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Some certainty back? A bonanza in Belfast as parliamentary deadlock ends

June 27, 2017Article by Paul Avery

The power-sharing deal between the UK’s (just about) ruling Conservative Party and Northern Ireland’s Democratic Unionist Party is now official.

Creating a working majority of 13 MPs, this ‘confidence and supply’ arrangement enables Theresa May to steer fundamental measures on security, budgets and Brexit through parliament.

In that sense, it is good for the national interest: apart from keeping the government up and running at a crucial time, the deal will focus our Brexit negotiating stance on results that benefit all parts of the union (think an open border with the Republic of Ireland and continued membership of the customs union – both of which would benefit the economy overall).

But the deal is especially lavish for Northern Ireland itself. It has been promised an extra £1bn in funding over two years, as well as control over how a further £500m will be spent in the territory. Northern Ireland’s annual budget is around £11bn, so this is a sizeable appendage – equivalent to £530 for each person in the country.

Most of the new funding is earmarked for infrastructure improvements (about £400m), as well as healthcare and education spending. The exact allocation will be clarified as coalition building in Stormont (the devolved Northern Irish executive) progresses in the wake of the recent election. That process, which had floundered, is also expected to be lubricated by Mrs May’s cash injection.

The deal also secures more formal buy-in from Westminster for Northern Ireland’s planned corporation tax cut (to match the Republic of Ireland’s 12.5% rate, rather than Britain’s 19%), as well as adjustments to VAT and air passenger duties.

So, to sum up, Northern Ireland now has the chance to splash out on better roads and schools, establish the most competitive business environment in the UK, and entice tourists with cheaper flights (and pretty much everything else they could care to buy).

Infrastructure, business and tourism are exactly the kind of drivers that support long-lasting property market growth. Add that to a fundamental shortage of new homes at a time when commercial building is through the roof, and you have an undeniable case for investment.

What does a minority government mean?

If the concept of a minority government is still a bit murky: it is what happens when the party with the most votes does not have more than half of all votes (a majority). Often in that situation two parties will form a coalition government and share key posts between them (as happened 2010-2015), but if the winning party has no obvious partners it can either proceed as a minority and hope to gather votes wherever it can find them on a case-by-case basis, or it can seek a less formal alliance, as the Conservatives have just arranged with the DUP.

‘Confidence and supply’ deals, such as this one, mean that the junior partner agrees to vote with the main party on key issues, but may diverge on other matters. It is unusual for such a deal to result in headline-grabbing concessions as this one has but I think this is solid news and all helps being a bit more certainly in decisions being made and confidence reinforced.

We will be keeping an eye on the situation and will be reporting back so please watch this space for more up-to-date commentary and opinion.

Author

Paul Avery

Paul joined us in 2016 to lead our in-house research efforts, producing reports and guidance for clients as well as the strategic market analysis behind our new project launches. His background is in sustainability in the construction sector, and he is currently being trained in property valuation to further bulk up his investment creds.
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