Official Report: Minutes of Evidence

The Chairperson (Mr O'Toole): We have in front of us from the Department Gavin Patrick, director, finance division; Clair Hampton, finance business partner; and Cathy Murtagh, also a finance business partner. You are the finance in Finance: "Quis custodiet ipsos custodes?", whatever the Latin is. Anyway, you are welcome.

Dr Aiken: Who guards the guardians?

The Chairperson (Mr O'Toole): Exactly. I am testing myself. Right.

An opening statement would be most helpful. Thank you very much.

Mr Gavin Patrick (Department of Finance): Good afternoon, Chair and members. Thank you for giving me and my colleagues Cathy and Clair the opportunity to brief you on the Department's 2025-26 position on the Executive draft Budget. It is good to be in front of the Committee for the first time and, indeed, to see some members whom I came across in my previous role in the Department for Communities.

I will start with an apology. At this stage, we do not have an approved opening budget, so the update will be at a high level.

The Chairperson (Mr O'Toole): Is that because the Executive have not approved the Budget?

Mr Patrick: It is about the internal process: the departmental position has not been finalised just yet, but I will give you a run-through of where we are in that process.

As you mentioned, Chair, I am joined by Cathy and Clair, who are finance business partners in my finance team in the Department. They provide support to key areas across the Department, including digital, security and finance shared services, Land and Property Services (LPS) and the Departmental Solicitor's Office (DSO). We have provided a written briefing. I will give you a high-level summary of the budgetary position, and we will be happy to answer any queries or questions.

The 2025-26 draft Budget provides the Department with a non-earmarked budget of £158·7 million, earmarked allocations of £79·9 million and a capital allocation of £32·5 million. The Department has continued to review its forecast non-earmarked resource baseline for 2025-26, considering where savings can be made by reducing or stopping non-essential work and delaying filling lower-priority vacancies. That has involved close working between my team and all business areas across the Department and ensuring careful and considered budget management.

The non-earmarked resource forecast is now £163·4 million. That is net of savings of £13·9 million. Those savings include £2·1 million from reduced utility and property costs following estate consolidation; delays in filling non-priority vacancies and associated costs of £3·6 million; and increased income of £8·2 million. The forecast of £163·4 million, which includes all requirements across business areas, when set against the opening baseline of £158·7 million, results in a pressure of about £4·7 million after taking into account those initial savings.

Forecasts do not include the effect of proposed changes to the employers' National Insurance contribution rate, estimated at £3·4 million.

The Chairperson (Mr O'Toole): Is that £3·4 million for the Department?

Mr Patrick: Yes, £3·4 million for the Department.

The Chairperson (Mr O'Toole): Is that for the Department and its arm's-length bodies (ALBs)?

Mr Patrick: Including the Special EU Programmes Body (SEUPB), yes. It is for the Department of Finance only.

Forecasts do not include the proposed increased pay award, announced on 20 January, which has an estimated cost of £4·2 million. That is above the assumption of a 3% pay award that was built into our initial estimates. It is anticipated that some additional funding will be provided by the Executive to cover those increased costs, but that will not be known for a number of weeks and may not cover the full costs.

As in every year, there will be a level of attrition, which is difficult to determine and is not accounted for in the £4·7 million pressure. Given the potential for constrained budgets in future, the Department will focus on filling priority posts in the first instance.

The draft Budget allocation provided Executive earmarked funding of £51 million for rate rebate, £25·3 million for the Integr8 programme, £2·4 million for EU match funding and £1·2 million for cybersecurity. The cybersecurity funding was originally a non-earmarked bid but has been earmarked given its importance across the Northern Ireland Civil Service (NICS).

Around £3 million is included in the funding for the rate rebate for staffing costs that will cover the costs that the Department incurs to deliver the service. In addition, it is anticipated that there will be a Treasury-earmarked allocation of around £600,000 for activities that are associated with the Windsor framework, and that will be made at a later stage in the financial year.

The Chairperson (Mr O'Toole): What are the departmental activities that relate to the Windsor framework?

Mr Patrick: Departmental activities.

The Chairperson (Mr O'Toole): What specific activities is the Department doing?

Mr Patrick: It is related to staffing costs in DSO and the public spending group.

