Budget 2022-2025: Update from the Finance Minister

Following the recent collapse of the Northern Ireland Executive, Finance Minister, Conor Murphy joined NICVA members to provide an update on the future of the draft Budget 2022-2025 and possible funding implications.

Opening the event Finance Minister Conor Murphy highlighted the regrettable political position and the impact it is having on funding and the future of the proposed three-year budget, which cannot now be agreed due to the lack of an Executive. The opportunity for a multi annual budget would have given more certainty to the future of public sector services, particularly health, as well as the future services and activities of voluntary and community sector organisations. Minister Murphy recognised that a multi annual budget would allow organisations to plan and prioritise their services.

Acknowledging that Health related spend makes up a large amount of the draft Budget, the Finance Minister highlighted that a priority of the Executive is the transformation of the health sector and enabling the improvement of the health services that are available to the public. The transformation of the health service in the long term is necessary as the cost under the current structures is not viable.

Within the draft Budget 2022-25, the Department of Finance had proposed a 2% savings from other departments to go to the Department of Health. Recognising the pressure that this might put on some departments due to the ongoing struggles faced by the public sector as a result of recent austerity policies, Minister Murphy stated that it was a decision that needed to be taken in order to the make the necessary improvements within Health.

There is also funding that has been transferred to Northern Ireland from a UK Council tax rebate in the region of £300million, which could potentially be added into the budget for next year, along with approximately £50million to spend before the end of this year. This £300million could have been pre-allocated at this stage into areas of concern and challenges but this is no longer the case due to the recent collapse of the Executive, as a result these monies will now sit with no allocation until an Executive is in place. The Department of Finance have taken legal advice on this issue and it is currently advised that this money cannot be allocated. The Department of Finance will continue to examine mechanisms to explore the possibility to allocate in the event that the Executive remains suspended.

Budget 2022-25

Departments cannot use the draft budget as a basis for planning as it doesn’t represent an agreed Executive position. However, some areas of the draft budget have been agreed, for example rates holiday for some sectors for three months; the Back in Business Rates scheme; rates freeze (domestic and non-domestic) for one year, and therefore can be implemented.

Where to next?

The Northern Ireland (Ministers, Elections and Petitions of Concern) Act 2022 allows Department Ministers to remain in place in a ‘caretaking’ role and the Northern Ireland Assembly to continue without a functioning Executive for at least six months.

The Northern Ireland Act 1998 states the need for an Executive to agree a budget before it is brought to the Assembly. After seeking legal advice, the Department of Finance were advised that the Executive had to agree the budget in the first instance; therefore without an Executive in place, the draft Budget 2022-25 is not able to proceed at this stage.

Without an agreed Executive Budget, public services will continue. The Department of Finance anticipate that the Budget Bill covering the 21/22 financial year will be passed by the Assembly over the coming days. This Bill will contain a clause that will enable departments to use up to 45% of their 2021/22 cash limits and resources limits in the first months of the 2022/23 financial year. This will allow departments to legally spend money from April onwards, and keep public services operational until after the NI Assembly Election. Once an Executive is formed after the election, it can pass a budget that will allow for certainty and planning.

If an executive is not formed after the election, there is provision in The Northern Ireland (Ministers, Elections and Petitions of Concern) Act 2022 to enable Ministers to remain in place through a ‘care and maintenance’ period, as is usually seen during the pre-election period. No new decisions or policies can be made but it will ensure that funding continues beyond the first months, through the use of powers provided by Section 59 of The Northern Ireland Act and Section 7 of The Government Resources and Accounts Act. The Permanent Secretaries of each department will have the ability to raise the 45% of baseline funding usage up to 95%.  Legislation recently passed in Westminster ensures that Ministers will be in place even if there is no Executive after the election. This however is effectively a contingency measure to allow continuation of services but it does not allow for major changes or budget planning for future years.

There are some planning assumptions that departments can utilise for spending their funding in the first months of the next financial year. The baseline for each department was set within the draft Budget 2022-2025, and serves as a good starting point for departments to use as no department received a budget outcome of less that their baseline. The baseline is therefore a good planning platform. Ring-fenced funding for specific policy areas or projects can also be included in provisional planning for spend by departments.

Key issues such as the freeze to the regional rates or agreements made on the continuation of welfare reform mitigations are able to be used as planning assumptions to ensure there is no disruption to particular services.

Furthermore, the Department of Finance is currently looking at what provisions can be made in terms of allowing the Department of Health to make use of funding that has come from the National Insurance increases.

Department Ministers also have a particular degree of autonomy within their allocated funding to set their own budget and prioritise departmental spend. If specific policies or strategies have been agreed in the Assembly or at Executive level, this in turn gives the Minister the approval to allocate funding to that area. It will be up to each individual Minister and Department as to how much funding they allocate to a particular scheme, programme or policy objective.

With regards to capital funding, departments can plan on the basis that all contractual agreements will be met, and previously agreed projects, for example the Belfast Region City Deal, will be met. A capital budget will be allocated to each department to allow small capital projects to be carried out.

The planning assumptions, both resource and capital, will allow for key services to be maintained.

ESF Funding

Through the January Monitoring Round some money has been freed up to allow for funding to be allocated to groups that are at risk due to the loss of ESF funding. The Department for the Economy and the Department for Communities have both been offered this extra money. The Department for Communities have accepted the money, but the Department for the Economy is still to make a decision. Although the Department of Finance will continue to talk to the Department for the Economy with regards to this money, Minister Murphy has urged groups to also make contact with the Department for the Economy to highlight the need for the extra funding. The Department for the Economy will have the opportunity to find the money next year however accepting the funding now would provide for security and future planning for many groups.

Budget 2022-25 Consultation

Although the consultation on the draft Budget has been put on hold, the Minister encourages groups and organisations to continue to respond. The consultation will hopefully be revisited as soon as an Executive is up and running again. Although the consultation page is paused, you can submit your response by email to [email protected]


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