Official Report: Minutes of Evidence

The Chairperson (Mr O'Toole): We have in front of us Joanne McBurney, deputy secretary, public spending directorate; Maryann Smith, director, central expenditure division; and Patrick Neeson, head of Supply division; and Ian Fleming, deputy director in the Supply team, and Janis Marynowski are attending remotely. We have lots to get through today, so we really appreciate your attendance.

First, we will have an initial statement from you, Joanne, or whomever wants to give it. Members, as always, indicate if you want to ask a question.

Ms Joanne McBurney (Department of Finance): Thank you for the opportunity to brief the Committee. I will try to keep my opening remarks short, because I appreciate that there may be a lot of things that you will wish to cover.

This month, there have been two written ministerial statements relating to the 2025-26 financial position. The first of those was on the allocation of additional funding that had become available through Barnett consequentials and easements identified by Departments. A total of £25·2 million in resource departmental expenditure limit (RDEL) was allocated primarily on the basis of the first calls previously agreed for Health and Education pay. A total of £29·7 million of capital departmental expenditure limit (CDEL) was allocated to the Department for Communities, Department of Education and Department for Infrastructure. As a result of the RDEL allocations, the overspend and overcommitment forecast by Education and Health reduced from £481·8 million to £456·7 million. On 11 February, the Executive agreed the allocation of the £400 million reserve claim to Education and Health. That is the financial position reflected in the spring Supplementary Estimates (SSEs). As the reserve claim fell short of the total forecast overspend, efforts continue to manage the residual pressure.

The Chairperson (Mr O'Toole): Do the spring Supplementary Estimates reflect the reserve claim?

Ms McBurney: They do, yes. The latest forecast out-turn, which the Committee should receive shortly, shows a further reduction in the Department of Education and Department of Health overspends to £49·7 million.

The reserve claim will be repayable over three years. In recognition of the challenging budget position in 2026-27, the repayment in that year will be £80 million, with repayments of £160 million in each of the following two years. Those repayments will be factored into the Executive's final Budget.

The Treasury agreed to continue engagement on the Executive's financial position beyond 2025-26. Part of that will be an open-book review of departmental budgets. That will provide the Treasury with a fuller understanding of the challenges facing the Executive and help to inform the Executive's deliberations on their Budget. The scope of the review has yet to be finalised but will remain firmly grounded in the principles of devolution, with the Executive's autonomy in deciding their priorities and funding allocations being respected.

We are also here to cover the spring Supplementary Estimates. I know that members are aware of the importance of accelerated passage for the Budget Bill if it is to receive Royal Assent before the end of the financial year. The Bill includes provision for a 2026-27 Vote on Account. That allows Departments to continue operating in the early months of the new financial year pending the Assembly's consideration of the 2026-27 Main Estimates and associated Budget (No. 2) Bill.

We are happy to take the Committee's questions.

The Chairperson (Mr O'Toole): Thank you very much. That was admirably concise, Joanne.

Before we get on to the draft multi-year Budget, it is important to clarify a couple of points about the reserve claim. At a political level, it is not a great thing that we are in this position year after year. However, it is better that we have that reserve claim, given the pressures. It is unusual in that reserve claims are supposed to be for unanticipated or even, sometimes, emergency expenditure. How did it come about? Who suggested it first?

Ms McBurney: As the Finance Minister indicated, he had for some time been pressing the Treasury on the financial pressures facing the Executive and on the spreading of any repayment of overspend this year over the Budget period. The reserve claim is the culmination of those discussions.

The Chairperson (Mr O'Toole): Did the Treasury say, "We will give you a reserve claim", or did the Finance Minister ask for it? The Treasury could have said simply, "We are providing you with additional in-year funding, which will be repaid". It did not have to be classified as a reserve claim.

Ms McBurney: The Treasury tends to classify any additional money coming in-year outside one of its fiscal exercises as a reserve claim or, rather, access to the reserve. That is why, even if Whitehall Departments get money later in the year, it tends to be through access to the reserve. It is a technical term that really just reflects the fact that you need money outside the fiscal exercises.

