Debate contribution: Budgetary Pressures

Debate contribution by Dr Caoimhe Archibald on 10 September 2024.

MLA

Dr Caoimhe Archibald

Party at the time

Sinn Féin

Date

10 September 2024

Type

Debate contribution (made as a minister)

Business

Private Members' Business

Heading

Budgetary Pressures

Assembly identifier

Official Report component 4517509

Read the official Assembly record

Text

Go raibh maith agat, a Phríomh-Leas-Cheann Comhairle.

I welcome the opportunity to provide an update to the Assembly on our budgetary outlook. It is no secret that the Executive are facing significant budgetary challenges. Since taking up office, I have been consistently clear about the scale of those challenges and also consistent in calling out the underfunding of our public services and the damage caused by 14 years of austerity under the Tories. I have made the case to the new British Government, as I did to the previous Government, that we need to see a change of approach that prioritises investment in public services and public-sector workers. The Executive are committed to speaking with one voice and will continue to make the case for additional funding for public services, but the reality is, with the Prime Minister and Chancellor at pains to warn of a painful Budget coming in October, there is little hope of additional funding being provided outside of Barnett consequentials, and the Barnett formula will not deliver the additional funding that we need. It is also clear that the previous Government's failure to raise budgets to take account of inflation has greatly contributed to the pressure on our public services. Members will be well familiar with Ministers speaking to the difficulties of their budgets. I commissioned an urgent exercise over the summer to get a clear picture of the current financial position, and, unfortunately, despite the efforts of many Ministers to manage their budgets, it is clear that it is extremely challenging. I have said many times that the demands on our finances far outstrip the funding available. Departments are currently reporting £767 million of pressures above their budget. The greatest pressures are in Health, Education and Justice, which together account for almost 90% of the total pressure. Some 55% of the total pressure comes from public-sector pay, based upon pay body recommendations. I have been clear with the Chief Secretary to the Treasury that our public-sector workers are critical to service delivery and that it is crucial that the Executive have sufficient funds available to enable them to meet the cost of public-sector pay awards. We know that there will be further Barnett consequentials this year because of allocations in England, but we will only get full certainty on our share towards the end of the year. I am not willing to delay until then and see services deteriorate further while we wait, so I will bring proposals to the Executive to increase departmental budgets by our latest assessment of what our Barnett share will be for the rest of the year. It is expected that that will allow the allocation of around £500 million. While that will fall short of the overcommitment that Departments are currently reporting, it will go a significant way towards addressing the pressures. However, all Ministers will have to play their part by living within their budget once the funding is provided.

