Official Report: Minutes of Evidence

The Chairperson (Mr O'Toole): I welcome Joanne McBurney, Budget director; Jeff McGuinness, head of Budget sustainability; and Maryann Smyth, head of central expenditure. As always, thank you all very much for coming. Happy new year to the team. I invite Joanne or Jeff to make an opening statement. There are two broad themes, so feel free to take it in turns. I do not think that we will sequence our questions today, folks, because, although we have a guest list, we do not have a huge cast list of MLA Committee participants. I will not break up our questions into two different themes. I will just mix and match as we go, but please make one or more opening statements.

Ms Joanne McBurney (Department of Finance): Thank you very much, Chair, for the opportunity to brief you. I have no issue with your not breaking up your questions. We will just field them between us.

I have a few opening remarks, and, as usual, I will try to keep them quite brief. As the Committee is aware, the Executive agreed the draft Budget for 2025-26 on 19 December. While the Executive received additional funding from the autumn Budget, there is no doubt that we still face an incredibly challenging financial situation. As is usual, the bids for both resource and capital far outweigh the funding available. In an effort to keep my opening remarks succinct, I will not go through all the allocations, but, in summary, the draft Budget provides £8·4 billion for Health and Social Care (HSC), which is 50·6% of the total departmental resource allocation. That is an increase of £642·5 million, or 8·3%, against the 2024-25 Budget, and that equates to £4,380 per head being spent on Health. The Budget provides £3·2 billion for Education for day-to-day spending, which is an increase of £344·6 million, or 12%, against the 2024-25 Budget, and that equates to £1,678 per head being spent on Education. It doubles the funding for the childcare strategy, providing £50 million for that; funds actions to make communities safer, including a particular focus on ending violence against women and girls; ring-fences £332·5 million of funding for agriculture, agrienvironment, fisheries and rural development; and focuses efforts on growing the economy by investing in skills. A total of £100 million capital funding is being provided to deliver safe, secure and affordable housing, while £105·7 million is being provided for NI Water to recognise the importance of our waste water infrastructure.

The draft Budget has, as far as possible, been viewed through the lens of the draft Programme for Government (PFG). That has been limited given the need to maintain existing services. However, there are earmarked allocations for childcare, skills, social housing, just transition and ending violence against women and girls. In other areas, while the funding has not been specifically earmarked, in order to provide flexibility in managing budget pressures, the allocations to Health, Education, Justice and Economy should contribute to the PFG priorities in those areas. Further work will be necessary to align PFG priorities with Budgets going forward, and that will be taken forward through the work on the Budget improvement plan. In parallel, ongoing work on Budget sustainability will focus on ensuring better transparency, developing long-term plans for Departments and putting in place the building blocks for fiscal sustainability. Departments will now consider how best to deliver their priorities within the funding envelopes that the draft Budget provides. A vital part of that is the consultation carried out by individual Departments in line with their equality schemes. The Department of Finance launched an overarching 12-week consultation on 19 December, and that, alongside departmental consultations, will be used to inform the final Budget.

I touched briefly on the work of the Budget sustainability team, and I understand that the Committee is keen to discuss the Budget sustainability plan annexes that relate to potential income generation. As the Committee will be aware, the interim fiscal framework included a commitment by the Executive to raise at least £113 million more income by 2025-26. Given the limited fiscal levers available to the Executive, that target is to be assessed over two years, effectively evaluating how much additional income is raised in 2025-26 compared with 2023-24. The Budget sustainability plan set out an initial forecast of £145·9 million against the target of £113 million. It is worth noting that the Finance Minister has always been clear in saying that income generation should be set as a component of effective delivery of public services rather than set to deal with a Treasury target. We have recently engaged with Departments on income generation measures, and, currently, there are only a few measures that are forecasting changes to the level of expected savings. Overall, the latest forecast income generation is set to be approximately £17 million above the £113 million target. The difference from the October sustainability plan publication is predominantly related to the latest rates assessments, which are now based on the draft Budget assumptions of 5% and 3% domestic and non-domestic rates. Jeff can provide more detail on that later in the session.

I am happy to take questions on either the Budget or the Budget sustainability work.

The Chairperson (Mr O'Toole): Thank you very much. Earlier in the meeting, we discussed the latest out-turn data. It appears that the position for 2024-25 is currently an overcommitment of just under £100 million. Are you confident that that will be resolved in January monitoring?

Ms McBurney: There are two things. We will have another forecast out-turn analysis with the Committee, hopefully this week, to inform next week's session. I do not have the figures in front of me, but that will see the £90 million reduce somewhat. From memory, I think that we are left with Health and Education showing pressures. The Executive should be considering the January monitoring round shortly. I do not think that there will be enough to address the pressures in full, so it will leave Departments with challenges. However, at this point, I am relatively confident that each Department should be able to manage to live within the budget that is set after the January monitoring round, albeit that might mean that difficult decisions have to be taken.

The Chairperson (Mr O'Toole): When you say that "difficult decisions" might have to be taken, does that mean re-profiling certain bits of spending into the next financial year, or does it mean massively scaling down services and laying people off?

Ms McBurney: I do not think that it will result in the latter. It will be for each Department to decide how best to manage it. For most Departments, unfortunately, it will come down to choices around pay and how far they can go in pay awards. Some people will face that. There may be slippage that allows them to push pressures into next year. However, we are relatively confident that we will come in within target. As I have said many times before, the consequences of not doing that are too severe not to, with £559 million becoming repayable and any overspend coming off next year. The Budget has shown that 2025-26 is already a challenging position for us.

The Chairperson (Mr O'Toole): If 2025-26 is a challenging position, do you have an estimate of your level of —? You do not know the pressures because we have not got into the new financial year yet, but do you have a sense of where the pressures will be in 2025-26?