The Chairperson (Mr O'Toole): The open-book exercise came as a surprise to a lot of people, and a lot of what that will mean is still uncertain. A previous witness appeared to be under the impression that the open-book exercise related only to the £400 million reserve claim, but it includes the whole Executive Budget: is that right?

Ms McBurney: Yes. The Treasury is committed to looking at the Executive's finances beyond 2025-26, and part of that work is the open-book exercise to get a better understanding of the challenges facing the Executive, so it looks at the wider Budget. We have not agreed the scope of it — it has not been finalised — so we cannot go into detail on the specifics at this point, but it is about the wider picture.

The Chairperson (Mr O'Toole): It is a bit last-minute: less than a month and a half from the start of the financial year.

We hope for — it is also the Department's position to want this — political agreement on a three-year Budget. Are Treasury officials entitled to second-guess, interrogate and challenge line items in the three-year Budget?

Ms McBurney: It is about the Treasury getting an understanding of the challenges facing the Executive in 2025-26 for the baseline level of funding and over the Budget period. It has recognised, as, I think, we all do, the autonomy of the Executive and their devolved powers, so it is not about it second-guessing or being able to tell the Executive what to do; it is about getting that better understanding.

The Chairperson (Mr O'Toole): Would it not have that understanding anyway? If Treasury officials had said to you or someone else in the Department of Finance that they would like to understand more about how the Northern Ireland Department of Health spends its budget, they could do so any time that they wanted, I presume. You would not stop them, and you would have to provide the information.

Ms McBurney: I cannot quote the legislation, but Treasury has the right to ask devolved Administrations for any financial information that it seeks. The exercise is part of our work with the Treasury to get that shared understanding, especially when we talk about the challenges that we face in 2026-27 in particular, given how difficult the Budget settlement is and the pressures on us. The exercise helps to inform that, so it is about working with Treasury to get that understanding.

The Chairperson (Mr O'Toole): It is important to say that calling it an "open-book exercise" is a bit strange, because, first, the Treasury has the ability and the perfect right, as it were, to do this or a version of it at any time in any way on its own initiative. Secondly, it has not finalised what it is. It feels a bit like Schrödinger's open-book exercise. It could have done this at any point in the past. It has not decided what it is going to do or how it will be done, but the financial year starts in less than two months.

Ms McBurney: Yes, and it is part of an ongoing process. It is not as though the Executive or the Department of Finance are sitting back and waiting for it to happen. There is ongoing engagement with Departments at ministerial and official levels on getting such an understanding. The exercise will build on that and provide assurances to Treasury. Obviously, our financial position this year has been extremely challenging in that it led to the £400 million being provided. When we are pressing Treasury on next year's pressures, saying, "Next year is particularly difficult for us", it is realistic for it to say that it wants a better understanding of what gives rise to those pressures.

The Chairperson (Mr O'Toole): I appreciate that I am asking a civil servant this question and that you may not be able to say much. At Northern Ireland Question Time in the Commons, the DUP leader, in a question to a junior Minister from the NIO, thanked the Secretary of State and NIO Ministers for their:

Was the DUP leader involved in those discussions, as far as you are aware?

Ms McBurney: I cannot comment on anything that has happened in the political sphere. All I will say is that the Finance Minister has for some time continually pressed the Treasury on the financial pressures facing the Executive and the need to provide additional support, including by spreading the repayment of any overspend this year over the Budget period. As DOF officials, we have been in ongoing engagement with the Treasury on the same issues, and the reserve claim is the culmination of those discussions.

The Chairperson (Mr O'Toole): Thank you. I will move on to the multi-year Budget. As you know, we heard evidence earlier from a range of third-party think tanks and economist groups. Pivotal stated that its projection or calculation indicated that, on the basis of departmental behaviours in years gone by and year 1 of the multi-year Budget, there could be an overspend of between £800 million and £1 billion: is that a number that you recognise?

Ms McBurney: I cannot comment on other people's —

The Chairperson (Mr O'Toole): No, of course. I am not asking you to.

Ms McBurney: — numbers without seeing them. The Education Minister has been clear about the pressures that, he feels, his Department faces. Similarly, the Department of Health faces considerable pressures, as do Justice and all Departments. There is no doubt that the 2026-27 financial year in particular is challenging for the Executive, partly because the increase that we got in the spending review was offset by the end of the stabilisation funding. I cannot comment on a particular figure. Part of the ongoing work is to get to the bottom of what the pressures are and what gives rise to them. There are significant pressures next year and throughout the Budget period.