The capital in the draft Budget that is allocated to the Department is £32·5 million. Forecasts for requirements are at £57·8 million, which results in a pressure of £25·3 million. The high-level capital forecasts across the business areas include £12·2 million in Construction and Procurement Delivery (CPD) mainly for capital maintenance, small lease consolidations and international financial reporting standards (IFRS) capitalisation costs.

There is £13·7 million for digital security and finance shared services, which is made up mostly of laptop and desktop refresh costs, multifunctional device refreshes and general IT infrastructure. There is £25·3 million in LPS. The largest amount there is for NOVA at £18·9 million and £5·6 million for the Land Registry special projects. The capital pressure position will be challenging, and significant work has been and continues to be taken forward in the Department since the draft Budget was announced on going through with business areas ways in which they could manage and reprofile their budgets in order to reduce their requirements to enable the Department to live within the draft allocation. An equality screening exercise on the Department's draft Budget allocation is being finalised, and it is anticipated that that will be screened out with no major negative impacts identified. That will depend on agreement about the final internal budget allocations.

I hope that you found our briefing helpful. I am happy to take any questions.

The Chairperson (Mr O'Toole): Thank you. As always, members should indicate if they wish to ask a question.

The Department has to be like Caesar's wife, if I may use that cliché, because it imposes spending controls and proper behaviour on other Departments. We regularly hear from the Department that other Departments should not overstretch or overcommit and create pressures that might not be met. It would appear that your capital budget is almost 100% overcommitted at this point. The Department's capital departmental expenditure limit (CDEL) allocation is £32·5 million, but there is a £25 million pressure on top of that. That is an extraordinary position for the Department of Finance to be in.

Mr Patrick: As I said, we are working with the business areas on how we can manage within the budget allocation. That work will look at an element of over-planning, as there tends to be slippage with capital projects as the year goes on. Just as we did in 2024-25, we will look at the potential sale of property, which will release income that will therefore become spending power for the Department. We will also value-engineer our contracts and projects to bring their costs down within the year.

The Chairperson (Mr O'Toole): If I were being polite, I would say that it would surprise me if the Department happened to have £25 million of property to be sold, but it is a contributor. You are not going to value-engineer — I presume that that means "efficiency saving" in old money — and realise £25 million of savings.

Mr Patrick: None of those measures by themselves could do that, but we are looking at all possible avenues to bring our forecasts within budget. It may mean looking at delaying projects into future years as well.

The Chairperson (Mr O'Toole): Is most of the pressure made up by NOVA, which is an LPS project?

Mr Patrick: NOVA is a new capital programme for us this year at a cost of £18·9 million. Compared with previous capital budgets, it is the key new element that we are facing.

The Chairperson (Mr O'Toole): A lot of that £25·3 million additional pressure is £18 million. It is also a significant proportion of this year's regional rate rise. LPS collects that, so one could argue that, in one sense, LPS is collecting additional rate revenue to spend it on an IT project.

You are sitting with that huge pressure on your capital budget, and you said that there are various ways in which you might realise savings. There must be more than that. Has there been an agreement that we get the first call on additional capital allocations inside the Executive or —?

Mr Patrick: Not as part of the draft Executive Budget. Other Departments have the first call on those. We are looking at how we can reprofile within the year and in future years. We are taking a mixture of measures to live within that budget, and there has been and continues to be work to do that, whether that means that projects are paused completely or delayed into future years whilst recognising that future budgets may not be any better. We are looking to manage all that.

The Chairperson (Mr O'Toole): This may not be a bit of data that you have to hand, but, if it is not quite at 100% but, maybe, I do not know — I could do the arithmetic in my head.

Dr Aiken: It is 86%.

The Chairperson (Mr O'Toole): Sorry, how much?

Dr Aiken: It is 86%.

The Chairperson (Mr O'Toole): The pressure is 86% of the total CDEL. Thank you, Dr Aiken. Are you aware of whether any other Departments are going into the new financial year with a pressure on the capital side that is 86% of the overall budget?

Mr Patrick: I do not know the percentages for other Departments, but I know that not all inescapable pressures were met as part of the draft Budget's being set, so we would not be alone in having pressures on capital. Like I said, though, there are ways to manage the situation. Capital projects can be paused, delayed or reprofiled. There are slippages, so, although we have an original forecast, often a percentage of over-planning would be in the region of 10% to 20% of the total. I am not speaking specifically for DOF, but that is a general over-planning percentage that can be looked at in capital.

