit. In principle, the NI government could take over both but the money required to do that is quite staggering: Peter had been quoted £200-£300 million pounds per year to maintain them. They’re also quite old systems and he’s been quoted £1.6 billion to replace them. That’s a lot more than the NI based systems which preceeded them cost but going back to those systems isn’t a runner as the teams which supported them have long since dispersed. To give an idea of how different the scale is, the model of computer which ran all systems in the NI civil service just before they were moved to England was the same model as was used in England just to control the printers. Hence, natually, the IT teams were somewhat larger eg a typical benefit support team in NI was three people compared to 30 in England supporting their version of the system.

Finally, there’s the time issue. A decision to change to universal credit or to take over running the old systems needs to be made quite soon or those benefits affected will simply stop being paid and the deadline for that decision isn’t far off.

So what will they do? They can’t continue to not make a decision for sure but there doesn’t seem to be any clear way out of the impasse. Peter’s suggestion that they hand back welfare to Westminster is going to meet strong opposition from a range of parties. Westminster taking it back either voluntarily or compulsorily may not be easy to do either and also has a deadline as staff need trained and systems updated not to mention the reintegration of NI welfare.

What’s clear is that they need to make a decision and soon.

The basic argument of the Yes campaign is that it’s better that the people of Scotland are ruled by the people of Scotland i.e. that independence is a good thing by definition and they’re right. The basic argument of the No campaign is that there’s strength in numbers and they’re right too.

But which is actually best?

It’s certainly very easy to knock down the Yes arguments:

• the support from oil will be a lot less then the sums they are expecting not least because Alex seems to count every penny coming in as tax revenue rather than the 20% or so that would actually come in but even that’s from a much bigger base than he’ll have courtesy of various international agreements which divvy up the amounts based on population rather than land area.
• it certainly would be best for Scotland to continue to use the pound and the Bank of England but that just isn’t a runner so at best Alex will be stuck with his first plan B i.e. use sterling but outside a sterling-zone arrangement. Presumably the banks in Scotland wouldn’t be permitted to continue to print their own money as they do now so the Scottish notes would be replaced by Bank of England ones in this scenario.
• since an independent Scotland simply wouldn’t have the wherewithall to support the banking system, it seems certain that most, if not all, of their banks would have to relocate to England even aside from European laws requiring that. There’s going to be quite a hit to the economy and jobs should that happen. On a related note, the various investment companies based in Scotland are already preparing to move and, of course, you could hardly have National Savings (a branch of the UK Treasury) based in Glasgow anymore.
• the freebies (education, prescriptions, etc.) are mainly dependent on the oil revenue which is somewhat less than Alex seems to think it is or would be and, of course, that knocks the “oil premium” fund on the head too.
• defence industries ranging from Trident to loads of small and medium companies would almost certainly have to relocate because the MOD insists on having various key components made and assembled in the UK.
• the much lauded research facilities in the universities are going to have to find their funding elsewhere as the vast majority of the research institutes which fund them are UK institutions.
• Europe is something of a wildcard as nobody can really say what the outcome of negotiations might be at this stage but it seems unlikely to be plain sailing.

For the No camp, well the argument is that none of the above will happen if they win.

However, it’s not really so simple as that. As the Yes people say, it’s not so much the nitty gritty details but that Scotland should be run by the Scots. Which is grand for those at the top of the pile but not so good when you find (as happened just prior to them joining with England in 1600) that it takes twelve Scottish pounds to buy one English pound, that your job went south and your pension is pretty much worthless.

The social security system has been, up to now, fairly standard UK-wide. It wasn’t that the system was exactly the same as historically there have been different sets of laws in the mainland and in Northern Ireland. However, the laws were arranged so that the amounts paid in the various benefits were the same even when there were different computer systems making those payments.

The operational aspects of that changed about 20 years ago when the computer systems were amalgamated so that, for example, the computer system which calculates and pays your retirement pension in Belfast is exactly the same one that calculates and pays it in Birmingham. Prior to that there was a system in Northern Ireland which paid the pensions in Northern Ireland and a different system on the mainland. However, the amount calculated to be paid was the same thus the changeover was seamless.

