Official Report: Minutes of Evidence

The Chairperson (Mr McGuigan): I welcome from the Department of Health Mr David Keenan, interim financial director; Ms Danielle Mallen, head of financial management; Mr Paul Montgomery, investment director; Ms Catherine Fitzpatrick, head of capital resources; and Ms Nicola Shields, interim head of financial planning. You are all welcome to the Committee. We have your paper, and we will hand over to you for some brief introductory remarks. We will then take questions.

Mr David Keenan (Department of Health): Thank you, Chair. I will start by making a few opening remarks, providing an update on the 2025-26 resource budget and the impact that that will have on the multi-year budget. I will then hand over to Paul to cover the capital position.

You will be aware that, at the start of this financial year, Health faced a funding gap of £600 million, which included an estimated £200 million for Health and Social Care (HSC) pay. In May, our permanent secretary briefed the Committee that he had established a systems financial management group to drive efficiencies and cash-releasing savings to reduce that funding deficit. A number of work streams were developed to drive value across all aspects of our system and, in tandem, work towards reducing our cost base, making it more affordable and sustainable going forward.

The plan was to deliver £300 million in savings internally and seek help from the Executive to cover the remaining £300 million. To date, Health has received £25 million in support from the Executive in June monitoring. To put that into context, at this time last year, Health had received £472 million in support. The Department has identified savings plans of £285 million to date, but, despite those efforts, we are unable to fully eliminate the overspend. That is not unexpected, as achieving cashable in-year savings on that scale was always going to be challenging in the timeline to the end of this financial year.

You will be aware that the Executive have approved the Minister's direction on the 2025-26 HSC pay award and agreed that Health will have first call on up to £100 million of the funding available in December monitoring.

However, that will still leave the Department facing a significant funding gap. Even if the £100 million is confirmed, it will address only up to half the pay pressure. As a minimum, the Department will still need to find a further £100 million for pay and an estimated further £100 million to break even. We continue to make every effort to reduce that figure through further efficiencies and savings, but our assessment is clear: without further support, which is not currently expected, we will not be able to break even.

Given the commitments that the Executive have made on pay, DOF did not invite Departments to submit resource bids in December monitoring, otherwise we would have bid for the remaining shortfall. In December monitoring, we have bid only to cover our depreciation requirement for this year, with a bid for an additional £10 million.

You will be aware that the Executive plan to agree a multi-year Budget for the next three years, which, ideally, would allow us to prioritise spending and investment more effectively in the long term. However, given that any overspend this year may be deducted from our 2026-27 budget, the next financial year will be at least as challenging as the current one. While it is not possible to provide a definitive assessment of our future funding position until a settlement for future years has been reached, it is likely that we will not have all the resources to do everything that we want to do or everything that needs to be done.

I will hand over to Paul, who will cover the capital position.

Mr Paul Montgomery (Department of Health): The capital budget is under less pressure than the resource budget in the current financial year, but it faces similar challenges in future years. In 2025-26, the opening capital budget for the Department was £391 million, which was reduced to £379 million in June monitoring, mainly due to the surrender of a reduced requirement for the mother and children's hospital project. At December monitoring, a further £30·3 million reduced requirement is being declared in respect of that project. That is linked to changes to the water system in the new children's hospital that are under consideration following the experience of the maternity hospital. Some of the equipment originally planned for procurement, purchase and vesting in the current financial year may no longer be suitable, following the water system redesign. The lower-than-projected requirement for that project in the current financial year means that additional funding will be required in future years.

From the briefing paper, the Committee will see that two capital bids with a combined value of £31·8 million have been submitted as part of December monitoring. The first is for £26·3 million for the replacement of servers, IT infrastructure, equipment and devices across the health and social care sector to reduce the risk of systems failing, which would have potentially significant consequences for the delivery of care. The second is for £5·5 million for backlog maintenance in the context of the estimated £1·6 billion backlog maintenance requirement. The bids submitted as part of December monitoring were based on the pressures identified by arm's-length bodies (ALBs) and business areas, the funding available from internal sources and the expected capacity to utilise the additional funding at this point in the financial year.

I turn to future years. We submitted capital bids with a combined value of £3 billion as part of the Budget process, which will cover the four-year period 2026-27 to 2029-2030 for capital departmental expenditure limit (DEL). On the basis of the Department of Health's share of the allocations made in the Budget process last year, we expect to receive between £1·6 billion and £1·8 billion over the next Budget period. The scale of the funding gap means that, as with the resource budget, difficult decisions will need to be made, with priority being given to inescapable pressures and limited scope to take forward other projects over the four years. The precise details will depend on the outcome of the Budget process, which will inform the development of a 10-year capital investment plan for the Department of Health. The plan will set out the projects to be funded over the next decade to provide the health and social care sector with a degree of assurance and clarity on the capital funding position.

