Devolution of more fiscal powers to Northern Ireland – Pivotal consultation response

Read Pivotal’s response to the Department of Finance’s consultation about the devolution of more fiscal powers to Northern Ireland. This consultation follows the report of the independent Fiscal Commission NI.

Pivotal welcomes the work of the Fiscal Commission NI. The Fiscal Commission’s reports provide very useful independent analysis that helps inform discussions about the possibility of more fiscal devolution here. We are pleased that the Department of Finance is seeking views on the issues raised and we would encourage politicians and civil servants to continue these important conversations.

In Pivotal’s response, we emphasise the importance of having proper consideration of the possibilities for increased fiscal devolution, particularly because of the bleak outlook for the public finances here in the coming years. While unpopular, and often rejected by politicians, increased local revenue raising may be necessary to ensure sufficient funding to maintain public services at an acceptable level. There is a need for a realistic conversation about this that considers all the options.

Our response however raises concerns, as also noted by many others, about the Northern Ireland Executive’s capacity to take on new fiscal powers. The Executive’s record in government does not suggest it is good at taking difficult or unpopular decisions or at developing policies for the longer term. Moreover, in the past the Executive has usually chosen not to use its current powers to raise more revenue locally. For example, as set out in the Fiscal Commission report, there are around £600–700 million of ‘super parity’ measures in Northern Ireland where potential revenue is foregone.

We suggest that if fiscal powers are to be devolved, it would be wise to take an incremental approach, beginning with smaller changes which are backed by a strong evidence base, perhaps to incentivise particular behaviours and/or raise revenue in a policy area like public health, environment or economic activity.

Whatever happens next, it is clear that a well–informed public conversation is needed about any future devolution of fiscal powers. These issues are not well understood and so accessible information is needed about the potential benefits and risks.