Official Report: Minutes of Evidence

The Chairperson (Mr Gildernew): I welcome departmental officials, alongside John, with whom we have been engaging. We are joined by Kathy Sands and Olga Beagon, finance directors in the Department for Communities. John, I invite you to make a brief opening statement. Following that, we will move to questions from members.

Mr John Greer (Department for Communities): Despite Kathy's protestations, I will make this brief. [Laughter.]

Today, we are going to talk about where we have got to in closing the last financial year and the draft Budget allocations for 2026-2030.

Members, you will be aware that, unfortunately, there have been no significant or material changes regarding the future years' budget position since we were previously at the Committee. The Department finished the 2025-26 financial year — the most recent financial year — with £930 million of resource departmental expenditure limits (DEL), £272·9 million of capital DEL and £31·4 million of financial transactions capital (FTC).

The Department was assisted in achieving those numbers with a number of successful monitoring rounds that allowed additional funding for disabled adaptations, the social housing development programme (SHDP) and so on. It was still a very challenging budget year, with almost circa

budget pressure on the revenue side going into the year. It was similar on the capital side, where the Minister dedicated over 70% of his discretionary capital to social housing to get close to delivering the Programme for Government (PFG) targets, in year.

We received the outworkings of the comprehensive spending review, which shaped the draft 2026-2030 Budget. That was provided to officials on 19 December. The Minister of Finance released a public consultation, which closed on 3 March. Frankly, we have significant concern about the allocations, as do all Departments. The Minister will have difficult decisions to make this year, as he did last year. In the previous financial year, the Minister prioritised only critical vacancies and did not do a number of programmes that would have been considered net new. He did that to secure funding to continue programmes that help the most vulnerable.

I move now to the next set of financial years in the draft Budget. For 2026-27, the draft Budget provides baseline plus £10 million on the revenue side, which amounts to £764 million; for 2027-28, it is £754 million plus £26·5 million, which is £781 million; and, in the final year of the spending review, it is £783·8 million.

Following our analysis, it is our view that the Department will struggle to maintain a balanced budget if that budget maintains. I say that cautiously. That would be the case if there are decisions that only maintain at standstill what the budget is doing currently. Typically, the Department will face inflationary pressures, which are not accounted for in this budget, of some £32 million. That is made up of inflation costs, general administrative expenditure costs, salaries, including salaries for arm's-length bodies (ALBs) and so on. That means that if the current allocation is provided in the next financial year, and approved, the Department would face £40 million of in-year pressure on the revenue side. Again, I stress that that is £40 million without doing anything new.

I move now to the capital position. While the 2026-27 draft position represents an increase on 2025-26, it remains significantly below the level required to fund the Department's inescapable capital commitments and the Executive's Programme for Government commitments. While the proposed reinvestment and reform initiative (RRI) funding for SHDP is welcome, the majority of that funding is required to meet existing contractual commitments, which leaves very limited scope.

Essentially, the social housing development programme, which is a PFG commitment, requires some £440 million for new starts. That is currently not funded. If we look at the year ahead — Kathy, I will look to you for help with this one — we have £107 million ring-fenced for housing. We have a contractual tail of some £104 million. You can see that there is only £3 million left for new starts, yet the requirement to meet the PFG commitment for the next financial year is about £115 million. That would require the Minister to dedicate all his discretionary expenditure and his capital budget to housing. I must stress that that comes at the expense of things such as maintaining our heritage assets and facilities and so on and so forth. With capital spending, as with revenue, the Minister will face some very difficult decisions.

To reiterate, when we combine inescapable and high-priority capital requirements, which are considered together, the Department faces a capital shortfall of some £132·4 million, a figure that rises to £288 million for the year 2029-2030. Draft earmarked capital allocations in the draft Budget have largely been met in full. For FTC, it is better news in the form of a small shortfall of £2·9 million for the last year of the draft Budget. We expect to be able to manage that across the Budget process throughout the years.

