Northern Ireland Budget Bill

(Limited Text - Ministerial Extracts only)

2nd reading & Committee negatived & 3rd reading
Tuesday 7th February 2023 Lords Chamber

Moved by

[Lord Caine]

That the Bill be now read a second time.

[The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Caine) (Con)]

My Lords, before I begin my comments on the Bill itself, I once again place on record my gratitude to your Lordships for considering this important Bill on a heavily truncated timetable. I recognise that we should be doing so only in exceptional circumstances. As I go through my remarks this evening, I hope noble Lords will agree that this Bill meets, and indeed goes beyond, that high threshold.

In moving this Second Reading, I once again speak with a strong sense of disappointment. At the Second Reading of the Northern Ireland (Executive Formation etc) Bill 2022, I said:

“No Government would want to be in the position in which we find ourselves today. It is clearly not a satisfactory state of affairs.”—[Official Report, 5/12/22; col. 22.]


That sentiment still applies as I stand before your Lordships this evening. It is also a sentiment shared, I would venture, by the noble Lord, Lord Hain, and my noble friend Lord Dodds of Duncairn, who have tabled regret amendments to the Second Reading Motion. With their permission, I will not seek to pre-empt what they might say when they come to speak to their amendments. Instead, I will endeavour to listen carefully to what they say and respond in my wind-up speech later on.

The Government are bringing forward this legislation because Northern Ireland has been without a fully functioning Executive since February 2022 and without a fully functioning Assembly since after the May Assembly elections in the same year; as a result, it has not been possible to set a budget. His Majesty’s Government stepped in shortly after 28 October last year, when Northern Ireland Ministers formally left their posts, and we subsequently worked with the Northern Ireland Civil Service to set a budget for 2022-23. I place on record my gratitude to those in it for all their hard work.

My right honourable friend the Secretary of State for Northern Ireland and I set out the budget allocations for each Northern Ireland department in a Written Statement which I placed before your Lordships’ House on 24 November 2022. The purpose of this Bill is to put those allocations on a legal footing. Setting this budget was not an easy task. Northern Ireland departments and Ministers who were, up until 28 October, in post had not been operating within confirmed spending limits and had not implemented plans to deal with looming overspends. As a result, we found ourselves facing an unenviable £660 million black hole in the finances—subsequently reduced, through discussions and agreement, to £330 million.

In facing this situation, we have, in what I would describe as the best traditions of a one-nation Conservative Government, prioritised spending on health and education, with an overarching objective of protecting the most vulnerable. This budget therefore increases education spending by just under £300 million and delivers a £786 million increase on non-Covid-related health spending. I suggest that these are not insignificant sums. We are acutely aware of the difficult decisions that now have to be taken in relation to health and education, and right across the spectrum in Northern Ireland, to live within this budget but the Government believe that, in the very challenging and difficult circumstances in which we find ourselves, it is a fair outcome.

Clearly, consideration will now need to be given to a sustainable and strategic budget outlook for the financial year 2023-24. If the Executive have been restored in time to set a budget for 2023-24, the UK Government will continue to work constructively with executive Ministers, including on a sustainable budget that delivers for the people of Northern Ireland and supports economic growth. However, if the Executive have not been restored, we are working closely with the Northern Ireland Civil Service to prepare for next year’s budget. I assure the House that the Government’s priority for that Budget will be to deliver a fair outcome for all taxpayers and citizens in Northern Ireland.

The pressures on Northern Ireland’s finances did not arise overnight. Many noble Lords will recall that both the Stormont House and fresh start talks in 2014 and 2015 were, in large part, driven by the need to deal with the Northern Ireland Executive’s finances. The Northern Ireland (Stormont Agreement and Implementation Plan) Act 2016 included provisions to introduce further transparency around the budgetary process, including requiring the Finance Minister to set out how any draft budget would not exceed the money allocated to the Executive from the UK Government. Despite this, the Government still inherited a budget halfway through the year with, as I said earlier, a projected overspend of some £660 million, reduced to some £332 million following work between my officials and the Northern Ireland departments. Notwithstanding that, the situation is still, however, unacceptable and the unsustainability of Northern Ireland’s finances cannot continue.

I should point out that there are some who would have us believe that the main problem is that the UK Government have somehow starved Northern Ireland of cash. I would of course strongly refute that argument. Spending per head in Northern Ireland is already the highest of any region in the United Kingdom. In the spending review of 2021, which set the block grant for three years, Northern Ireland received record levels of financial support—the highest since the restoration of devolved government in 1998-99. Funding per head in Northern Ireland is some 21% higher than the United Kingdom average.

