Official Report: Minutes of Evidence

The Chairperson (Ms Bunting): I welcome Deborah Brown, director of the justice delivery directorate; Richard Logan, head of financial services; and Andrea Quail, head of financial planning and strategy. Folks, thank you very much. Thank you for bearing with us on time. We were taking evidence on the Justice Bill in the previous session, so you will appreciate that that is quite important for us. It is our work priority at the minute. Thank you for bearing with us and for taking the time to come to give your evidence. I will hand over to you for your opening remarks, and then we will move on to questions, if that is all right.

Ms Deborah Brown (Department of Justice): Thank you very much. Good afternoon, and thank you for the opportunity to update the Committee on the Department's draft budget 2025-26. As you said, I am joined this afternoon by Richard Logan, our finance director, and by Andrea Quail, our head of financial planning and strategy. We provided the Committee with a written briefing on the draft budget outcome, and Richard will shortly provide a brief overview of that. Before he does, I will make some observations on the budgetary challenges that face the DOJ in the coming year.

After providing for earmarked items, the Executive had available just under £1·3 billion of funding to meet pressures of almost £4·7 billion across all Departments. The Department of Justice received a general allocation of £132·3 million, which represents 10·5% of the funding that was available to the Executive. That is a favourable outcome for the Department when compared with our previous budget settlements. Whilst the £132·3 million is welcome, it must be considered in the context that the Department has faced years of underinvestment, of which the Committee is well aware. It remains concerning that the DOJ's share of the block has fallen continually over the past 14 years from just under 11% in 2011-12 to only 8% in 2025-26.

At this stage, we forecast that the Department will live within its budget in 2024-25, but that result will require continued strong financial and operational management over the next couple of months. The draft budget for 2025-26 will go some way to alleviating the significant pressures that are being experienced across the justice system. However, despite the additional allocation of £132·3 million, the Department faces £60 million of stabilisation pressures going into next year.

There are competing pressures in all areas in Justice, and there is minimal, if any, scope to reduce or divert resources from one critical area to another, given that the services that are delivered are all deemed to be departmental priorities and are interdependent. Additional funding is still needed to sustain current services and meet the increasing demands in areas such as policing, legal aid and prisons, but, given the significant pressures that exist across the Northern Ireland block, it is likely that there will be limited, if any, additional funding available for reallocation in 2025-26.

The Department's shortfall of £60 million will present challenges across all our business areas, including legal aid, policing and delivery against the Programme for Government (PFG) and our business plan. Difficult decisions on prioritisation and service provision will therefore be required across the Department and its non-departmental public bodies (NDPBs) to manage the remaining pressures in order to live within the draft allocation.

Business areas have been asked to provide a high-level update on their assessment of budget impacts as part of the draft budget allocations that were issued on 29 January, along with their updated equality impact assessments. That information will be provided to the Minister to inform finalisation of allocations and consideration of the actions that could be taken to reduce that £60 million gap.

Further discussions will be needed with the Executive and the Department of Finance to consider the options for funding the exceptional pressures of £227 million for the legal claims. The previous Finance Minister's view was that those items are unaffordable within the existing Executive block; therefore, it was her intention to explore the potential for making a reserve claim to HM Treasury. We hope that the new Finance Minister will continue to support that.

You will appreciate, therefore, that this is a challenging budget for the Department that will require very careful management and difficult decisions to reduce the risk of an overspend.

I will pass to Richard, who will give you more information.

Mr Richard Logan (Department of Justice): Thank you, Deborah. Thank you, Committee. I intend to provide a brief overview of the draft budget position, which is detailed in the briefing papers.

The Finance Minister issued Budget allocations to Departments on 19 December 2024. The Department's non-ring-fenced resource departmental expenditure limit (DEL) budget included an additional general allocation of £132·3 million, which equates to 10% of the total funding that is available to the Executive. We had to make a number of assumptions and consider options for allocating the additional money across our business areas. The Minister was very clear that the allocation should be made on the most equitable and fair basis for all our organisations. That is particularly important for the justice system, given the consequential impact that funding decisions in one area may have on other areas of the Department. At the previous finance update for the Committee on 12 December, there was a discussion on the potential impact on service delivery in a worst-case funding scenario. Thankfully, we are not in that position, as the draft budget outcome was more favourable than that scenario. However, there are still significant pressures, and we were mindful of the potential impact on services when considering budget allocations.