The Chairperson (Mr McGuigan): Thank you. There is a lot to go through.

The trusts have made savings of £59 million in phase 1 and £55 million in phase 2, and the strategic planning and performance group (SPPG) has made savings of £43 million. The obvious question is about the impact of those savings on front-line services and the SPPG in particular, which is a commissioning service. Does that saving equate to services not being commissioned or to an impact on patient outcomes?

Mr Keenan: A lot of the savings that have been given up are because of less demand. They were holding budgets for things such as high-cost drugs, which are demand-led. That has made a contribution to the savings that they have delivered. As well as that, there has been slippage in recruitment and, internally, SPPG has been doing its own recruitment control and managing vacancies. With the savings that I have mentioned, the impact on front-line services should be minimal.

The Chairperson (Mr McGuigan): I was going to ask about that. Paragraph 10 states:

I was amazed when I read that. I am amazed that you even say it, because I can see no aspect of our health service that is facing a reduced demand. Every day, it is more people, more issues, lack of capacity and lack of workforce. Everywhere I look, as Chair of the Health Committee, never mind as an ordinary MLA, I see more demand. I am really confused and shocked by that language.

Mr Keenan: You are right: demand continues to outstrip supply. However, we need to consider the size of the Health budget and the fact that certain budgets are for specific things. For those specific things, you can have a reduction in demand. Then it is about asking, "If that demand is down, what are the choices? What is to be done with that funding?". If we were in a situation where we had a balanced budget, that reduction in demand and that service would be taken and switched immediately to fund where demand outstrips supply in another service. However, where we are at the minute is that the Department is attempting to break even. We have turned over every stone. At the beginning of April, something may have looked as though it was needed, but maybe there were delays in governance, the development of business cases, the recruitment of staff and that has meant that that budget has become available. Given that we are trying to manage a deficit, we are pulling those budgets back to address the funding gap.

The Chairperson (Mr McGuigan): I understand that Health, like every other Department, has a tight budget, and it is really important that we look in detail at each service. It was just the reference to demand-led programmes that shocked me, and £43 million from a commissioning service seems a particularly large saving across the trusts. It would be useful for me and the Committee —.

Mr Keenan: To get a breakdown of that?

The Chairperson (Mr McGuigan): Yes, to get a breakdown of that, so that we can see the detail, and it might make more sense when we do that. I would appreciate that.

Mr Keenan: Yes. A lot of it is one-off savings. They will be savings for this year, but they will not be available.

The Chairperson (Mr McGuigan): You talked about drugs. Every day, my constituency office gets letters from constituents who are not given access to drugs that, they think, would help them. The detail will be useful.

I will move on to the waiting lists. We have previously had a conversation with the permanent secretary and the Minister about the £215 million and the £80 million that was "earmarked" versus "ring-fenced". According to the paper and the Minister, it was not necessary in meeting the Programme for Government (PFG) targets, which may in itself be good. However, we should not draw a line in the sand and say, "When we get there, we will stop treating people or dealing with people who are on the waiting list". A lot of people will be concerned that money, whether earmarked or ring-fenced, was allocated for a specific purpose, such as dealing with waiting lists, and we are not going to do much more, though we could do, to reduce them. The figures are out: there was some reduction in waiting lists, but there are still an awful lot of people on them.

Mr Keenan: It is probably best if I break down the £215 million that was in the budget. Some £85 million of that was to address red-flag/time-critical cancer patients. That is going ahead and is fully committed. That funding, at the minute, has delivered something in the order of 122,000 additional interventions. The Programme for Government target was for 70,000 procedures, so that figure alone has already exceeded that target. The Department, of course, will want to do more.

The Chairperson (Mr McGuigan): Sorry, I —.

Mr Keenan: Let us look at the rest of that funding as well. The £50 million was to address long waits. Again, that £50 million is fully committed. The latest figures show that there has been a 29% reduction in outpatient waits among those long waits. There has been a 41% fall in treatment waits for people who been waiting for over four years. The Department wants to do more.

The £80 million was for building capacity in the health service to address waiting lists. The total was £215 million, but there were three distinct amounts within that. When the Executive allocated that £80 million to the Department, they gave the Department flexibility so that, if that could not be fully utilised, it could be used to address other pressures in the health system. It got to the stage in the year when the Department was looking at progress, and, obviously, you want to do more, but we were achieving the Programme for Government target. Was there a possible opportunity with that pot of money? Can it be fully utilised in this year?

The other thing to bear in mind is that the funding was not allocated recurrently. In order to build capacity in the health service, you are talking about recruiting teams of staff to address waiting lists. If you do not have that funding recurrently, the Department has to overcommit on the basis that the funding may be available the next year. Where you have staffing costs, you really want to guarantee that that funding will be recurrent.