I feel like the bearer of bad news every time I come here. The draft Budget provides stark choices, as it does for every Department, and it highlights the need for all Ministers to make difficult decisions alongside significant transformations in how we deliver public services — something that Grainia and I spoke about in the earlier session. We are, as always, at the behest of the Committee. I am happy to answer any questions. No decisions have been made on the Department's future years' budgets, because the Executive Budget is only in draft form at present. Officials have been looking at the numbers in the draft Budget and working through various savings scenarios of how we may get to a point at which we have confidence about delivering a balanced budget.

I commit to you all here today that each of those analyses has lived by certain principles. Those principles include minimising the impact on citizens at all costs, maintaining essential services and programmes, and continuing to deliver impact as much as possible. Importantly, for our delivery partners, and for our ALBs, we must ensure that we take the majority of the pain, where possible, and that we provide them with the financial agency that they need to continue to deliver on the Department's behalf. Undoubtedly, if the draft Budget maintains, it will have an impact on how the Department can deliver its services.

The Chairperson (Mr Gildernew): Thank you, John. We are acutely aware of the financial pressures on all Departments, including the Department for Communities. I would like to get a sense of the immediate pressure facing the Department. You identified a financial pressure of £174·4 million of ring-fenced resource DEL in 2026-27, rising to £244·5 million by 2028-29, which is a huge increase of £70 million over three years. Can you break that £70 million increase down for us? How much of it is due to pay increases and how much to other factors?

Ms Kathy Sands (Department for Communities): I refer you to table 3 in your briefing pack, which lays out where the pressures are coming from. It breaks it down across the raft of DFC pay, homelessness intervention, and supporting people etc. It is driven by a variety of things for which we make bids. The increases, year-on-year, are contained in that table as well.

For example, for pay, we had a need of about £31 million — £26 million for the Department and about £4·5 million for our ALBs — and that increases year-on-year to £44 million and then again to £57 million. That is on the basis of estimates of indicative pay and progression percentages, which are given to us at a global level by DOF, to use in that scenario analysis.

The Chairperson (Mr Gildernew): In light of that, who in the Department is ultimately responsible or accountable for prioritisation decisions? The overall Budget is poor, but there is still a departmental budget within which certain decisions are being made and will have to be made. Who decides which programmes will be scaled back or ceased, and what criteria are applied?

Mr Greer: That is the Minister's decision. It is for the accounting officer and the accounting officer's officials to ensure that the way in which decisions are made is compliant with the relevant legislation and statutory obligations as well as the relevant governance and assurance frameworks. We have had two meetings with the Minister to discuss various scenarios relating to the draft Budget. We have spoken to him about the principles that, we think, should be adopted — the prioritisation of protecting essential services, minimising the impact on citizens and so on — and we have had no instruction from him to deviate from those. That is what our savings scenarios are built on.

We still await the final number, because there are two scenarios in play: the current draft Budget is agreed; or the draft Budget is not agreed, and, under the legislation, we move to DOF setting a Budget at 95% of last year's baseline. On the revenue side, when the earmarked element is taken out, that equates to about £720 million. That would increase the Department's pressures, which sit at approximately £40 million, to some £70 million.

The Chairperson (Mr Gildernew): OK. What specific services or programmes are most at risk of reduction or cessation under the projected resource DEL shortfalls?

Mr Greer: They are all at risk. We are trying to minimise the cessation of services and to understand where we can save money, where that is possible, or to look at the efficacy of programmes. Across the board, in some cases, it is about maintenance rather than providing more money. That is difficult because it sometimes means not providing additional money to delivery partners that have to make pay awards and so on — inflationary pressures. In other instances, where we know that a programme could perhaps withstand certain cuts, we will look at that. There is no exact science in that — those decisions are all subject to ministerial approval — so it would be remiss of me to go into specifics at this stage.

