Why Devolved Government doesn’t work when someone else pays the bills. – A Guest Post by Rogue One

 I decided to write this article after reading Sam McBride’s excellent, articulate and comprehensive book Burned covering the RHI scandal. 

What interests me most about the book isn’t so much the RHI scandal itself, but what it reveals about the inner workings (or more accurately the dysfunction) at the heart of the system of devolved Government here. I come from the background of a private sector adviser to Government since before the Good Friday Agreement. For obvious reasons I have chosen to remain anonymous but hope to add my own observations and insight into how Government really functions based on my own first-hand observations and drawing on some of the revelations within the book.

If I were to make a constructive challenge regarding the book it is that it alludes to, but doesn’t quite get to, what I believe is one of the key root causes of RHI within the very structure of devolution and why, without changing the very nature of devolution, RHI won’t be the last scandal we will see and why we will continue to have a system of Government that serves its people abysmally. 

The track record of Devolved Government since 1998.

I choose the word “abysmally” deliberately, for that is the only conclusion one can draw from the evidence of Government’s performance here since devolution began. This also applies to Government at all levels from political parties and politicians to civil servants within the machinery of Government. To be clear, I’m not saying there aren’t good, competent, hardworking individuals in politics or the civil service; there are. However, the evidence of abysmal Government is there in its actual performance in policy outcome areas where politicians are not sufficiently held to account by the media. We have the longest waiting lists for consultant appointments in the UK or Ireland (~100,000, 1/18 of the entire population waiting for more than a year for a first consultant appointment), all cancer treatment targets have never been achieved since they were set several years ago, schools with insufficient resources to function properly, £1.2bn backlog maintenance in roads, the highest economic inactivity levels in the UK or Ireland, poor educational attainment, and a stagnant economy with an overdeveloped public sector and underdeveloped private sector etc. In short, our outcomes in key policy outcome areas (the acid test for any Government) are “abysmal”. 

And yet, N Ireland is the most heavily subsidised region per capita of the UK. So how can we square the circle of having the highest subsidy (and it has been so for decades) and yet some of the worst outcomes? 

Burned and evidence to the RHI inquiry gives us some clues in relation to this question. The book references the attitudes of not only politicians, but SPADs, and most interesting of all to me, civil servants in relation to their attitude to subsidy from GB and to the Block Grant. 

For those unfamiliar, N Ireland public services are funded through a transfer from Treasury in London to the tune of approximately £20bn every year. Approximately £10bn of this is spent on Annually Managed Expenditure (AME), where the exchequer takes on all the risks of overspend, (welfare payments, state pension) with a further £10bn being spent on Departmental Expenditure (schools, hospitals, roads etc). N Ireland generates in the region of £11bn in taxes, leaving a shortfall of around £9bn a year. In other words, the shortfall between the taxes we generate and the cost of public services is met through the financial transfer from Treasury. Critically, as a devolved region rather than a country, N Ireland Government has the powers to spend the Departmental spending element according to its priorities, but very limited tax-raising powers or responsibilities. In contrast, countries like Ireland for example, have to balance taxation and spend policies to “balance the books” or fund the difference usually through National Debt. N Ireland does not have this responsibility with the books balanced in London at a national level. More on this later.

Why “Free Money” is actually a curse.

What is clearly articulated through the RHI inquiry and explored in Burned is the attitude of politicians, Spads and civil servants in N Ireland to public money, especially in the context of that money coming from London, rather than locally generated and controlled via tax and spend.

The evidence to the Inquiry is replete with references to the, ultimately incorrect, assumption that any RHI overspends would be funded by London rather than the NI Block. In essence, the prevailing attitude was that this was “Free Money” and the policy goal was to maximise this “Free Money” for N Ireland. Indeed, Sam McBride dedicates a chapter of his book to this.

Some of the comments by civil servants giving evidence to the inquiry may shock some but are frankly unsurprising to me as I have heard similar sentiments expressed first hand. They include comments like “maximising the income for NI” “while London was footing the bill there was limited urgency but when the money was coming from Stormont’s budget there was horror” “If we overspend all that will happen is we get more of the UK pot”.

