Debate contribution: Public Expenditure: Outcome of Chancellor's Statement

Debate contribution by Dr Caoimhe Archibald on 4 November 2024.

MLA

Dr Caoimhe Archibald

Party at the time

Sinn Féin

Date

4 November 2024

Type

Debate contribution (made as a minister)

Business

Ministerial Statement

Heading

Public Expenditure: Outcome of Chancellor's Statement

Assembly identifier

Official Report component 4625275

Read the official Assembly record

Text

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

Last Wednesday, the Chancellor presented the autumn Budget. I want to update Members today — the earliest opportunity after recess — on the implications of that Budget for our public finances. I have been clear that delivering quality public services and a strong economy that supports businesses are key priorities for me in order to improve the lives of workers, families and communities. The scale of current pressures is so severe that it will take time and significant further investment to turn the tide and undo the damage caused by underfunding of our public services after years of Tory austerity. The amount of money announced by the British Chancellor last week reflects the state of public services and the urgent need for investment — something that I have been pointing out since I took up post — but let us be real: the impact of 14 years of austerity is not going to be reversed by one Budget. I have been calling for greater investment in our infrastructure for some time. I therefore welcome the British Chancellor's announcement that the Government will change their self-imposed debt rules to free up capital funding. However, the proof of that announcement will be in its delivery. The change in fiscal rules is a first step. We must now see the Chancellor deliver the resources that the Executive need to invest properly in our public services in the long term. Next year's spending review will be the test of that. I also welcome the lifting of the pause on the Causeway Coast and Glens and Mid South West growth deals. The pause should not have happened in the first place, but I am glad that common sense has prevailed and the right decision has been made to enable the deals to go ahead: they will be key drivers for economic development and improving regional balance. Whilst there are things in the Chancellor's Budget that, on first review, are encouraging signs of a different approach to public services, there are also clear areas of concern, including the impact of increased employer National Insurance contributions, particularly on our small businesses; the change in treatment of our agriculture funding; changes to agricultural property relief; and the reduction in the Shared Prosperity Fund. I turn to the extra funding that we will receive for the rest of the current financial year. The autumn Budget will see the Executive receive an additional £609·3 million of resource departmental expenditure limit (DEL) and £30·4 million of capital DEL for 2024-25. That is on top of £308·9 million of additional Barnett consequentials, received from the spring Budget and Westminster Main Estimates, that I allocated in the June monitoring round, making a total of £918·2 million of additional resource DEL funding in 2024-25. That level of in-year funding is unprecedented outside of COVID. While that is welcome, it is, again, worth pointing out that the scale of the funding reflects the reality of how badly public services have been funded as the result of 14 years of austerity. As a result of the interim fiscal framework that I agreed in May of this year, the Executive have received £184 million more than they would otherwise have done in 2024-25. I will move quickly to propose allocations to the Executive to get that funding out to Departments as part of the October monitoring round. As Members are aware, Departments previously identified resource DEL pressures of £770 million, so the extra funding falls short of what is needed and is not sufficient to meet the trajectory of overspend that Departments have indicated for this year. That will inevitably mean that Departments have to take decisions in order to live within budget. The overcommitment figure does not include the cost of a number of exceptional items, such as the PSNI data breach, holiday pay and McCloud injury to feelings. It was anticipated that, if those costs were to crystallise in 2024-25, they might be funded by a reserve claim. However, given the level of in-year funding provided to the Executive in the autumn Budget, the Chief Secretary to the Treasury has indicated that, while further conversations are possible, the Treasury position in the first instance is that those items should be funded from the settlements that have been announced. It is my clear view, however, that these items are unaffordable, given the existing pressures facing Departments. I will therefore seek to negotiate a reserve claim. The Chancellor's statement on Wednesday also outlined the first year of a multi-year spending review that will conclude in spring. That sets the Executive's funding envelope for 2025-26. It is welcome that the Chancellor has recognised the recurrent nature of the pressures being faced in 2024-25 by baselining the additional £609 million of resource DEL consequentials provided in the autumn Budget. The same approach, however, has not been taken for the autumn Budget 2024-25 capital DEL consequentials. As a result of the interim fiscal framework, the Executive's capital borrowing limit for 2025-26 will be increased from £220 million to £225·7 million. The Executive will also receive an additional £601 million resource DEL and £270·8 million capital DEL as a result of the announcement. Again, as a result of the interim fiscal framework, the needs-based factor has also been applied in 2025-26, meaning that the funding provided is £248 million more than it otherwise would have been. That brings the total additional funding provided as a result of the interim fiscal framework to £431·4 million. That demonstrates the difference that the framework has already made by providing hundreds of millions of additional funding for public services here. While Barnett consequentials are not hypothecated and it is for the Executive to decide how those are used, I have included a breakdown of the Barnett consequentials for both years in an annex that accompanies the statement. In addition to the Barnett funding for 2025-26, including the restoration package, the Executive will receive £668·7 million resource DEL and £91·6 million capital DEL that is non-Barnett funding. The 2025-26 settlement equates to a real-terms uplift of 1·3% in resource DEL against the latest 2024-25 position. However, given the continued pay and inflationary pressures and growing demands on our services, it still represents a challenge for the Executive and highlights the need for the transformation of our public services. Previously, the Executive received a ring-fenced allocation for agriculture and fisheries support that was based on the level of EU funding in 2019. From 2025-26, that £332·5 million is included in the Executive's baseline. Therefore, it will now be for the Executive to agree on funding for agriculture as part of the Budget process. As well as the direct impact of last week's Budget on the Executive's finances, there were a number of other announcements that are worth highlighting. On Wednesday, the British Chancellor announced changes to the employer rate National Insurance contributions policy. While the Treasury has advised that it will provide support funding to the public sector for additional costs, we do not know yet whether that will be sufficient to offset the costs. I will provide a further update on that in due course. Of course, the bigger impact of the change will be felt by businesses. There is no doubt that the taxation increase will prove challenging for many small businesses, which are the bedrock of our local economy. Although the 1·2% increase in rate that was announced is lower than the 2% that some had speculated, that will be cold comfort to the businesses that have been impacted. While the increase in employer's allowance from £5,000 to £10,500 will help to protect the smallest of our businesses, I have no doubt that the increased cost of National Insurance will be difficult for many businesses to manage. While the British Chancellor has said that the Budget is about putting more money into people's pockets, the Office for Budget Responsibility's (OBR) analysis stated that it assumes that three quarters of the National Insurance cost increase will eventually be passed on to employees through lower real-terms wages. That will impact on individuals who are still impacted by the cost-of-living crisis. It is disappointing that the Chancellor did not move to abolish the two-child limit or to reinstate funding for the winter fuel payment, which will have a detrimental impact on the well-being and health of older people. That highlights again the impact of bad decisions taken at Westminster on people here, and, unfortunately, with the huge pressures already on our budgets, the Executive cannot mitigate every such bad decision. The Chancellor also announced changes to agricultural property relief. I understand the concerns raised by many farmers about the potential impact of those changes on the sustainability of the family farming business here. The importance of our farming sector was raised in the meeting with the First Minister and deputy First Minister, the Chancellor and me on 12 September. I will continue to make the case for all the small farmers and small businesses that are vital to our economy. The changes to agricultural property relief mean that, from April 2026, the first £1 million of combined business and agricultural assets will continue to attract no inheritance tax at all, but, for assets over £1 million, inheritance tax will apply at an effective rate of 20%. The Treasury has indicated that it expects only around 500 agricultural estates across Britain and the North to be affected by the change next year. It has also argued that small family farms are protected. Clearly, we need to see the proof of that. My officials have already been in contact with their Treasury counterparts to understand the impact locally.

