Analysis of NI Executive Draft Budget under consideration

Earlier this month, the Northern Ireland Executive ran out of money. Over-spending left it with a shortfall of £100 million (around 1% of the overall budget). To cover this, the UK Treasury allocated it a loan, on condition that the Executive agree its 2015/16 budget by the end of the month.

It is noteworthy, first of all, that the Executive does have some revenue-raising powers. It could:

  • raise the Regional Rate paid by households and/or businesses (a 19% rise, as implemented on one occasion under Direct Rule, would raise almost exactly the £100m shortfall) and/or remove the Regional Rate Cap (whereby rates are not assessed on property value above £400,000);
  • introduce separate Water Charges paid by households (depending on exemptions, this would eventually raise £150m-£250m annually, although it would likely be phased in so would raise less than half immediately); and/or
  • introduce other charges, such as for Prescriptions (raising £7m-£31m depending on the charge itself and exemptions) or motorway tolls (as in the Republic of Ireland, potentially raising £30m annually although there would be set-up costs).

The largest party, the DUP, is against all of these except Prescription Charges (the Finance Minister noted that, in any case, the full advantage to the public purse would not be felt immediately). The second largest party, Sinn Fein, is against Prescription Charges (and seemingly everything else except removing the Regional Rate cap). The outcome, therefore, is that revenue-raising options will be ignored.

That means that any shortfall in the 2015/16 budget – estimated at around £762 million plus repayment of the £100 million loan – has to be met purely through spending reductions. In practice, although Health and Education remain priorities, absolute protection of their budgets becomes impossible when looking at an effective 8-9% reduction across the board, not least as these are the biggest two Departments.

The Draft which will be put to the Executive is as follows:

Department

Draft Outcome (£ million)

Change

Share

Agriculture

187.3

-5.2%

1.9%

Culture

87.1

-12.8%

0.9%

Education

1849.3

-1.0%

18.5%

Employment

659.4

-12.8%

6.6%

Environment

101.7

-12.8%

1.0%

Enterprise

194.0

+5.3%

1.9%

Finance

139.0

-10.9%

1.4%

Health

4693.1

+3.3%

46.9%

Justice

1024.0

-6.0

10.2%

Regional Dev.

322.0

-4.0

3.2%

Social Dev.

589.1

-9.9

5.9%

OFMDFM

65.4

-0.6

0.7%

Assembly

42.5

Nil

0.4%

Sundries

38.5

-6.8%

0.4%

Some smaller parties have difficulties with this, particularly in the area of Education. There may be some minor changes there, but it is hard to see any significant difference emerging from the above, assuming any deal is done at all.

It is worth noting also that the above budgets refer only to expenditure falling under what is known as Departmental Expenditure Limits – in other words spending on public services. It does not include areas such as benefits and pensions, which fall under Annually Managed Expenditure (as strictly speaking they can be estimated but not precisely budgeted for).

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One thought on “Analysis of NI Executive Draft Budget under consideration

  1. […] The Finance Minister is currently presenting a revised NI Executive Budget to the NI Assembly, after consulting on the Draft Budget and the availability of some additional funds through Barnett Consequentials and non-use during the current financial year. This follows on from and is complementary to our analysis of the Draft Budget. […]

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