The Chairperson (Mr McGuigan): Those are critical decisions. You talked about the red flags and the 122,000 interventions, and we are definitely reducing that. We still have people whose needs are not being met by the targets, however, and that is the point that I am making. I am not denying that the Department of Health will or may meet its Programme for Government targets; I am saying that we should not stop at a line when we meet our targets, particularly when we have people who are on red flags.

Going back to that time, my narrative of the Programme for Government discussion — I am not on the Executive, so I do not know — is that I can remember, because it was only a wheen of months ago, that the Minister said that he needed £215 million to meet that requirement of reducing waiting lists. That was around February/March/April time, when the Health Minister said that he needed £215 million. The Executive gave him £215 million, and, a few months later, we are being told, "There is £80 million that we asked for and said that we needed, but we do not need to do what we said we needed it for". Is that a correct interpretation?

Mr Keenan: The other issue was that that funding had already been given to the Department in the draft Budget, so it was within our baseline. When the final Budget came out, that funding was ring-fenced for waiting lists. When that funding was given in the draft Budget, it was already committed to other services. The ring-fencing of that £165 million caused the Department a problem.

When it came to the £85 million, the Department had already committed something like £76 million to address the red-flag and time-critical patients, so that was not as big an issue. It was not new money for the Department at that stage. When you move from where we were with our financial plan to where we were in the final Budget, that was not new money. That was always going to give us a problem. That was creating a gap; the Minister would have had to make the choice to extract that from other services and direct it towards waiting list times. We were talking about the Programme for Government target, and I mentioned the 122,000 interventions. That is where they are now; the Department will still drive to improve on that as well.

The Chairperson (Mr McGuigan): I am not negating the good work that is going on; I am just saying that most people will wonder why the Department, when it had that £80 million earmarked for a particular thing that, most of the public think, is crucial, is no longer putting it towards that when it could do so much more.

That is the point that I am making, and it was obviously a political decision.

On capital spending, paragraph 19 of the paper refers to £26·3 million for IT equipment and so on. I have raised, a number of times, the Comptroller and Auditor General's report from a few months ago on imaging services, including CT and MRI scanners. Will much of that £26 million go towards replacing, renovating and rejuvenating CT and MRI scanners across the trust areas?

Mr Montgomery: We have made a bid to DOF for that money. Before we made the bid to DOF, we looked at our internal resources and the pressures that had been identified internally, rather than having to make a bid to DOF. We have allocated £7 million to imaging diagnostics, which will include CT scanners etc.

The Chairperson (Mr McGuigan): During my visit to the Mater Hospital last week, I engaged with a number of patients and care workers who mentioned the CT and MRI scanners. A group of philanthropists is prepared to fund equipment in that hospital, and I assume that that happens elsewhere. How can the Department avail itself of philanthropy or groups that are prepared to donate money for a specific item, such as a CT or MRI scanner?

Mr Montgomery: It is mainly for the trust to deal with that.

The Chairperson (Mr McGuigan): OK.

Mr Montgomery: The trusts have charitable foundations. For example, the Friends of the Cancer Centre is willing to make a significant contribution to the haematology project. Each trust has its own charitable foundation, which the money is allocated through and is used in part for projects. However, if Bill Gates wanted to offer us £100 million for capital projects, we would not say no, and a way would be found.

The Chairperson (Mr McGuigan): Fair enough.

The initial capital budget was £390 million, and only £70 million has been spent. Is that right?

Mr Montgomery: Sorry, I do not recognise that. What is the source of your figures?

The Chairperson (Mr McGuigan): Sorry, "not spent". There was £390 million, and £70 million has not been spent. We had a discussion with the permanent secretary and the Minister about certain capital projects and the interaction between the Departments of Health and Finance. Where are we at with that conversation?

Mr Montgomery: I am still not sure. Were the figures in the briefing?

The Chairperson (Mr McGuigan): There are capital projects, such as the Birch Hill centre for mental health and the children's unit at Altnagelvin Area Hospital, for which money was set aside initially, and that money was not allowed to be spent because of conversations with the Department of Finance.

Mr Keenan: There was a potential capital to resource switch.

Mr Montgomery: At the start of the year, we talked about £46 million being held for a range of partially committed projects, including the Birch Hill centre, and it was to be subject to a review. We looked at the profile of those projects, because they go over a number of years. It is not just about making sure that they are affordable this year; they have to be affordable in each year, because we cannot stop and start the funding. When we look at the profiles for capital projects, they tend to start small at a couple of million pounds, but they rapidly grow and then stop. The projects that looked affordable this year are not affordable next year and the year after. We decided that we could fund some projects from the £46 million, and the Minister has agreed to fund Fintona fire station, Cushendall fire station, the haematology project and the Antrim Area Hospital electrical infrastructure project. That leaves £30 million, which was to be held for a capital to resource DEL switch, because of the pressures on resource DEL, as mentioned in the resource DEL paper. However, subsequently, the scale of the pressures that we faced on the capital DEL side, particularly for digital projects, such as the diagnostic project that you referred to, meant that we required the £30 million for capital projects. Furthermore, the capital to resource DEL switch requires approval from the Treasury and/or approval at the Executive level, but no Department has the spare resource DEL to allow the counterparty for the capital to resource switch.

