TONY BLAIR is facing a demand for a £1 billion “peace fund” for Northern Ireland as the price of a deal to revive the province’s power-sharing government, writes Liam Clarke.

The idea is backed by Ian Paisley’s Democratic Unionist Party (DUP) and Sinn Fein. The money would be spent on infrastructure and other public projects.

The British and Irish governments have given the two parties until Friday to reach agreement on power sharing but Paisley has said he could not recommend a deal without an answer on the money issue.

He argues the financing could come from savings on security spending if peace is secured. The fund is the brainchild of the DUP but the support of the republicans makes the demand hard for the government to ignore.

The two parties argue that many elements of the province’s infrastructure have fallen into disrepair during the last 30 years of violence.

The water and sewage system, for instance, has to be largely replaced. Unless it receives special funding this would result in water charges of £400 a household, far higher than elsewhere in the UK.

A government source pointed out, however, that any package would have to meet the approval of Gordon Brown, the chancellor. This would be in addition to backing from No 10 and the Northern Ireland Office, which are conducting negotiations. He added: “If that is a sticking point for a deal then it has to be considered.”

There are still major differences between Sinn Fein and the DUP on other issues that have held up an agreement and the parties have yet to hold a face-to-face meeting. Negotiations are being conducted in a form of shuttle diplomacy.

• The tribunal investigating the Bloody Sunday killings in 1972 will hear its final closing speech tomorrow. It started work in 1998. Findings are not expected before the summer.

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