The announcement that the Shared Prosperity Fund will continue for a transition year is welcome. That avoids a potential cliff edge in March 2025 and allows consideration of post-2026 arrangements. However, the total funding of £900 million for 2025-26 that was announced last week represents a 40% reduction in quantum from 2024-25. Our allocation for 2025-26 is not yet known, but Ministry of Housing, Communities and Local Government officials have advised that information will be available shortly to provide certainty for groups and projects that use the funding. I have already made it clear to the Chief Secretary to the Treasury that I do not believe that a reduction in the funding is acceptable and will continue to press hard for at least the same level of funding as before. I hope that the statement has provided Members with an overview of the implications of the autumn Budget. While the additional funding is to be welcomed, the reality is that public services are still stretched and the level of funding announced last Wednesday still does not plug the current gap. We will need to see continued investment over the coming years to help transform public services. As an Executive, we have committed to taking a more strategic, longer-term approach to the Budget process, with the Executive Budget sustainability plan published earlier this month. We are committed to transformation and reform to help our services become more sustainable and efficient going forward. The multi-year spending review in the spring will give us the ability to plan on a longer-term basis. My immediate focus is on allocating the funding for 2024-25 before quickly turning our attention to the 2025-26 Budget, which I intend to bring to the Executive in coming weeks. There is no doubt that there will be challenges ahead, but, working together, we will be better placed to meet them and to deliver for all our citizens.

1,933 words. Text as published by the Northern Ireland Assembly.

Assessment

Not flagged

Jev’s structured answers

Assessed 21 October 2026 at 11:27 UTC by jev-1.13.0 (requested as typesafe/jev) under rubric 2026.10-r9, methodology 1.9.

Disagree with this assessment?

Classifications can be challenged. A person reads every challenge, and any change is recorded publicly above with its reason.

Challenge this classification