Four-fifths of households in Northern Ireland receive more in benefits than they pay in tax, according to a new report from the Economic & Social Research Institute, funded by the government’s Shared Island programme. This calculation includes tax credits and the State pension, which people do not always think of as benefits, so the finding caused some incredulity. Nevertheless, it is correct.
The equivalent figure for the Republic is just over half of households. The report was a comparative study of the causes of income inequality, North and South. It found southern households earn more and pay more tax, but a greater use of means-tested benefits in the North makes inequality about the same on both sides of the Border. However, this arises from two different systems acting in opposite directions. The report mentioned implications for a future of ageing populations and possible “convergence” of tax-benefit systems or “increased economic co-operation on the island” – presumably delicate references to a united Ireland.
While all of it was interesting and widely reported, there is a problem with the Shared Island programme’s hope of fostering better debate. Politics in Northern Ireland is nowhere close to considering these issues. It can barely consider taxation or welfare in isolation, let alone combine them into coherent, competing philosophies. You might as well discuss a Stormont space programme. An almost total dearth of ideology, beyond unionism or nationalism, may be the deepest North-South political divide.
Devolution began a quarter of a century ago with limited taxation powers, but more have always been available on request. Hopes rose and fell over the years that this might spur the development of left-right politics, supplementing if not replacing the orange-green variety. The request for more powers never came, apart from a few mostly trivial exceptions.
Stormont’s only significant revenue-raising power remains domestic and commercial property rates, a tax the rest of the UK has replaced twice since 1990. Not only has Stormont kept rates, it has kept them at about the same level, with inflation-only increases until compelled this year by London to raise a little more. Scotland and Wales ran detailed commissions on further tax devolution well over a decade ago and partially devolved income tax, among other measures.
Stormont has barely embarked on this process, with a commission report from 2022 now gathering dust. Sinn Féin has taken charge of finance and is in favour of devolving taxes, but mainly as a republican exercise in “repatriating powers from Britain” rather than with any vision for their use.
Corporation tax was devolved in 2015 after lobbying by business groups. They succeeded by playing down the usual economic and political ideas inherent in a business tax cut, focusing instead on the practical need to match rates in the Republic. Unionist and nationalist subtexts of this all-Ireland harmonisation were played down as well. Devolution collapsed before the power was enacted and its moment is now felt to have passed. Stormont has spent too much money elsewhere.
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Welfare has always been devolved, apart from tax credits and child benefit, yet nothing has been done with this vast power that relates to almost every social issue. London pays the £5 billion benefits bill directly, separate to Stormont’s £15 billion budget, provided benefits are the same as in Britain. If Stormont wants to be more generous, it has to cover the difference itself – which admittedly would be a huge cost in most instances. But the reverse applies: even a minor benefit cut could unleash enormous savings, sufficient to fund almost anything – including better-targeted new benefits. Refusing to exploit this potential has been political failure on an epic, pathetic scale.
Although Sinn Féin’s move from the left at Stormont has been well documented, the only position it seems to have moved towards is spineless populism. The post-Brexit humbling of the DUP has caused a further intellectual flattening of Northern Ireland politics, unlikely as it may seem. In its heyday the unionist party liked to strike centre-right economic poses. Although this was an affectation, at least it offered some distinctive spin. Now the DUP waves the begging bowl at Westminster like everyone else. The UUP and the SDLP largely tag along behind. Alliance has moved to the left on fiscal policy and has had the courage to propose domestic water charges, but on the whole Stormont is an ideology-free zone.
To be fair to the executive parties, bland consensus is effectively a requirement of mandatory powersharing. This should be considered its most insidious cost and the best reason to pursue the reforms that rose up the agenda during recent collapses of Stormont, only to slip down again once devolution was restored.
Until it is possible to assemble a voluntary coalition that leans left or right, Stormont may never have a higher philosophy than shadowing Britain.