Written Ministerial Statement

Published on Friday 10 December 2021.

 

Mr Murphy (The Minister of Finance): I wish to update the Members on the Executive’s agreement to consult on draft Budget 2022-25 proposals.

I am informing the Assembly of this by written statement to provide Members with the earliest possible notification of the position agreed for consultation.

However, it remains my intention to make an oral statement to the House next week, at which point I will also provide a draft Budget 2022-25 document.

The publication of the Draft Budget document will mark the start of the formal consultation period which will run to 7 March 2022. While this will make the timescale for agreeing a Final Budget very tight, I feel that it is important to provide the full 12 weeks for consultation especially as the Executive is setting the first multi-year Budget since Budget 2011-15.

 

Funding Available

As Members will be aware the majority of the Executive’s funding is based on the Spending Review outcome which was announced on 27 October. I have provided a separate statement setting out the funding which was provided by the Spending Review.

While the Spending Review outcome was not as bad as feared it did not provide enough funding to meet the pressures the Executive is facing.

The Spending Review set out the following control totals which are at the Executive’s discretion to allocate.

 

Table 1: NI Spending Review General Funding

 

Spending Review Ring-fenced Funding

In addition, the Spending Review provided a number of ring-fenced funds which are set out in Table 2 below. These will be allocated to the relevant departments in the usual way with Farm and Fisheries funding going to DAERA and Security Funding going to DoJ. Tackling Paramilitary Funding will be held centrally for allocation in-year.

Table 2: Spending Review Ring-fenced Funding

                £million

 

Financial Packages Funding

There is also additional funding available from the Confidence and Supply and New Decade, New Approach (NDNA) financial Packages. The additional Resource DEL funding available from these financial is set out in the Table 3 below.

Table 3: Financial Packages Funding

£million	2022-23	2023-24	2024-25
NDNA Medical School	5.0	5.0	5.0
NDNA – Unique Circumstances Communities in Transition	4.1	3.3	-
NDNA Transformation	49.0	49.0	49.0
Total	58.1	57.3	54.0

The Communities in Transition forms part of the overall Tackling Paramilitary Activity programme and will be allocated in-year. Combined with the funding provided in the Spending Review this brings the total funding provided by Treasury for this Programme to £9.1 million, £8.3 million and £4.8 million. The Executive had previously agreed to provide up to £8 million per year match funding for this programme and this has been set aside as part of the Budget baseline and therefore is also held centrally for allocation in-year.

The NDNA also provided up to £15 million Resource DEL for a medical school, at Magee. The profile for the medical school is not necessarily aligned to the spend profile and discussions will take place with Treasury on ensuring the most appropriate profile going forward. However the draft Budget must reflect the profile as set out by the Secretary of State. There is also some £45 million of Capital ring-fenced from the Inclusive Future Fund for the Medical School. At the time of the NDNA agreement there were just below 4000 students at Magee. Ulster University has recently indicated that the University is actively making changes to increase numbers to 6000. The Executive remains committed to increasing student places to 10,000 as outlined in NDNA, including providing the necessary funding.

 

Regional Rates

Given the pressures being felt by businesses emerging from the COVID-19 pandemic and the cost of living crisis we currently face the Executive has agreed that both the domestic and non-domestic regional rate will be frozen over this Budget period.

A further £50 million has been set aside to provide rates support for businesses. Legislation is currently being enacted that removes the ability of businesses to appeal their NAV on the grounds of COVID-19. Over the last two years companies were compensated for the impact of COVID-19 through rates holidays and grants. Next year, in recognition that all sectors are set to lose their right to appeal, all businesses with the exception of larger food stores and utilities will receive a one month rates holiday. And as some sectors have been harder hit by the pandemic, retail, tourism, hospitality, leisure, childcare and airports will receive a total of three months of rates relief. In 2023 a revaluation, which will take into account the impact of COVID-19, will come into effect. This provides a much more comprehensive package of support to businesses than the appeal mechanism, which was not designed for a general pandemic.

