Funding and delivery of public services: follow up

Northern Ireland’s public services remain in crisis. Its health service is under immense pressure, with long waiting lists, a struggling primary care sector and an acute mental health situation, in part due to Northern Ireland’s recent history. There are severe demands on the education sector, too, with SEN pupils suffering and schools operating with large deficits. Policing and justice continue to operate under budgetary constraints, while dealing, among other things, directly with the legacy of Northern Ireland’s recent past. Other sectors are not immune to funding and service delivery problems, and all this continues to stifle Northern Ireland’s ability to invest in skills, infrastructure and grow its economy. The problems are clear. In the rest of this report, we consider some potential solutions. (Conclusion, Paragraph 21) The needs-based assessment

Northern Ireland must be funded according to its level of need. In the short term, that means in the main by central Government. The previous Government accepted that for every £100 spent on public services in England, it costs £124 to run the equivalent services in Northern Ireland. Opinions differ on whether this 124% uplift in funding a fair and accurate assessment of Northern Ireland’s relative level of need is. There are clearly opportunities for the Executive and service providers to use their current funding more efficiently, as highlighted by the BMA, and through improved data collection. To that end, we welcome the work that Prof. Gerald Holtham is undertaking to make a new, independent assessment of need in Northern Ireland. From the evidence which we have taken, it seems clear that a figure of 124% or 127% will not make a significant difference to Northern Ireland’s public services on its own in the short term, if it is applied in future only to Barnett consequentials. To ensure that Northern Ireland is funded according to need as quickly as possible, and to avoid a potential 35 cliff edge in funding from 2026–27 when the additional one-off funding Northern Ireland received under the 2024 Executive restoration package comes to an end, there is a compelling case for backdating the 124% uplift to the start of the 2021 Spending Review period, and reflecting that in the Block Grant baseline figure for the next. Applying the figure for relative need to the Block Grant year-on-year, without Barnett consequentials, is another option. But, whatever the means, the key objective is to ensure that Northern Ireland is fully funded according to need, through stable, sustainable and predictable allocations, starting with the allocation at the next Spending Review. (Conclusion, Paragraph 40)

The Government must engage constructively with the conclusions of Prof. Gerald Holtham’s independent review of Northern Ireland’s level of need in deciding future levels of, and mechanisms for, needs-based funding. In negotiations with the Executive on the final Fiscal Framework, we urge the Government to backdate assessed need to the start of the 2021 Spending Review period, in order to include it in the Block Grant baseline figure for the next Spending Review period—or, alternatively, having acknowledged the shortfall during that Spending Review period, compensate Northern Ireland in future years. (Recommendation, Paragraph 41) Transformation and reform

Northern Ireland must have appropriate funding now to transform its public services in the medium term. In recent years, Northern Ireland has received one-off funding packages to alleviate short-term problems. This well-intentioned resourcing has done little to help Northern Ireland plan and invest strategically for long-term public service transformation. We note, however, that the Executive has more than the ring-fenced £235 million at their disposal which they could spend on transformation, but it has failed to do so. In the case of the Executive restoration package, funding has been diverted to day-to-day spend. Despite Government reassurances, the public sector, and community and voluntary sector are still concerned about upcoming increases in National Insurance contributions. The Executive, public service providers and, most importantly, service users need longer-term funding settlements to enable better long-term planning, implementation and outcomes. With the political institutions stabilised, funding needs to follow suit. We also note some evidence which seems to demonstrate that the siloed nature of NI Executive Departments works against joined-up government and collective responsibility. The cohesion of government structure in the Executive and between the Departments in Northern Ireland will need to be enhanced in the medium-term if the funding and delivery of public services is to be more efficient and effective in the future. (Conclusion, Paragraph 61) 36

The Government must provide stable, sustainable, multi-year funding as part of future budget settlements, to enable the Northern Ireland Executive and service providers to plan for long-term public services transformation. (Recommendation, Paragraph 62) Raising revenue

In the longer-term, one way in which Northern Ireland could reduce its reliance on the vagaries of the Block Grant, Barnett formula and short-term funding would be to raise more revenue itself. That is, of course, easier said than done. The introduction of water charges (for example) may be politically difficult, but the public elect politicians who are expected to make difficult decisions and therefore the discussion should not be avoided. Such reform may take time to implement practically—delaying any increased revenue which could be collected and spent. Further fiscal devolution, with the Executive taking control of currently centralised tax and revenue-raising levers, may offer a different way forward if Northern Ireland takes control of, and responsibility for, increased fiscal powers which enable it to broaden its tax base and generate increased revenue. That the Government and the Executive are both willing to enter into these negotiations speaks to a welcome stability in Northern Ireland’s institutions, which can only benefit the funding and delivery of public services more generally in Northern Ireland. (Conclusion, Paragraph 73)

As a matter of urgency, the Government and Executive should agree a final Fiscal Framework which includes a route map to potential further fiscal devolution—to improve Northern Ireland’s public services and the daily lives of all the people of Northern Ireland. (Recommendation, Paragraph 74) 37