Subsequent to the paper on the resource DEL position being sent to you, it was decided that it would be best to allocate that £30 million. That money has now been allocated primarily to digital projects. You will ask, "Well, what about the Birch Hill centre for mental health and all the other projects?". They will now be considered as part of the development of the capital investment plan to see what projects we can fund over the coming years within the available budget. Of course, the key point in that will be the Budget outcome for the Department of Health over the coming years. That will determine the profile of how soon we can take forward those projects. The Minister is exceptionally keen on a lot of those projects, and we are keen to take them forward as early as possible. However, if the funding is not there, we simply cannot do it.

The Chairperson (Mr McGuigan): That moves me on to the last point in my questioning: the three-year Budget. The other day, in the Chamber, I heard the Finance Minister say that he had been engaging with the Department and expected to take a draft Budget to the Executive this side of Christmas. I hope that I am not misquoting my party colleague, but I am pretty sure that that is what he said. We are not far off Christmas, so I assume that the Department has sent in a draft budget to the Finance Department. Given the engagement, what can we expect to see with regard to improvements to the service as part of the three-year Budget? I am thinking of things that were always held back because of workforce planning and some of the things that we have talked about here.

Mr Keenan: All of that has been bid for. As part of the three-year Budget, we submitted our return in September. The Department has bid for what we call our "inescapable pressures" to cover the likes of pay, inflation and the national living wage. We have also submitted nine high-priority bids that are linked to and will support the Department's reset plan. Those are for things such as primary care reform and social care reform, which includes the reform of adult social care, the Adult Protection Bill, funding for the workforce strategy, mental health reform, acute services, some in secondary care on improving diagnostic capacity and imaging, and pathology services.

The Chairperson (Mr McGuigan): On pay, the Minister has given a commitment that he will not do what he did this year. When he gets his budget, he will give a commitment to deal with the pay issue. Can we expect that commitment to be lived up to for healthcare staff and, in particular, social care staff, who were promised the minimum living wage, but that has not been delivered yet? Has that been built into the budgets, moving forward?

Mr Keenan: It is built into the plan at the minute, but, obviously, that will depend on what we see in the outcome of the Budget. However, as you made clear, one of the Minister's priorities at the minute is to address those at the outset. Both of them are built into the financial plan, but what we can do will very much depend on what funding is available.

The Chairperson (Mr McGuigan): OK. I will move on to members.

Mr McGrath: Thank you for your presentation. Health is probably the toughest Department to work in, and looking after the money in that Department is probably the toughest part of the toughest job, so thank you for the information.

One of the remaining areas on the capital side is the work for the backlog in maintenance. It says in the paper that that sits at £1·6 billion, which is equivalent to almost half of the value of the estate. Last year, you made bids for £20 million, but that was unsuccessful. In the December monitoring round, you are looking for £5·5 million for estates. Given that the health services will be only as good and as safe as the places that we deliver them in, will you detail some of that breakdown? I ask that because £5·5 million of £1·6 billion, works out to be about 0·3% that we are looking for to try to fix up those buildings and clear the backlog. What do we do with those buildings?

Mr Montgomery: We were careful about bidding at this time of the year because there is a risk that we ask for the money and then we are left with a big underspend at the end of the year. Before we bid for it, we said to the arm's-length bodies (ALBs), "What could you spend this on? Make sure that you can spend it". That is why it is £5·5 million. We would have liked to bid for more. We are bidding for quite a large amount of money. As I said, we bid for £20 million in June monitoring, but we did not get that. It is all great for us to say, "Put in a £50 million bid", but, first, we will not get it, and, secondly, I doubt whether we could spend it. Over the Budget period, our capital bids will be £30 million each year. I do not have the detail on the specific projects with me — we can provide that to you — but we will check with the trusts and say, "Here is additional funding. Can you spend it?", and we hope that they will allocate it to the most critical projects.

Mr McGrath: The information that you have provided says that 60% of the estate is:

What does not being compliant with statutory regulations mean? I have an office. We are given the money by the Assembly for that, and we have to comply with statutory obligations, such as having insurance in place and meeting health and safety requirements. Are there massive amounts — 60% — of our estate that are not compliant?