In essence, a key reason why no cost controls were put in place for RHI was to “maximise income” for NI. This incorrect assumption that Treasury would fund any overspends was a key factor in the RHI scandal. However, in my experience, this attitude is far from unique or specific to RHI. It is ingrained in the DNA of devolved Government that we should “maximise our share of the UK pot”. To some, this may seem not unreasonable or even a “benefit of the union” but it is at the heart of why devolved Government has performed abysmally here and why it will continue to do so unless the very structure of devolution and how public services are funded, which drives this culture changes. So why is it a problem?

Problem 1: Lack of an imperative for good Government

Firstly, as mentioned previously, subsidy based devolution negates the need to “balance the books”. This is important because it means devolved Government doesn’t have to take the difficult, sometimes unpopular, but necessary decisions to improve policy outcomes that national Governments do. There is no imperative to reform inefficient health or education systems when that waste is essentially paid for by London and English taxpayers.

In contrast, if devolution involved responsibilities for balancing the books between taxation and spending, Stormont could simply not afford such waste. It would be *compelled* to reform to balance public spending (or cut public services to align with taxes generated- electorally damaging to any politician). This would have two further consequences, an unavoidable imperative to grow the economy (to generate more taxes to pay for public services) & to reduce waste/ improve efficiency and effectiveness of public services (to make public services affordable). 

Problem 2: Perverse incentives

Another problem with subsidy based devolution, as evident through RHI, is that the prime driver of policy becomes “maximising the subsidy”. In other words, instead of focussing on policy outcomes like improving the economy or health system, the focus becomes securing more subsidy to pay for the (wasteful and inefficient) system. Over time, that mentality leads to avoidance or delay of reform, a worsening of inefficiency and the current situation we see in terms of poor outcomes for the population. We see this mindset at a political level (such as the DUP hailing “securing £1bn” as part of the Confidence and Supply agreement) as if the additional subsidy itself is a policy outcome rather than an *actual* policy outcome e.g. improved health outcomes or a growing economy. We also see this mindset in the Civil Service where the priority becomes “spending the subsidy (or else lose it)” rather than “we can’t afford to waste a penny of our finite taxes and need to demonstrate effective outcomes for people”. 

In short, we have a devolved Government system that is structurally set up to focus on “securing more subsidy” than “improving outcomes for people”. The net result of that culture is a failure to reform health, education and a stagnant, public sector dominant economy. 

Problem 3: Self-preservation culture within the civil service and lack of consequence for poor performance

Another cultural problem with subsidy based devolution over decades is we have a civil service which is oversized for our population and whose prime objective is self-preservation, not maximising outcomes or Value for Money for the public. For those who would disagree with me on this, Burned and the RHI Inquiry ably illustrates that despite evident gross incompetence by some of those involved, no one has been disciplined and, I predict, no one will. Throughout my career spanning 25yrs only one civil servant was ever sacked and that individual went on to a job in another part of Government. In other words, the system looks after itself and its own. The problem with this of course is that there is no consequence for poor performance and no real incentive to perform well. Indeed Burned reveals that two of the individuals involved have since been transferred to new roles and promoted. No organisation, nevermind Government, can perform well while accepting (even rewarding) incompetence. 

These structural dynamics will not change following the RHI Inquiry Report simply because they are intrinsic in the vary basis and structures of devolved Government. Consequently, I see no grounds for optimism that the outcomes Government delivers will improve either. 

So what would need to change to see Government deliver better outcomes for people? 

There are essentially 3 options in my view which I appreciate tie into the constitutional question but for which I believe there is only one logical option, if people in N Ireland want to prioritise good Government and better outcomes for them.

Option 1 – is Direct Rule from London. This would have the advantage of tax and spend authority residing in one entity i.e. the London Government. In other words it addresses the need “balance the books”. The considerable downside to this option is how likely is it that a London Government would prioritise a region representing 2% of the UK population and for which there are no votes for GB political parties? N Ireland is essentially inconsequential economically or politically in a UK context.