A pro rata allocation based on inescapable stabilisation pressures was ultimately determined as the option that provided the most equitable distribution of the available funding across our core departmental agencies and NDPBs. That option is consistent with the approach that we took in 2024-25 and was approved by the Minister. The opening budget allocations were communicated to our business areas on 29 January.

Although the additional £132 million of funding is to be welcomed, it still leaves the Department facing stabilisation pressures of approximately £60 million going into next year. Those consist of the £34 million remaining from the £207 million of pressures initially reported to DOF in October 2024. In addition, £26 million of new pressures have since emerged that relate to increases in employers' National Insurance contributions, revised Northern Ireland Civil Service (NICS) pay award assumptions and increases to legal aid fees, as recommended by the Burgess report.

It is reasonable to assume that the Department will receive some additional funding in due course for the cost of employers' National Insurance contributions, the Windsor framework and technical transfers. The amounts, however, have not yet been confirmed by DOF, the Treasury or other Departments. In any event, they are unlikely to cover the full costs involved. The former Minister of Finance previously stated that, given that the Chancellor's autumn budget and spending review reset the funding envelopes for Whitehall Departments, Northern Ireland Departments cannot expect the same levels of additional funding to be provided in-year during 2025-26 that were provided in 2024-25.

Furthermore, given the significant level of pressures across the block, with the bids for all Departments being approximately £3·4 billion more than the funding available, it is likely that there will be very limited, if any, funding available for reallocation during the 2025-26 monitoring rounds. The Department's business areas are therefore currently considering what actions are required in order to live within the resource budget allocation, as it falls short of what is needed, and Deborah mentioned that difficult decisions will still be required to be taken. As a result, all DOJ business areas will be required to implement cost reductions and efficiencies in order to reduce the level of remaining pressures.

The Department's capital DEL allocation was £100 million, which is a shortfall of £35 million, or 25%, against our total revised bids of £135 million for inescapable, high-priority and desirable projects. The Minister approved the allocation option, which met 100% of the inescapable bids, provided an allocation to the Prison Service equivalent to its average capital expenditure over the past four years and allocated the remaining £17 million balance to the high-priority bids across all areas.

I trust that we have provided the Committee with a helpful but candid overview of our financial position. We continue to operate in an uncertain financial environment, so managing the Department's budget is still extremely challenging. Thank you for the opportunity to brief the Committee. We very much value your role and your views. We are happy to take questions.

The Chairperson (Ms Bunting): Thank you very much, Richard. Well done on living within budget in what was a very tough year. From looking at next year's budget, I see that it is not going to get any easier. I will bring in members. Has anybody got a question?

Mr Beattie: I have a brief question. Where does the PSNI's business case and its bid for £200 million for the recruitment campaign and additional recruitment sit at the moment?

Ms Brown: We are nearing finalisation of the business case, and we have been engaging with DOF with a view to getting the business case to it for approval. The in-year position is that, as you are aware, the PSNI has started to recruit but still faces pressures. The recruitment campaign will continue, but it is about replacing officers at this stage. It is therefore not prejudiced by the business case, as it is needed. The business case clearly sets out a need to increase police numbers over the next year to 7,000. We have had very good feedback from DOF on the business case, but, of course, it still has to go through the approval processes. We will then need to go to the Executive about future funding in order to make sure that we can fund the existing Police Service and then grow it towards the 7,000 figure.

Mr Beattie: I do not want to put you on the spot, but do you have a rough time frame for finding out whether the business case will be agreed?

Ms Brown: We hope to get the business case to DOF in the next couple of weeks.

Mr Beattie: Good enough. Thank you.

Mr McNulty: Thanks, folks. To what extent are you taking into consideration the draft Programme for Government and the objectives of the enabling access to justice reform programme when acknowledging the actions that will potentially need to be taken as a consequence of budget constraints?