Mr Montgomery: I am afraid that that is a question for our health estate colleagues. They are the ones who make the assessment. The 'State of the Estate Report' will provide detail on the background to that. We can provide that report to you. I am sorry; I just deal with funding, not the assessment of the estate. The architects and quantity surveyors have specific standards for the estate, and they determine the amount of funding that is required to bring the estate — each piece of accommodation or land — up to the required standard.

Mr McGrath: The report that we have says that 20% of the estate is deemed "unacceptable". Obviously, it is not your side of the house, but you have provided us with that report. It seems weird for us to get a report that says that works need to be done and 20% of our health estate is unacceptable without asking that question. Maybe we could get a breakdown of that. Maybe there is a difference in the interpretation of "unacceptable". If something is "unacceptable" in the context of statutory requirements, when we are talking about the buildings to which we are asking our public to go to get their healthcare, that is something fundamental that we need to address. Maybe we could get a breakdown of what those issues of "unacceptable" compliance are so that we can determine whether we need to investigate that further.

I will finish with an easier question. I asked the Minister about an MRI scanner for the Downe Hospital. Where does that sit? I think that I have been asking that question for the 10 years that I have been here, and I keep getting told that there is a capital bid; that we are waiting for more staffing in the trust; or that there is a bid from the trust to SPPG. So many people who are reliant on getting that type of scanning are having to drive right past a fully functioning hospital to go to another hospital to be scanned. That scanner has been on the list for so long, and, in the context of the available moneys, the cost of that seems quite small in comparison. Where does that sit? What are the next stages in the process for that?

Ms Catherine Fitzpatrick (Department of Health): It is one of the new diagnostic schemes, and I think that it is approximately £10 million. Is that right?

Mr Montgomery: Again, it depends. It is a new project. The priority will be the committed projects, the inescapable pressures that we really have to spend money on and the partially committed projects. If we get only £1·6 billion to £1·8 billion instead of the £3 billion that is needed to include the new projects, it will be hard to see how we will be able to take many of those projects forward, but, obviously, we will look at them on an ongoing basis and try to take forward as many as possible. However, the financial position means that we will simply not be able to afford to take forward a lot of good projects.

Mr McGrath: I ask you to come back to me on that specific project on the basis that I do not think that it is new. As I said, I have been here for 10 years and have been speaking about the MRI scanner at the Downe Hospital for 10 years. At different versions of the Committee, we have been told that the project is in different places. If we could get a résumé of where it is and what the next stages will be — whether it is going to happen or not — we would at least know what those stages are. That would be very useful.

Mr Montgomery: We call them "new projects", but that is probably a misnomer. They are "not committed projects".

Mr McGrath: OK. Fair enough. So they could be old projects?

Mr Montgomery: Yes.

Mr McGrath: I get you.

Mr Montgomery: There is stuff here that I recognise from past monitoring rounds.

Mr McGrath: That was the easy question. Thank you for that.

Mrs Dillon: You have already answered the question about social care workers. We need to understand what is happening there.

Following on from Colin's question about buildings and estates, is there any maintenance money for those, or is money being spent to keep unused sites or buildings in the health estate safe and maintained?

Mr Montgomery: It is difficult to know. There are different types of maintenance, depending on its form. Some of it will be resource spending, and some of it will be capital.

Mrs Dillon: I understand and am well aware of that. I would like to get the detail on whether there are unused sites or buildings that are costing the health service money. That was a significant problem for the PSNI, and it is reaching the point only now where it is getting rid of those sites. If that is an issue, we need to know about it. We need to understand whether we are throwing good money after bad or whether there is potential to make money from such sites. It is important for us to understand that.

It is great that there will be savings on new drug treatments due to the reduced prices. Is the recent pharmaceutical agreement between the US and the British Government likely to have any impact on prices here? You may not be able to answer that, so I am content for you to come back to me in writing on that.

Mr Keenan: We are not aware of anything yet. We are not yet aware of where we could assess the impact. It is, however, on the Department's radar.

Mrs Dillon: Are you aware of whether new drugs have been factored in to the budget? I am thinking in particular about the ones that the National Institute for Health and Care Excellence (NICE) recently approved and that are not being made available to patients here, specifically those life-enhancing, life-extending and, potentially, life-saving drugs for young women, with young families, who have breast cancer. Have new drugs that are coming online and that are not currently being provided here been factored in?

Mr Keenan: In our bid to DOF, we have factored in an amount for new drugs in that area, as advised by SPPG, but I cannot give you an assurance on the particular drug that you have mentioned.

Mrs Dillon: I understand that; I do not expect you to give that assurance. Chair, can we ask SPPG whether it has included in that only those drugs that it has decided at this point to commission? Do you think that it has put in a contingency for drugs that might come online?

Mr Keenan: Once NICE has cleared a drug for use in Northern Ireland, it will be included. SPPG will look at the timeline for that.

