26 June 2017

How strong and stable is this DUP deal?


Many Conservatives were a bit bemused as to why Theresa May was seeking a confidence-and-supply agreement with the DUP. After all, they’d usually voted with the Conservatives in the last Parliament anyway and would hardly have voted to bring down the government if it meant (as it does) Jeremy Corbyn becoming Prime Minister.

Why not simply run as a minority administration and dare the DUP to vote you down? There would of course have needed to be individual negotiations with the DUP on questions that would not bring the government down, but that would be necessary under any confidence-and-supply arrangement anyway.

Nonetheless, though a deal with the DUP wasn’t really required, the one that’s been announced today seems harmless enough. In fact, it seems sufficiently anodyne that one wonders what all those supposedly difficult discussions were about. Maybe one side or the other wanted something more that wasn’t eventually forthcoming? I guess we’ll have to wait for the memoirs to find out.

The deal’s pretty simple, really. The DUP undertakes to back the government on all confidence motions (including the Queen’s Speech) and all core finance measures (budgets or other money bills). The price of support on those money bills was the government undertaking to keep the “triple lock” on pensions and the winter fuel payment universal (though, given the election result, the Conservatives would have ditched these anyway); maintain defence spending at 2 per cent of GDP; guarantee that agricultural support would stay the same over the next Parliament (which was a Conservative manifesto pledge anyway); and provide £1 billion extra of funding to the Northern Ireland power-sharing Executive on top of £0.5 billion that had already been agreed previously, assuming that the Executive is restored.

The DUP also endorsed May’s Brexit plan and undertook to support the various Brexit bills coming forward. Interestingly, although it notionally lasts for the whole Parliament, the agreement is to be reviewed after each Parliamentary session. Since the current one will last two years, that means the first review will come immediately post-Brexit, assuming that still happens on time.

There is little, if anything, in there that most Conservatives would find difficult. Even the extra billion for Northern Ireland depends on the Northern Ireland assembly getting up and running, and so means the DUP have an extra incentive to reach an agreement with Sinn Fein.

Keeping the triple lock and universal winter fuel payments, along with the notable absence from the Queen’s Speech of any social care reform, means that the government is now unlikely to be able to meet its target of getting the deficit down to 1 per cent of GDP. If it stays at 2-3 per cent of GDP for the next few years, that’s pretty harmless in the short term. There will need to be more austerity post-Brexit, but there’s no real rush.

One interesting detail in confidence-and-supply agreement itself is a reference to “ the opportunities for growth that exist” in Northern Ireland’s agriculture sector. Agricultural support is still around 40 per cent of the EU budget and farming is a much bigger part of the Northern Ireland economy than the of the rest of the UK. An agriculture bill is one of the main Brexit bills announced in the Queen’s Speech. We will obviously be leaving the Common Agricultural Policy in any plausible Brexit scenario, but what will replace it in the UK?

We so far have had little to no indication from the government as to what it has in mind for a post-Brexit agriculture system. Michael Gove is now in charge of that department, meaning he can now be known as the “Minister for Keeping the DUP Happy”.

Agriculture will be one of the more interesting policy areas to be debated over the next few years. and there is obvious overlap with other key government objectives, not least its plan to build one million extra homes by 2020. Will they be on agricultural land? If so, will there be any attempt to tax the “planning gain” made as agricultural land re-designated for development sees its price rise by multiples in the tens or hundreds?

All those debates lie ahead. But, for now, we dwell in the land of all-too-obvious cliché. Did the DUP negotiations perhaps take longer than expected because May’s team decided no deal was better than a bad deal? And now that we have a deal, will the government over the next five years, or at least the next two until Brexit, prove to be, um, strong and stable?

Andrew Lilico is an economist and political writer