Background toBudget 2016

NICVA18 April 2016

Joanne McBurneyHead of Central Expenditure Division

DFP

Economic Context

Improving labour market but structural weaknesses remain

We face demographic pressures which will place further strain on key services, especially health....

Source: NISRA Over 65s to increase by 27% between 2015 and 2025

1700

1750

1800

1850

1900

1950

2000

2050

NI Population

Financial Context

• NI continues to receive more in budgetallcoations than it pays for in taxation

• The economy is more reliant on the publicsector than other areas of the UK

NI Fiscal Deficit - Trend

4000

5000

6000

7000

8000

9000

10000

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

£m

illio

n

Fiscal Deficit

Fiscal Deficit

Public Expenditure Context

• The Chancellor announced that even thoughworld economic growth has been reviseddown, the UK GDP forecasts would see stronggrowth over the next 5 years.

• Despite this growth, the UK Government iscontinuing its policy of driving down deficitand debt and public service spendingcontinues to be tightly constrained.

Formulation of NI Budget Envelope

• UK Spending Review

• Funding Mechanism

• NI Control Totals

UK Spending Review

• The UK Spending Review set the budgets forWhitehall departments up to 2019-20 forResource DEL and 2020-21 for Capital DEL.

• Whitehall departmental spending will reducebut on average, will fall at less than half therate of the previous five years.

PESA REGIONAL COMPARISONS

0

50

100

150

200

250

300

1. Generalpublic

services

2. Defence 3. Publicorder and

safety

4. Economicaffairs

5.Environment

protection

6. Housingand

communityamenities

7. Health 8.Recreation,culture and

religion

9. Education 10. Socialprotection

Ind

ex

(UK

ide

nti

fiab

le E

xpe

nd

itu

re =

10

0)

2013-14 Expenditure on Services by Region, per head indexed

England

Scotland

Wales

Northern Ireland

How Northern Ireland is Funded

Source: Budget 2011-15

45%

55%

TOTAL FUNDING

AME

DEL

93%

5%2%

DEL

HMT DEL

REGIONAL RATES

RRI BORROWING

SR 2015 – NI Outcome

£million 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

Non Ring-

fenced RDEL9,661.5 9,745.0 9,821.0 9,827.5 9,853.8 -

CDEL 957.3 1,009.6 1,036.0 1,073.2 1,126.3 1,184.7

FT CDEL 104.3 113.6 100.7 76.4 66.1 54.0

UK 2016 Budget – NI Outcome

£million 2016-17 2017-18 2018-19 2019-20

Non Ring-fenced RDEL 5.796 64.934 69.279 70.154

CDEL 3.024 1.173 3.768 5.123

NI Air Ambulance 2.000 1.500 1.000

SR 2015 & UK 2016 BudgetNI Outcome

• Reducing Resource DEL

(-4.5% real terms by 2019-20)

• Increasing conventional Capital DEL

(+12.9% real terms by 2020-21)

Budget Trends and Forecasts

9200

9300

9400

9500

9600

9700

9800

9900

10000

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

£m

illio

n

Resource DEL Trends and Projections Resource Outturn

Resource Plans

Budget Trends and Forecasts

800

850

900

950

1000

1050

1100

1150

1200

1250

1300

£m

illio

n

Capital DEL Trends and Projections Capital Outturn

Capital Plans

Policy £m

Student Fees 38

Free Prescriptions 30

Concessionary Travel Fares 8

Water Charges 180

Domestic Rates 150

Housing Benefit Top Up 10

Housing Rent Differential 88______

504

We have introduced a number of ‘Super-Parity’ policies. In 2014-15 these cost:

Fresh Start Agreement

• Up to £150m over 5 years to help fund the bodies to

deal with the past;

• Flexibility to use £700m of capital borrowing to fund a

voluntary exit scheme;

• A contribution of up to £500m over 10 years of new

capital funding to support shared and integrated

education and shared housing;

• Up to an additional £350m borrowing for infrastructure

projects;

Fresh Start Agreement

• Funding for investment in fraud and error detection in

the welfare system

• Funding for dealing with paramilitary activity

• National Security funding

• Shared Future funding of £60 million

• £75m of funding from the Republic of Ireland for the

A5

Departments

• Northern Ireland Departments are reducing from 12 to nine.

• The most extensive reorganisation of departmental structures since 1999.

• A Programme Board has been established to oversee the transition to nine departments.

• On 7 July 2015, the Executive agreed to produce the 2016-17 Budget on the basis of the new nine department structure

"A Fresh Start" Implications for Budgets

£m

2016-17 2017-18 2018-19 2019-20 2020-21

VES Borrowing 200.0 200.0 100.0

Shared and Integrated Education and Housing 50.0 50.0 50.0 50.0 50.0

Additional Borrowing for Capital 100.0 100.0 50.0

Welfare - Fraud and Error 25.0 25.0 25.0 25.0 25.0

Welfare - Return of welfare deuctions 20.0 20.0

Security Funding 32.2 34.3 33.7 31.1 28.7

Dealing with the Past 30.0 30.0 30.0 30.0 30.0

Dealing with Paramilitary Activity 5.0 5.0 5.0 5.0 5.0

Dealing with Paramilitary Activity - Monitoring 0.8 0.8 0.8 0.8

Shared Future 12.0 12.0 12.0 12.0 12.0

ROI Funding for A5 25.0 25.0 25.0

Total Budget Implications 500.0 502.1 331.5 153.9 150.7

Capital DEL

Fresh Start Agreement

• The funding package agreed as part of the Fresh Start

agreement will be additional to the Spending Review

envelope

• In addition the Executive will set aside funding for

welfare reform mitigation measures

• Allocations will be carefully monitored and outcomes

reported on.