I have a lot to get through. Not doing so would have grave consequences for future funding. Any overspend would come off next year's Budget. Even more concerningly, the Treasury has been explicit that not living within budget would result in the Executive having to repay the £559 million that the Treasury had agreed to write off, making an already difficult financial situation even worse. Along with my Executive colleagues, I will continue to make the case for adequate funding of our public services, but I remain hugely concerned that the ramifications of not living within budget this year would represent a potentially disastrous outcome for the Executive and our public services. At the Executive meeting last week, I outlined to my ministerial colleagues the need for urgent action to be taken. Collectively, we must ensure that a balanced Budget is delivered. I am meeting individual Ministers to discuss the budgetary challenges, and collectively, as an Executive, we will need to chart a way forward. I will continue to make the case to the British Government that more funding is needed for public services to support our workers, families and businesses and will raise that at a meeting with the Chancellor later this week. Difficult times require courageous leadership. Last week, the Executive agreed the draft Programme for Government (PFG), demonstrating our determination to deliver for people. The draft PFG sets out our immediate priorities and will guide where we invest our funding. One of its priorities is the reform and transformation of our public services. We are committed to delivering positive change and playing our part in making our finances sustainable. We will look at all options to deliver efficiencies, generate revenue, enhance borrowing powers and examine fiscal devolution. Financial sustainability will require collaborative working as well as innovation and efficiency in the delivery of services. I agree that, in the longer term, we must seek a funding arrangement that provides appropriate levels of funding and fiscal responsibility. I was pleased to sign an interim fiscal framework on behalf of the Executive in May this year, which was an early and significant milestone as we work towards putting our finances on a more sustainable footing. It is already making a difference, with an additional £60 million being provided so far this year, and it will result in further additional funding for the Executive this year and in the years to come. Importantly, it recognises that, until budgets are confirmed at the spending review, the Executive will continue to plan on the assumption that they will be funded at or above the 124% level of relative need in future financial years. It also includes a firm commitment from the British Government to review the Executive's funding, including concerns about the 2026-27 funding, as well as considering a review of our level of need if multiple independent and credible sources provide evidence that our relative need is different from 124%. I believe that spending on public services by the British Government is too low and that there are unique characteristics that may push our overall level of need above 124%. Members should also recognise the Fiscal Council's assertion that 124% is a reasonable estimate and that socio-economic data would not necessarily support an increase in the need calculation. However, I am focusing on ensuring that we have the evidence base in place to negotiate for a higher needs-based factor in future. My officials are working to build on the robust, independent evidence base that we already have for our level of relative need, thanks to the Fiscal Council. That work includes working with independent experts and other Departments. Further work is also being progressed by the new fiscal team established in my Department on how we can enhance our financial management tools, such as increasing our level of borrowing and taking greater control of fiscal levers through additional fiscal devolution.

I have a lot to get through, sorry. We will examine those options as part of the considerations for our final fiscal framework. That will be detailed work, and it will take time to deliver. Work is also ongoing on developing the Budget sustainability plan. As Treasury was unable to engage formally with us during the pre-election period and given the need to secure formal Executive agreement for the plan, I have agreed a short extension with the Chief Secretary to the Treasury. There is an inherent challenge in presenting a Budget sustainability plan with the current level of overcommitment that I have outlined, but we must strive to bridge the gap. I intend to publish the plan at the end of September, subject, of course, to securing Executive agreement in the next couple of weeks. I confirm to the leader of the Opposition that it is also my intention to align with the spending review announced by the British Government, one year in October and then in spring in the following two years. The publication of the sustainability plan is a stepping stone to the Executive's larger ambition of securing and maintaining sustainable Budgets. It is the first stage in a process that will set the Executive's finances on a more stable trajectory. The path to sustainable finances is not straightforward and will require decisions that will impact on the public services that the Executive deliver. With some six months of the current financial year already having passed, achieving fiscal balance in 2024-25 will prove challenging, but, as I have outlined, not delivering a balanced Budget is simply not an option. Finally, the motion calls on the British Government to depart from their austerity policy and implement different fiscal rules or different taxation systems. I absolutely agree with the wider call to change the approach to austerity and to implement more progressive taxation systems. The new British Government have choices to make about how they spend their money and how they raise their money and who will shoulder the burden. Those who can afford most should pay most. Investing in public services and supporting ordinary workers and families should be the priorities. My Department and I will continue to engage with the Treasury and the British Government on securing a final fiscal framework that provides certainty on finances in the longer term. In the interim, however, we must face up to the challenges, strive to live within our budgets and avoid a scenario in 2025-26 of having to pay back any overspend from this year along with a further £559 million from previous years. We must do that by taking the responsible decisions that are needed in order to achieve financial balance this year. I call on Members to support Ministers and to work in partnership with us to navigate the challenges ahead, recognising that we cannot do everything that we would want to do. It will not be easy, but it is the right thing to do to help us deliver change in the longer term.

1,649 words. Text as published by the Northern Ireland Assembly.

Assessment

Not flagged

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Assessed 21 October 2026 at 11:02 UTC by jev-1.13.0 (requested as typesafe/jev) under rubric 2026.10-r9, methodology 1.9.

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