Option 2 is devolution of taxation powers to Stormont. This would entail a Stormont Assembly setting taxes for the region and having responsibility for “balancing the books” between tax and spend. The advantage to this option is that it would *compel* our politicians to balance the books and take the difficult but necessary decisions needed to improve outcomes. They could no longer afford waste or inefficiency. The disadvantages to this are many, however. First is the competence of our politicians to balance the books. Second is that in reality, it would require, at least for the short to medium term, a significant cut to public services due to the imbalance between taxes generated by our stagnant economy and an inefficient system of public services. 

Option 3 entails unification on the basis of a centralised Government in Dublin controlling tax and spend. This option is similar to Option 1 but has the advantage that N Ireland would be a much more significant proportion of the Irish population and economy than the UK (& therefore more likely to have in built incentives to grow the economy and address waste in public services). In addition, this Option has the advantage over Option 2 of not relying on a political class in N Ireland that has failed to demonstrate a competence to govern. 

Where this leaves us now

The challenge now for any of the above options is that after decades of misgovernment and failure to reform, there is actually a need for significant investment in N Ireland to tackle worsening problems in health, education, the economy etc and create a system of public services that is efficient and effective. It is akin to driving a car for 20 years with 200,000 miles on the clock but not properly maintaining that car during that time. Eventually, it will suffer catastrophic failure where it is too late for “patch ups”. I fear we are at or nearing that point.


  1. Sean Danaher -

    Thanks, Rogue One.

    This is very damning. NI does have unique structural problems, not least the Orange vs Green politics, which seems to give politicians impunity. The Ian Paisley Jn. scandal was extraordinary and not survivable in a properly functioning democracy.

    I had hoped that the NI Civil Service could have kept things on an even keel even if the politicians are fairly useless.

    Only option three has, in my view, any real chance of making things better, but there is a total lack of leadership from the Unionists.

    Stoking sectarian rhetoric – its “them’uns” and the IRA seems to be business as ever.

    There is a lack of realism. There is, as I have blogged about, demographics. The inbuilt Unionist majority is disappearing. It is gone from the assembly, the European Parliament and maybe even Westminster after the GE.

    The DUP have failed spectacularly at Westminster; fanatic Union Jack waving is not enough to make them indispensable. If there is a decent Tory majority and Brexit goes ahead with Johnson as PM, it is clear that he knows little and cares less about NI. I can see the right-wing attack dogs going for the Unionists and a Border Poll being called.

  2. Samuel Johnson -

    The Tories cannot revenge themselves on the DUP by, unilaterally, getting shot of NI. No Irish govt would agree to hold a referendum on unity without extensive preparations, which will take years. Brexit alone makes the case for careful advance deliberation and voters knowing exactly what they are voting for. “Burned” burns it in even further. And this well-informed post is a salutory warning.

    Why only three options? For me the obvious one was compromise and joint administration of NI as an equal part of both Ireland and the UK. It’s the zero-sum approach that has beggared the place, and will continue beggaring it as long as it lasts, and probably for a long time afterwards (East Germany provides a ready comparison for the difficulty of convergence).

    The Irish govt has managed many things an awful lot better than those responsible for NI, on both sides of the Irish sea. And yet, when reading the book the thing that struck me was was how relatively small the stakes were in comparison to the banking crisis — again on both sides of the Irish sea. That, however, was at least in some ways a complex affair, with govts having insufficient understanding of what was going in the private sector. This scandal involved govt officials in NI using English taxpayers’ money to heat empty barns for a profit. The book includes a photo of an outbuilding on the property of a civil servant which was heated with taxpayer subsidy for a non-residential property, and from which a pipe was run in order to heat the adjacent home. And this was found to be perfectly within the rules.

    Just imagine the conniptions in the rest of the UK if the so-called faceless bureaucrats in Brussels were found to have engaged in such carry-on.

    A BBC Panorama exposé based on this book should have happened by now. The BBC has been gutless in challenging corruption in the UK and this will, in retrospect, be seen as a contributory factor in the end of the union. It has been a tool of the state at worst and supine and in fear of it at best. If the UK had constitutional protection for the BBC I’d have some hope for the union’s ability to make course corrections and improvements to its abysmal governance arrangements. Alas, I don’t foresee change until after the ship hits the Brexit rocks and the Tories are forced to own their lies and are driven from office.

    So much on borrowed time: the monarchy, the union, the BBC, the Tories, the DUP, the House of Lords, the voting system and more (the billionaire-owned “free” press?). And then, of course, there’s the climate, the biggest fire of all.

