Northern Ireland's finances: theory and practice

08 November 2016 - by Jonathan Finlay

With all eyes looking toward the Executive’s forthcoming Budget, we assess the theory and practice of the process around Northern Ireland’s finances.

Recent weeks have seen a number of high-profile policy announcements from the Northern Ireland Executive. We now have a draft version of the Programme for Government, as well as the Health Minister’s vision for transforming health and social care. The plans are ambitious and wide-ranging.

Yet all policies must be paid for and departments are awaiting the next Budget – the allocation of funding as agreed by the Executive.

Committees have been told that Minister of Finance Máirtín Ó Muilleoir intends to deliver a statement on the Budget to the Assembly in December. That Budget will then be formally laid before the Assembly in early January, prior to a cross-community vote at the end of the month.

So far, so familiar, though a number of factors make this situation notable.

Most obviously, there has been a sea change since the Assembly election. The result of the EU referendum has led some to speculate that the UK Government may offset potential fallout with a fiscal stimulus.

The Department of Finance suspects that the Treasury could pay for such an increase in capital expenditure (money allocated to acquire or enhance an asset) by reducing the resource spend (earmarked for day-to-day running costs).

The Minister has therefore decided to proceed with a four-year capital budget as before. However, citing the uncertainty of Brexit, Ó Muilleoir decided  to initially introduce a one-year resource budget to allow for any developments in the Chancellor of the Exchequer’s Autumn Statement (set for 23 November).

Some Opposition MLAs on Assembly committees have raised concerns around the transparency of this Budget process. The Department of Finance says that the lateness of the Autumn Statement has forced them into a constrained timescale, but it has been argued that the length of time between the Budget being laid and the Assembly vote does not give enough time for committee scrutiny.

It has been posited that providing such an opportunity for scrutiny is a statutory obligation. The Belfast Agreement (strand one, paragraph 20) specifies that a yearly Budget is “subject to approval by the Assembly, after scrutiny in Assembly Committees”.

This has not been the only bone of contention between the Opposition and the Executive over financial matters as of late.

The recent monitoring round was controversial for abandoning the old system whereby departments submitted formal bids to address in-year pressures.

Now, the Minister of Finance says a united Executive has agreed on a more streamlined approach. The bidding process is gone, replaced by “ongoing engagement” between departments and the Public Spending Directorate.

Those outside the Executive (including the new official Opposition) have sought to clarify exactly what form this “ongoing engagement” takes.

A recent paper from the Assembly Research and Information Service suggested that “the removal of the bidding process raises a question as whether it could be seen as a retrograde step in the Executive’s approach to budgeting”.

There is also the question of how short-term spending can align with the long-term thinking that is proposed in the Programme for Government.

Whatever the outcome, the process is certainly different.