The Chairperson (Mr O'Toole): That is a good answer: not engaging completely on the detail but giving a reasonable account of it. When it comes to the pressures, in RDEL terms, there are below-inflation increases for basically everybody. It is about 1% to one-point-something per cent for Health and Education, but everybody else has either a flat-cash allocation or is pretty close to that.

When was the last year like that that you remember?

Ms McBurney: Honestly, my memory is not so good that I can hold that sort of figure in my head, especially at my age, so I cannot say when the last time was. It is difficult, as spelt out in our financial position. The Finance Minister has said that the draft Budget proposals do not reflect what we wish to give Departments; they simply reflect the funding that we have available. Part of the ongoing work will be to resolve those issues.

The Chairperson (Mr O'Toole): It is fair to say that the repayment of the reserve claim adds another pressure. Whether or not there is political agreement on the multi-year Budget, it is out for consultation and has gone to the Executive. Has it been discussed at the Executive, or is it just that a paper has been circulated to members of the Executive?

Ms McBurney: The Finance Minister's draft Budget proposals, which reflect the constrained financial position, have been put out for public consultation. The consultation runs to 3 March, after which we will gather the responses and reflect them to the Executive. That will form part of the Finance Minister's ongoing work and engagement with his Executive colleagues, at which point they will consider the final Budget.

The Chairperson (Mr O'Toole): OK. Theoretically, as long as you have a Vote on Account, the Budget could be agreed in April or May, but that would be far from optimal and a bit chaotic. What date are you working towards? If there is going to be political agreement, would you expect that to be in mid or late March?

Ms McBurney: We are working towards getting that agreement as soon as we can, but all the other factors need to feed in. We need the responses to the consultation exercise, and we will want to see how the engagement with Treasury is going on the open-book exercise: all of that will factor in. Ideally, we will have a Budget agreed before the start of the financial year, but, in the past, that has slipped by a few weeks and, as you said, the Vote on Account procedure is in place.

At this point, there is a desire to agree a multi-year Budget — certainly, that is what the Finance Minister will push for — and, hopefully, if that is around the start of the financial year, that will be manageable.

The Chairperson (Mr O'Toole): This my final question before I bring in colleagues. The Vote on Account is, generally, just over 45%. However, when we came back two years ago, for example, it was 65%. That reflected the fact that we had just been restored and some of the other uncertainties. Are we to read anything into that 45%? If, for example, there were more uncertainty or if you were unsure that there was going to be political agreement to any Budget, you might go for the 65% to give a bit more certainty. Can we assume or are we to infer from the 45% that there is a bit more confidence that political agreement to the Budget will be secured?

Ms McBurney: The fact that we have maintained the 45% points to the desire to agree that Budget within the necessary time frame.

The Chairperson (Mr O'Toole): Do you mean that the Minister does not want to allow slippage on political agreement because people can say, "Sure, we have agreed 65% of the Budget spending: we can haggle a bit more for a few more months"?

Ms McBurney: It is not for me to speak for the Executive, but the feedback through the bilaterals is that all ministerial colleagues desire to agree a Budget. Nothing in that points to the need to increase the Vote on Account.

The Chairperson (Mr O'Toole): The Minister has had bilateral discussions with all his colleagues, but there has not been a plenary discussion in the Executive.

Ms McBurney: Obviously, I do not sit in Executive meetings. I am sure there have been many ongoing discussions, but I cannot comment on those.

The Chairperson (Mr O'Toole): Agreement of the multi-year Budget has not been on the formal Executive agenda.

Ms McBurney: There will have been discussions, but we are still in the consultation period on the draft Budget proposals, so it will come back to the Executive after that.

The Chairperson (Mr O'Toole): There will be an updated final Budget for agreement after the consultation. OK. That is helpful.

The Deputy Chairperson (Ms Forsythe): Thanks to Joanne and the team for joining us. As you said at the outset, Joanne, it was not so long ago that you were looking at a potential £481·8 million overspend for this financial year, not knowing what was coming next.