Ms Brown: DOF has commissioned an exercise to map the budget to the Programme for Government. We are taking that forward, but, of course, the Programme for Government does not cover everything that the Department does.

It is not only the Department of Justice that is delivering the safer communities priority in the Programme for Government, but we do have a number of initiatives that will contribute to it. In addition, we have put in a number of transformation bids that, if successful, will help deliver the safer communities initiative. We await the outcome of the three bids that we submitted. We are therefore aligning with the Programme for Government. The Committee has our draft business plan, and we are now considering our corporate plan for the next three years in order to align properly with the Programme for Government and the Minister's priorities.

Mr Logan: Now that the draft allocations have been shared with business areas, that will give them time to look at what their pressures are. The pressures that we are talking about now were submitted to us back in September 2024, so they are four or five months out of date. The business areas therefore need to look at their allocations and at their latest pressures to see what impact those will have on their priorities and on the PFG etc. We hope to know the impact when we get their feedback on the draft budget that we issued to them.

Mr McNulty: Thanks a million, Deborah, Richard and Andrea.

The Chairperson (Ms Bunting): Does anybody else have anything to ask?

Miss Hargey: Thank you very much for the update. It shows an improvement, in that things are moving in the right direction. You will hopefully have the same positive engagement with the new Minister.

I have a couple of questions to ask. At this point, do you have any further update to provide on the reserve claim? You talked about pressures as a result of having a funding gap of around £60 million. We still have to see the outcome of the increase in employers' National Insurance contributions and hear what the Treasury has to say about that. Going into the next financial year, how much risk are you willing to manage in the budget?

The Minister is rightly focusing on domestic violence and on tackling violence against women and girls. That is one of the areas about which you raised budgetary concerns. As part of the prioritisation process, will the Minister be considering that work? A lot of good work has been done to highlight the issue, and it would be very concerning if it were to be dropped because of budget constraints. I would like to get some assurances.

Mr Logan: Our understanding is that DOF will wait until the new financial year to see what the total reserve claim is. The issues in the reserve claim are the PSNI data breach, holiday pay and the McCloud injury to feelings judgement. The data breach is the only one that is specific to DOJ — the others are across Departments — so the intention is for DOF and the Minister of Justice to go to the Treasury together to say, "Here is the total ask", rather than going about it piecemeal.

Miss Hargey: OK.

Mr Logan: For the Minister's priority of ending violence against women and girls, bids were submitted and pressures taken into account. Funding was allocated to allow a range of work to be done. It will therefore be addressed by the funding that was allocated. It will not be addressed in full, but that priority has certainly been included.

Miss Hargey: OK. What level of risk are you willing to manage as we enter the next budgetary period?

Mr Logan: Now that business areas have their budgets, we know that they have to make reductions and savings. The Department's total budget is £1·4 billion, so 1% efficiencies or cost reductions would be equivalent to £14 million. If everybody were able to identify 1% efficiencies, and if we were to get some money for the employers' National Insurance contributions — half or two thirds — that would chip away at the £60 million. We are still waiting for some money for the protocol. We are also waiting to find our whether there is money for the NICS pay awards. There are therefore a number of possible sources of additional income or cost reduction that we hope will bridge the gap.

We met the PSNI on Monday. It will take the figures away and work through what they mean for its plans to maintain police numbers and recruit additional officers. The gaps will therefore be narrowed, but the next phase will be to determine what the revised gap is. That will influence our decision on the risk that we will take from that point.

The Chairperson (Ms Bunting): Ciara, you wanted in.

Ms Ferguson: As my party colleague mentioned, it is deeply concerning that we may not be funding projects that are aimed at tackling domestic abuse. We are also aware of the pressures on legal aid. There are delays in paying bills, and the Burgess uplift needs to be implemented, not to mention the impact that the pressures are having on the legal profession and on local people's access to justice. Can you clarify what assessment has been done on the impact that the budget allocation will have on legal aid payments and the planned uplift?

Ms Brown: I will cover where we have got to with legal aid generally. I believe that there is a good news story in there. Look at how the legal aid baseline has grown. Since '19-20, it has grown from £76·9 million to what has now been allocated for 2025-26, which is almost £120 million. That is an increase of nearly £43 million over the period, which represents a 55% increase. Spend has grown from £82 million in '19-20 to approximately £118 million, which we intend to spend —.