    1. Sean Danaher -

      Samuel. So many good points here I hope Rogue One can reply. I am not convinced by the Tories commitment to the GFA. They can, I think, unilaterally call a border poll. The trigger is just that the NI secretary of state thinks a majority would vote for a United Ireland.

      Opinions polls are c 50:50 at present and If “Burned” is given headline treatment in the English right-wing press opinion could easily swing to “just to get rid of the damn place” – it costs more than EU membership with dubious benefits.

      The Emma De’ Souza case seems to show a total disregard for the GFA, and a case before the Court of Arbitration in The Hague may not be far off.

      Fortunately, the US Congress and the Irish American lobby should put enough pressure on UK Gov. There is I think a vote tonight reaffirming support for the GFA.

      I agree a form of Join Authority might be the way to go but politically it will be very difficult.

    2. Rogue One -

      Hi Samuel, sorry for the delay in responding due to work pressures this past week. You make very valid points in response including the fourth option re joint authority- though my view on that is it would be very complex and difficult to manage practically and politically.
      You also make a very good point about if the RHI scandal was “delivered” by the EU or UK Govt or would have a Panorama special. The fact that it doesn’t speaks volumes of how little people in GB and WM care for here. Put crudely, as long as there arent bombs going off in England there is little concern for here or how it is governed, even where massive sums of taxpayer money are wasted and corruption and incompetence in government rife.

  3. Peter May -

    I never realised Northern Ireland was so unutterably corrupt.
    They are certainly standing at a fork in the road now Johnson has sold them down the river whilst saying that he hasn’t. Local industry must be tearing its hair out.
    And yes, I’m rather uncomfortable with the frequent references to balancing the books in this article…
    Proper use of available resources would, I think be better!

    1. Sean Danaher -

      Peter, from the MMT viewpoint, of course, you are correct. What is horrific about NI is that much the deficit is not used for productive things like improving health, education or infrastructure but is just squandered. I suspect “cash for ash” is not the only fiddle going on.

    2. Rogue One -

      Hi Peter, thanks for your comments. I think a good question to ask ourselves is why is NI, despite the highest level of subsidy per capita anywhere in UK, the poorest performing. Some might say the troubles, but they ended more than a generation ago now. The real reason imo is misgovernment. While the souths government has driven some of the fastest growth of any european country (with no block grant), we with a £20bn grant each year have one of the poorest performing economies, inefficient public services and infrastructure. Our government has had 20yrs to grow the economy, reform public services, tackle paramilitaries, reduce grant dependency, foster social inclusion…but has failed to deliver anything tangible by way of such outcomes. We have a political class that have no track record of good government but a record of being reelected irrespective of performance. In a normal democracy, such a poorly performing govt would be relegated to an opposition – another key element of a democracy that we have not really had until very recently. Even then I would argue it failed to perform a robust job of an opposition.
      Governmentally and politically we live in what I call the land of no consequence (for the politicians and civil servants). The rest of us have to live with their incompetence and corruption unfortunately.

  4. Kevin O'Connell -

    I agree with pretty much all of the above but am disappointed to see Rogue One adhering to the ‘paste & cut’ (a.k.a. ‘tax & spend’) theory of money.

    Would be very odd if UK Gov were to call a border poll & Dail (? responsibility) refuse a referendum…

    1. Rogue One -

      Hi Kevin, sorry for the delay in replying due to work pressures. Im not sure what you mean by paste and cut or tax and spend. My general point is that grant dependency encourages misgovernment because there is no need to take difficult decisions based on affordability eg necessary but unpopular reforms to public services, water charges etc. We have the lowest household taxes in the UK. Some might say thats a good thing but it comes with consequences as does failure to reform health as we are seeing now. When someone else pays for our waste and inefficiency, wheres the imperative to address them?

      1. Kevin O'Connell -

        ‘paste & cut’ refers to ‘tax & spend’ in the sense that both are backwards. ‘Tax & spend’ is the idea that the Gov brings in taxes (puts them in an account) and then spends that money. What really happens is that Gov spends money and then taxes (for a variety of reasons). Very different from what happens within a household.

