Official Report: Minutes of Evidence

The Chairperson (Mr O'Toole): We have Gavin Patrick, director of the finance division in the Department of Finance; and Cathy Murtagh, finance business partner in the Department of Finance. Thank you, Gavin and Cathy, for being patient and joining us after 5.00 pm. We appreciate your coming to brief us. Please give us a brief opening statement. Members, as always, please indicate should you wish to ask questions.

Mr Gavin Patrick (Department of Finance): Good afternoon, Chair and members. Thank you for this opportunity for Cathy and me to brief you on the Department's in-year budget position and the future-year position, based on the draft Budget. We have provided the Committee with written briefings. I will give you a high-level summary of the budgetary position, and then we will be happy to answer any queries that members have.

The in-year position is that we are planning to land our resource and capital budgets, following December monitoring and the January technical exercise, in which easements totalling £6·6 million in earmarked budgets were given up. Those easements included costs associated with the Integr8 delivery partner being negotiated down. There were delays to the appointment of the delivery partner and to filling vacancies, resulting in a £6·1 million easement on Integr8.

The Special EU Programmes Body (SEUPB) has reduced PEACE PLUS income, and, as a result, match funding was reduced by £0·4 million. There was also a £0·1 million easement from the Departmental Solicitor's Office (DSO) in relation to the Windsor framework allocation. There was also an easement of £2·5 million in relation to non-earmarked resource. That arose due to delays in filling vacancies across the Department and delays to maintenance due to the legal case on the contract.

From the start of the year, the Department has carefully managed its resource overplanning position of £8·2 million through the refinement of vacancies — including refining the quantity of vacancies and the timing of filling vacancies — and attrition across the Department. We also received the £1·2 million allocation for National Insurance contributions. There were delays in vacancies and maintenance due to the ongoing legal case.

The capital budget has been managed through slippage on a number of projects and maintenance easements, which are also due to the legal challenge and to asset sales.

Turning to the future-year budget, the draft Budget for 2026-29/30 is, as the Committee was just discussing, the first multi-year Budget in more than a decade. It will cover the same period as the Chancellor's spending review. As a finance director, I welcome the opportunity presented by the multi-year Budget to plan over multiple years.

The draft Budget provides the Department with non-earmarked resource budgets, over the three years, of £160 million in the first year, £162 million in the second year and another £162 million in the third year. The Department has continued to review its resource forecast since the exercise that was carried out last summer, considering where savings can be made by reducing or stopping non-essential work and by working on a strategic workforce plan, in line with the people strategy commitments, in order to better assess the affordable workforce complement. The non-earmarked resource complement is now £175·5 million, £188 million and £189·6 million over the three years. The forecasts have decreased since that exercise, mainly as a result of the census costs having been moved to earmarked funding.

When set against the opening baselines, that forecast results in pressures of about £15 million, £26 million and £27 million over the budget period. To manage those gaps in funding, we are working through a number of steps, which include asking business areas to continue to review their forecast to identify where efficiencies can be made through careful budget management.

Further general allocations may result from the autumn Budget, which would provide £5 million in the first year and £3·9 million in the second year but which cannot be allocated as part of the opening budget process. We have included 75% of vacancy costs in the forecast. We are looking to see whether those are appropriate costs and whether they will follow through in the time expected. All bids are being reviewed and prioritised.

Finally, if the transformation fund budget is allocated to any of our three bids, that may reduce our resource forecast.

The draft Budget allocation also provided earmarked funding of £124 million, £144 million and £140 million over the three years. That related to the census, the rate rebate, the Integr8 programme, EU match funding, the Windsor framework and cybersecurity. As I mentioned, the census funding was originally non-earmarked but has now been earmarked, given its importance across the NI Civil Service (NICS).

The Chairperson (Mr O'Toole): That is quite big. The Department of Finance is a big recipient of earmarked funding, relative to its normal —.

Mr Patrick: It is. The majority is rate rebate and move-across. For example, in the first year, it is £93 million, so it takes up a large amount of that earmarked spend.
On capital, the draft Budget has allocated £40 million, £38 million, £30 million and £30 million; it is a four-year period in relation to capital. We have forecast about £73 million, £85 million, £81 million and £74 million. That results in pressures of £33 million, £47 million, £51 million and £43 million over the four years. The main areas of capital forecast include, in CPD, capital maintenance works, small lease consolidations and estate review.