Mrs Mason: John, I will be honest: every time you say, "Kathy, I'll look to you for help", my heart goes, and I think, "Don't be looking to me for help". [Laughter.]

Mr Greer: Sorry.

Mrs Mason: I will point out just one thing. I know that there is a difference between revenue and capital, but you mentioned a figure of £40 million for the pressures, and it has not gone unnoticed that that is the exact figure that will go to the Ulster Folk Museum. When we think about all the pressures that you are talking about, we see that they raise a serious question about prioritisation. I know that the priorities are the Minister's.

John, when you were here previously, I asked you about prioritisation and about money that the Department was spending on various projects. I pointed out that hundreds of thousands of pounds were being spent on x, y and z projects, and I asked you specifically about the money that was to be spent on Queen's Parade in Bangor. You said that it was fully financed by city deal money. You can check that on social media: you will see it there. In response to my question for written answer, the Minister said:

in that project. Can you clear that up? Is the answer nothing or is it £10 million?

Mr Greer: I apologise: I misspoke. City deal moneys are ring-fenced. There is a triumvirate of investment partners, with money coming from the UK Government, local government sources and some from Departments. It is all ring-fenced.

Mrs Mason: I understand that.

Mr Greer: When the Belfast region city deal was agreed, the proportion of funding from the Department for that project was ring-fenced. You are absolutely correct that there was £10 million. That was my error, and I apologise for that.

Mrs Mason: That is OK. It is quite concerning. We asked specifically about that at a finance briefing, and £10 million is quite a sum to seem to have gone astray, so you can see why there was confusion.

On the Belfast city deal, is any money going to any of the other projects of the Department or just to this one particular one?

Mr Greer: The Department will make a contribution across all the projects in the city deal because it has the policy area for regeneration, and all the projects that have a regeneration impact will come from DFC.

Mrs Mason: For example — I am being parochial here — in the Newry, Mourne and Down city deal project, do you know what the breakdown is of what the Department for Communities contributes there?

Ms Sands: I do not have it to hand, Cathy, but I can get it for you in a further breakdown of the specifics of the city deals.

Mr Greer: Cathy, just for clarity, I misspoke, but the operational reality is that the city deal money is ring-fenced. We have a governance control of the money that is deployed into that, but, if the money is not deployed into the city deal, we cannot take it somewhere else. Therefore, the money is not in play for us.

Mrs Mason: Are you saying that that £10 million is not in play for you?

Mr Greer: That £10 million is kept sitting against the city deal. We cannot redeploy any of the city deal money to another project to relieve a pressure.

Mrs Mason: OK.

Ms K Armstrong: Thank you very much, guys. You have talked about the Department taking the majority of the pain, but a lot of others are sharing that pain with you, including those in the community and voluntary sector, who do not know whether they are up or down at the moment. There are a couple of things that I want to ask you about. The Chair has already mentioned one, and it is mentioned on page 5 of 17 in your papers. The top paragraph states:

I appreciate that that is a decision that is probably taken by the Minister. When there is the opportunity to share that with us, it will be really useful to see how that has been considered and what those lower priority areas are.

Has there been a reduction in pressures, given that the move to universal credit (UC) is basically done now? That big programme of work has happened. Has there been any alleviation in your budget because of that?

Ms Olga Beagon (Department for Communities): The move to UC was completed in March. As we discussed, we have still a lot of vacancies in the benefits operational area. We are still unable to deliver the full intent of UC policy. There is still a lot of pressure there. Currently, only 20% to 30% of claimants get the full work coach support that they need, just because of resource. Yes, in the future, there may be less pressure, but not all the pressure will be alleviated.

Ms K Armstrong: I was just wondering whether there was an opportunity for some of the people who had been processing universal credit claims to move to helping Capita to get a move on. Capita is taking over a year to process some applications and some reviews. It becomes quite difficult in constituency offices when you hear that.

In table 4, which is on page 13 in our packs, can you clarify what the "Additional General" capital and "Complementary Fund" are, please?