Ms McBurney: Every Department would say that the draft Budget outcome has not given it everything that it would like. That is probably fair to say. At this stage, I do not think that we should go down the line of overcommitments with Departments, because the 2025-26 position is much better than the opening 2024-25 Budget. I do not think that we can expect the same level of Barnett consequentials to come in-year. We expect some but nowhere near the same amount that we got in 2024-25. By setting a Budget before the start of the financial year, each Department will have to take action to manage to live within its budget. There cannot be that same level of over-planning or overcommitment with the assumption that funding will come later. Action will have to be taken to live within the budgets provided.

The Chairperson (Mr O'Toole): Do you think that that happened in this financial year? Do you think that people thought, "Well, there is a new UK Government. They are going to be a bit less constrained in spending terms, so we can afford to be a bit looser and overcommit a bit more"?

Ms McBurney: The position at the start of 2024-25 was so difficult. There was probably a recognition that Whitehall Departments also faced pressures. There was an assumption, but not necessarily around a new Government or whatever. Departments here talk to their counterparts in Whitehall. They knew that everybody faced pressures and that there would likely be funding coming down the line.

The Chairperson (Mr O'Toole): There has been lots of coverage in the past couple of weeks about things like the spike in gilt yields and the cost of UK borrowing and what that will mean for Whitehall spending. There are reports of the Treasury telling other Departments that spending will be constrained further, perhaps, in the spring Budget. Have you had any specific communication about what that will mean for the block grant?

Ms McBurney: No. We have had no specific communication about what that would mean. Treasury will not share anything in advance of its spending review outcome. We read the news, and we raise those things with Treasury, and it would say the same, which is that the position is incredibly tight and will be constrained. I do not think that we can expect the same levels of increase in the next phase of the spending review as we received in this one. The position will not be —

The Chairperson (Mr O'Toole): It is fair to say that, notwithstanding that a couple of very unwelcome things happened around city deals, what happened last summer was that the Executive got more than they were expecting. We were in the unusual position of having slightly more than was expected.

Ms McBurney: The level of in-year funding last year was certainly unprecedented. I do not think that we can expect the same level of in-year increases going forward. The Chancellor's autumn Budget was effectively a reset of Whitehall Departments' budgets, and that is what has been factored into ours. We have other issues with the end of the financial package, and there are ongoing negotiations with the Treasury on what happens with that as we move forward, alongside the implementation of the interim fiscal framework, etc. I do not think that we can expect anywhere near the same level of in-year Barnett consequentials.

The Chairperson (Mr O'Toole): The public hear lots of talk about the pressures — and there clearly are pressures on the Executive Budget — but the public are also being told that this is, in one sense, an unprecedented in-year uplift for the Executive Budget. It is not necessarily a contradiction coming from you, but there is a contradiction in the overall messaging to the public.

That moves us on to the Budget sustainability plan and what is happening with that. Is part of the Budget sustainability plan about looking at getting to a position where Health does not take up — did you say it is 50·6%?

Ms McBurney: It is 50·6% at the moment. Jeff will talk about the good work that his team is doing on that. It is important to recognise, when we are talking about the in-year allocations in 2024-25, that our 2025-26 Budget is higher than our 2024-25 Budget. Therefore, although we are saying that we will not get the same level of in-year allocations, our starting point is a little bit higher. That is an important point to make. There is a lot of work to be done on the Budget sustainability plan, and Jeff will want to say something about that.

The Chairperson (Mr O'Toole): Just on that point, Joanne, it is true to say that the Executive has a bigger Budget than it expected to have. Leaving aside the restoration package, the baseline level of Executive funding is now higher than they anticipated back at the start of 2024.

Ms McBurney: It is, though I think that that is in recognition of the level of pressures that everywhere faces. If you look at the way they normally calculate baselines, you will see that, yes, it is higher, but there has to be a recognition of the pressures that we face. I will let Jeff talk about the Budget sustainability work.

Mr Jeff McGuinness (Department of Finance): There are two strands to our Budget sustainability work. The Budget improvement plan, for which we have provided you with a roadmap, has a number of key areas where we are developing and improving the Budget process itself and trying to understand where stakeholders are coming from and to develop the Budget in a way that helps to provide additional or better information for the public, stakeholders and anybody else who is engaged in the Budget process.

The second element will be our longer-term departmental plans. We are working with Departments on five-year departmental plans and trying to align Departments to get all the information that they have on their strategic direction, workforce planning, and efficiency and transformation agendas. We will compile all that information to produce a set of five-year departmental plans, which will effectively tell the bigger picture of each Department. We get a lot of sound bites from Departments around what is happening on their transformation programmes or specific pressures, but the five-year plans will try and corral all the issues within Departments so that we have a strategic picture of each Department for the next five years. We plan to commission that with Departments shortly. We are doing a pilot project in DOF on that, and we are engaging with Departments on the lessons that we have been learning. We will be looking for Departments to have those in place around September this year, which correlates with the spending review.

The Chairperson (Mr O'Toole): What will that document be called?

Mr McGuinness: Those are five-year departmental plans.

The Chairperson (Mr O'Toole): OK. Those are not five-year Budgets; they are a thematic, "What are you planning to do in budget terms in the next five years?".

Mr McGuinness: Yes. Essentially, it will ask Departments, "If you do nothing from now on, what will your costs look like over five years?". We will also put in a rough projection of what a Budget might look like for them. That will be at a high level — Northern Ireland percentage level — rather than specific budgets for Departments, but it will give an idea of the gap between the pressures that Departments face and what budget they may reasonably expect to get. It will then be for the Departments to start to think about how they close that gap.

The Chairperson (Mr O'Toole): The Budget sustainability plan has lots of interesting intent on how things might be managed differently or better and then an annex table that says, "This is how we get to £113 million"; maybe it is a bit more than that — I think you said £140-odd million.

Mr McGuinness: Yes.