Historically, changes in social security payments in England were always reflected in corresponding changes in payments made in Northern Ireland. This time around though the policitians in Northern Ireland haven’t, yet, reached agreement to make the necessary changes which in turn means that Northern Ireland has been subject to penalty payments corresponding, roughly, to the amount that would have been saved if they’d made those changes. Those penalty charges are starting to mount up and we’re now starting to see the start of the effects of such penalties being imposed.

First off, it’s worth noting that the budget for the social security department is usually the highest of all the departments so penalties imposed on it that need to be spread amongst the other departments hit the other departments quite hard. Secondly, the Northern Ireland executive have resolved that neither education nor health will have cuts imposed which leaves fewer departments to shoulder the cost and that cost will be quite substantial.

This week, we’ve already seen the announcement that DRD won’t have enough cash to repair all the street lights and that DOJ will be suffering a similar major cut. They are only the first to make their announcements and similar cuts will be happening in public services over the coming year if agreement on welfare reform doesn’t happen. Of course, without agreement, it’s not just this year but every year to come that will have cuts. They’ll be increasing in scale too: it wouldn’t just be “tens of thousands” of street lights that would go out this year, but rather that a similar additional number would go out each and every year thereafter.

What’s also a looming problem is that the ability to pay the benefits affected will gradually dwindle as time goes on. Despite what some of the politicians think, the computers currently making the payments will be switched off in due course or rather the ability to support them will be. In fact, the ability to support them is already diminishing as the support teams are being transferred to other duties. For a change there really is a firm end date for them to work to and unmissable deadlines are approaching very quickly indeed. Even basic training for those in the benefits offices takes time and, without agreement, that won’t be done. Changing over to the new system is something that will take time to do and the time available to do that changeover is running out.

How’s it going to look if some key deadline passes and it isn’t possible to changeover in time? How are they planning on explaining to the thousands of recipients of the affected benefits that it’s no longer possible to pay them?

For a very long time, the social security payments scheme in Northern Ireland was more or less identical but separate from the scheme in the mainland. Thus, for example, if you retired in Northern Ireland and then moved to England, your retirement pension would be paid from the English system but the amount would be the same.

However, up until the early 1990s there were separate computer systems to do this in Northern Ireland and in England. Then with the replacement of the English system in the 1990s, the running of the systems gradually moved to England and the various computer teams supporting the old Northern Ireland systems were disbanded.

Roll that forward 20-odd years and the reform of social security that is taking place in England, Scotland and Wales hasn’t, yet, been accepted.

Options as to how to proceed are quite limited.

Firstly, NI could carry on with the old system for a while. There are penalties of, at present, £5 million a month being applied and that’ll have consequences for the non-social security money i.e. there would need to be substantial cuts to balance the books. However, there’s only one computer system now, run in a number of centres across the country but supported centrally and that’s rather a bigger problem. Once the mainland change over to universal credit, support for the old systems will stop and those support teams will disband. The NI computer system is actually in England and, in principle, NI could buy that but what they can’t buy is the support team as that will be moving on to the new system. Outcome of this option? Well, something like 2 or 3 years from now the social security payments in NI will simply stop being paid because the computer system which is paying them now will either be switched off or, if it’s not, it will develop a fault and the team that currently fixes faults won’t exist. In practice, this is likely to end in chaos.

Second, continue on with the old system but get a replacement to avoid the consequences of the switch-off above. Again, there are the penalties to contend with. However, more significant is that 2 to 3 year deadline: it just isn’t long enough to train up a new support team, even if the will to do that were there (which it isn’t) and the GB teams were able to train up a backup team (unlikely in the timeframe). It would also be seriously expensive as the GB systems were written with much larger IT teams than are usual in NI (around 10 times as large) so running costs would be much higher per capita.

Third, agree the changes in welfare in NI. Best option probably, but seemingly rather unlikely to happen.

Fourth, give back the social security to direct rule. Not that different from the previous option but probably a whole lot better from the point of view of the local politicians as they’ll be able to argue that the cuts are imposed directly by London.

So what’s likely to happen? The possibility of social security payments simply stopping should focus the minds of the politicians but they don’t seem to believe that the computer system would be switched off – what they haven’t allowed for is that without support, it’ll just stop working sooner or later. Neither of the first two options are great for NI given the penalties that will be applied and the consequences for public services. Options 3 and 4 aren’t great politically so unlikely to happen before the upcoming elections.