Northern Ireland Finances 2022-23

On Monday I introduced the Northern Ireland (Executive Formation etc) Bill, which allows six weeks, and potentially a further six weeks, for a Northern Ireland Executive to form. In line with the intent of that Bill, I firmly believe that the best way forward for Northern Ireland is for the political parties to come together and form an Executive.

However, in the absence of a Northern Ireland Executive and Northern Ireland Assembly, there has been no Executive budget set for the financial year 2022-23. Departments have therefore not had clear totals against which to manage their finances.

Not only did the former Executive fail to agree a budget, but the Ministers, who remained in their posts during the six months from May to October 2022, left Northern Ireland’s public finances with a black hole of some £660 million.

I am extremely disappointed that this situation has come to pass. It remains my belief that for Northern Ireland to be a great place for people to live and work, there must be a locally elected, stable and accountable devolved Government that continually prioritise the things that matter in everyday life for the majority of local people.

I believe that it is right to give the parties another opportunity to form an Executive, which the Bill I introduced on Monday will do.

In the meantime, I recognise that the people of Northern Ireland must be protected in future by bringing the public finances under control today. Difficult choices cannot be deferred any longer without continuing the lamentable trend of storing up ever deeper trouble. I am therefore setting a Northern Ireland budget for 2022-23 today. I will bring forward legislation for this budget in a Bill in due course.

It should be noted that the spending review 2021 set the largest annual block grant in real terms since the devolution Act in 1998. This provides around 21% more funding per head than equivalent UK Government spending in other parts of the UK. Yet, NI Ministers have failed to protect the public finances and secure the delivery of public services. This is a failure of their responsibility to the public, typically those most in need, which worsens the impact of the reductions that must now be delivered. If the necessary diligence over Northern Ireland’s public finances had been applied by NI Ministers during the last six months, these measures would not be needed now.

Action needs to be taken now to protect the current and future health of Northern Ireland’s public services.

The budget position I am setting out today recognises the challenges that face all of us in the UK over the cost of energy. Through the Energy Prices Act 2022, the UK Government are taking positive measures to ensure Northern Ireland citizens receive the support they need in the absence of an Executive. However, I do expect the Northern Ireland Departments, as some of the largest users of energy in the region, to be pragmatic in their approach to their energy bills by ensuring they are getting the best, most cost-effective deals possible. This will reduce pressures on the Northern Ireland budget and in turn help protect funding to serve the public.

This budget recognises the cost of living challenges that our frontline workers are facing by increasing public sector pay and ensuring the living wage threshold is met. I appreciate that these pay awards will not go as far as many workers would wish. Until there is the right level of income to Northern Ireland Departments, this position on public sector pay is the most that can be afforded within the budget available and without cutting into important frontline services. A future Executive need to get to grips with a sustainable approach to public sector pay alongside the work needed to transform public services. The Executive need to reform as this work should not be further delayed.

Northern Ireland Ministers have long failed to demonstrate prudent fiscal management. Almost 10 years on from the commitments made in the Stormont House and Fresh Start agreements to put Northern Ireland’s public finances on a sustainable footing, long-promised public service transformation and fiscal sustainability have not been delivered.

I set out below the resource and capital allocations that I consider to be an appropriate settlement for Northern Ireland Departments.

In deciding on these allocations, I have engaged intensively with the Northern Ireland civil service to understand the needs of Departments, the various views on budget priorities and the savings needed to balance the budget. I am grateful to them for their engagement. I have also met with Sir Robert Chote, the chair of the Northern Ireland Fiscal Council, and received a range of representations from public groups and individuals.

On the resource side, this budget position delivers:

For health, this budget provides £7.28 billion in funding; an increase of £228 million above 2021-22 spending, which included significant covid-19 funding, or £786 million if we compare with last year’s funding excluding the one-off covid-19 funding. This will protect spending to address the critical health pressures in Northern Ireland. It also ring-fences funding for abortion services, as ensuring the availability of services is a statutory duty on me as Secretary of State.

For education, this budget provides £2.6 billion in funding, which is an additional £286 million on top of last year’s spending—after excluding accounting for one-off covid support in 2021-22. This will protect spending for programmes such as free school meals, home to school transport, and the extended schools and Sure Start programmes, all of which support those who need it most. However, even this level of increase will require significant reductions in current spending trajectory levels to live within budgetary control totals. This will affect funding for high-spend areas such as the Education Authority’s block grant and the aggregated schools budget. As some costs are demand driven, this will have impacts. However, these are unavoidable given the scale of the overspend risk facing the Department. The required action to curtail expenditure must be taken by all education spending areas in order to live within budget.

This budget protects funding for the most vulnerable by protecting spending levels in the Department for Communities at current levels and ensuring that programmes such as the discretionary support grant can continue. It also increases resources for Northern Ireland’s critical infrastructure networks with a 4.4% increase in the Department for infrastructure resource spending—after excluding one-off covid support in 2021-22. This increase will sustain vital infrastructure support that is so important to the Northern Ireland Economy. We recognise that steps will also need to be taken to improve Translink’s sustainability through uprating Translink fares. This will help to reduce the budget pressure, whilst ensuring that the increase remains below the level of inflation.

Elsewhere, the level of protections and increased spending afforded to health and education, with lesser increases also afforded to infrastructure and justice, means some reductions in the Department for the Economy, while Departments including the Executive Office, the Department of Finance and the Department of Agriculture, Environment and Rural Affairs, remain broadly at similar levels as last year.

For capital, this budget provides continuing investment and enables key flagship projects to progress, including the York Street interchange and A5 and A6 road schemes. It also ensures sufficient funding to meet departmental capital commitments that can progress in the absence of an Executive.

As I set out in the opening to this statement, the need for action to put Northern Ireland’s public finances on a sustainable footing can no longer be put off. Steps need to be taken now to address the systemic issues that are facing public services and address the long-term sustainability of Northern Ireland’s finances.

Importantly, I remain firmly of the view that the right people to be taking such decisions for future budgets and public services are locally elected and accountable Ministers sitting in a fully functioning devolved Government.

I will continue to work towards the restoration of an Executive, but I recognise that consideration needs to be given to a sustainable and strategic budget outlook for 2023-24.

If the Executive have been restored in time for a budget for 2023-4, the UK Government will continue to work constructively with Executive Ministers, including on a sustainable budget that works for the people of Northern Ireland and supports economic growth.

However, in the absence of an Executive, the Government’s priorities for next year’s budget will be to deliver a fair outcome for all taxpayers and citizens in Northern Ireland. We will work to put Northern Ireland’s finances on a sustainable, long-term footing. That means we will need to consider wide-ranging options for revenue-raising and review all spending.

My Department will continue to work closely with Northern Ireland’s Department of Finance ahead of the next financial year to identify what steps could be taken. Among the options we will examine will be water charges and/or increasing income from regional rates, to ensure that citizens in Northern Ireland and all taxpayers are treated fairly and the 2023-24 budget is balanced from the outset of the year.

I must repeat that I am only bringing forward this budget legislation because the Northern Ireland parties have failed to display the necessary political leadership for which they were elected. I look forward to the Executive getting back to work and taking these decisions in the interests of the people of Northern Ireland.

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