The Chairperson (Mr O'Toole): That is slightly above the target. Am I to understand that the detailed tables in the sustainability plan, which is in appendix D —

Mr Frew: It is on page 270.

The Chairperson (Mr O'Toole): Yes, it is on page 270 of the meeting pack. Are those detailed tables now a policy? Will that all definitely happen?

Mr McGuinness: The 2024-25 position is all pretty much baked in. We have asked Departments for updates and they are still on track with those, with a couple of exceptions and marginal things at the edges. For 2025-26, they are either policy or current intent. Ministers have not yet made decisions, but we are confident that we will meet that particular £113 million target, regardless of whether a Minister decides on 4% or 3% in some of those areas.

The Chairperson (Mr O'Toole): For the purpose of people watching the meeting, in broad terms, appendix D is a list of revenue-raising options, which range from this year's regional rate increase to things like increasing regulatory charges: Ordnance Survey charges and Agri-Food and Biosciences Institute (AFBI) charges, presumably relating to animal health. Lots of those are simply operating with inflation. Was the Treasury official not wise enough to say to you that you cannot include in your £113 million calculations simply increasing by inflation costs things that would otherwise be uprated with inflation? Was it not daft of them not to have thought of that?

Mr McGuinness: Treasury's view was that we need to raise £113 million of additional revenue to what we raised in 2023-24, and that is exactly what we did.

The Chairperson (Mr O'Toole): It was not wise enough to say that it cannot just be inflationary increases in commercial charges.

Mr McGuinness: I am not going to make a view on the wisdom of Treasury on this one.

The Chairperson (Mr O'Toole): In any case, there are certain things here that, I think, are slightly bizarre. For example, one of the things that is scored as a revenue-raising decision is not proceeding with the Hospital Parking Charges Act 2022 to introduce free parking at hospitals. That is a bit surreal in that that is an extra £6 million of income versus a baseline that presumably factors in the implementation of that Act. I think that people find that a bit strange.

I have asked enough questions. I will bring in colleagues.

Ms Forsythe: Thank you, all, for coming back in 2025. It is great to see you. Thanks very much for the latest out-turn figures. The last time that you were here, you said that we should wait until we have the November figures to get the full picture. The format of them is, again, useful. We can see the £97 million of overcommitments, and we can also see set out the plans for how each Department aims to hit break-even. That gives a bit of reassurance that it is, at least, on people's minds that they need to take further steps. Those were November figures. Have you had sight of the December figures to see whether it is getting any better?

Ms McBurney: Those figures are just in. The team is working on those, and we hope to get them to you shortly. From memory, they are very slightly better. The only thing that I will add, maybe quite cynically, is that they will have been provided before the January monitoring round, so Departments will still want to highlight the fact that they have pressures because they will be bidding for funding in January. I suppose the really true one — sorry, I appear to keep telling you to look for the next one. After the January monitoring round, the figures will show the position for the year. It will come down slightly. While there are still challenging decisions for Departments, we are certainly in a better place than we were.

Ms Forsythe: Excellent. I remember that, last year, you said that, because of the terms of our financial package, you were not able to move unspent money between the previous financial year and this financial year. Will the financial package restrict that in the same way this March?

Ms McBurney: No, we have our normal carry forward. It is still at a restricted level — the Budget exchange scheme is based on a percentage of our final plan — but we are able to carry funding forward, so there will not be the same pressure to make sure that we keep those underspends as close to zero as possible.

Ms Forsythe: Thank you very much. On the Budget for 2025-26, a big thing coming down the line is the increase in employers' National Insurance contributions (NICs). I can see a line referring to the Departments and NICs, but we know that the impact will be so much wider once you take into account arm's-length bodies and the voluntary and community sector. Has there been an assessment of the Budget based on a potential reduction in public services and the entire cost of that for Department's, arm's-length bodies and the voluntary and community sector? Have we an idea of what that increased cost to our delivery of public services will look like?

Ms McBurney: We do not have an overall figure. We have engaged with Departments, and the Departments are saying that, for the central government bodies, it is around £200 million and possibly slightly more. That is just those Departments and their arm's-length bodies, which are treated as being central government. You will know that the Chancellor said that there will be support for those public-sector bodies. We do not yet have a figure for what the support will be. It is likely to cover Whitehall Departments and support provided to local government in GB. Our initial assessment is that it will not cover the £200 million, and, on top of that £200 million, councils estimate that they have just over £12 million of pressures. As you rightly say, you then have the impact on businesses and on the community and voluntary sector, which delivers a lot of services on our behalf. That has not been captured yet, and I think there is an ongoing body of work to do that. The difficulty for the Executive will be that we will not receive the funding from the Treasury to compensate for that, so it will result overall in a pressure for us to deal with.

Ms Forsythe: Have you an idea of when you will get an indication from Treasury on how much it will provide towards this?

Ms McBurney: I hope that we will get it before the start of the financial year, but — I will turn to Maryann — I do not think that we have been given a timeline for that. When we will get those numbers is one of the things that we ask about every time we talk to the Treasury. It should be in advance of the start of the financial year, I hope, or very early in the financial year.

Ms Forsythe: Thank you. The final one from me is about the table in the Budget sustainability plan that refers to the increase in rates creating an extra £43·2 million. Is that the value of the bills, or is an element of non-collection or write-offs of rates built in?

Ms McBurney: We do resource-based budgeting, and the regional rates figures are factored into our budget on an accruals basis, so it is bills. The £43 million is the additional income, but, within our overall rates figure, we have a provision for bad debt, which means debts that are written off or that we do not think that we will collect. Bad debt is not the same as outstanding debts, because we are still working to collect those, but that is how it is factored in.

Ms Forsythe: That is good to know. We know that the level of uncollected debt and write-offs for rates is high, and I would not want to see that hit the results in the sustainability plan, so it is good to hear that it is factored in. Do you have an estimate of the shortfall in rates collection or of rates write-offs for 2024-25?