Ms Sands: Are you referring to the "Additional General" of £5 million, Kellie?

Ms K Armstrong: Yes.

Ms Sands: Essentially, that is just how the paper is set out. We have been given a general allocation of £155 million and a proposed £5 million. Therefore, if the draft Budget stays as it is, the Minister will have £160 million in his allocation.

Ms K Armstrong: Given that it is called additional general capital, is that for use for anything?

Ms Sands: It is not specific. The specific ones are in the next section of the table, which gives you the RRI allocation, and you will note that, in future years 2028-29 and 2029-2030, we have an additional amount that is specifically for social housing.

Ms K Armstrong: What about the complementary fund?

Ms Sands: I will consult my notes. I hope that I can bring it to hand.

Mr Greer: If I may —.

Ms Sands: Yes.

Mr Greer: The complementary fund is a further funding programme of £105 million on top of the city deals. It works in a similar fashion to the city deals: if a project or programme is approved for funding through the complementary fund, it is funded through a tripartite arrangement. That is ring-fenced against those pre-agreed projects.

Ms K Armstrong: So, the complementary fund is accounted for. The additional general capital feels a bit like a slush fund. If we are so tight with our budgets, how do we have anything in additional general?

Mr Greer: This is what came to us in the draft Budget. When we first saw it, to be honest with you, we were asking ourselves why it was not just all one. That is the way that it was presented to us. Essentially, it is just an additional general allocation.

I will just come back on your question about UC, if I may. There was quite a significant piece of work to redeploy those staff as the Move to UC programme came to an end. Of course, some ongoing pressures moved from the Department because, as people move to UC, they then receive rates relief from Land and Property Services, which is under the Department of Finance, rather than from us.

Ms K Armstrong: Rates relief will apply only to some, not all, recipients.

Mr Greer: Yes.

Ms K Armstrong: It is just that all personal independence payment applications are taking far too long at the moment.

Mr Greer: I had a meeting with Capita last week on that, and a rectification plan is being put in place to try to address that. The Department is chasing that very hard.

Ms K Armstrong: Good, because I dealt with another family last night who have been waiting for their review for over four months, and there is a palpable fear that they will lose everything. We are just waiting for the review.

We know that, for many reasons, we are not hitting the targets in the housing supply scheme. A massive reason is that Northern Ireland Water has closed capture areas all over the place that overlap with housing supply scheme areas of importance. If there is any slippage in those schemes, would there be the potential, once the Budget is known, to reinvest something into Supporting People, which is carrying the weight of the pressure of people still being homeless.

Mr Greer: I think that your question is this: if there is slippage in the social development housing programme as a result of constraints on water infrastructure, could money be redeployed to Supporting People? My understanding is that Supporting People is largely revenue and that it is over £80 million, whereas the social development housing programme is all capital, so we could not redeploy that money to Supporting People.

Ms K Armstrong: Could we not even ask the question? Housing schemes in my area have already been turned down because of Northern Ireland Water.

Mr Greer: I will say this, Kellie: when we deploy the capital to the Housing Executive and the Housing Executive then deploy it to housing associations, we monitor that extremely closely. Kathy's team are up to 30 and 31 March in monitoring that very closely for slippage, so it is very well managed, and, in my time in the Department, I have never seen significant slippage.

Ms K Armstrong: OK. My only worry is that we end up building houses where there is not the highest priority, and that would be simply because Northern Ireland Water does not have a problem in those areas. I am concerned that we will end up putting houses in the wrong, although every house is good, to be honest.

The other issue is the community and voluntary sector. Whatever way those groups get their money out of the Department for Communities — it may well be an ALB — they currently have funding until the end of June. Again, that is a lot of people who are heading for redundancy. Having to dip into their reserves is against charity rules, and they need those reserves if they are to have to pay people off. When will they know their next funding quarter?

