Finance Minister launches consultation of 2022 – 2025 Draft Budget

When it comes to the delivery, never mind the reform and transformation, of public services, the common denominator is where the money comes from, hence the critical importance of the Executive’s Budget and its (in)ability to raise revenue locally.

This week the Finance Minister launched a public consultation on the draft Budget. The consultation will run until 7 March, with Executive approval then needed on the final Budget before the beginning of the new financial year.

The 2022-25 Budget marks a welcome return to multi-year budgeting, following six successive annual budgets. This as Conor Murphy points out, “provides a more stable basis upon which public services can be planned, reformed, and improved.”

On the benefits of multi-annual budgeting, the Finance Minister has pointed to how a health budget of £21 billion over the next three years “provides a long-awaited opportunity for long-term planning, reforming service delivery, and tackling waiting lists on a sustainable basis.” This certainty will also be replicated across all departments.

However, a pre-determined Block Grant from the UK Treasury and the absence of a magic money tree, not to mention the backdrop of COVID and the outworkings of Brexit, means trade-offs must be made. The Finance Minister is clear about this, noting “more money for one area means less money for another.”

All other Executive departments, with the exception of the Department of Health, who will receive an additional 10%, have been asked to contribute 2% of their opening baseline to fund health pressures. Notwithstanding one-off additional cash injections from Westminster as a result of spending announcements, this will mean Ministers making difficult choices around other departmental and Executive priorities.

In this context, this week’s other significant fiscal development – the Interim Report from the Independent Fiscal Commission for NI - represents an interesting area for discussion.

The Commission was set up by the Finance Minister earlier this year to examine additional means of Executive revenue raising and taxation powers.

For its Interim Report, the Commission considered around 20 taxes for potential devolution. Those meriting further consideration are: income tax; fuel duty; alcohol and tobacco duties; stamp duty land tax; APD; apprenticeship levy; and landfill tax.

It is the hope of the Commission that the Interim Report will stimulate and inform further debate on these issues prior to the publication of its Final Report next year.

Welcoming the report, the Finance Minister said “more powers could enhance local democracy, create more options for funding public services, and equip us with policy levers to deliver our social and economic priorities.” Murphy also recognised that more thought must be given “to how greater local control over taxes would operate in practice.”

So, with the 2022-25 Budget setting out short- to medium-term spending priorities, and the Fiscal Commission set to make final recommendations next year on measures that could increase the Executive’s revenue raising powers in the long-term, the missing piece remains aligning spending to outcomes in the Programme for Government.

With an election and new Programme for Government due next year, the challenge of merging short-, medium- and long-term thinking will be for the new Executive to deliver.