Welfare Reform Mitigation

£million

2016-17 2017-18 2018-19 2019-20 Total

Welfare Reform 46 89 93 84 310

Tax Credits Mitigation (UC) 14 55 51 51 171

Administration 5 5 5 5 20

Total 64 149 149 140 501Note: totals may not add due to rounding

Source: Professor Evason’s Report on Welfare Reform Mitigations

Budget 2016-17

• Protection for health and social care

• Degree of protection for policing budget

• Unprotected baselines faced 5.7% reduction

• AOCC, NIA and NIAO exempt

• NIA and NIAO have identified savings

Budget 2016-17

• Additional allocations for

– Health £133 million

– Education £40 million

– Legal Aid £15 million

– Roads Structural Maintenance £20 million

– Skills £5 million (plus commitment to £20 million in-year )

• Departmental outcomes ranging from -5.7% for

DAERA to 2.7% for DoH

Budget 2016-17 - Resource £million

Baseline Budget

%

Change

Agriculture, Environment and Rural Affairs 209.8 197.9 -5.7

Communities 820.6 871.2 6.2

Economy 814.3 790.0 -3.0

Education 1,947.3 1,947.5 0.0

Finance 141.5 140.1 -1.0

Health 4,751.4 4,880.1 2.7

Infrastructure 372.0 372.8 0.2

Justice 1,023.9 1,050.5 2.6

The Executive Office 62.2 59.1 -5.0

Non Ministerial Departments

Assembly Ombudsman/Commissioner for Complaints 2.3 2.3 -

Food Standards Agency 8.6 8.1 -5.7

NI Assembly Commission 39.0 39.4 0.9

NI Audit Office 7.7 7.9 2.3

NI Authority for Utility Regulation 0.2 0.2 -6.0

Public Prosecution Service 32.8 31.0 -5.7

Total Planned Spend 10,233.7 10,398.0 1.6

Budget 2016-17 – Capital £million

Conventional

Capital

Financial

Transactions

Capital

Total

Capital

Agriculture, Environment and Rural Affairs 48.8 - 48.8

Communities 148.7 11.0 159.7

Economy 60.1 30.8 90.9

Education 193.7 - 193.7

Finance 33.6 - 33.6

Health 222.6 10.0 232.6

Infrastructure 384.1 - 384.1

Justice 58.0 - 58.0

The Executive Office 5.0 6.0 11.0

Non Ministerial Departments

Assembly Ombudsman/Commissioner for Complaints 0.0 - 0.0

Food Standards Agency 0.1 - 0.1

NI Assembly Commission 2.0 - 2.0

NI Audit Office 0.0 - 0.0

NI Authority for Utility Regulation 0.0 - 0.0

Public Prosecution Service 1.5 - 1.5

Total Planned Spend 1,158.2 57.8 1,216.0

Budget 2016-17 – Centrally Held Funding

£million

Resource DEL

Capital DEL

Financial Transactions

Capital

Delivering Social Change 14.0 15.0 -

Change Fund 7.1 - -

EU Match Funding 1.0 - -

Atlantic Philanthropies 8.0 - -

Air Passenger Duty 2.4 - -

Unallocated Tax Credit Funding 30.0 - -

Paramilitary Monitoring 0.8 - -

Funding for Addressing Paramilitary Activity 10.0 - -

Dealing with the Past 30.0 - -

Shared Future 12.0 - -

Northern Ireland Investment Fund - - 55.8

Shared/Integrated Education & Shared Housing - 50.0 -

Total 115.2 65.0 55.8

Budget 2016-17 – Flagship Projects

£million

2016-17 2017-18 2018-19 2019-20 2020-21

A5 Road 13.2 40.0 53.0 55.0 68.0

A6 Road 21.0 57.0 60.0 60.0 60.0

Belfast Rapid Transport 17.0 9.0 20.0 12.9 -

Belfast Transport Hub 5.8 16.0 40.0 60.0 -

Mother and Children's Hospital 16.0 29.3 62.8 73.0 61.6

Desertcreat 3.9 0.3 18.3 28.2 28.7

Regional & Sub Regional Stadia 9.8 27.0 30.0 15.0 9.0

Total 86.7 178.6 284.1 304.1 227.3

Next Steps

• 2016-17 In-year Monitoring

– Ministers have additional flexibility to realign

departmental budgets in June Monitoring

– Commitments to skills, education etc

– Emerging pressures

– BES

Next Steps

• Budget 2016

– Multi- year Budget

– Resource DEL 2017-20

– Capital DEL 2017-21

– Northern Ireland (Stormont Agreement and

Implementation Plan) Bill

– Strategic issues