J.M. Thorn

6th October 2005

When the British Government announced it was to postpone the introduction of water charges in the north some left groups hailed it as a sign that the government was on the back foot, and its neo-liberal agenda faltering. However, this optimistic assessment has been punctured by Secretary of State Peter Hain’s keynote speech setting out his vision for the future of Northern Ireland.  Delivered to a meeting of the Institute of Directors in Belfast on 21 September, and repeated at last week’s Labour Party conference, it set out a comprehensive programme for the neo-liberal reform of the north’s economy. Rather than being on the back foot over water charges, the British government appears to be positioning itself to deliver an even heavier blow. 

Economic shock therapy

While the media coverage of Hain’s speech focus on his reaction to the recent loyalist rioting, the bulk on his speech was economic reform. What he did say about the loyalists consisted of the usual offer of a bribe, dangling the promise of two hundred million pounds in front of them if they will change their behaviour. On past form the loyalists are most likely to pocket the money and carry on regardless with their sectarian attacks and gangsterism. The policy of throwing money at the loyalists was put into sharp contrast by Hain’s prescription for the rest of society. Rather than a bottomless pit of public funds to draw on, the northern economy would have to get by on a lot less in future.

The basic tenet of Hain’s speech was that the economy of Northern Ireland was over-dependent on the public sector. He cited the fact that public spending accounted for over 60 per cent of GDP, nearly a third higher than in the UK, and that a third of all employment was in the public sector, compared to the UK average of a fifth. Indeed, Hain was probably understating this point. When procurement, peace funds and the number of NGO’s and statutory bodies are taken into account, the role of the British state in the north’s economy is even greater. Whatever the level, Hain’s argument is that the north’s public sector is a massive drain on the taxpayer (i.e. the British treasury) and has to be cut. The British Government may have been prepared to put up with this in the past but now there is peace and it wants a financial dividend.

Following on from this premise, Hain sets out a number of strategies on how a massive reduction in public spending will be achieved. The first of these is privatisation, with parts of the public sector, and those who are employed in them, to be handed over to private companies. This is euphemistically described as giving the “private sector a greater role in the delivery of public services”. In reality is the destruction of public services, and is always associated with a deterioration in the terms and conditions of the workforce. This process is already ongoing in Northern Ireland with the expansion of Private Finance Initiatives, particularly in the health and education sectors. Hain’s speech envisages an acceleration of this with an “ambitious programme of asset sales” (i.e. privatization).

The second element of element of Hain’s programme, and probably the most far reaching, is the reorganisation of the Governmental structures of in the north, from health and education boards, to local councils. This is being carried out under the Review of Public Administration. It is due to put forward its proposals later in the year. These are likely to include the abolition of boards and councils and the centralisation of services over larger geographic areas. While this is proposed under the guise of the phoney populism of cutting bureaucracy and shifting resources to the frontline, it will actually result in the loss of services and massive public sector redundancies. We can see that  already happening with the cuts in the education budget. Schools are losing teachers, special needs assistants and crossing patrols, while parents now have to pay for what were once “concessionary” services such and transport and music lessons. In the health sector, rural hospitals are being stripped of acute services. The recent Appleby Report on the Northern Ireland health service envisages this process of rationalisation going further. It also proposes the introduction of regional pay for health workers. The Review of Public Administration will move this process a step further with the complete closure of many schools and hospitals.

The third element of the programme for reducing public spending is an increase in rates and the introduction of service charges. The aim is to raise the level that household bill for rates and water closer to the average in England and Wales, which is about £1,500 a year. The average rates bill in Northern Ireland is around £600 a year. Key to this is the introduction of the water charge, which will be around £400 a year. Hain signalled that, despite the opposition, the government was determined to introduce this in April 2007. He also repeated the lie that any surplus raised by the water charge can be used to fund other public services. The fact is that any money collected through the water charge will be private money; the newly created water company will own it. Indeed, the point of setting the water charge so high is to build up a capital surplus that will attract investors when the Government owned water company is eventually privatised.

Overall, this programme of cuts, privatisation and charges aims to deliver 2.5 per cent a year reductions across government departments – some £589 million a year by 2007/8. It represents a massive assault on the north’s working class, which is already one of the poorest in Western Europe. For Northern Ireland, such changes in a relatively short period, is the equivalent of economic shock therapy or a structural adjustment programme. It would be wrong to think that this was just rhetoric from the Government, and that such harsh policies will not be introduced. Many of them are already operating in the north albeit at a slower tempo. However, the government has signaled its intention to step this up. For example, in the same week as Hain’s speech it was announced that control of water treatment facilities had been handed over to a consortium of private companies. These included the notorious Tyco International, based in the tax haven of the Bahamas, whose former chief executive and finance chief have been jailed in the US on serious fraud charges. The Government also announced that it was to sell off almost all of its civil service buildings in and rent them back under a PFI deal. The Workplace 2010 scheme involves the private sector not only buying the buildings but also providing catering, security and cleaning services to the civil service. A law dating back to 1933 - the Stormont Estate Act - will have to be changed to allow the sale of key buildings. The threat posed by what Hain has set out has to taken seriously.

Opposition

The relatively muted response to Hain’s proposals by the local political parties shows that they have no intention to mount any serious opposition. Indeed, their own record shows that they have been complicit in introducing neo-liberal policies. In the short lived executive all the parties supported privatisation. Also, it was the executive that commissioned the review of the rates system and the Water Service, and set up the Review of Public Administration. If they were still in office it is likely that they would be pursuing similar policies to the ones set out by Hain. It has been suggested that the political parties may wish for the British to do their dirty work, and implement these policies, so they can avoid incurring any public hostility. The idea of a Northern Ireland Assembly and Executive being a bulwark against neo-liberalism is really an illusion. A good illustration of the infectiveness and duplicity of political parties was their reaction to the recent education cuts. This provoked an outraged response, but when it came to the vote on the education boards, most of the councilors who sit on them voted to accept the new budgets. This was justified on the basis that they could implement the cuts in a more sensitive manner! Sinn Fein and the SDLP did withdraw their representatives from the boards in protest but quietly returned after local council elections to administer the very same budgets that had provoked their resignations!

An effective opposition to this onslaught must be built at the grassroots level, among trade union members and in working class communities. It is only a mass campaign that will move politicians and the Government. It must also be a campaign that has opposition to privatisation as its foundation. What Hain’s speech makes clear is that this is a general offensive against the public sector, of which the introduction of water charges is but one part.  Therefore the response must also be generalised. This is why Socialist Democracy has continued to highlight the importance of privatisation in the anti-water charges campaign. It is the issue that ties all these various attacks together and the basis on which they should be opposed. The positive thing about Hain’s speech is that it clearly lays out the intentions of the Government. It should serve to shake people out of their complacency. Hain has thrown down the gauntlet; it is now the time for trade union and socialist activists to pick it up and meet the challenge.