It would therefore be simplistic in the extreme to say that the issues facing Northern Ireland as we stand here today are simply down to a perceived lack of money. Rather, the difficulties in which Northern Ireland departments now find themselves are the result of difficult decisions not being taken—not just this year, but in successive years before it. I would add that that situation was of course not helped by the lack of a functioning Executive and Assembly between 2017 and 2020. The Bill before the House will place the budget that I outlined on 24 November last year on to a legal footing. It will allow departments and other listed public bodies to continue to deliver public services into the first half of the 2023-24 financial year, through a vote on account.

I turn briefly to the individual clauses. Clauses 1 and 2 will authorise Northern Ireland departments and other specified public bodies to use resources amounting to £26,656,975,000 in the year ending 31 March 2023. This includes cash items such as payment of salaries, the purchase of goods and services, and investment in the construction of new capital assets, as well as non-cash items such as the depreciation of existing assets and making provision for future liabilities. Of that total sum, £24,242,000,000 is authorised for current purposes and around £2.5 billion is authorised for capital purposes.

Clauses 3 and 4 will authorise the Northern Ireland Department of Finance to issue nearly £21.5 billion out of the Northern Ireland Consolidated Fund for this financial year. This is a lower figure than the resources authorised in Clauses 1 and 2 because departments do not require cash for depreciation costs, provisions and other non-cash items.

Clause 5 will authorise temporary borrowing by the Northern Ireland Department of Finance, up to approximately half of the sum issued out of the Northern Ireland Consolidated Fund under Clause 3. This is a normal safeguard against the possibility of a temporary deficiency, and any borrowing authorised under this clause is to be repaid by 31 March this year.

Clause 6 will authorise Northern Ireland departments and other listed bodies to use the income they receive from the specified sources listed in part 3 of their Schedule 1 estimate. The authorisations in Clauses 1 to 6 supersede previous authorisations in the Budget Act (Northern Ireland) 2022 and other legislation. In order to give effect to that, Clause 7 allows the authorisations in the Bill to be treated as having effect from the beginning of 1 April 2022.

Clauses 8 and 9 authorise the use of resources by Northern Ireland departments and other listed bodies amounting to some £17.5 billion over the course of the financial year ending on 31 March 2024. Of that total, nearly £16 billion is authorised for current purposes and around £1.5 billion is for capital purposes. The authorisation for this is a vote on account at 65%, to allow public services to continue to be delivered into the first half of the next financial year. This is greater than usual: 65% instead of 45%. The vote on account does not imply the setting of a budget for 2023-24; its purpose is to allow the use of resources to ensure that services can continue to be delivered, pending the consideration of a budget Bill for the full financial year.

Clauses 10 and 11 authorise the Northern Ireland Department of Finance to issue just over £14 billion out of the Northern Ireland Consolidated Fund during that period. Clause 12 authorises temporary borrowing by the Northern Ireland Department of Finance. Just as borrowing during the current financial year must be repaid before the end of the current year, any borrowing during the next financial year under this clause must be repaid in full before 31 March.

Clause 13 provides for the Bill, if passed, to have the same effect as if it were a budget Act of the Northern Ireland Assembly. Clauses 15 and 16 are minor and consequential.

I will make a short statement on legislative consent. Clearly, we have been unable to secure a legislative consent Motion from the Northern Ireland Assembly given that it is currently not sitting—indeed, if it were, I would hope we would not have needed the Bill at all. But the continued absence of the Assembly and the Executive means that we have been left with no other option but to take action here.

I express my thanks again for the ongoing hard work of the Northern Ireland Civil Service, which now has a responsibility to ensure that Northern Ireland departments live within the budget limits set out in the Bill. I recognise that this is not easy and will require difficult decisions. People in Northern Ireland rightly expect to see those decisions taken at Stormont, and I agree with them. I state again my continued disappointment that, as a Government, we are having to step into Northern Ireland affairs and intervene in this way. I look forward, as I think do noble Lords across the House, to the restoration of the Northern Ireland Executive and Assembly at the earliest opportunity. However, until a functioning Executive return, the Bill will allow public services to continue functioning and help to protect public finances in Northern Ireland. I therefore commend it to the House.