Mr McGuinness: No.

Ms McBurney: Not in cash terms. We will look not at the cash but at the bad-debt provision and the overall bills at the end. We will factor something in in January monitoring — the overall figure may be down slightly on what we had in October monitoring — and we will get the actual figure when we do our provisional out-turn in May.

Ms Forsythe: Thank you very much.

Mr Carroll: Thanks for the presentation. Has there been a rethink in the Department about the Budget and the economic strategy more generally, given the deluge of attacks on the Chancellor, some of them very much warranted and others less so, about her economic strategy? For me and many other people, it is almost a carbon copy of what the Tories have done: cuts to public services and no investment in working-class people or communities. Considering that a lot of pressure has been put on the Chancellor, I wonder whether there has been a rethink. I am also curious as to how robustly officials and the Minister challenge the Chancellor in meetings. I do not know whether that always happens. We are told that a strong case is being put forward, which I do not doubt. I just want to know how robust the challenges are and how often they take place.

Ms McBurney: The first thing to realise is that our influence on the Treasury's economic policy is extremely limited; to say that is probably to exaggerate it. The Treasury will make its own decisions, but, that having been said, our Minister, on every occasion on which she has met Treasury and in every letter, urges it to allocate more funding not just to the Executive but to public services generally, because, if there are properly funded public services in England, the Executive benefit from that through the Whitehall Departments. She has been very robust on that, and, in every meeting and every letter, she continues to press for more funding for public services.

Mr Carroll: You are talking down your position by saying that your influence on Treasury is limited. I appreciate that only so much can be achieved in a meeting, but it needs to be challenged. The Treasury approach to economics is completely short-sighted in underfunding public services. As you said, Joanne, that is just as much the case in England as it is in the North of Ireland. There needs to be more robust challenge.

Just before the meeting started, we got correspondence from the Health Minister. I appreciate that you may not have seen that, but, as a general point, he makes the case about underfunding in Health. I am not here to bat for him, obviously, but there is concern about the health service and funding generally. He said in his written ministerial statement that the £200 million savings that he has been told to make for the second year in a row will put people at "considerable risk". That is very concerning. We have already seen emergency departments (EDs) run into the ground and people being overworked. The crisis comes every winter, but it seems to be increasing in severity.

What is the Department's view on that? He has also stated that, in 10 years, this is the lowest spend on Health in the North. This is part of the Budget process, and I have real issues. That is, in part, why I voted against the Budget. What is the Department's view on that point?

Ms McBurney: Nobody is underestimating the pressures facing the health service, but the other side of that equation is that the Executive have a finite pot of money available to allocate, and the funding that goes to one service means that there is less funding for another. I have not had a chance to look at the Health Minister's statement in any great detail. Excluding earmarked funding, the Department of Health's 2025-26 Budget outcome is £200 million higher than the October monitoring position. As I have said many times before, you do not necessarily compare an in-year position with an opening budget because there is still the potential for additional money in year. Although I have said that the Barnett funding that we expect to get next year will be lower, we will still get something, and I imagine that there will still be in-year allocations.

It is for the Health Minister to decide how that funding is allocated to his own priorities. When comparing 2025-26 with 2024-25, you also need to take account of the significant funding that went into the Department of Health prior to that. Since the Budget 2020-21, the Health baseline resource departmental expenditure limit (DEL) funding has increased by over £2·6 billion, or 45·7%. The equivalent figure for the total of the Departments is 38·8%, so we have put more funding into Health in that period. There is a limit to what we can do. I think that the Health Minister mentioned in his statement a £400 million funding gap. If we were to have provided that £400 million to Health, it would have left every other Department much lower than their October monitoring out-turn. Those are the challenges facing the Executive. If you prioritise one area, you deprioritise another. I do not think that any Department would say that it received the funding in the Budget that it needed to do everything that it wanted to do; it just comes down to trying to prioritise that funding as best we can.

Mr Carroll: That goes back to my original point about really challenging the Treasury approach to economics. I do not know the extent to which that is being challenged, but I take your point. I think that the Health figures are disputed by the Minister and others.

My final question is about the childcare strategy, for which £50 million has been allocated, which represents 12·5% of the needed £400 million. That is a supposed priority of the Executive, so many people will be saying, "If it's a priority, why's it not funded adequately?". Will you, Joanne, indicate — I think that you did so during a previous meeting — what work is being done to meet that £400 million figure for a proper strategy that everybody can avail themselves of?

Ms McBurney: I am not completely over the detail of the childcare strategy. The £50 million that we have set aside in Budget 2025-26 is double the amount that was in 2024-25. It is back to my original point: the Executive have a finite pot of funding. The strategy is funded through a formula, not through any negotiations with Treasury. The Executive have to decide what to prioritise with that finite pot of funding. In my view, they prioritised childcare by putting aside that £50 million. Is it as much as we would all want to do? No, but it is there, and it is prioritised. If we provide more money for that, the question is about where we take the money from.

Mr Carroll: I disagree that it is a priority, but thanks.

Miss Hargey: Thanks very much for the presentation. Joanne, I think that you said that, despite the additional money in the autumn Budget, we are still dealing with a challenging Budget. Obviously, National Insurance contributions is one part of that. What other challenges do you see coming in the next year?

My other question is about the five-year departmental plans, which are important. All Departments are, forever and a day, going to present with increased pressures, year on year. Whether you look at Justice, Health or Education, the complexity of work is increasing, which adds to the pressure on public services in dealing with those complexities. As part of Budget sustainability and the transformation bids that are coming forward, how are we assessing those plans against the outcomes that we want to see at the other end? It is not just about meeting the Programme for Government priorities; it is also about how we change outcomes so that we start to address some of the departmental pressures and complexities that we see right across our public services. Is there more detail that can be given? Plans from the process that you are working on now will be forthcoming later in the year — I think, Jeff said to align with the comprehensive spending review. Do you know at what part of the year that will come? Is there yet a date for the next phase of the transformation bids?