The Chairperson (Mr O'Toole): One way of looking at it might be to say that the Department now has almost a vested interest in capital underspends in other parts of the Executive, because that would help to plug a gap in its own budget.

Mr Patrick: Through our digital, security and finance shared services, we provide support to other Departments. The laptop and desktop refreshes are not just for the Department of Finance but for all Departments, so we can look to other Departments to see how we will carry out that refresh programme.

Ms Forsythe: Thank you, all, for coming here to speak to the matter. I want to discuss the baseline moving into 2025-26. To me, the baseline is where you know you will be, so it is good that you highlighted the two staff costs: an extra £3·4 million for increased National Insurance and an estimate of £4·2 million for the pay award. That makes £7·6 million that, you are pretty sure, you will incur but have decided not to include. My understanding is that, if you know that you will have that cost, it should be in the baseline.

I also understand that the pay award is not settled, but it will be in and around that amount, so I expected an estimate to be in the baseline. The change to the National Insurance contributions is £3·4 million. You know that you will incur that cost. Whether the Treasury funds that in its entirety or partially, it is a cost that the Department will incur this year. I am just trying to understand why you would not include that in your baseline budget cost.

Mr Patrick: We separated those out. We know that those costs are coming, so rather than over-inflate that initial pressure when we know that budget will be allocated, albeit that we do not yet know how much, we kept it separate. It is not that we are ignoring it; we are keeping it as a separate table knowing that those pressures may come, but we do not yet know how much funding will go behind it.

Ms Forsythe: A total of £51 million was set aside for housing benefit in 2024-25, which is the current year. Has the amount that has been set aside this year been enough to cover the contributions to communities? Historically, it has not always been enough. Is £51 million in 2025-26 likely to cover it?

Mr Patrick: We have enough this year, and, as I mentioned in my opening remarks, we have included in the £51 million some of the staffing costs that DOF is incurring. That was not covered in previous years. We felt that it was important that, as we are delivering a service, the funding should flow as part of it.

Ms Forsythe: That is good. It is good to have the evidence that shows that the estimates are a real expectation of what funding will be. A final question from me is about the EU match funding of £2·4 million. Can you give us a bit more detail on what that is for?

Mr Patrick: DOF is the accountable Department for the investment area for strategic planning and engagement. The specific objective of that is to reduce the legal and administrative barriers to cross-border cooperation through joint development and management strategies, as well as cooperation, capacity building and identification of solutions. That funding will support that key objective.

Ms Forsythe: OK. Thank you.

Mr Brett: Thank you very much for coming along today. First of all, why has the draft departmental budget not been agreed?

Mr Patrick: We are still working through it in the Department and with our Minister. Until we have finalised it with the Minister, it will not be agreed. We are not the only Department to be in that position.

Mr Brett: What other Department is in that position?

Mr Patrick: I could not name all the Departments, but, from speaking to my finance directorate colleagues, I know that we are not the only one.

Mr Brett: Have some Departments agreed their budgets?

Mr Patrick: I think so.

Mr Brett: It is just that we would always want the Department of Finance to be one of the first to get it done, given that we would encourage other colleagues to get theirs done as soon as possible.

I am not good at finance issues, so I wonder if you could help me with something that is in your papers. Last year's position in comparison with this year's is not in the papers, if I read them correctly. Your non-ring-fenced opening position for this year is £158·7 million. What is that in comparison with last year's position?

Mr Patrick: For 2024-25, the opening position was £150·1 million.

Mr Brett: OK, and then for ring-fenced?

Mr Patrick: The ring-fenced was £58 million.

Mr Brett: What was it for capital?

Mr Patrick: Capital was £38·9 million.

Mr Brett: Is the large increase in the ring-fenced mostly a result of the IT projects?

Mr Patrick: It is an increase in relation to Integr8 and an increased requirement in rate rebate.

Mr Brett: The increase in the non-ring-fenced funding is just over £8 million, but the biggest decrease is up for both ring-fenced and capital. In briefings such as this, would the Department normally provide the previous year's opening and closing positions and the current year's opening position? I am a new MLA, so I am not familiar with the process.

Mr Patrick: I am new in post as well, so I do not know what was done previously, but I am happy to provide that information.

Mr Brett: It would be useful to have an opening and closing position for last year and an opening position for this year.

Again, I ask this just because I am new, but why does housing benefit come through the Department of Finance's budget?

Mr Patrick: It is for rate rebate.

