As expected the DUP has agreed to support Theresa May’s minority government through a confidence and supply deal worth an estimated £1.5bn in extra funding to Northern Ireland. The deal will see £1 billion in new financial support over the next 2 years including new flexibility on a previous £500 million commitment. The key areas that the DUP had been negotiating on were capital spending on infrastructure, health and education, the granting of a lower corporation tax status for the region and the possible abolition of air passenger duty (see breakdown on cost allocations below).  The deal will not include additional funding for Scotland or Wales as Downing Street has said that the money will not be subject to the UK wide Barnett formula (see formula detail & Scottish & Welsh position below).  This approach from the Government will cause a political backlash from opposition parties.

The full text of the new deal can be found here which makes no reference to the additional financial support outlined by DUP leader in Downing Street. According to Arlene Foster the extra funding will be used to  ”boost the economy and invest in new infrastructure” with the agreement also ensuring that:

• The triple lock for pensions is retained

• The winter fuel payments for all pensioners is retained

• Defence spending is maintained at 2% of GDP

• The armed forces covenant is extended to Northern Ireland

The main points from this document include a breakdown of the spending as follows:

• £200m per year for two years to deliver York Street Interchange Project and other priorities

• £75m per year for two years to deliver broadband

• Corporation Tax to be looked at again with possible devolution coming in Autumn budget providing an Executive is in place

• City deals and Enterprise Zones across NI to be explored

• Health and Education - £50million per year for two years (to alleviate immediate pressures in these sectors)

• £100m per year for two years for health service transformation

• Any previous monies not spent can now be allocated 'flexibly' within this Spending Review period.

Regarding Air Passenger Duty (APD), a detailed consultative report will be commissioned into the impact of VAT and APD on tourism in Northern Ireland to recommend how to support growth.

A separate three–page financial annex to the deal sets out the exact details which can be found here.  The deal has left room for further negotiation within this Parliament allowing the DUP to potentially return for further negotiations in 2 years time.  In her approach to the media Ms Foster’s referenced the ‘precious’ union indicating the deal would be of benefit to the whole of the United Kingdom. The Prime Minister also highlighted ‘the value of the union’ suggesting this was a prevalent theme of negotiations. In a separate statement the Prime Minister praised the deal and also referenced the ongoing discussion to  restore devolved government in Northern Ireland stating that “Time is running short for the parties to come together and reach agreement to re–establish a power–sharing executive by 29 June.”

There has been some confusion over any pre–conditions supposedly laid down as to if and when Northern Ireland get this extra one billion funding. The only pre–condition is that the DUP supports a minority Conservative government and that is now the case. It does not hinge on what happens at the talks in Stormont rather the additional money for capital spending is an incentive to local politicians to seal their own deal and take full control of how that money is allocated across various devolved ministries like health and education. If they can’t reach a deal by deadline day on Thursday then it there are three options 1. More elections 2. Northern Ireland civil servants or potentially London based Tory ministers who will manage the additional spending on a direct rule basis.

Barnett formula  – Scottish & Welsh position

The Barnett formula is  not set out in law, and in practice the Treasury decides how to apply it. It can also be bypassed if the Treasury decides certain spending is outside the formula. If the devolved governments disagree they can argue the case. Scottish Secretary David Mundell last week said he was ‘not going to agree to anything that could be construed as back–door funding to Northern Ireland.’ The Labour Welsh first minister, has criticised the Tory/DUP deal very strongly. He said that it was “outrageous” and “unacceptable” and that “all but kills the idea of fair funding for the nations and regions”. 

Shane Finnegan