Ms McBurney: There is a lot there; I am not sure that I will cover all of it, but I will try my best. You are absolutely right: National Insurance is causing a pressure for us, and the uncertainty around it is not helpful. It is pressure over the wider sector, not just Departments. That is something that we have to deal with. As you said, all Departments are facing significant pressures, and everybody would say that they need more funding, and they do. There are inflationary pressures, and there are continuing pressures to make sure that our public-sector workers are appropriately rewarded with appropriate pay deals, and that adds financial pressures.

Jeff will want to say a bit about the work that is happening with departmental plans, but, yes, the aim of that process is to look at the longer term and see what more can be done to make our finances sustainable. A key part of that will be the transformation and looking to see how we can do things differently or how we can deliver better outcomes. It is not about just continuing to pour more money into doing the same thing. We need to look at how we can use our money more wisely and get better outcomes from it. I do not have a timescale for the transformation bids, but hopefully that will be coming forward shortly.

Treasury has indicated that it will make the next spending review announcement in mid-June. That will cover three years for resource DEL, which is up to 2028-29, and four years for capital, which is up to 2029-2030. We hope to tie our next Budget process in with that. The Finance Minister has been very clear that she wants to see multi-year Budgets. If we get the spending review outcome in June, we would commence work on drafting those multi-year Budgets over the summer, with a view to having them in place before the start of the 2026-27 financial year. The work on the five-year plans will feed into and inform the work that we will be doing in autumn of this year. Jeff might want to add something.

Miss Hargey: This is for Jeff. It is about how we better measure the progress of Departments in managing their budget and prioritising for better outcomes at the other end. Is that built into the departmental plan? How is that going to be measured over that five-year period?

Mr McGuinness: We will be looking at understanding. The first phase of the five-year departmental plan will be getting the bigger picture from each Department and understanding all the components that contribute to their costs, their direction of travel and some of the ways in which they will try to reduce those costs. That could be through transformation, and not just the transformation fund but general transformation: what ideas do the Departments have? That will be contained in the plans. We will be looking at efficiencies in those plans and trying to understand what a Department is trying to do to be more efficient, more effective and more productive in its areas.

On the other side of our forward work programme for the Budget improvement plan, we have commissioned an exercise to start to understand the alignment of the Programme for Government, albeit in draft form, with the 2025-26 Budget. We have asked Departments for information on how that aligns at spending area level, and we will be starting to look at that to understand where the Budget is feeding into the Executive's Programme for Government priorities. Between those twin-track approaches, we will, hopefully, be able to understand and assess where Departments are going and their direction; the amount of money that they are spending on the priorities that the Executive have put in place; and where their pinch points and pressures are and how they are planning to address, or at least reduce, them.

Miss Hargey: Thank you.

Mr Frew: Joanne, you touched on this with the Chair. We have ascertained that the baseline Budget that we are going to get for 2025-26 is far greater than the previous Budget. When you add all the in-year allocations, which were mighty, as you have outlined, how does that compare with the baseline Budget for 2025-26?

Ms McBurney: Treasury took a different approach this year, which was part of the reset. Usually, our baseline Budget would be set on the last spending review, and any Barnett consequentials that we get in the interim do not go into our baseline. In the autumn Budget, on the resource DEL side, it put the Barnett consequentials that we got for 2024-25 into our 2025-26 baseline. That is one of the reasons why it was a good spending review outcome, and then we got Barnett on top of that.

Maryann will correct me if I am wrong. I am assuming that what Treasury will use for the next phase of the spending review for 2026-27 will not include the Barnett that we got for 2025-26 but will basically be our 2024-25 outcome, so it will be interesting to see what that is. Certainly, the approach that Treasury took this year was a reset and was different from what it normally does.

Mr Frew: In comparison, then?

Ms McBurney: I think that the 2025-26 position is roughly £600 million higher than 2024-25.

Mr Frew: Right; OK.

Ms McBurney: That is if you do not include the farm and fisheries stuff.

Mr Frew: Of course, we are not expecting the big lift in year that we were expecting this time last year.

Ms McBurney: Definitely not.

Mr Frew: At the start of the Budget last year, we were always expecting a big lift in year.

Ms McBurney: Yes.

Mr Frew: Whilst Ministers were jumping up and down saying that they did not have enough, we always knew that they were going to get more. That is not the case this year. We are not expecting that big lift in year.

You said that Health is taking up 50·6% of the new Budget. What was it last year and the year before?

Ms McBurney: It was possibly slightly higher. I do not know whether I have the figures in front of me for that.

Mr Frew: You think that it was 51%.

Ms McBurney: Yes, I think that it was slightly higher, but in some ways that is representative of previous years. Other Departments would say that they were more underfunded in order to contribute funding to Health. If you look back to my other one about the Health baseline and the increase, you see that that was done at the expense of other Departments.

Mr Frew: Yes, sure.

I take you to the sustainability plan. Jeff, you have certainly weaved your magic. There are 20 measures with regard to increasing revenue. Take away those 20 measures and just centre in on the regional rate. Given the fact that the new rates in the Budget are 5% and 3% — am I right in saying that?

Ms McBurney: Yes. That is right.

Mr Frew: When you add that into the revenue-raising and sustainability plan that you need to publish to spend £113 million, where does that get you? With rates alone, where does that get you with regard to the £113 million?