In the digital area, there will be laptop and desktop refresh across the NICS and other hardware and software considerations; the Land and Property Services (LPS) transformation project; and funds for the Northern Ireland Statistics and Research Agency (NISRA) for data collection and analysis. That capital position will be extremely challenging, and, since the draft Budget was announced, significant work has been taken forward by the Department to work through how business areas could manage and re-profile their budgets in order to reduce requirements and enable the Department to live within the draft allocation.

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

The Chairperson (Mr O'Toole): Thank you, Gavin. That was helpful. What is the percentage increase in resource departmental expenditure limit (RDEL) year on year?

Mr Patrick: I have not worked through the percentages, so bear with me.

The Chairperson (Mr O'Toole): I have them here. You can confirm whether they are correct. Excluding earmarked items at annex C, it is a 1% increase. The Finance Department has the sharpest decline, if I understand it correctly, in day-to-day non-earmarked spending in year 1. It is then 1·4% in 2026-27 and an actual fall in cash terms — just over £1·5 million less. There is then a 1·4% increase in flat cash in the final year. It is the tightest settlement of any Department.

Mr Patrick: Yes, and that is the reason why we are having to work through it with the business areas to ensure that we will be able to live within the budget that we are being provided with.

The Chairperson (Mr O'Toole): There are hugely significant projects, including transformational things such as Interg8, but there is also day-to-day work on everything from building regs to civil law to the budget processes that we are talking about now and have talked about previously.

Do you foresee redundancies or the Department having to freeze recruitment? It is a pretty tight settlement to be operating a 1% cut. Basically, between 2025-26 and 2028-29, your non-earmarked DEL goes from £161 million in this financial year to £162 million in 2028-29. That is pretty brutal; that is nearly flat cash. It is less than a £1 million increase in spending at a time of relatively high inflation, so it is a significant — I cannot do the maths — real-terms decrease in the Department's budget over the next three years. In one sense, it is admirable that you are being Caesar's wife and not asking other Departments to take settlements that you are not imposing on yourselves, but it is pretty tight. Presumably, the permanent secretary has to think about staffing.

Mr Patrick: Staffing is a major element of our cost and will be involved in it. You mentioned redundancies, but that is not something that we will be taking forward as a Department. There will be natural attrition in the Department. We have a level of vacancies, and there will be decisions in the first year about whether vacancies are filled. Given that we will have a three-year settlement, that allows us to plan. I set out where the pressures are over the three years. When it comes to resource, the pressures are much worse in the second and third years compared with the first. We will need to make use of the first year to plan ahead for years 2 and 3 when we have the multi-year settlement.

The Chairperson (Mr O'Toole): Sorry, did you say that the first year is not as bad as the other two?

Mr Patrick: There is still a pressure. However, when you look at our bids and our forecast needs, you see that the gap in funding will be greater in years 2 and 3.

The Chairperson (Mr O'Toole): OK. That is because you are getting earmarked funding for a range of things for which Finance is responsible in year 1. Unless I have misunderstood it, year 1 looks tighter than years 2 and 3 because there is an actual 1% fall in cash terms. That is at annex C of the written ministerial statement. Anyway —.

Mr Patrick: That is one side of it. Our requirements in years 2 and 3 would be higher —.

The Chairperson (Mr O'Toole): Pressures are greater.

Mr Patrick: Yes. Pressures are higher, so the gap is bigger in years 2 and 3.

The Chairperson (Mr O'Toole): OK. That makes sense. I will bring in other members now, starting with the Deputy Chair.

Ms Forsythe: Thanks, Chair, and thank you both for being here today. I wanted to ask about the categorisation of priority of spend, where we have the "inescapable", "high priority" and "desirable". When we see that coming through centrally — not necessarily from you in the Department — it seems to be applied very differently across different Departments. When people are bidding, everything is "inescapable", but when the money is allocated, it goes into their "desirable" category. When you apply those categories, do you take guidance? How do you apply it? Is "inescapable" actually inescapable?