Ms Ferguson: You are saying "1920".

Ms Brown: Yes. I mean the year 2019-2020: the financial year. Sorry. Not 100 years ago. [Laughter.]

Ms Ferguson: I was wondering why you went back 105 years.

Ms Brown: Apologies.

Ms Ferguson: That would have been some sum then. You therefore mean the financial year. You are talking about five years ago.

Ms Brown: Yes, sorry. Spend has grown from £82 million then to an anticipated spend this year of £118 million. Last year it was £114 million. We continue to secure additional funding for legal aid and to get payments out the door.

That means that the backlog that we had at the end of last year of nearly £20 million, which is about 11 to 12 weeks of backlog, should reduce by the end of this year to between £11 million to £14 million, which is six to eight weeks. If our demand next year is £115 million against the allocation of £120 million, that will allow us to make further inroads into reducing the backlog, potentially bringing us back closer to four or five weeks.

The caveat to apply is the impact of the Burgess increases. You will see in the paper that we have estimated the annual cost of the implementation of the Burgess increase of 16% from May, which is the point at which we expect to have all our approvals and our legislation in place. We can then start to pay out perhaps £6·5 million. If you consider the fact that our demand has dropped this year — demand is £111 million or £112 million — so, although we are paying out more money, doing so is clearing the backlog. That £111 million plus £6 million should not have a massive impact, but we will, of course, ask for further funding throughout 2025-26. Yes, it will have an impact, but the good news is that the Legal Services Agency (LSA) continues to make significant inroads on reducing the payments.

We do not know what impact the withdrawal of services in January, which has continued into February, will have next year. It may push costs up further, or we may have a big catch-up in 2025-26 that will then increase demand. We just do not know. Paul Andrews is an absolute master of being able to do all the scenario planning and projections for the different things that he needs to do. You can rest assured that he will be on top of it, but 2025-26 is presenting us with new challenges to do with the withdrawal of services and also the implementation of the some of the Burgess recommendations, including the 16% uplift.

Ms Ferguson: You are therefore saying that we need to be a bit cautious, because the impact from the withdrawal of services, if pushed back, could run into the next financial year. At the moment, there could be some good news from cutting the payment delays and from being able to cover the 16% uplift in May, given the decrease in demand. We need to be cautious about the next financial year, however.

Ms Brown: Any time that we think that we are getting ahead of the game and that we are making inroads on making legal aid payments, something else comes out of left field. We knew that the Burgess review recommendations were coming out and that we would need to consider them. The withdrawal of services was something that we thought that we could have prevented, but, unfortunately, despite best efforts in negotiations and engagement at length over the past months, that has not been possible.

Ms Ferguson: Thank you.

The Chairperson (Ms Bunting): Deirdre, do you want back in?

Miss Hargey: I have a brief question on the budget that relates to the increase in employers' National Insurance contributions. It is more to do with the organisations in the community and voluntary sector that the Department funds. The Treasury has already said that it will not extend support to them. Are you looking at what the scale will look like for those organisations? Are you looking at the potential for jobs to be at risk? Could there be cuts in hours or redundancies? Are you looking to offer flexibility with grants, perhaps to allow some of the pressures to be absorbed within existing grants? I want to get a sense of the potential impact on providers that work on behalf of the justice system.

Mr Logan: In our engagement with those organisations we see only a snapshot of their costs that relate to our projects or programmes, so we do not know their overall pressures. Based on the costs that are coming in for the core Department, agencies and NDPBs, we are probably looking at a 1% or 2% increase in costs overall. We pay out in the region of £7 million to the community and voluntary sector, so we are perhaps talking about a couple of hundred thousand pounds. We do not know, however, whether those are actual costs, because salaries may not be fully affected. We will therefore see what funding we get, and then it will probably be down to the individual business areas in the Department that engage with the community and voluntary sector to see what their pressures are and then deal with them on a case-by-case basis.

Miss Hargey: You are alert to the issue, however.

Mr Logan: We are.

