Sector hears from the Department of Finance on the 2018-20 Budgetary Outlook

Julie Thompson began the briefing by stressing the Budgetary Outlook, published on 18 December, was not a draft budget, nor did it contain concrete proposals – rather it contained choices faced by the Department of Finance and a future Minister. She said the Budgetary Outlook was a briefing paper normally only presented to Ministers in the past, but with the non-existence of an Executive, it was decided to release the paper to the public domain.

Whilst the options in the paper have no official status and no significant budgetary decisions can be taken until Ministers are restored (whether devolved or direct rule) its publication has initiated a public debate on the issue. It was added that any budget would be in place by the end of February 2018.

Ms Thompson said that Northern Ireland’s block grant remained largely flat, but that cost pressures were increasing. While transformation (in health, education, housing and justice etc) remained a civil service priority, she said these would take time, and choices to balance the budget in the short-term needed to be made, through income generation and departmental spending reductions.

While not specifically endorsing any specific scenarios, Ms Thompson provided three illustrative scenarios:

1. Scenario 1 (‘do nothing’): This is similar to the approach of previous Executives. It would apply 4% reductions in 2018-19, and then 8% in 2019-20), to non-protected departments/areas and assumes an inflationary increase to Regional Rates (domestic and non-domestic). It provides no central fund for new actions and interventions in support of the Programme for Government.

2. Scenario 2:  Similar to scenario 1, but assumes new funding from additional income generation and reviews of existing policies which could be used to fund additional pressures. Possible options for income generation include:

• Increase in patient charging for dental services
• Increased car parking changes at HSC premises
• A charge on car parking for staff at civil service sites
• New controlled parking zones
• Increase rents on Housing Executive properties
• Review of public transport concessionary fares
• Higher education fees
• Prescription charges
• Broadening of the community care services

         Possible reviews of existing policies include:

• Non-emergency patient transport
• Educational Maintenance Allowances (EMAs)
• Teacher training
• Council Rates Support Grant
• Industrial de-rating
• Small Business Rate Relief

         Under Scenario 2 there would be a central fund for new actions and interventions in             support of the PfG of £40 million in 2018-19 and £50 million in 2019-20.

3. Scenario 3: This scenario relies more heavily on departmental reductions to allow available funding to be redirected to priorities such as health and schools. It provides a central fund for new actions and interventions in support of the Programme for Government of £30 million in 2018-19 and £40 million in 2019-20.

It was added that water charges had not been considered as a possible income generator because of the time it would take to implement their introduction would exceed the period of the Budgetary Outlook. Delivery of some proposals would require legislation and therefore either a functioning Assembly and Executive or the imposition of direct rule to make it happen.

Concerns raised by the sector included:

• The issue of income generation on people who are unable to afford it and that those who are well-off in Northern Ireland were particularly protected.

The Department replied that they presume Ministers would want to take those issues into account when deciding.

• Are Northern Ireland’s departments expensive to run, compared with Great Britain?

The Department said that per capita, Northern Ireland spends £10,000 while England spends £8,000 and that a high-spend coupled with low income (explained by our Chief Executive as “a right-wing income policy and a left-wing spend policy”) in Northern Ireland puts a stretch on resources.

• The potential for differential outcomes and a clarification on the Section 75 process.

It was explained by the Department that as any decision gets taken the quality impact would be looked at on its own merits and that the options in the Budgetary Outlook briefing were a series of figures to inform debate.

• The consideration of Brexit when drafting the paper.

The Department said that Brexit was a looming context in all of the options and it anticipated more money through the Barnett Formula for Brexit, as indicated by the Chancellor.

NICVA are grateful to the Department of Finance for coming to NICVA to engage with the sector on the briefing. The Department are continuing to accept feedback on the paper until Friday 26 January 2018 and details on how to respond can be obtained here.