Mr Patrick: Guidance is provided by my colleagues in DOF to all Departments on the definition of each category. "Inescapable" should apply when there is a contract in place and it is inescapable that we will have to spend, whereas "high priority" and "desirable" are more discretionary. While they are likely to have significant outcomes that a Department would want to have, in theory, they would be discretionary. When our bids went through the "inescapable" ones — I had gone through them — they met the proper definition of inescapable.

Ms Forsythe: Have you any examples of "high priority"? What is the risk to the operation of the Department of not hitting your "high priority" bids?

Mr Patrick: I can provide more detail.

Ms Forsythe: If you could provide it in writing, that would be helpful.

Mr Patrick: I suppose that, when it comes to the likes of "high priority", I am thinking about laptops and desktop computers for across the NICS. They are not "inescapable", in that we do not have to buy them, but if we do not have computers that work across the NICS, it will not be good for delivering outcomes for Ministers, etc.

Ms Forsythe: When it comes to assessing the consequences of it, when you look at the core numbers, sometimes you do not get the full picture.

The Chairperson (Mr O'Toole): Thus far, no further members —. Harry Harvey wants to come in.

Mr Harvey: How much will the Department of Finance receive from the reserve claim, and what will it be used for?

Mr Patrick: As we are planning to land the budget within both resource and capital, we will not have an overspend, so it does not relate to us.

The Chairperson (Mr O'Toole): Yes. There is no reserve claim benefit. You just have to do the work in securing the reserve claim.

Mr Patrick: Colleagues do. Having said that, we will look to reduce our spend where we can so that our reserve claim can be as low as possible. From that angle, absolutely: we will be working to have the impact there, but we are not seeking any of that funding from the reserve claim.

The Chairperson (Mr O'Toole): Are you happy enough, Harry, yes?

Earlier, we talked about staffing. I am pleased to hear that there will not be redundancies. However, you would imagine that, with such a settlement, there might have to be attrition with people retiring. We know that there is an age profile — a high number of people who are 60 or approaching it — in the Northern Ireland Civil Service. Obviously, many great people work well beyond 60, but that is what the Civil Service retirement age is, and most people avail themselves of it. They are entitled to do that. However, it has created a bit of a cliff edge when it comes to the age profile of civil servants. Will that create a problem in the Department if, effectively, you are de facto having to shrink because you simply cannot afford to replace people?

Based on those numbers, and the fact that you do not have so much of the Department's cost or wage cost because you are not a front-line delivery service, other than in some of the areas that you have mentioned —. We are talking about things that are not earmarked. There is capital spend, and you work on capital projects, but, with the exception of LPS, you are generally not involved in front-line service delivery. There is a lot of strategic policy and advice to Ministers, and all that work. The upshot is, with the pressures on the RDEL, that it looks very likely that there will have to be natural wastage.

Mr Patrick: Certainly. I mentioned the strategic workforce plan. That is in line with the people strategy, and that is what that will look at. We have vacancies, and given the budgets that we are receiving, we would not be able to fill all of them. There is also attrition, which will add to the vacancies as the year goes on, depending on whether people leave or retire, so that is the strategic workforce planning. My understanding is that we will focus on particular vacancies and where staff should be so that we can live within our budget envelope. Therefore, it will be done in a strategic way as opposed to an empty seat not being filled. It will be done in a more strategic way than that.

The Chairperson (Mr O'Toole): Presumably, what will be prioritised is the stuff that is supposed to be transformational. As we discussed in the previous session, a lot of the work for the Department — as well as servicing this Committee and keeping us talking about things — is the big transformational stuff, whether that is, hopefully, the people strategy, public service transformation work or Budget improvement work. The Department is supposed to be at the centre of all those big transformational things to make the Civil Service and devolved government work better. If natural wastage is going to happen, and if certain vacancies cannot be filled as people retire or leave the service, I presume that the priorities will be the things deemed to be transformational and of high priority.

Mr Patrick: They will be prioritised, along with other areas that we are legally required to take forward work on or people-facing services such as LPS. We want to maintain the service to the public through that. A number of areas would have to be prioritised if we were in that position. We recognise that transformation is an area that needs to be taken forward and supported.

The Chairperson (Mr O'Toole): OK, that is helpful. There are no further questions at this stage, so thank you, Gavin and Cathy, for that update. We appreciate it. Once the final Budget position is agreed — should it ever be agreed — and if the departmental position changes, we would like to know. I am sure that we will know, but anyway. Thank you.