Fiscal Framework

Oral Answers to Questions — Finance – in the Northern Ireland Assembly at 2:00 pm on 7 May 2024.

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Photo of Colm Gildernew Colm Gildernew Sinn Féin 2:00, 7 May 2024

3. Mr Gildernew asked the Minister of Finance to provide an update on her discussions with the Treasury on a fiscal framework. (AQO 383/22-27)

Photo of Patsy McGlone Patsy McGlone Social Democratic and Labour Party

4. Mr McGlone asked the Minister of Finance for an update on her discussions with the UK Government on a new fiscal framework. (AQO 384/22-27)

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

With the Principal Deputy Speaker's permission, I will answer questions 3 and 4 together.

I have pressed the Chief Secretary to the Treasury on the importance of putting in place a fiscal framework as quickly as possible that includes funding us properly, based on need. That is essential if the Executive are to be able to deliver sustainable quality public services here. My officials are engaging with their Treasury counterparts on the application of the needs-based adjustment factor that was included in the financial package, on the necessity for the Executive to be funded at an agreed level of need going forward and on the development of a wider fiscal framework. Those discussions are ongoing, and I will meet the Chief Secretary later this afternoon to press for progress on those important matters.

Photo of Colm Gildernew Colm Gildernew Sinn Féin

Gabhaim buíochas leis an Aire as an fhreagra sin.

[Translation: I thank the Minister for her answer.]

Minister, will you outline how we can get a fiscal framework that provides a fair level of needs-based funding in order to allow us to provide services into the future?

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

It is critical that a new fiscal framework provide clarity on our long-term funding model. As the Member will be aware, the financial package is for two years. Concerns have been outlined in that regard. We must ensure that we are funded to our level of need in order to enable the Executive to deliver the high-quality public services that people expect and deserve and for us to have sustainable public finances. The current approach is unsustainable. Recent reports from the Fiscal Council and the NI Affairs Committee have reflected what I have been saying, which is that the North is not receiving the funding that it needs. Both raised concerns about the financial cliff edge that we are facing and stated that our funding should be adjusted based on need from the start of the current spending review.

The Fiscal Council has made the point that we are the only devolved Administration being asked to deliver public services whilst being funded below our level of need. In my view, these assessments reaffirm the position for the British Government to secure an urgent long-term solution to ensure that public services are sustainably funded. Any new fiscal framework will be key to achieving that.

Photo of Patsy McGlone Patsy McGlone Social Democratic and Labour Party

Gabhaim buíochas leis an Aire as ucht a freagraí go nuige seo.

[Translation: I thank the Minister for her answers so far.]

Minister, you have had the overwhelming support of the Assembly to negotiate a fiscal framework that reflects our needs, and you have outlined those. However, it has been three months and there does not seem to be any sign of change in the UK Government's position. If the UK Government do not change their position, what is the plan B, or is there a plan B?

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

I have been consistent in setting out that engagement is continuing. So far, it has been constructive. My officials are engaging with Treasury officials. I have met with the Chief Secretary to the Treasury on a number of occasions and am meeting her again later this afternoon. We need to see urgent action from the British Government to ensure that we are funded appropriately based on our level of need and that we do not face that financial cliff edge in two years' time. I have stressed that with the Chief Secretary to the Treasury on my previous engagements with her, and I will continue to do that.

Despite the short-term uplift for our public finances due to the financial package, the current situation would see us effectively trapped below our level of need for a number of years, which would create a fiscal ceiling rather than the fiscal floor that all parties have been united in asking for. We are not asking for special treatment here. We are asking to be treated the same as Scotland and Wales and for our funding to be needs-based. Scotland and Wales are funded above need, and that will be denied to people here. That is not a tenable situation.

There are a number of other areas that we think any new fiscal framework should cover to help us to sustainably manage our public finances. These could include a new fiscal reserve, increased borrowing powers and increased devolved fiscal powers. That is part of the ongoing engagement.

Photo of Jim Allister Jim Allister Traditional Unionist Voice

Is the Minister still committed to raising £113 million of resources? With the Secretary of State's gazumping of some of the functions and powers of the Department with the iniquitous Irish Sea border, is there a knock-on financial consequence or will all those costs still come out of the block grant? How do her accounting officers deal with that situation?

Photo of Carál Ní Chuilín Carál Ní Chuilín Sinn Féin

Minister, there were several questions there. Answer whichever you deem fit.

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

Thank you. Obviously, as part of the financial package, the British Government indicated that there should be revenue-raising of £113 million, which is tied to the write-off of the £559 million overspend from last year. The Executive do not accept that that should be a condition, given that the overspend accrued because we were being funded below our level of need. As a Finance Minister, I do not want to be in the position next year of losing £559 million from our block grant. In making the case to the Chief Secretary to the Treasury that we had limited levers to raise revenue, that period has been extended to 24 months.

On the issues around the funding for the Windsor framework, Departments make bids to us and then to Treasury, so Treasury pays for the arrangement. Up until now, the arrangement is that Treasury funds the elements of the Windsor framework. We anticipate that that will continue and that we will see that in the June monitoring round.

Photo of Steve Aiken Steve Aiken UUP

On the level of the fiscal floor, has any modelling been done on the figure of 124% or is there a new figure that you think would be suitable for us to take forward? Have we come to that conclusion yet?

Photo of Caoimhe Archibald Caoimhe Archibald Sinn Féin

The Member will be aware of some of the work of the Fiscal Council around the fiscal floor. He will be aware that the Executive do not accept that 124% is the level of need and also that some additional modelling has been done by the Fiscal Council to take account of other factors, such as policing and justice, which could, potentially, see that factor of need being higher.

We want to build on that. We are engaging with Treasury on the actual level of need and ensuring that that level of need is baselined into our Budgets so that we are in a position to deliver high-quality public services and have more sustainable public finances.