Mr McGuinness: With rates alone, the 2024-25 position in the plan is about £43 million, and 2025-26 is about £47 million. When we factor in the changes that have happened in 2024-25 and 2025-26, the latest position, as of about four days ago, was approximately £40 million in 2024-25 and just over £37 million in 2025-26. So, 2025-26 has changed quite a bit. It is roughly just over a 1% change in the overall quantum of rates, but that is due to additional forecast updates, the latest position, uptake of reliefs and so on and so forth in the assessment for 2025-26. The key measure is changing the assumptions from 4% and 4% to 5% and 3% in domestic and non-domestic rates increases, and there is one change to the comparator. In the Budget sustainability plan, we looked at comparing it against a baseline. We reckoned that that was not the right thing to do. We need to compare it with the 2024-25 position, which continues to move. That is why there is slightly more change than we anticipated.

Mr Frew: My point is that, of the £113 million that we were meant to raise in revenue in order to relieve the debt, it was my impression that we were getting there simply through the rates rises. How far are we off?

Mr McGuinness: Roughly £77 million will be gathered through the rates alone. Another £57 million or so is other departmental increases.

Mr Frew: OK. The 20 measures laid out in the chart all seem to have been implemented in 2024. There are some incremental increases. Translink, for argument's sake, is in the 2025-26 year, but the majority of them have already been implemented. Have any impact assessments been done on any of those measures?

Mr McGuinness: It will be for individual Departments to have those carried out when they are assessing changes.

Mr Frew: Right. We will talk a bit about car parking charges. We have added that in as revenue raising, but it was always there anyway. It was going to be removed, but it was always there. Is that really additional revenue raising?

Mr McGuinness: Yes. The Department of Health has said that that is truly additional revenue raising compared with the 2023-24 position. It says that that £6 million, or whatever it is, is additional for 2024-25.

Mr Frew: Simply because it took it out of a budget line and then put it back in.

The Chairperson (Mr O'Toole): Yes, exactly. That is what I have been saying.

Mr Frew: You could do that for any of these figures. You could decide that you are not going to charge something one year and then add it the next year, when it becomes additional revenue.

Mr McGuinness: That is not quite the case. We would challenge Departments a bit if they did that. Obviously, there are unique circumstances around the hospital car parking charges.

Mr Frew: I am not necessarily blaming you or the Department of Finance for that. You could pose the question to the Department of Health. Is that not sleight of hand?

Mr McGuinness: No, I would not call it sleight of hand.

Ms McBurney: We need to view the target as what it is: an arbitrary target set in a financial package created for the restoration of the Executive. The more important thing is that the Executive raise the income that is appropriate in order to balance their Budget and make it sustainable. That is the bigger picture. Focusing on the £113 million target is a bit of a distraction in some ways, because we need to balance our Budget, and we need the income to allow us to fund the services that we want to fund. We cannot speak for the Treasury, but I think that its view would be that it is about making our finances sustainable, regardless of whether the target is £113 million, £115 million or £130 million. It is about sustainability.

Mr Frew: Arbitrary or not, it was a target set by the Treasury, which we had to meet.

The figure that scares me most is the one for current client contributions for nursing homes and residential care homes. That is an increase of £10·6 million, the burden of which is placed on vulnerable people.

Mr McGuinness: The Health Department would say that it has financial assessments of client contributions for nursing homes and residential homes that protect the most vulnerable.

Mr Frew: Somebody is paying for that £10·6 million, and it is somebody who resides in a nursing home or a care home.

Mr McGuinness: Yes. Those are client contributions from people who are in nursing or residential care.

Mr Frew: There is something really unfair about that sort of payment and about placing the burden on those vulnerable people.

One figure strikes me as intriguing. It is only £20,000 — sorry, £105,000 — for exporting energy back to the grid. That is down as additional revenue raising. Do we not do that anyway? We have been getting income from the sale of energy to the NI grid for years.

Mr McGuinness: That is additional. I suspect that it refers to, for example, the installation of solar panels, whereby, when excess energy is generated, it is paid back to the grid and creates an income stream.

Mr Frew: Is it a series of new roofs that have been installed with solar panels, or is it a change in practice whereby, instead of using energy, we have sold it back to the grid?

Mr McGuinness: I suspect that it might be a combination of both. Obviously, we need to sell excess energy to the grid, otherwise it is wasted.

The Chairperson (Mr O'Toole): The problem with the appendix to the Budget sustainability plan is that, when we returned — I am making some political remarks here — the media presented the view, which certain political parties were happy to go along with, that the Executive faced an unbelievably penal set of options. In many cases, the appendix lists things that were either happening anyway or do not involve any ministerial involvement let alone political decision. I presume that "Exporting energy back to the grid", which raises about £100,000 additional income, is a forecast that an excess of energy will be generated and therefore sold back to the grid. No Minister has responsibility for that, and there is nothing politically controversial about it. Other options in the appendix include an inflationary increase in court fees. Not only did that not involve a politically difficult ministerial decision, it happened before Ministers were even in office. The decision was taken by the Lady Chief Justice in October 2023 to raise £3 million by increasing court fees in line with inflation. I am not saying that that is a bad thing or a good thing. I am simply saying that the £113 million was presented that way, and not necessarily by you. When I started as Chair of the Finance Committee and leader of the Opposition, I was asked questions by journalists who said, "The £113 million is going to be so painful to raise". Really? That is £3 million in court fees that are paid by businesses that are litigating. There are questions about us being transparent with the public about what has and has not happened, but that is my statement.

I have a couple of additional points. The Department of Health is getting an uplift in the 2025-26 Budget. Its budget is an increase on its position post monitoring round and post Barnett and on its 2024-25 opening position, which is different from what happened in the previous year about which there was a lot of controversy. Today's written ministerial statement from the Health Minister — I know that you have not had a chance to look at it yet — said that the Department will be £400 million short for delivering vital services, which is extremely concerning. Given the scale of what the Health Department eats up out of the Budget, the state of the health service and the work on Budget sustainability, most people will think that the priority for the Budget sustainability work and the public sector transformation board (PSTB) would be to make the health budget more sustainable and services more reliable. Why has Health not been given more priority in transformation? Previously, I asked why the PSTB did not simply give all of the £200 million to the Department of Health to start to deliver transformation. There is a question.