The Chairperson (Mr McGuigan): Departmental officials will be up next week to discuss issues from a pharmacy point of view, so we can flag the issues with them, and they can answer those questions.

Mrs Dillon: Yes. Can we flag those in advance of the meeting so that they have the answers when they come here? That would be helpful.

Miss McAllister: Thank you very much for the presentation. I would like to reflect on the fact that the entire Executive are in a particularly difficult financial situation, as is, therefore, each Department. It is deeply frustrating. That is why, as an Executive partner, we in Alliance queried the ring-fencing of another Department's budget, no matter how good the intention behind that. We recognise that it is difficult and frustrating when something is ring-fenced but you are already spending on it. We understand the difficulties that arise there.

I listened to what you said about not repurposing but changing the £70-odd million in order for that to be spent and then making savings elsewhere. You also used the word "efficiencies". I am just trying to get it clear in my head what are savings and what are efficiencies. What is the balance between those? Obviously, I am not looking for an exact percentage — I do not expect you to have that in your head — but is it more on the savings side than on the efficiencies side?

Mr Keenan: It is more on the savings side in terms of the savings that have been delivered. It also depends on what you classify as an efficiency. For example, has recruitment control been built into savings? If you are controlling administration staff, there is an argument that you are being more efficient. If you are containing the administration costs within a service, it is a saving, but you are also being more efficient in using that resource. It is a difficult distinction to make, but, generally, what has been generated so far in the savings plans in the Department fall more on savings than efficiencies.

Miss McAllister: Has much work been done on what could be done better or differently to produce those efficiencies? We do not get a lot of detail on that. I am not talking about hundreds of pages but just detail on what can be done better to produce efficiency savings.

Mr Keenan: Some of the work streams in the systems financial management group that the permanent secretary has created are looking at things such as labour skills mix, unwarranted clinical variation and diagnostics. Those were all identified in a number of finance summits at which the permanent secretary got all the trusts together to look at areas where they believed that efficiencies could be delivered.

Miss McAllister: Is that a new thing that the new permanent secretary set up?

Mr Keenan: Yes. It is part of the work stream in the systems financial management group that he created. We have not seen a lot of traction in what it is delivering to date in-year. The drive is still there. The work streams in the systems financial management group were, in part, about not only delivering just cash savings that we could use this year but looking at the long-term situation. How can we bring the cost base of HSC down? Those are three areas that I can immediately think of where the Department is looking to drive efficiencies. We would hope that, when we move into 2026-27, we will start to see outcomes and benefits coming out of those work streams.

Miss McAllister: That is important.

Mr Keenan: There is a procurement work stream as well. Again, there has not been a lot of traction on that to date, but it is an area that should be able to deliver efficiencies in the longer term and help to reduce the cost base.

Miss McAllister: That is important, and given that there is so much spend on health now and that the focus is on in-year savings, we say over and over that there must be something very wrong with the way that we are doing things. We are spending more and more money without getting better outcomes, yet we still ask for even more money. It is particularly frustrating that it is just now that the new permanent secretary has said that we need to get a hold on things and deliver efficiencies. It is almost as though it is better late than never, yet it is still important that it be done.

Mr Keenan: There is a drive now to accept that things need to change, given the cost base.

Miss McAllister: Why was that not the case before?

Mr Keenan: There have always been attempts. The permanent secretary has brought in things that he has seen work in other jurisdictions.

Miss McAllister: Was there just an acceptance that we —?

Mr Keenan: The Department has always tried to deliver more, but we came up against obstacles. There is now a recognition that we cannot go on doing things as we have in the past. We need to change our thinking, and things need to be done differently.

Miss McAllister: Are those obstacles being removed? Sorry, if that means people, I did not mean that to sound flippant. If there are cultural obstacles, have they been removed, or are they still posing a challenge? Are they political, too, obviously? I understand that transformation is a political issue, but there are others.

Mr Keenan: Whether we have got the obstacles out of the way will come out as we drive the process forward. The only way that we will be able to achieve this is by removing them, and the Department is determined to do that.

Miss McAllister: We are determined to keep an eye on that and work with you on how we can support it. That is important. Part of the efficiencies is transformation, which I mentioned. The paper that you provided mentions — sorry, I do not know where — the new multi-year transformation bids and that additional money per year will go into those. We know that multidisciplinary teams will be rolled out under that transformation bid, but has the Department put anything else as a first priority under that transformation bid?

Mr Keenan: This year, we have two bids on transformation that are through to the final allocation. One is for e-prescribing and the other is for transforming family support. It is positive that two areas like that have made it to that stage. It will now be up to the Department of Finance and the Executive to agree that.

Miss McAllister: What do you mean by "transforming family support"?