    2. Samuel Johnson -

      I think it’s unlikely that the UK govt will call a border poll unless a) it’s very clear that there is likely to be vote in favour of reunification and b) unless the Irish govt had agreed to hold a follow-up referendum in the event of a vote in favour.

      There’s no chance of the Irish govt refusing to do so. That said, it will want the terms of any new constitutional settlement to be approved in a referendum, indeed legally it must. So, two referendums is a possibility.

      At some point, what might suit govts on both sides of the Irish sea is a narrowly failed border poll. Another cannot be held for 7 years. If the direction of travel is clearly such that the next will likely succeed that will concentrate minds on preparing for what should then follow, either way. In the case of nationalists, the terms on which unionists are integrated and treated equally; and vice versa.

  5. Michael Green -

    I have a nightmare fear if there is a border poll. If there is a wafer thin unionist majority, the IRA will start up again. If there is a narrow majority for unification, the protestant paramilitaries will not accept it and will start their own guerilla war – “Ulster will fight and Ulster will be right”. I think Leo Varadkar has recognised this.

    1. Sean Danaher -

      it is indeed a worry. I hope we are some years away from a Border Poll, as far too little preparation has been done for a UI. IE is in no rush and it needs a min of 5 years to prepare, more likely 10. Once Brexit is clearer, much more bandwidth will be available and I do expect a lot of work.

      My worry is that NI might become politically toxic in GB, in particular, England may just want to be rid of the place and call a premature poll. At present, the opinion polls are around 50:50 – it is very uncertain what way things would go.

    2. Rogue One -

      Hi Michael, I agree there are risks around a BP but that is not a reason to curtail democracy. We should remember that over 70% of people backed the GFA and the principle of consent. It is unlikely in my view that there will ever be an overwhelmng majority in a BP either for a UI or Union. Its hard to see the rationale for an armed campaign by one side or another but that doesnt preclude it happening. At the end of the day it boils down to do we respect democracy or not. My view is we have to, whatever the outcome, and deal with any consequences of that. To silence democracy over the threat of violence from whatever quarter strikes me as a dangerous precedent to set and would store up even more problems.

  6. davy green -

    Very good article-much of it coincides with my own thinking
    One update is that 300,000 people now waiting for out patient appointments-that is 1 in 6 of population though many will have more than one medical addition
    The Belfast Agreement is in reality a dead duck and only kept alive because politicians in UK and R of Ireland can think of nothing else.
    If I was in Dept of Finance in Dublin I would be horrified at being landed with this mess.NI will stay part of UK for foreseeable future as no one has any better practical workable ideas-Meanwhile polarisation and decline will continue

    1. Rogue One -

      Hi, Davy thanks for your comments. Yes, I note the rapidly worsening situation with health. Sadly one of various failures of government over 20yrs. My career spans 25yrs now, started just before devolution and I’ve seen report after report on health reform- all basically saying the same thing. We have waited for government to act to no avail. Sadly when someone else pays for our wasteful services, including a health system in desperate need of reform, the incentive to take unpopular but necessary decisions (like centralising health services in hubs and closing peripheral hospitals) is not there.
      Id have to respectfully disagree re the GFA in relation to its principles like consent. However, where I think the GFA is a dead duck is in relation to the Govt structures within it. They simply dont provide for good government as the last 20yrs prove.
      Regarding Dublin, you make a good point. Why would any government want to “take on” us? We are a basket case politically, governmentally and economically. A key element of the planning for a UI imo needs to be reducing the cost of our public services. This can be done by doing what devolution should have done but hasnt: remove waste and duplication from health, education, local government etc and adopt economic stimulus measures like reducing Corp Tax. Interestingly, on Corp Tax, the main reason why this wasnt delivered was again based on a fear of reduced grant from WM (to compensate for the reduced tax take). Another perverse outcome of grant dependency. The souths govt just took a decision and did it, with no concern for grants that in their case don’t exist. My prediction if Stormont is restored is that there will be limited impact because none of the people involved in govt will have changed, nor have factors such as grant dependency or a “free money” culture in govt. we live in the land of no consequence (for politicians and civil servants). Sadly the consequences of that are borne by the rest of us.

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