Ms McBurney: We are not responsible for the public-sector transformation board.

The Chairperson (Mr O'Toole): Yes. I get that.

Ms McBurney: I am not over the detail of the transformation bid, and it is for the board to answer that question. The Health Minister has an £8·4 billion budget; of that, only £6·8 million is ring-fenced. It is for the Health Minister to prioritise that within that. There is evidence of additional money going into health and the spend increasing, but there is limited evidence of the outcomes improving.

I do not want to get into an argument about Health. All Departments are facing challenges, but the point is quite simply this: if the money goes to Health, it does not go somewhere else. As we see, all Departments launch equality impact assessments, and the vast majority of them will say, "We have issues. We have pressures". That begs this question: if we give more to Health, where do we take it from?

Health transformation is absolutely a priority, and it will be a priority when we look at the Budget sustainability plans and long-term plans, but that has to be driven by the Department of Health, because it has the knowledge of the health system. With the best will in the world, we can challenge and ask questions, and we will do that, but we do not have the in-depth knowledge of what is happening in the health service and the trusts. The Health Minister has the £8·4 billion budget to allocate as he sees fit to the health and social care sector.

The Chairperson (Mr O'Toole): In the past few weeks, a lot of people will be thinking, "How the hell do we sort out the health service?". There are structural challenges with an ageing population and new advances in medical science. We know that a lot of it is mismanagement, and some of it relates to cost pressures. The fundamental question for the Executive and the Department of Finance is this: is it a strategic priority to basically say to the Health Department, "Tell us what you need and where you want to spend money in order to get waiting lists down, deal with the crisis in EDs and recruit the staff you need"? Is there a five-year plan? That might involve the Health Department telling the Executive what it needs, but the trade-off is that it will be asked where waiting lists, the health service and the overall budget requirement will be in five years' time. The public want to know whether there will be a clear trade-off between additional resource and an improved health service. If additional resource involves revenue raising, can the public be assured that, if they pay more, there will be an improved health service? Is that part of the Budget sustainability work?

Mr McGuinness: Absolutely. That is a fundamental part of our five-year plans for Departments. We are asking Departments these questions: what is your strategic direction? What costs and cost demands do you face? What demographic change might change those costs? What will your workforce look like in five years' time?

How will you look at income generation and transformation? What are you trying to do with those? Are there any historical trends that show you the trajectory of your spend that will then help to inform those? We are asking all Departments those questions. You are right: if we can solve a Health problem, it would much better that we do so in the shorter term. The Department of Health specifically is looking at engagement. It is engaging with trusts to look at the longer-term picture for them. At the end of that process, we will say, "The pressures that you face are either a flat line or a big increase, and the budget that you will get will not be as high. What will you do to make those two lines meet?". That will be part of that departmental plan.

The Chairperson (Mr O'Toole): If Health is preparing a five-year plan for you, it, and you, should be ready and in position to deliver a multi-year budget in the next year for it, particularly if there is a multi-year spending round coming from London.

Mr McGuinness: Effectively, those five-year plans —.

The Chairperson (Mr O'Toole): Presumably, that will be alongside targets on waiting list reduction. I know that it is not for you to say what those reductions should be, but I think that the public wants to see that joined-up thinking between your Department, Health and the whole Executive.

Mr McGuinness: Effectively, our five-year plans will come in in the autumn and will dovetail with what the Department is trying to do with its budget. The Budget process will then be fed by those five-year departmental plans. A Department can therefore say in the Budget process that it is bidding for only the next three years of resource or whatever but that it can show its five-year plan and the things that it needs and the pressures and issues that it faces. Everybody will then have an idea of what that Department looks like, all the components that add to its pressures and some potential solutions too.

The Chairperson (Mr O'Toole): OK. I will bring in Steve Aiken now.

I should have said — I am doing this very late — that I presume that no one has any objections to Hansard recording the evidence? [Laughter.]

I should have done that right at the beginning.

Dr Aiken: Thanks, everybody. I am sorry for joining a bit late. I was attending a press conference about an election that I observed last year. I had to listen in. I thought for a bit there that we were asking questions about Health rather than Finance.

Thank you very much, team, for what you have said. Of course, I would like you to address the pressures that Health has been under. Everybody has understood those. A year and a bit ago, when we were all sitting in various rooms in either the Department of Finance building or Hillsborough Castle or, at least, in the grounds around Hillsborough, it was readily understood that the priority would have to be Health. All parties signed up to that, and all parties realised that there would also be significant costs towards it.

What is the balance of the plans around future spending, particularly the comprehensive spending review? There now seems to be a mismatch in how resources are being allocated to Northern Ireland Departments against those in the UK as a whole. We hear many people saying that we are spending over 50% on Health in Northern Ireland, but that is the state in many other places around the world, and the GDP in some places is spent on health. Bearing in mind that Health has considerable challenges, which everybody recognises, what flexibility in the system are other Departments showing to recognise those issues? Bearing in mind that everybody said that it would be the number-one priority, what priority are we giving it?

Ms McBurney: Everybody recognises the pressures that face the health service. It also has to be recognised that pressures face all Departments. For example, I imagine that, when the Department of Education does its equality impact assessment, it will say something similar about the pressures that it faces. The health service has been prioritised. I mentioned a figure to Gerry Carroll. In 2021, the previous Executive came in and said that they would prioritise Health, and that is what happened. Its baseline funding has increased by over £2·6 billion or 45·7% since the 2021 baseline. I am referring to baseline funding and not in-year funding because that is the important bit; it is the ongoing level of funding. That is the amount that we will give Health year-on-year. It has gone up by £2·6 billion.

The Chairperson (Mr O'Toole): Is that in cash?

Ms McBurney: That is in cash terms. It is not in real terms.