The Executive has also agreed to consult on increasing the rates liability of vacant properties from 50% to 75%, and removing the domestic rates cap of £400,000.

 

Departmental Resource DEL Allocations

Members will be aware that the budgets for the Audit Office, Assembly Commission and the Public Services Ombudsman are set independently of the Executive and the funding identified by these bodies has been provided in the draft Budget.

 

Health

Turning to departmental allocations, even before the pandemic struck the returning Executive agreed that health would be its top priority. This commitment was confirmed as discussion began on agreeing this draft Budget.

Therefore the focus of this draft Budget has very much been on providing significant additional resources for transforming our health service and reducing waiting lists on a permanent basis.

With the funding provided by the Chancellor’s Spending Review falling short of what was needed to fund Executive’s priorities, funding our health service means a proposal for other departments  to contribute 2% of their opening baseline.

The Health Minister has already set out a number of strategies for improving health outcomes and it is proposed that his bids for the Elective Care, Cancer and Mental Health rebuild strategies are met in full, providing £120.9m / £182.4m / £255.3m over the budget period.

A general allocation of some £1.9 billion over the Budget period (above the baseline) has also been proposed for use at the Health Minister’s discretion to help address the significant funding pressures identified. It is proposed that some £523 million of this will be funded by contributions from other departments. It is envisaged that the Health Minister will provide more detail on how this funding will be used as part of the draft Budget consultation.

It is also proposed that the Transformation funding, provided under New Decade New Approach, of £147 million over the three years be allocated in full to Health.

While Barnett consequentials are unhypothecated and may therefore be spent at the Executive’s discretion it is worth highlighting that this proposed draft Budget settlement provides the Department for Heath with a budget allocation which is significantly in excess of the funding received from Barnett consequential on health related allocation in the Spending Review.

This year the opening budget for Health was £6,451.9m. Under this draft budget, next year it is £6,782.4m. Health will also receive the first £50m available in the 2022-23 monitoring round. In 2023/24 the budget is £6,947.4m and in 2024/25 it is £7,109.2m.

Of course, major challenges in health and social care remain and the Health Department could spent much more than this. But any further diversion of resources from Departments would be devastating for other public services. This draft Budget strikes a balance between prioritising Health and protecting other public services. That is an unenviable trade-off but that it the financial reality that must be faced up to and addressed.

This draft Budget delivers on the Executive’s commitment to prioritise Health. It is now time to deliver reform.

 

Other Priorities and Pressures

The Executive also has a responsibility to fund other vital public services and this draft Budget should allow departments to fund other priorities and pressures.

In setting departmental budgets for consultation, the underpinning assumption has been that departments will find the proposed 2% reduction required to provide additional funding to health from efficiencies in the existing budgets. The challenges of doing this cannot be under-estimated. However, it is a measure of the priority given to our health service.

 

Specific Allocations

A number of allocations for specific departmental and strategic issues have been proposed in this draft Budget.

These include the continuation of Welfare Reform mitigations and the Shared Future Programme as well as funding for Victims and Survivors of Historical Institutional Abuse and Victims Pensions.

We remain in dispute with the British Government of over funding for the latter. However, it is important that this does not impact on the Victims themselves and therefore funding is included in this draft Budget.

The Executive has also agreed a number of recommendations arising out of the work of the Truth Recovery Design Panel into the Mother and Baby Institutes, Magdalene Laundries and other workhouses. Funding to take these forward is also being provided to TEO as part of this draft Budget.

To assist in the management of the demand led costs of Victims Pensions, HIA and Mother and Baby Institutes it is proposed the Executive Office is provided with a single ring-fenced allocation which it can use for these purposes.

In addition, it is proposed that a number of additional allocations are provided to departments on a ring-fenced basis for specific purposes. These proposals are set out in Table 4 below.