Mr Brett: It is a rate rebate. Why, then, is it labelled in the report as housing benefit?

Mr Patrick: I think that is a typo on our part. It is for rate rebate.

Mr Brett: OK. Thank you.

Mr Frew: I just want to clear something up. This does not involve a massive amount of money, but your paper says that employers' National Insurance contributions are an estimated cost of £3·4 million. Information that we received from the departmental Assembly liaison officer (DALO) says that it is £3·6 million. Why is there that variation?

Mr Patrick: I would need to check to see where that came from.

Mr Frew: It is not a lot of money, of course, but, if you take that sort of variation across all Departments, you would find that it would soon build up into an inaccuracy that we could not really stand over.

Mr Patrick: It might have been a timing issue, but I will check it.

The Committee Clerk: From what I understand, you sent us your paper at a very early stage so that we could have it for the pack. The DALO subsequently pointed out that the figures may well change, hence the update from the DALO.

The Chairperson (Mr O'Toole): We can clarify that.

Mr Frew: Certainly.

My colleague Phillip Brett asked about the fact that the budget has not been agreed yet in the Department. What are the sticking points?

Mr Patrick: We have discussed a lot of the areas this afternoon. Capital is, clearly, a difficult position. We are working that through so that we can stand over an opening budget position and allow the business areas to move forward with it. It is about working through all parts of the budget. I would not say that there are any particular sticking points.

Mr Frew: Tell me a wee bit more about the LPS NOVA programme. We heard a wee bit about it, including the costs. What is the difference between LPS NOVA and the IT system Rapid?

Mr Patrick: I may defer to Clair on this. Rapid is part of the NOVA programme. It is one of its strands, as opposed to being different. It is part of the overarching programme.

Mr Frew: How much is Rapid, specifically, going to cost in the new budget year?

Mr Patrick: I do not have the cost breakdown across the NOVA projects. I can get that for you.

Mr Frew: OK. That would be worth knowing. If NOVA is the overall IT system and there are various levels of it, I think that we would like a breakdown.

Mr Patrick: Part of the work has been about how they can be reprofiled and worked within the budget that is available, which is why we do not have that breakdown, as such, at the moment.

Mr Frew: You talked in your papers — I cannot find it now — about work ceasing here and there, which has creating savings. I should try to find it for you. I read it earlier, but I have lost track.

Mr Patrick: A number of our posts are not being filled. There is not one area that is stopping; they are posts across different directorates in the Department. I mentioned in the opening statement that one of the key savings was £2·1 million because of reduced costs in relation to consolidation, given the fact that we were able to sell some of our buildings this year. That realised savings for us.

Mr Frew: Your paper states:

Was that what you were speaking to?

Mr Patrick: Yes. It is not that we are closing down a division; we are looking to streamline the processes in divisions so that vacancies do not necessarily need to be filled.

Mr Frew: You knew this time last year that, even if the starting position of the budget were tight, we were going to have bumper monitoring rounds. We know that, this year, we are not going to get bumper monitoring rounds, so, as my colleague Diane alluded to, why did you not put everything up front? Why are you hoping for money in-year to make up any deficit?

Mr Patrick: We are not necessarily hoping for further money. We are trying to spread out, for example, the capital cost more where we can, which would maybe spread it into future years. We certainly do not expect to get any further resource funding once the budget is set. Some capital tends to appear during the year. Equally, with IT costs, such as a refresh of laptops and desktops, those are not specific to the Department; it also happens in other Departments. That is where it may be a good call in monitoring rounds to look for those to be funded.

Dr Aiken: Thanks very much indeed, Gavin and team.

Some members mentioned our 86% pressure: I think that you said that over-planning accounts for about 20% of that. That knocks the figure down to 66%, which is about £17 million.

You said that that might lead to you holding on to, stalling or not delivering projects, particularly IT projects. The permanent secretary, Neil Gibson, was in front of us not so long ago, and he argued strongly that capital spend needed to be spent on things such as Integr8, LPS's NOVA and the rest of it, because getting those things was vital, as the entire system would otherwise collapse in a heap. I do not really understand how we are contemplating stopping those projects, if they are vital.

Mr Patrick: I am not suggesting that any projects be stopped. We might be able to reprofile them so that the spend will be stretched out over a longer period. The Integr8 project is not capital; it is resource. The contract for NOVA has not quite been signed yet, so there may be delays that impact the costs that were initially forecast. It is about profiling the spend and working with whoever our contractors are so that it aligns with the funding that we have available in the year.

