BELFAST BRIEFING:Unless politicians can find a budget resolution soon, the North will be left high and dry, writes FRANCESS McDONNELL

JUST WHEN the Northern Ireland Executive thinks it cannot get any worse, there is fresh evidence today that yet more cash is disappearing from under its feet.

A new study undertaken by the Royal Institution of Chartered Surveyors (RICS) has found that house prices in the North have been falling for three years. According to the RICS, property values have dropped steadily every month since August 2007.

It is hardly rocket science when a mere glance around the nearest village or town will confirm that For Sale signs easily outnumber the Sold signs outside properties.

The reason why the latest study is particularly depressing for the Executive is that it effectively puts a dampener on one of its few alternative sources of raising much-needed money. Ambitious plans to raise capital from “asset sales” have been knocked on the head as a result of the downturn in the local property market.

Proposed asset sales should have played a key role in helping boost Northern Ireland coffers in the shape of capital receipts according to the Budget 2008-11 document.

But since the budget was drawn up, the property market has hit rock bottom and the Executive has fallen significantly short of its overall target of asset sales. In short, it has raised less money than it had planned.

Sammy Wilson, the North’s Minister for Finance and Personnel, yesterday warned that some asset sales might have to go ahead anyway regardless of the fact they might now realise a much lower price than had been previously hoped.

The latest property market study is just the latest blow for the Executive which is trying desperately to trim budgets, save face and underwrite the prosperity promises of the peace process.

The Executive’s Budget 2008-11 document set out plans to increase current expenditure by government departments to £9 billion (€10.8 billion) in 2010-11. Net capital investment was planned to increase to £1.4 billion. The next budget is unlikely to be so generous.

The finance for running Northern Ireland comes from four principal sources.

The lion’s share is handed over to political leaders from the British Treasury under UK Public Expenditure allocations.

Regional rates from domestic and commercial properties are also an important source of revenue but this too has been badly hit by the economic downturn. According to latest statistics, the Department of Finance and Personnel is currently chasing uncollected rates from local businesses worth an estimated £120 million.

One other potential source of funding is from the UK’s Reinvestment and Reform Initiative. Technically this is an opportunity to borrow money rather than raise it under a scheme operated by the Treasury where up to £200 million can be drawn down each year.

Finally, the Executive can also apply to the European Union for funding which is targeted towards specific projects but which is getting harder and harder to secure. Outside of this, Northern Ireland has few opportunities to raise the necessary funds to run the region.

In the past this might not have been so much of a problem because there was always the option of going back to the Treasury and asking for more cash. But those days are long gone.

The Liberal/Conservative coalition has heralded a new era of spending cuts, not handouts, and Northern Ireland is about to learn the hard way that standing on its own two feet can be very tough. Ministers are currently in the process of negotiating just how much less they are going to have to spend over the coming years.

A draft Budget 2010 document is being drawn up and is due to be made public after the UK’s 2010 spending review which will be unveiled by the Chancellor of the Exchequer on October 20th.

Sammy Wilson has made no secret of the fact that he is less than happy with some of his fellow ministerial colleagues who have displayed an “unwillingness to address the serious financial questions” that they are now up against. The challenge for the North’s political leaders, who have never before faced a funding crisis, is where they are going to cut budgets – with the exception of health and education – and still find the money to finance essential services.

The Executive’s track record of managing the public purse, even before the current economic downturn, is hardly confidence inspiring. Its decision to further defer the introduction of domestic water and sewerage charges has left the Executive with a £200 million headache.

A historical dispute over an equal pay claim for administrative staff in the Northern Ireland Civil Service is also likely to result in the Executive footing a bill of between £155 to £170 million.

Generous measures such as free prescriptions and a rates freeze might be universally welcomed but they still have to be paid for.

Add to the fact that under initial revised spending plans for 2010-11, the Executive faces an overall “public expenditure pressure of £367 million” and the magnitude of the financial black hole facing the North becomes obvious.

Even before public expenditure cuts are made the Northern Ireland budget is already in the red. The Executive has always maintained it does not want to raise money by placing a “substantial burden on households and local firms”.

But it is running out of time to find solutions to its problems. It needs money; there are no open cheque books; and unless political leaders can work together to reach a budget resolution, Northern Ireland is going to be left high and dry.