Mr Greer: On Wednesday evening, the Department received initial guidance from the Department of Finance setting out the steps that would need to be taken if a Budget is not agreed. One step is that the Finance Department then provides each Department with an allocation of budget that allows it to engage with the Minister to deploy that money. Part of that would be an allocation for the voluntary and community sector. We are coming to a situation, probably in the next week or so, where we will have to agree with the Minister another set of interim allocations that are based on a DOF allocation that is due to come or an allocation that is based on the control vote that is bound in the Budget Act 2026.

Ms K Armstrong: Will that come with a notice that nothing more is coming? I worked in the community and voluntary sector, and I was sick to the back teeth of having this every year. It would be good for those organisations to have some confidence.

Mr Greer: Yes, and we are very much in that space. We work closely with them to understand how we can alleviate the technical and statutory barriers that they will come up against in that situation. I do not see a situation in which they will not be provided with some surety, whether through a Budget for the Executive or a Budget through some other means.

Ms K Armstrong: Nobody wants to get to 95%.

Mr Greer: As I have said consistently, the Budget will not be what everyone would hope it to be.

Ms K Armstrong: I am thinking of some solutions if it all goes terribly. One relates to debt advice: the Department's Make the Call service does a great job, as does the independent advice sector, but that means duplication. Has there been a review, or will there be a review, to find a cheaper way to deliver that?

Mr Greer: I will need to consult the relevant policy colleague, but I am happy to get back to you in writing on whether a review is planned or is ongoing.

Ms K Armstrong: Wonderful, thank you.

Mr McHugh: Tá fáilte romhaibh arís, John. Tá fearadh na fáilte roimh Olga agus Kathy.

My question is about the Place-Name Project and the fact that it might be under pressure. Its funding could be withdrawn. How much is allocated to that project at present, and is it likely that it will not continue to be funded?

Ms Sands: Sorry, but I will have to come back to you on the Place-Name Project. I have to get the details from the officials in the Department who look after it. I do not have that information to hand.

Mr Greer: I suspect, and I hope, that, because we do not have a Budget, it has been given an interim allocation, as have all funded partners, for the first quarter. Anything after that will be for decisions subject to what the Minister deems a priority. If you are content, we will provide that information to you in writing to provide absolute clarity that this is an interim allocation pending a Budget and that no decision has been made, as no decision has been made on any programmes or priorities at this stage for the current financial year.

Mr McHugh: Might it be the case that it is the low-hanging fruit, as they say, when it comes to the Department looking to save money or allocate money to other pet projects?

Mr Greer: Those are all decisions for the Minister.

Ms Mulholland: My question is about welfare. The Executive recognised an additional £16·9 million of benefit delivery funding. The draft multi-year Budget provides only £8 million a year. Why has the allocation dropped so significantly when the Department's assessed requirement is £23·9 million for 2026-27 and £34·8 million by 2028-29? What would that funding gap mean in practice for claimants? Should we be concerned about that, given that those who receive those benefits are, for the most part, already under financial pressure?

My big concern around all of the draft Budget, which I asked you about in the earlier session, John, is the underfunding of benefit delivery to crisis support and discretionary support. Has any modelling or assessment been done on the knock-on impact of any reduction in crisis support?

Mr Greer: I will take your first question first. The £16·9 million was a bid put to DOF in the last financial year to fund 400 posts in benefit delivery. Due to recruitment delays, we could spend only £8 million of that, so, in December, we returned £8 million of that unspent money to DOF. We have subsequently recruited into those posts, so we are incurring and will continue to incur those costs; hence the bids for the current and future financial years. In short, that will land on the Department as a pressure. When we began the negotiation with the Department of Finance, we were very welcoming of the £16·9 million, but we were very careful to flag to the Department of Finance that, normally, when a provision is made for staffing, it will be a recurrent provision because, obviously, staff need to be paid every year. However, this was not recurrent, so the Department has reduced that to £8 million across the draft Budget. In answer to your question, that lands with us as part of our overall pressures. We have recruited into those posts, but I must stress a point that Olga touched on earlier, which is that we are still not living up to policy parity. We are still delivering benefits, but we are not delivering real, deep employment support to help people to go on a journey. That is deeply concerning for the Department.

