During the course of the past two years the UK Government has continued to work towards the restoration of a devolved government. I remain fully committed to seeing this happen as my belief in the Belfast Agreement and devolution is resolute as is my commitment to protecting the best interests of the people of Northern Ireland.
A fundamental part of this is to protect the delivery of public services and ensure good governance in the absence of an Executive. I am, therefore, providing clarity and certainty on Northern Ireland finances for the 2019-20 financial year. This would enable Northern Ireland departments to plan and prepare for the year ahead.
2019/20 Budget allocations
I set out below the resource and capital allocations which I consider to be the most balanced and appropriate settlement for Northern Ireland departments. It would be open to a restored Executive, of course, to consider and revise the position I have set out.
In deciding on these allocations I have engaged intensively with the Northern Ireland Civil Service (NICS) to understand the needs of departments as they continue to manage public services in the absence of an Executive. I have reflected too on the various views on budget priorities submitted to me over the course of the past year and discussed the budget situation with the main political parties in Northern Ireland.
As we work towards restoring devolved government, this Government will respect the devolution settlement and only intervene in Northern Ireland when it is absolutely necessary to do so. In the absence of local Ministers, and given the proximity of the next financial year, it would not be appropriate for the UK Government to seek to take fundamental decisions about service delivery and transformation. Those are strategic decisions that should be taken by locally elected and accountable Ministers in a new devolved government. Yet we must act to secure public services and enable Northern Ireland departments to meet urgent pressures in health and education and protect spending to other departments with core front line public services. That is what this budget settlement will do, by protecting and preserving public services within challenging fiscal constraints.
On the resource side, it delivers real-terms increases for health, education, infrastructure and justice. It also delivers cash increases to the departments of Economy and Agriculture, Environment and Rural Affairs. Elsewhere departments would either be cash-flat, with notable reductions only for the two central departments (Finance and the Executive Office). For capital, it provides a strong basis for investment and enables the York Street Interchange to progress as well as key flagship projects including the Mother and Children’s Hospital and the A6 road scheme.
UK Government Support
The budget position is based on the assumption that the 2019-20 funding allocation set out in the financial annex to the Confidence and Supply Agreement will be released, subject to Parliament’s approval at Main Estimates.
Furthermore, in recognition of the lack of opportunity for more fundamental service reconfiguration over the last 12 months, this Budget includes £140m of new funding and some financial flexibilities to deliver this draft budget. These flexibilities include using £130m of existing 2019-20 capital funding to address public services resource pressures and additional carry forward of up to £85m resource and £8m capital from 2018-19 into 2019-20.
As I set out last year transformation is needed in a number of areas to make services sustainable in the long term. Northern Ireland departments are limited in what strategic decisions can be taken without Northern Ireland ministers but work to prepare for this must proceed. To that end, the Budget includes a £4m fund to prepare the ground for transformation.
As part of setting a budget, it is essential that the UK Government provides clarity on the regional rate. This budget position has been constructed on the basis of a 3% (plus inflation) increase on the domestic regional rate, and 0% plus inflation on business rates. I consider that this is a necessary and important step to continue to support public services, particularly in health and education. I can also confirm that this budget settlement would provide the basis for the Small Business Rate Relief to continue.
Securing a deal with the EU which Parliament can support remains this Government's focus and priority. As a responsible government, we are preparing for EU exit in all scenarios and so have allocated £2bn in 2019-20 to support departments and devolved administrations in either a deal or no-deal scenario. For Northern Ireland departments this includes £20.4m of general EU Exit funding that is allocated in this budget and a further £16.5m for the Police Service Northern Ireland (included in the Department of Justice’s allocation) to reflect the specific and unique circumstances in Northern Ireland.
Implementing decisions within the overall allocations
This statement outlines overall allocations, based on my assessment of the options currently available to the Northern Ireland departments and the funding available. To the extent possible, the consequent prioritisation of resources within Northern Ireland departments will need to be undertaken by Permanent Secretaries, as has been the case during the past two years. It is anticipated that further funding will become available through the usual in-year monitoring process and this should enable departments to address any remaining pressures. Permanent Secretaries cannot, of course, take the full range of decisions that would be available to Ministers. In that context, the UK Government shall continue to support the Northern Ireland administration, and to do whatever is necessary to meet our responsibilities to the people of Northern Ireland.