FTI Consulting UK Public Affairs Snapshot: Another deal, another Stormont: The return of power-sharing in Northern Ireland

Two years on from the Democratic Unionist Party’s (DUP) decision to resign from the Northern Ireland Executive, Members of the Legislative Assembly (MLAs) have finally returned to work.

Although ultimately responsible for the collapse of power-sharing in February 2022, the DUP has been the arbitrator of its return after months of tense negotiations with the UK Government and increasing public exasperation on both sides of the divide.

The DUP’s acceptance of the Government’s “Safeguarding the Union” deal is certainly an attempt to show that the meaningful changes to the Northern Ireland Protocol required by the party – encapsulated within its “seven tests” – have been made.

This would help allay the concerns of hardliners within party ranks and reassure them that Northern Ireland’s place within the Union was secured both symbolically and practically.

Yet, privately, the deal also signifies DUP leader Sir Jeffrey Donaldson’s acceptance that the party had backed itself into a corner and something had to give, lest another Assembly election be called and Sinn Fein’s majority, alongside calls for a radical change to the region’s governance, be further emboldened.

The deal has indeed taken steps to smooth issues concerning customs arrangements under the Windsor Framework, such as a substantial reduction in the levels of checks required for goods heading to the Republic of Ireland.

But that is where tangible change all but ends, given that the DUP’s other tests, and the rest of the document’s provisions, primarily focus on Northern Ireland’s status as part of the UK.

That this is highly exposed to interpretation has been evidenced by the protestations of hardline loyalists even before the deal’s publication. For them, the acceptance of any deal is considered a climbdown.

However, the danger of further electoral demise and the potential for heightened rhetoric over Northern Ireland’s status altogether has seemingly cut through hardliners within the party’s 12-strong decision-making body.

Stalwarts like Ian Paisley Jr and Sammy Wilson have been careful to direct their continued concern at the UK Government’s efforts with the European Union rather than Donaldson’s leadership specifically.

Donaldson has therefore not only tactfully negotiated a deal outright but one that he has been able to – so far – sell to the core members of his party that hold sway over his leadership. However, selling the deal to the remaining hardline loyalist base and ensuring its application stays true to its commitments will be crucial for him going forward.

Meanwhile, the return of power-sharing marks a historic moment in the history of Northern Ireland’s politics, with the appointment of the first nationalist First Minister, Sinn Fein’s Michelle O’Neill.

Using the DUP’s boycott to market herself as a progressive First Minister-in-waiting who will cater for all, O’Neill has a real opportunity to prove her party’s evolution and fitness for government.

Doing so will warrant restraint from Sinn Fein in calling for a border poll on a united Ireland, something which O’Neill is discovering in real-time, having already said this week that she envisages one within a decade.

Irrespective of which party occupies the role of First Minister, the challenges facing the Executive are profound and will require power-sharing to mean what it says. With a health service at breaking point and public sector strikes over pay, the first priority of the new Executive will be funding, which all parties agree needs fundamental reform.

The £3.3 billion earmarked by the UK Government as part of the return of power-sharing will largely go toward addressing these issues. But critics argue that it falls significantly short of what is required.

Downing Street – which has expended great energy to restore power-sharing for almost no political gain – recognises this, hence its imposition of a condition on the Executive that it commits to additional revenue-raising measures.

O’Neill’s brand of standing up for workers and the holding of the Finance and Economy briefs by Sinn Fein Ministers mean that it is likely these measures will be directed towards businesses rather than households.

Businesses should also expect that the plans within the new deal to progress the devolution of corporation tax to Stormont may not reap the benefits of an immediate rate cut, seeing as doing so would allow HM Treasury to raid the region’s block grant for public services.

An ongoing consultation within the Department of Finance on removing Northern Ireland’s industrial derating scheme, which currently provides a 70% discount in rates for manufacturing space and is worth around £71.5 million to the 4,500 businesses that benefit, may also be firmly in Finance Minister Caoimhe Archibald’s plans to fill the black hole in the public finances.

While the return to power-sharing is, for the moment, being hailed across governments in London, Belfast, Dublin, and even Washington, the time for celebration will be short. The precariousness of governing in Northern Ireland remains, as always, dependent upon its sensitive politics.

All parties will need to navigate the optimism of the past week carefully, avoiding illusions of the challenges ahead and focusing on the critical need for good governance to tackle them.