Mr Keenan: Sorry, I have not got the detail of that.

Miss McAllister: That is fine, I do not expect you to. I can follow that up. Those were all my questions for now.

Mr Donnelly: A couple of the questions that I was going to ask have been asked already. I suppose that that shows that we are all thinking about the same things. I find this stuff incredibly complex, and there are a few things that I want to ask so that it makes more sense in my head. It was announced recently that extra procedures have been done and that numbers on waiting lists for procedures are falling. We have heard about that. We heard today that there are now more people in Northern Ireland on waiting lists than ever before. Are you aware of the figure of 542,451 people who, as of the end of September, were on a waiting list to see a consultant for the first time? We have removed £73 million from the waiting list programme, yet more people are now on waiting lists. Constituents of mine are waiting huge, long periods of time and spending large amounts of money to go private instead. You can see the impact that this has on people. Were you aware of that trend of the amount of people on waiting lists continuing to grow?

Mr Keenan: No, I was not.

Mr Donnelly: No? OK. That was announced just today, but the figure is from the end of September. They are Department of Health figures, but you were not aware of them?

Mr Keenan: I was not aware of that, no.

Mr Donnelly: OK. It was, of course, good to hear previously that more and more procedures are being done, and that we have, if I heard you correctly, met the Programme for Government target of 70,000.

Mr Keenan: Yes, we have gone way beyond it, and the Department wants to do more. The Department is determined to do more between now and the end of the year. It is unfortunate that people are continuing to wait on lists. The only thing that I can say about the £73·5 million is that that was to build capacity. You could say, "How much we could have done with that money in-year" as well. We wanted to do more, obviously.

The Department and the permanent secretary have an objective to try to achieve break-even — to achieve what he can do. The Department of Finance and the Executive gave us the flexibility to divert that funding if it could not be fully utilised. I take your point that it is disappointing that those figures continue to rise. They are not there, but the Department is determined to address the waiting lists and to bring the numbers down.

Mr Donnelly: Does the fact that you have been able to go significantly beyond the target, which you said that you have, suggest that the target was too low?

Mr Keenan: That would be an understandable interpretation.

Mr Donnelly: OK. What should it have been?

Mr Keenan: That is beyond me. I would not be well-informed enough to say that.

Mr Donnelly: It is good to hear that that bit is a success.

We hear about three-year budgeting all the time. What are the savings, as you see them? Where are those areas?

Mr Keenan: Sorry?

Mr Donnelly: We hear about three-year budgeting; the Minister brings it up all the time. What are the key areas where you could achieve significant savings?

Mr Keenan: That is still being developed. We expect the position in 2026-27 to be very difficult, given the fact that any overspend this year is likely to come off us next year. Next year is going to —.

Mr Donnelly: It is £100 million so far.

Mr Keenan: Yes. Once we get confirmation of the funding that is available from December monitoring, that will set the balance of pay that we are going to effectively overspend on. Upwards of £200 million is going to come off next year's budget. The Department is very aware that, next year, we are going to have generate savings internally to basically do anything that we want to do. The plans are still being developed.

Mr Donnelly: Why was the pay deal not factored in at the start of this year? Obviously, pay uplifts happen regularly, but it seemed to come as a surprise later in the year.

Mr Keenan: It was factored in at the start of the year at the amount that the Health Department in England was allowing for pay awards, which was a lower amount. When it comes to affordability, it was about the sheer size of it. Are you asking why the Department did not try to pay it earlier?

Mr Donnelly: No. I have heard other Ministers say that they set aside money in their budget for it. It seems that, in this case, the Minister did not, and he then had to ask for it all.

Mr Keenan: The quantum of it in Health makes it incredibly difficult to set it aside at the start of the year. It comes down to choices. For example, the total National Insurance increase for the Department of Health was about £140 million. We did not get that full support from the Executive. We funded the National Insurance increases for the likes of family health services and the independent sector because that was an inescapable cost that those sectors had incurred. It might have come down to a choice. If we wanted to fund pay, we might have had to say, "No, we're not funding any of that", even though that was an inescapable pressure. Everybody deserves to be paid and rewarded, but the Minister still had a choice to make about pay, whereas all the support bodies behind Health, including our arm's-length bodies, were going to incur those National Insurance costs anyway. Things such as that were funded because they were inescapable.

The national living wage was another one. It cost between £60 million and £70 million last year. It is a legal requirement; it had to be funded. We were aware of the pay pressure, but the quantum was unaffordable, even at the start of the year. It then grew once the pay review bodies made their recommendations in May; their recommendation was higher than what we had allowed for by about £50 million.

Mr Donnelly: Next year, will that forecast be made at a very early stage so that pay uplifts are factored in?