I am chairing already; I was going to make reference to the Chair. Whilst I welcome the reserve claim, with the £400 million coming through, the Chair of the Committee seems to think that there is something wrong with DUP MPs speaking to that on the Floor at Westminster. He should recognise the good work that is being done — I wonder where the SDLP MPs were at the time — because it is a good example of how Westminster and Stormont work together. You said that you can speak to the Minister's engagement, which I very much welcome.

We were looking at a potential overspend of £481 million, but, as you said, that is down to £49·7 million, which is the latest figure. Is there potential to bring that right down to balance between now and the year end?

Ms McBurney: To be honest, I am hopeful about that. I know that all Departments have been asked to redouble their efforts to find savings. The Department of Health and the Department of Education in particular are doing everything that they can to bring that down. I remain optimistic at this stage that it will be manageable.

The Deputy Chairperson (Ms Forsythe): Those Departments have arm's-length bodies, so their figures come in a little later than some of the others. It is good to look into that position.

As we look to next week's debates, which will include one on the spring Supplementary Estimates, is there anything specific that you want to highlight for the Committee's attention?

Ms McBurney: No. The Committee has a good understanding of the pressures that we are under. However, as you would expect, I highlight the urgency of getting accelerated passage for the SSEs, because it is essential that we get Royal Assent before the end of March to avoid Excess Votes for the Departments that got additional funding in-year, including from the reserve claim. The risk that we will run out of cash is slightly less, but, again, it would be good to get Royal Assent before the pay run on 23 March, so the Committee's support for that would be very much appreciated.

The Deputy Chairperson (Ms Forsythe): Absolutely.

Mr Kingston: Thank you for your presentation. I will stray slightly into the political sphere. Collaborative working is important. It is not easy for Ministers to be in a four-party Executive, but it is important for there to be a collaborative effort to make savings across every Department. Do you see such collaborative working, and is that being driven by the FM and dFM or the Finance Minister?

I was impressed that the Education Minister recently published a five-year budget strategy and was prepared to identify areas where savings could be made. Do you see other Ministers bringing forward such strategies, as they are required to do?

Ms McBurney: It is obviously not for me to comment on the political sphere, but there is good collaborative working. There is a four-party coalition, as you mentioned, so there will be different views on things, but, overall, there is a constructive and collaborative approach. That was borne out in the bilateral meetings that our Minister had with his ministerial colleagues. Departments are doing what they can.

It is positive that the Education Minister published that strategy and that the Health Minister has published his reset plan. As their Departments face overspends, their showing that they have a road map for managing the pressures downwards is welcome, but I do not underestimate the challenges that they face in doing so. Our Minister certainly encourages all Departments to play their role in managing the pressures down; indeed, on many occasions, he has asked them to do so. The fact that easements have been identified, allowing further allocations to be made, points to other Departments playing their part in that.

Mr Kingston: OK. Thank you.

Mr Tennyson: As always, Joanne, I thank you for your evidence. I will ask about the discussions with the Treasury. There has been some agreement on the reserve claim, and there is detail to work through on the open-book exercise. What other matters are within the scope for discussion with the Treasury, or have other discussions ceased?

Ms McBurney: I would not say that other discussions have ceased. There is always ongoing engagement with the Treasury on a range of matters. The focus has been on resolving the issue this year and making sure that that does not make a difficult decision next year even worse. That has been done: the issue has been recognised, and we have to repay only £80 million next year. There will be ongoing discussions. The fact that the Treasury has recognised the need for ongoing engagement beyond 2025-26 is welcome. The open-book exercise will be part of that, and, after it has concluded, it will inform further discussions at ministerial level.

Mr Tennyson: Are discussions ongoing on issues pertaining to legacy costs and things such as the interim fiscal framework, which, I know, the Minister has mentioned?

Ms McBurney: We continually raise those issues with the Treasury. They are on the list of things that we raise regularly with it. That includes the move to the full fiscal framework and some of the issues to be addressed as part of that.

Mr Tennyson: You said that the scope and precise detail of the open-book exercise have not been worked out yet, but can you speak about its intended purpose and give a timeline, in principle, for the work?

