The Northern Ireland Executive is back, the Assembly is functioning, the agreed agenda is ambitious, large and demanding. The financing for the Executive is now to be supervised by a new independent Fiscal Council.
The Agreement to restore the Executive budget contains two critical features. First, the Agreement lists four elements of an enhanced financial package to supplement the local budget. Second, the Agreement sets out measures to test the merits of providing extra funding and to ensure that these funds put Northern Ireland’s finances on a sustainable footing. The calls on extra funding are many and varied. However, the additions to the Northern Ireland public sector budget, understandably, are not an open ended commitment.
The United Kingdom Government, at the behest of the Treasury, has made funding subject to demanding conditions to be monitored by an independent Fiscal Council and further reviewed on a quarterly basis by a new UK government-NI Executive Joint Board.
The Fiscal Council will be established by July 2020 which should mean that it can have an input into Budget planning in mid-2020/21.
From a Northern Ireland perspective, the Treasury regards the inherited Stormont budget as being reasonably generous for the local Executive in comparison with other parts of the UK. Additionally, the Treasury is not satisfied that funds are being allocated to the strongest social and economic priorities as well as (despite the recent NHS salary problems) on occasion going beyond a reasonable interpretation of ‘parity’.
The Treasury, through the Fiscal Council, will have a method of challenging the devolved NI Budget.
The Fiscal Council will prepare an annual assessment of the Executive’s revenue... and spending proposals and how these allow the Executive to balance their budget, and prepare a further annual report on the sustainability of the Executive’s public finances, including the implications of spending policy and the effectiveness of long-term efficiency measures.
As a consequence the Executive is asked to commit to delivering a balanced budget ... and to take steps to put NI’s finances on a sustainable footing.
In recent years both when there was a functioning Executive and in the three years without an Executive, the Department of Finance has avoided the full publication of a NI Budget.
There have been, in a piecemeal fashion, statements of the delegated spending budgets for each of the NI departments. Even these DEL statements have been issued without adequate comparative information to show how the totals have changed over a period of years.
Missing from the (so-called) Budget statements have been summary details of the allocations for spending on Annually Managed expenditure (AME) where the spending is determined by direct cash obligations such as state pensions and the extra costs of the RHI scheme.
Also missing has been a presentation showing trends in the anticipated revenue, current and capital, allocated to NI as an outcome of the Barnett formula.
The inadequate reporting on the overall perspective of the NI Budget has been an unwelcome deficiency in public awareness. It has also served to frustrate informed debate about the nature of the NI Budget. Senior officials in the Treasury, who have access to the greater detail, recognise that Stormont has disguised the degree to which some expenditure has been well above what parity would require whilst at the same time NI pressure groups have asked for supplementary funding to meet other local needs.
The new Fiscal Council may be expected to comment on the merits of charging the household costs of NI Water directly to the Stormont budget, the large favourable differential for NI households in average domestic rates and differences in housing costs in public sector owned housing.
Reviews of funding for NI from the UK Government will take place on a quarterly basis.
The Executive will now be more seriously challenged on its proposed budget allocations. Stormont budgeting is now under challenge by the UK Government.