Table 4: Specific Allocations

				£m
Dept	Description	2022-23	2023-34	2024-25
DfC	Translation Hub	0.3	0.3	0.3
	Supporting People	5.2	8.0	10.9
	Children’s Funeral Fund	0.8	0.8	0.9
	Special Rules on Terminal Illness	2.7	2.7	2.7
	Welfare Reform Mitigations	41.5	43.0	44.0
DfE	Previous Executive Commitments	3.7	3.0	3.0
DE	Addressing Food Poverty/School Holiday Food Grant	22.0	22.0	22.0
DfI	NI Water – Price Control 21	13.0	11.9	12.1
	Concessionary Fares	2.5	3.3	3.4
DOJ	PSNI Staffing	14.8	14.8	14.8
	Domestic & Sexual Abuse	1.6	4.2	4.9
TEO	Victims/HIA/Mother & Baby Homes	126.2	146.9	146.2
	Shared Future	12.0	12.0	12.0
Total		246.2	272.9	277.2

 

As well as these proposed ring-fenced allocations, under this draft Budget departments would also receive general allocations, which along with their baseline funding, may be spent at the discretion of Departmental Ministers.

The proposed outcome of the budget would see no department facing a reduction on its opening baseline position. Tables summarising this proposed Resource DEL outcome are attached at Annex A.

Given the range of pressures facing departments and the fact that these cannot be funded in full it will be for departmental Ministers to allocate budgets on the basis of their priorities.

 

Capital DEL

As members may recall departmental capital allocations are determined from a zero baseline.

Following the Spending Review outcome, and taking account of funding available for other sources, the conventional Capital DEL available for allocation in this draft Budget is set out in Table 5 below.

Given the need to maximise investment, the Executive has also agreed that borrowing be accessed to increase departmental capital allocations. However, we must also be conscious that funding needed to complete projects which have commenced should also be affordable. Therefore it is proposed not to access the full amount of borrowing available in the first two years. The draft budget capital outcome would access RRI borrowing of £140 million / £194 million / £200 million over the three years.

Table 5: Capital Available

            *To be held centrally pending discussion of profiling with NIO

 

City/Growth Deals

Initial profiles of City/Growth Deals expenditure show a funding requirement of £30.5 million / £100.9 million / £184.5 million over the budget period. These amounts have been allocated to the department with policy responsibility for the area to which the City/Growth Deals project relates. This funding is ring-fenced for City/Growth Deals and profiles will be kept under review as Deals progress.

 

City/Growth Deals Complementary Fund

The Executive agreed to establish a £100 million Capital DEL Complementary Fund alongside its agreement to match funding City/Growth Deals. This fund can be accessed by all City/Growth Deals with the exception of the Derry City and Strabane Deal which receives additional funding from the Inclusive Future Fund which the Executive also matches.

As Complementary Fund allocations must be funded from the Executives Capital DEL, bids were sought from eligible City/Growth Deals for the first tranche of funding from the Complementary Fund as part of this Budget process.

While the bids received significantly exceeded the level of funding intended to be allocated in the first tranche it is considered important to restrict the first tranche of funding to around £50 million in order to ensure that those Deals which are not as far progressed still have the opportunity to benefit from the fund.

The bids agreed as part of this Budget process are attached at Annex B.

Unfortunately, given the extent to which the bids received outweighed the funding available it is simply not possible to meet all the bids which have been supported by the relevant policy departments. This has meant that difficult decisions have had to be made. I appreciate that this may be disappointing for both the departments and the councils concerned. However, there will be an opportunity for City/Growth Deals will also be able to resubmit bids as part of the second tranche of funding.

All projects will be subject to the usual expenditure approval process and should any project fail to demonstrate value for money then the funding must be returned for reallocation.

 

Flagship Projects

A number of Flagship, Capital projects had been agreed by the previous Executive and departments are provided with ring-fenced funding which must be used for that specific project. The draft Budget allocations for Flagship projects are set out below.