Ms McBurney: It will have to be a short, sharp, focused piece of work, because the Treasury has said that it should be completed by mid March. That will allow it to be factored into the Executive's Budget deliberations. In some ways, that will constrain how in-depth it is, but it also means that it has to be focused. The detail of what Treasury colleagues would like to look at is still being worked through. I imagine that they will want to look at individual departmental spending and income etc to get an understanding of where the pressures are arising, possibly with a focus on the big three resource-spending Departments: Health, Education and Justice. We have to work through all the detail of that.

Mr Tennyson: A multi-year Budget settlement would be preferable, but have there been discussions about a single-year Budget being an option, or is the Minister still very much committed to a multi-year settlement?

Ms McBurney: The Minister is still very much committed to a multi-year settlement, and the feedback from the ministerial bilaterals is, I think, that everybody recognises the benefit of a multi-year Budget.

Mr Tennyson: Thank you, Joanne.

Miss Dolan: Thank you for your presentation. I am sorry if this has already been touched on, but what happens if a multi-year Budget is not agreed before the start of the financial year or before the Vote on Account runs out?

Ms McBurney: As I have said, there has been ongoing engagement, including through the bilateral meetings, since the draft Budget proposals were published, and there is a desire to agree the multi-year Budget. Therefore, while the timescales involved in getting agreement for the start of the financial year are tight, I remain optimistic that it will be agreed. Departments are able to operate under the Vote on Account until the summer. Should a Budget Bill not be passed by that stage, there are contingency measures, but the Finance Minister wishes to avoid that situation. The priority is to reach agreement on the Budget.

Miss Dolan: Thank you, Joanne. That was concise.

The Chairperson (Mr O'Toole): No other members have indicated that they wish to ask a question, but I — go ahead, Deirdre.

Miss Hargey: I have one about something that came up in the previous session: the open-book exercise and looking at Budgets. The witnesses in the previous session said that there should be greater focus on fiscal sustainability: is that something that you want to push? When we look at the pressures even in the next year, we see that it is OK to do five-year plans, but, if we are going to overspend again next year because our Budget is, in general, not big enough, that is an issue. Are you pushing back at Westminster on sustainability?

Ms McBurney: One of the things that we would like to get out of this is longer-term fiscal sustainability. There are probably a number of strands to that, including the full fiscal framework. The exercise will inform Treasury's view of the challenges that we face, so, hopefully, we can put forward a good case for what needs to be done. The reset plans published by the Education Minister and the Health Minister will also feed into that. It is therefore about the bigger picture, and the open-book exercise is only a small part of that. As you will appreciate, the Finance Minister has continually pressed Treasury on the need for longer-term fiscal sustainability and on the issues that the Executive face. It has come to a head with the particularly challenging position this year and in 2026-27. It is welcome that the Treasury has recognised the need for ongoing engagement beyond 2025-26.

The Chairperson (Mr O'Toole): Is what is coming from the Treasury not a bit weird? Two years ago, there was a big Executive restoration package. We were there, even though we were not going to be in the Executive — I was there for a day or a bit of a day of the negotiations — and a Treasury official was there on finger-wagging duty, essentially. I am sure that you are well aware of that posture, Joanne, and probably more than able to respond to it. That was two years ago, when the whole shtick, some of it justifiable, was about all the work streams that you guys were set to do around the restoration package: the transformation programme; budget sustainability; and revenue raising, such as it was, from Ordnance Survey fees to hospital parking charges. That was presented as a package with fiscal sustainability conditions leading, more broadly, to an agreed fiscal framework.

From the Department's perspective, certainly, we have not got a final fiscal framework, and whether the Treasury is even engaged is another matter. However, all of a sudden, the Treasury has said, "We now want a huge new open-book exercise": what seems a bit strange and chaotic. I know that the political administration in London is different from what it was in February 2024, but is it not a bit weird for the Treasury to do that now?

Ms McBurney: No, I do not think so. We engage constantly with Treasury, as does our Minister. Treasury listens to the arguments that we put forward and the concerns that we raise. It is not a huge open-book exercise. It can only be a very short, sharp, focused exercise, given the timelines, but it is important that it informs its understanding of the pressures that we face. Those pressures have materialised this year with the projected overspend, and we needed access to the reserve to help us to resolve that. Treasury wants to understand better what has led to that, and that is helpful from our perspective as well, because, if Treasury better understands our challenges, it will be better able to help us to resolve those issues and become more fiscally sustainable.

