Belfast Telegraph

Northern Ireland budget brings modest or even negligible increases


Budget: Secretary of State Karen Bradley
Budget: Secretary of State Karen Bradley
John Simpson

By John Simpson

Secretary of State Karen Bradley has tabled a large part of the budget for the public services in Northern Ireland for the year 2019-20.

The statement last week reviews the financial allocations to NI departments for recurrent spending but does not include the expected spending on social security, state-funded pensions and other UK-wide cash-determined services falling within the concept of Annually Managed Expenditure (AME).

Although the details cover the big areas where discretionary local decisions can be made, the £13bn is probably less than 70% of the broader impact of public sector spending. The budget as tabled is not a full statement of how revenue and expenditure compare or are matched.

The budget does not explicitly show, for example, the level of any expected borrowing by NI to contribute to the capital budget.

In a fully devolved administration a clearly articulated public sector accounting framework would be preferable.

For 2019-20, the Secretary of State has continued the shorter, arguably less adequate, presentation on departmental spending limits with no discussion of overall context and only limited links to questions of public policy.

Even though the budget presentation is managed with a minimalist approach to presenting the wider setting of evolving Government policies, there is also a welter of statistics on how the Department of Finance will monitor and supervise public sector spending.

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Two questions offer a test of the adequacy of the (so-called) NI budget. First, does the UK budgeting and devolution financing formula treat NI fairly and/or adequately? Second, within the devolved budget is there an optimal and rational allocation of resources? The first of these questions attracts the surprising answer that, yes, NI does seem to be fairly treated within the UK framework.

The budget for 2019-20 adds new elements to the financial base for the NI Budget. The current expenditure starts with the 'block grant' as determined by the Barnett formula. That brings £10.8bn to the Stormont finances for current spending and sits alongside £1.4bn earmarked for capital spending.

By UK standards, expressed as a per capita relationship, that £12.2bn gives NI a favourable margin compared to other parts of the UK. That relative statement takes no explicit account of NEEDS as opposed to SHARE which leaves some room for further debate.

For 2019-20 the NI outcome is more favourable than the customary Barnett formula. In addition to the Barnett allocation, there will be:

  • £125m allocated from the Fresh Start allocation made three years ago
  • £330m allocated from the DUP confidence and supply funding
  • £140m extra Treasury allowance for a backlog in reconfiguration of services
  • £130m unusually transferred from the capital budget to current services
  • £93m allowed to be carried forward from 2018-19.

In total, these special arrangements will add over £600m to the normal budget: an addition of almost 5%. These extra items would make the immediate task of any local Minister of Finance much easier.

That said, the overall departmental allocations leave most departments with modest or no real increases in spending. The below inflation adjustments to the budgets for Agriculture, Communities and the Economy will leave these departments looking for further spending reductions.

Given the arrival of the Brexit effects, these three departments are each vulnerable to special needs. The adverse impact of Brexit will mean special ad hoc spending may be necessary. Another uncomfortable conclusion must be that, within NI, there is a growing need to examine the merits of all forms of government spending (or failure to raise possible revenue) that are, by comparable UK standards, more generous here.

The health and education budgets, as well as the housing and university budgets, are contributing to a growing gap in service levels. Whether it is water charges, lower than comparable domestic rates, lower housing budget subsidies …. these and any similar parity plus examples now need to be tested and evaluated.

Belfast Telegraph