Miss Hargey: OK.

Mr Logan: The cost increase would be roughly 1% or 2%.

Ms Brown: Our approach to making allocations to organisations in the community and voluntary sector, where they help us deliver our core services, has always been to try to minimise the impact on them, because we know that we could not deliver without that help.

Miss Hargey: Thank you.

The Chairperson (Ms Bunting): I have a couple of questions, but I can race through them. Can you provide a timeline for when you anticipate decisions to be made on the transformation bids? Services may be cut, so there is a lot of risk involved. How are you going to prioritise in order to sort out the issues? In paragraph 8 of the briefing paper that you provided to the Committee, the Minister has gone for option 1, which is:

That is fair enough. You have based it on inescapable pressures, but how are you going to tie in doing that with the priorities that have been identified?

Mr Logan: We do not know what the timeline for transformation is going to be. We are subject to the Executive's making a final decision. The Northern Ireland Office and the Treasury are also involved in approving the decision. There are therefore a few stages still to go through, so we will just have to wait and see. We cannot be definitive about the timeline.

We will be better placed to answer your question on service cuts when we get responses from the business areas on the impact. Now that they have their allocations, they can refresh their pressures to see what changes or reductions they will have to make. We will therefore wait for feedback from the business areas to see what those will be.

Paragraph 8 is on the inescapable —.

The Chairperson (Ms Bunting): It is on your non-ring-fenced resource DEL allocations.

Mr Logan: The high-priority and desirable pressures were relatively minimal, perhaps only £3 million to £4 million of the total £200 million. Some may have already dropped off, or some of the things that were deemed to be inescapable will hopefully come in at a lower cost. If so, that will allow other high-priority pressures to be addressed by the business areas. We are waiting to see what they come back with, after which we can make an assessment of the risk to the overall provision of services.

The Chairperson (Ms Bunting): What is the time frame for doing that?

Mr Logan: We have asked business areas to come back to us by 14 February with their equality impact assessment returns and by 17 February with information on the overall impact. We will have an opportunity to look at those at that stage. The Department of Finance consultation then finishes on 13 March. We therefore have that bit of time to assess before budgets are finalised.

The Chairperson (Ms Bunting): That is helpful. When we consider some of the services that may be cut, and the resultant impacts, it does not paint a pleasant picture, that is for sure. It is certainly enough to keep you up at night.

You were anticipating a Civil Service pay increase of 3%, but it is now going to be 6%. What is the figure involved there, and from where is it going to be found?

Mr Logan: The figure will be somewhere between £4 million and £5 million across the core Department, our agencies and our NDPBs. The staff in a lot of our NDPBs' terms and conditions are aligned with those in the NICS. The terms and conditions of police civilian staff are, as are those of staff from the Office of the Police Ombudsman and the Policing Board. The impact is therefore not just on the core Department but wider.

At the moment, we perhaps need to see what funding will come from the Executive and then allocate that. I think that the intention was to set some funding aside, but I am not sure whether that covers the core Department and agencies only or the wider public sector, so we will need to see the allocation. As we have said, it is reasonable to assume that we will get other allocations during the year, but we do not know the quantum. If we get half of what we need to meet our pressures, it will not solve everything, but it will certainly bridge the gap. That will probably be the approach taken to a lot of this. We will not get one large amount in the monitoring round to clear the pressures. Rather, it a case of looking at a number of options and reducing slightly in one area and another area, with the cumulative effect of that being to bridge the overall gap instead of it being necessary to make one big cut in a particular area. It will hopefully be a combination of different, smaller impacts.

The Chairperson (Ms Bunting): My final question is about the McCloud judgement and the other two issues that the Department's budget cannot meet. The longer that that goes on, is it the likelihood that the sums involved will increase?

Mr Logan: That is not necessarily the case. There are ongoing discussions and conversations about each to try to resolve any outstanding issues, but, at this stage, whether they are all resolved today or in six months' time, the final answer will still be the same.

The Chairperson (Ms Bunting): That is fair enough. Thank you very much. No other members have any questions. That is lovely. Folks, thanks so much for your time today and for the papers that you provided. It is greatly appreciated.