The Chairperson (Mr O'Toole): If it is not a huge, detailed sort of — I am trying to find the words; I was going to use a medical analogy, which is probably not very wise or tasteful. If it is a very brief exam rather than a huge open-book exercise, what is the point?

Ms McBurney: The point is to get a better understanding of the pressures that the Executive face. It is an exercise that Treasury will undertake in conjunction with DOF. We will engage with Departments to seek the information to inform that. While we have not worked through the detail of it yet, it is all about informing Treasury and getting a better understanding of the challenges that have given rise to the issues this year and which we face in agreeing a Budget for 2026-27.

It is very positive that Treasury is engaging with us in that way. I do not want to point back to previous engagement with it, but it is positive that it is listening and willing to engage. To be honest, that is a testament to the Finance Minister's engagement with the Chief Secretary to the Treasury (CST).

The Chairperson (Mr O'Toole): That is good. I am glad to hear that. Will it lead to a final fiscal framework? Will the Minister be saying, "We have agreed to the open-book exercise, but we still need engagement from you on our view of need here. We still have a difference of view on that, because the Department believes that that view of need could be more complete to include agriculture and a few other things and on fiscal devolution". Is that part of the quid pro quo?

Ms McBurney: That work has been ongoing since the interim fiscal framework, and the methodology was agreed. It is not my team, so I am not over the detail, but the engagement has continued, and we are working towards that full fiscal framework.

The Chairperson (Mr O'Toole): Joanne, tell me if this question is not one for you, but there is a bit of confusion, certainly on my part, although I can sometimes be easily confused. It relates to the local growth fund and the exact position on it. It is often quicker to go to you guys and ask the question than go round the houses and correspond with individual Departments.

Initially, we got a letter from the CST around the time that the Treasury had indicated that there would effectively be a cut. It indicated that it was in negotiations with yourselves — the Department, not necessarily with you specifically — and that there would be more flexibility. That flexibility has not emerged, certainly not for the financial year 2026-27. Is the position that it will effectively be the worst-case scenario for 2026-27 and then that the Executive will have a bit more control from 2027-28?

Ms McBurney: It is not my area, so I do not want to mislead you by commenting on it. I know that it is constantly mentioned in the input that we get from other areas into the Finance Minister's engagement with the CST, but I do not want to misspeak and give you the wrong information.

The Chairperson (Mr O'Toole): I appreciate that. I turn to the Vote on Account. If it is 45·7%, can you say roughly, to within a week or two, when that will take us to?

Ms McBurney: I will turn to Patrick. I do not think that we have done the calculations down to which week, but it usually takes us to around July.

Mr Patrick Neeson (Department of Finance): Yes. We generally expect it to last until the end of summer.

The Chairperson (Mr O'Toole): Tell me if these timings are right. Generally, we would do the Vote on Account for about 45% and agree a Budget, whether single-year or multi-year, before the start of the financial year. That would enable you to write a Budget Bill that would be introduced by June. Is that right?

Mr Neeson: It is usually introduced before summer recess.

The Chairperson (Mr O'Toole): If we do not have an agreed Budget just before or just after the start of the financial year, it will be difficult to write a Budget (No. 2) Bill. You just could not do a Budget (No. 2) Bill, because that requires knowledge of what position you are writing it to: is that right?

Mr Neeson: Yes, that Budget Bill is based on the Main Estimates, which rely on the Budget being agreed.

The Chairperson (Mr O'Toole): It relies on the Budget itself.

At what point are you in breach of Standing Orders and/or the Northern Ireland Act in how it relates to the Budget rather than the Budget Bill? You are in breach if a Budget is not agreed by the end of the financial year, I think: is that right?

Ms McBurney: Yes. The Act states that a Budget that has been agreed by the Executive has to be brought to the Assembly by the start of the financial year.

The Chairperson (Mr O'Toole): OK. We have gone over time by quite a bit. No other members have indicated that they have further questions, and I have exhausted myself and all of you with mine. Thank you very much. Hopefully, we will have you back soon and will have a final multi-year Budget to talk about.