On the question of the assessment of crisis and advice services for those who find themselves in financial crisis or difficulty, that impact is not happening right now. However, we stand ready, when decisions are made or are being considered, to understand that. Our highly skilled analytics team has a great deal of data on benefit delivery, poverty and so on, so we can carry out a strong assessment of the impact that that will have.

Ms Mulholland: When you talked about maintaining parity of welfare delivery, you mentioned job coaches. Is that the only element that we are not maintaining parity on, and what does that look like in practical terms? Are any other areas of parity most at risk in this Budget?

Mr Greer: I will lean on Olga for the specifics. At a high level, however, Bills that have gone through Westminster recently relate to 'Get Britain Working'. A significant funding provision went to the Department for Work and Pensions to invest in job coaches, who provide a rich level of support. Ultimately, it would also provide funding to the voluntary and community and advice sectors so that they could help people to go on a journey. That investment amounts to between £800 million and £1 billion. None of that money has come to the Department via Barnett hypotheticals. Our employment support provision over the past number of years has consistently gone down. Last year, the Minister took a decision to fund JobStart. In the year before, JobStart was funded by money from the Northern Ireland Office and so on. All of the budgetary pressures that I have laid out make the discretionary decisions that the Minister may take more difficult, because the pressure is greater.

Ms Mulholland: Does that link in with the British Government's changes to welfare support? When we looked at unemployment, we knew that a lot of those supports — Right to Try and so on — were not going to be directly funded, unlike in England and Wales, by the Government. Has that been put on hold, and does that put us in an even worse position as regards a baseline for trying to get people back into work?

Mr Greer: I am sorry, Sian; I hope that I have understood your question. Are you referring to the delay in the proposed Green Paper?

Ms Mulholland: Yes.

Mr Greer: That is all subject to the outworkings of the Timms review, the ramifications of which will be considered by the Department. Has that created additional pressure for the Department? Frankly speaking, no. Historically, despite what the legislative position has been at Westminster, we have not received the Barnett consequential from that, because that comes unhypothecated and has not come to the Department. Even in the current legislative environment, a number of significant funding programmes that were part of legislation have not been realised by the Department here.

Ms Mulholland: That is my concern, John. When we look at the position that we are in, it looks very unlikely that we will ever be in a position, at least in the next couple of financial cycles, to provide that support. We are looking at potentially reducing support but are not in a position to give like-for-like support to get people into a job or maintain a job, which would reduce the amount that is going out in welfare. My concern when I look at your budget is that there is no room for further support. Quite clearly, that is what it is saying to me.

The Chairperson (Mr Gildernew): OK. I will pick up on Sian's question: how will the Department ensure continued compliance with equality duties if programmes that support vulnerable groups are reduced?

Mr Greer: We will, as we do, conduct equality impact assessments on our budget. When we have done that, we will look to put in place suitable mitigations so that those impacts do not manifest themselves.

The Chairperson (Mr Gildernew): OK. Finally, you mentioned that, in a couple of weeks, you will make recommendations to the Minister on funding decisions. When can the Committee see those?

Mr Greer: As soon as those decisions are made, I will be more than happy to come back to the Committee and give a full briefing on them.

The Chairperson (Mr Gildernew): On the recommendations as well as the decisions?

Mr Greer: Yes.

The Chairperson (Mr Gildernew): OK. Thank you, John, Olga and Kathy. I appreciate your briefing. It is a very worrying situation, and we did not even touch on much of it. However, we will continue to work with you. We appreciate your coming to the Committee regularly to update us.

Mr Greer: Thanks, Chair. Again, apologies, Cathy.