Dr Aiken: Let us get this right. The permanent secretary told us that the projects were vital and could not be stopped, reprofiled or whatever it happens to be. We are now in the position of having potential pressures that mean that we might have to delay them because the contract has not been signed.

Mr Patrick: It is not all in NOVA. We can look at other areas. I refer to the laptops and desktops. At the moment, £8 million is forecast as the cost of replacing them over the year for all Departments. The reprofiling and delays could be in that area. Laptops might not be refreshed within the period that they normally are. We might also look at the spend on property maintenance. When I talk about reprofiling, I am not necessarily talking just about the big projects and NOVA; it is across the whole capital forecast.

Dr Aiken: Do we know roughly how much we are likely to bring in from selling off the estate? Obviously, you cannot leave it sitting empty for a long time. We have noticed that lots of places have "For sale" signs stuck up beside them. Do you have an idea of that?

Mr Patrick: We are working through that at the moment with colleagues in CPD to see how much we could realise next year that we could take account of in the opening budget. That would then release funding and spend to go against the pressure that we are talking about.

Dr Aiken: Would it be appropriate, Chair, for us to ask the Department to give us a rough idea of what it has put up for sale to see whether we are getting good value for money for it? That would be helpful.

The Chairperson (Mr O'Toole): Yes.

Dr Aiken: That is it. Thanks.

Mr Tennyson: I am happy enough, Chair. All my questions have been addressed.

Miss Hargey: Same.

The Chairperson (Mr O'Toole): Something that relates to that occurred to me. It may not be in the Department's bailiwick, but I think that there were bids for Integr8 and NOVA or, at least, for one of them to the public-sector transformation funding but those were unsuccessful.

Mr Patrick: That is correct.

The Chairperson (Mr O'Toole): Will you remind me of whether any of the Department's bids to the public-sector transformation board (PSTB) were successful?

Mr Patrick: No.

The Chairperson (Mr O'Toole): As I said, this might be outside your bailiwick, but I am not aware of whether final awards have been made or when that might be. Do you know?

Mr Patrick: I am sorry. I do not have that information. It is not being led by my team.

The Chairperson (Mr O'Toole): OK. That is helpful. There do not seem to be any further questions.

We on the Committee would welcome continued updates from the Department so that we are kept abreast of when it signs off on its budget. We also would like more of an explanation about the fact that the Department is starting with a pressure of 86% of the allocation. That is a large amount, so we would like to be kept abreast of actions on that.

Mr Patrick: As I said, as part of the opening budget that has been agreed, we will formulate how that is managed. That is exactly what we are working through. We will absolutely pass that information to the Committee.

The Chairperson (Mr O'Toole): Is that one of the reasons why the sign-off has been delayed?

Mr Patrick: It is about both pressures. Until I can assure the permanent secretary and the Minister that we can live within the budget with the plans that we have in place, we cannot have an agreed position. We are working closely to that.

The Chairperson (Mr O'Toole): It is pay on the resource departmental expenditure limit (RDEL) side and the projects on the CDEL side, particularly NOVA, that are creating those pressures, which, at this stage, you cannot sign off.

Mr Patrick: We do not have a matching budget against that. We need to work through how we can do those things and live within the budget.

The Chairperson (Mr O'Toole): It seems unlikely that you will manage your CDEL pressures down to zero, but I presume that you would like to get them down from £25 million on top of the £32·5 million.

Mr Patrick: Absolutely. Like I said, we can use different measures to live within that budget such as over-planning, potential further income and reprofiling the projects. That is what we are looking to finalise.

The Chairperson (Mr O'Toole): It would be a wee bit hard, then, for the Finance Minister, the permanent secretary and Joanne McBurney to say to their counterparts in other Departments, "You are not allowed that few million quid overcommitment, whereas we are allowed to have it, and, by the way, we have this unfunded £20-odd million of capital pressure".

Mr Patrick: From my experience of other Departments, I know that there is normally an over-planning element in their initial plans for capital, because there tends to be slippage in capital. We will absolutely come back to the Committee with the plan that we have put in place to live within the budget.

The Chairperson (Mr O'Toole): OK. We would like to be kept abreast of that, particularly given the Department and the Committee's roles on spending controls elsewhere.

Thank you, Gavin, Cathy and Clair, for that briefing. We appreciate it.