Mr Keenan: Pay is always factored in, but yes, the Minister has said that he wants to deal with pay at the outset. That is in the financial plan at the minute. We will have to see what funding is available and how we deliver that.

Mr Donnelly: You are going to run that from day 1, effectively.

Mr Keenan: We are going to try.

Mr Donnelly: Will you do that over a three-year period?

Mr Keenan: The pay award will be year on year, so it will just be for the first year. It will then be looked at in 2027-28.

Mr Donnelly: We talked about demand-led services. My understanding is that demand goes up and down. I assume that that was modelled in those particular services. Can you give us an example of a type of demand-led service for which there was not the demand that you expected? What was the reason for that?

Mr Keenan: One that I touched on earlier was the high-cost drugs. Basically, drugs are factored into the financial plan for specific purposes. It came about that there was less demand, and they were not needed. The breakdown that the Chair asked for will provide the detail of what you are looking for there.

Mr Donnelly: OK. I look forward to that. Thank you.

Mr Robinson: Thank you for the information. I want to understand better the piece around capital pressures and bids, specifically the £126·3 million for the replacement of servers and IT equipment. The paper refers to them "now" being out of warranty. How long were you aware that the equipment was going to be out of warranty? Have you bid previously for that? Surely it was not the case that you waited for the equipment to be out of warranty and then bid for moneys to replace it? It is quite stark. The paper says:

and that there is:

Mr Montgomery: That is from our digital health colleagues. We simply manage the funding. We receive the bid, but we do not manage the warranties and licences. That is a matter for digital health. There is an extent to which those are serious risks or not-so-critical risks. As you know, if a TV goes out of warranty, it does not necessarily mean that you cannot use it any more, but it is best practice to get it replaced. It is important that the equipment is replaced, but not all of it is critical. We expect our colleagues in digital health to continually review their licences and equipment to make sure that they are still fit for purpose. As I said, it is not within our remit.

Mr Robinson: So this wording is not as stark as initially painted.

Mr Montgomery: It is important. The position that we face in 2026-27 means that we are really under pressure. Prudent financial management is to address this year as many of the pressures over subsequent years as we can. That is what we have tried to do. I am not saying that it is not important to address it this year. It is not critical, but doing so will help with next year. It will become a pressure in future years, so it is better to fund it now.

Mr Robinson: The Minister said that he intends to increase spending on the transformation piece by £50 million each year out of the public-sector transformation fund. You touched on two examples: e-prescribing and family support. For my constituency, two key pieces of the jigsaw at Altnagelvin Hospital are the emergency department and the phase 5 paediatrics unit. I assume that there is no advance work on transformation that means that they could be funded as a result of that increase?

Mr Keenan: All the transformation funding is resource, I think.

Mr Robinson: All resource? Not capital? OK. I will bow to that.

Ms Danielle Mallen (Department of Health): There may be a small element of capital.

Mr Robinson: Fair enough.

The Chairperson (Mr McGuigan): Is this going to be included in the three-year plans? We hear regularly, and rightly at times, about how the Minister and his Department are trying to shift left with more investment in neighbourhood care, community pharmacy and care in the community. Will that be a focus of the three-year budget plan. To pick up on the conversation that you have had with other members here about different things, will we see a difference in the three-year budget that will arch the curve of how the Health Department spends its money so that it invests in things that will save value down the line and improve patient outcomes, which is ultimately the objective?

Mr Keenan: That will depend on the outcome of the Budget, but, at the minute, the investment in the neighbourhood model is part of the plan. It is a major thing in the reset plan. That is what the Department wants to drive forward. It is certainly the intention to direct funding towards that.

The Chairperson (Mr McGuigan): In response to a couple of things that I have asked him recently, the Minister has said that he knows that it is anti-strategic — for example, not paying Health and Social Care workers and so on. He is saying himself that that is anti-strategic. We have always said, at least since I became an MLA, that we need multi-year budgets. We are finally getting a multi-year budget, so we need to see improvements now that we have that. One of those improvements has to be that a Minister and a Department must be able to fund strategic initiatives that save money.

Mr Keenan: That will be part of the plan. As I touched on earlier, however, 2026-27 is going to be incredibly difficult. We would like to start that in 2026-27, and hopefully the following two years will give us the capacity to do more. But we would like to at least start that in 2026-27.

The Chairperson (Mr McGuigan): How much have you bid for in 2026-27? It was £8·5 billion this year.

Mr Keenan: It is over £1 billion.

The Chairperson (Mr McGuigan): OK. Sorry, £1 billion? After the £8·5 billion? Is that £1 billion extra?

Mr Keenan: A billion extra.

The Chairperson (Mr McGuigan): OK. I was thinking, "God, you will have been really efficient if you have gone from £8·5 billion to £1 billion". [Laughter.]

OK, fair enough. There are no other questions, so thank you very much. I appreciate that.