Table 6: Flagships Funding

 

Green Growth

Given the importance of Green Growth and Sustainability and particularly the move towards net zero this draft Budget proposes allocations of some £304 million of capital for this purpose. While these would not be ring-fenced, departments can provide more detail on the green growth projects they intend totake forward as part of their draft Budget consultation.

 

General Capital Allocations

With the exception of ring-fenced funding, such as City/Growth Deals and Flagship projects, departments will be provided with proposed capital funding envelopes within which Minsters may fund their own priorities.

Details of the proposed capital outcome provided for each department under this draft Budget is set out at Annex C.

 

Financial Transactions Capital

Financial Transaction Capital (FTC) may only be used for loans to, or equity investment in, private sector bodies. The Spending Review provided £162.8 million / £66.4 million / £62.2 million over the Budget period.

It is proposed that funding is provided for housing as well as the NI Investment Fund which invests in the transformation of the region for the long-term, supporting economic growth and the low carbon economy. Table 7 below sets out the FTC allocations proposed as part of this draft Budget.

Table 7: FTC Allocations

 

Reconciliation to Treasury Funding

Amendments made to the NI Act 1998 following the Fresh Start Agreement, require me to set out how the Executive’s Budget reconciles to the funding provided by the Treasury. I provided a statement to the Assembly on 4 November 2021 setting out the funding notified by the Secretary of State. The tables at Annex D shows how the departmental allocations set out in the draft Budget reconcile to those amounts.

 

Conclusion

The move from single-year budgets to a three-year budget provides a more stable basis upon which public services can be planned, reformed, and improved.

Nevertheless the reality is that the funding available does not allow us to fund every pressure that departments face. Therefore we have to prioritise. As an Executive we have publicly committed to make health our top priority and this draft Budget sets out how that commitment could be honoured. Although no Department is facing a cash reduction in their baseline the prioritisation given to health and social care undoubtedly presents significant challenges for other departments.

It may take some time for Ministers to assess the implications for their departments of this draft Budget. However it is imperative that we are able to provide as much information as possible to the public during the consultation period and I have asked colleagues to publish more detailed information as soon as possible.

Equality Screening should be published by departments as soon as possible and, where applicable, Equality Impact Assessments should also be completed and published for consultation by the relevant departments.

I look forward to engaging with the Finance Committee and Assembly members along with other key stakeholders of the coming weeks.

INDEX OF TABLES

Annex A Proposed Resource DEL Outcome

Annex B Complementary Fund Allocations

Annex C Proposed Capital DEL Outcome

Annex D Reconciliation to Treasury Controls   

 

Draft Budget 2022-25: Resource DEL Outcome for Consultation

																			£million
		SR Ring-Fenced Funding			Financial Packages Funding			Specific Allocations			Reductions			General Allocations			TOTAL
	Baseline	22-23	23-24	24-25	22-23	23-24	24-25	22-23	23-24	24-25	22-23	23-24	24-25	22-23	23-24	24-25	2022-23	2023-24	2024-25
DAERA	224.2	315.9	330.3	332.5							-4.5	-4.5	-4.5	15.1	16.6	19.0	550.7	566.6	571.2
DfC	781.7							50.4	54.8	58.8	-15.6	-15.6	-15.6	22.6	17.6	15.5	839.1	838.5	840.4
DfE	817.8							3.7	3.0	3.0	-16.4	-16.4	-16.4	27.0	37.7	36.9	832.1	842.1	841.3
DE	2269.6							22.0	22.0	22.0	-45.4	-45.4	-45.4	185.0	225.0	257.0	2,431.2	2,471.2	2,503.2
DoF	168.5										-3.4	-3.4	-3.4	3.4	7.0	9.0	168.5	172.1	174.1
DoH	6069.8				49.0	49.0	49.0							663.6	828.6	990.4	6,782.4	69,47.4	7,109.2
DfI	420.7							15.5	15.2	15.5	-8.4	-8.4	-8.4	16.0	20.7	22.6	443.8	448.2	450.4
DoJ	1086.4	31.2	31.2	31.2				16.4	19.0	19.7	-21.7	-21.7	-21.7	5.3	13.8	6.4	1,117.6	1,128.7	1,122.0
TEO	60.7							138.2	158.9	158.2	-1.2	-1.2	-1.2	13.0	13.0	13.0	210.7	231.4	230.7
FSA	11.7										-0.2	-0.2	-0.2	0.2	0.2	0.2	11.7	11.7	11.7
NIA	45.8													1.8	1.8	2.6	47.6	47.6	48.4
NIAO	8.6													0.2	0.4	0.9	8.8	9.0	9.4
NIAUR	0.2										0.0	0.0	0.0	0.0	0.0	0.0	0.2	0.2	0.2
NIPSO	3.6													0.3	0.4	0.4	3.9	4.0	4.0
PPS	35.2										-0.7	-0.7	-0.7	0.7	0.7	0.7	35.2	35.2	35.2
Total	12004.5	347.2	361.6	363.7	49.0	49.0	49.0	246.2	272.9	277.2	-117.5	-117.5	-117.5	954.4	1183.4	1374.6	13,483.7	13,753.8	13,951.5