The Chairperson (Mr O'Toole): Are you fairly confident that that would still be a real-terms increase if you account —?

Ms McBurney: Those are the numbers, but I imagine that it would be at that level.

Mr McGuinness: Thirty-seven per cent.

Ms McBurney: There you go.

The Chairperson (Mr O'Toole): Fine. Sorry, go ahead.

Ms McBurney: I would say that it has been prioritised. That is not taking away from the pressures that face Health. Let us at look this year's Budget and the Budget for 2025-26. I do not disagree with what the Health Minister said about the increase compared with his October monitoring position. The figure is around £200 million, which is about a 2·5% increase. However, the Minister talked about a funding gap of £400 million, and we need to put into context what that would mean for other Departments. After meeting their earmarked commitments, which were things such as welfare mitigations and victims' pensions etc, the Executive had £1·2 billion to allocate for general resource allocations in the Budget. Of that £1·2 billion, Health received £672 million, which is over half of that amount. If we were to provide Health with the £400 million to fund the funding gap on top of that, that would leave just £185 million for allocation to other Departments. The amount that is required in the 2025-26 Budget to uplift Departments just to their 2024-25 October monitoring position is £372 million. If we were to give Health the £400 million, most, if not all, Departments would be well below their 2024-25 October monitoring position, while Health's position would be 7·3% higher. We need to look at the funding that is available and the pressures across all Departments, which will all make their case, and then look at what is provided to each.

You are absolutely right that the spending across the board in other jurisdictions is higher, and you are right that the Executive —.

Dr Aiken: We are not comparing like with like. We are constantly told that the Northern Ireland Health budget is in some way an outlier. It is not. It is about where prioritisation is placed. If you look at some of the key areas on which Wes Streeting has placed prioritisation, you see that we are not getting the same prioritisation in Northern Ireland. Again, I emphasise that this is the Finance Committee and we are trying to look at where the lines are. It was a prioritisation process, and everybody agreed that Health was going to be the priority, so there will be winners and losers, regrettably. We need to put it in that context.

Ms McBurney: We also need to look at the impact on the other Departments if they do not get the funding that they need. Again, to put it into context, yes, Northern Ireland receives a Barnett share of the changes in England, but Northern Ireland funds a number of things through policy choices for which it does not receive a Barnett share. We do not get Barnett consequentials for welfare mitigations and victims' pensions, and we do not charge for water. Those are all policy decisions, based on the local situation here, that the Executive have made. That means that we cannot do a direct read-across of where the funding goes in England to where it goes here. That is why we are devolved and make those decisions.

I would say that Health has been prioritised by that £2·6 billion, which increases its baseline. You might argue that the £200 million increase between the 2024-25 October monitoring and 2025-26 is relatively modest. I would argue that there may be more funding in-year and that it is not comparing like with like. However, you have to look at the need for all Departments to deliver efficiencies. I am not entirely sure that we are seeing that across the board. I will talk about Health, because that is what we are talking about, but all Departments could go further.

There has been significant growth in the size of the Health workforce in recent years. At the end of September 2024, the HSC Northern Ireland workforce stood at 66,119 full-time equivalents. That is a 12% increase since 2019, which is fair enough, given the pressures. The figure has varied across staff groups. Between 2019 and 2024, there has been a 15% increase in the number of administration and clerical staff. The number of medical and dental staff has increased by 16·5%. The ambulance workforce has increased by only 0·9%. My earlier argument was that, despite that increase, there is limited evidence of improvement in outcomes. There are other indicators that point to areas for improvement in Health. There has been an overall decrease in throughput. The average number of inpatients in each available bed decreased from 50·3 admissions per bed in '19-'20 to 41·1 admissions per bed in 2023-24. The average length of stays in hospital decreased.

Dr Aiken: Was that 1920 or 2020? I thought that I heard "1920"

Ms McBurney: Sorry, "'19-'20", as in 2019-2020.

The Chairperson (Mr O'Toole): The financial year '19-'20.

Dr Aiken: Oh, sorry. The financial year '19-'20.

Ms McBurney: Yes, the financial year.

Dr Aiken: Sorry, the link is not great. I was hoping that you were not going back 100-plus years. Even the Department of Finance would not try that one.

Ms McBurney: I do not think that we could do that. We might, if we had the data, but we do not.

Dr Aiken: I would not let you away with it. Paul Frew might even perk up at that one. Thanks for that.

The Chairperson (Mr O'Toole): We have other witnesses, but go on ahead.

Ms McBurney: I will not go on except to say that there is limited evidence of improvement. There is limited funding that has to be prioritised. All Departments have pressures, and, in all Departments, we could point to areas for improvement. The key will be in where we go forward from this situation in those five-year plans — an element of realism may be needed. I will also caution, though Jeff may say otherwise to me, that we will still have a finite pot of funding, and every Department may come forward with a plan that is not affordable. The challenge for the Executive is in deciding how to prioritise the funding, but those five-year plans will help to inform that.

The Chairperson (Mr O'Toole): On that note, unless anyone has any urgent or pressing questions, we will adjourn. Having many more questions to ask is always very useful. In parenthesis, I think that it fundamentally comes down to choices. I am speaking on a personal basis, but I would say that we are now clear that, with some of the choices that were or were not made — they were not actually choices — as outlined in appendix D and some of the choices that the Executive have or have not made and the Health Minister has or has not made, it will fundamentally come down to whether Ministers are willing to make decisions, particularly after, as has been said, what was a relatively unprecedented uplift in 2024-25. It will not be as comfortable going forward.

In any case, today's briefing was really useful, and we will, I am sure, hear from you again in the not-too-distant future. Thank you, Joanne, Jeff and Maryann. Thanks, everyone. Joanne is back next week, of course. You never escape.

Ms McBurney: I thought that you had forgotten that.

The Chairperson (Mr O'Toole): Yes, indeed.