Totals may not add due to rounding

 

Percentage Changes against baseline

Resource DEL		Outcome for Consultation (£m)			% Change from Baseline
	Baseline	2022-23	2023-24	2024-25	2022-23	2023-24	2024-25
DAERA*	540.1	550.7	566.6	571.2	2.0%	4.9%	5.8%
DfC^^	823.2	839.1	838.5	840.4	1.9%	1.9%	2.1%
DfE	817.8	832.1	842.1	841.3	1.8%	3.0%	2.9%
DE	2,269.6	2,431.2	2,471.2	2,503.2	7.1%	8.9%	10.3%
DoF	168.5	168.5	172.1	174.1		2.2%	3.3%
DoH	6,069.8	6,782.4	6,947.4	7,109.2	11.7%	14.5%	17.1%
DfI	420.7	443.8	448.2	450.4	5.5%	6.5%	7.1%
DoJ**	1,117.6	1,117.6	1,128.7	1,122.0		1.0%	0.4%
TEO^	200.9	210.7	231.4	230.7	4.9%	15.2%	14.8%
FSA	11.7	11.7	11.7	11.7
NIA	45.8	47.6	47.6	48.4	3.9%	3.8%	5.6%
NIAO	8.6	8.8	9.0	9.4	2.6%	4.5%	10.0%
NIAUR	0.2	0.2	0.2	0.2
NIPSO	3.6	3.9	3.9	4.0	8.6%	9.9%	11.5%
PPS	35.2	35.2	35.2	35.2
Total	12,533.4	13,483.7	13,753.8	13,951.5	7.6%	9.7%	11.3%
* Farm Payments Added
** Security Funding Added
^ Victims / HIA / Shared Future Added
^^ Welfare Added

City/ Growth Deals - Complementary Fund – Allocations

Lead NICS Dept	City/Growth Deal	Project Title	Lead Organisation	Complementary Fund Allocation                        £m
DAERA	BRCD	Whitespots Country Park	Ards and North Down Borough Council	7.4
DfE	BRCD	Ballymena Integrated Green Hydrogen Hub / Hydrogen Technologies Accelerator Hub	Mid and East Antrim Borough Council  /  Belfast City Council, Mid and East Antrim Council, Antrim and Newtownabbey Borough Council	15.0
DfE	MSW	Industrial Investment Challenge Fund (IICF) Phase 1	Armagh City, Banbridge & Craigavon Borough Council	7.5
DfC	BRCD	15 Acre Albert Basin park Newry	Newry Mourne and Down District Council	16.3
DfE	All City & Growth Deals	Digital Transformation Fund	Belfast City Council	6.0
			TOTAL	52.1

 

Draft Budget 2022-25: Capital Outcome for Consultation

2022-23

 

2023-24

 

2024-25