Belfast Briefing: End of North’s financial year and still no budget

Put aside the political stalemate for one moment because, in just 24 hours, Northern Ireland will have a real crisis on its hands as it is officially the end of the financial year in the North and there is still no budget.

What this means is that, on Wednesday, although the big government bills will technically still get paid, Northern Ireland is in a state of limbo as regards its budget for 2017-2018, putting millions of pounds of funding in jeopardy and hundreds of jobs in doubt.

There is a mechanism in place that ensures financial resources will be allocated to government departments at the start of the financial year even without an executive in place.

The permanent secretary of the department of finance, David Sterling, has the authority to divide 75 per cent of last year’s budget allocation initially. By the end of July, if there is still no budget bill in place, this can be increased up to 95 per cent of the previous year’s budget.

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But this is not without difficulties. No new funding decisions can be taken and already his boss, the head of the civil service, has warned that while he intends it will be “business as usual”, there are simply certain things that the civil service cannot do.

The North’s 27,000 civil servants will still get paid – as will teachers and medical professionals but if there is only 75 per cent of last year’s budget available then there will obviously be some funding shortfalls. For starters, the PSNI has been asked to make budget cuts.

Financial pressure

They will not be the only ones. Each government department will obviously find itself with less money than it had hoped for and, with certain key government departments like health already under severe financial pressure, the impact is going to be widespread.

But there is a much bigger issue at stake than smaller budget allocations for an economy that is so public sector-orientated.

Any business that depends on government spending such as those in the construction sector that are currently engaged on capital expenditure programmes could suddenly find themselves in a situation where nobody knows if there will funding to finish the job. Overnight, construction workers could find themselves without a job. There are also major concerns for those who work in the voluntary and community sector.

The Northern Ireland Council for Voluntary Action, which is the umbrella body for the sector, says nearly one-third of its members have already put staff on notice of potential redundancies because of the budget crisis. Its Funding Watch survey also highlights that 88 per cent of its members who currently receive statutory funding have received “no confirmation” of funding for their services after March and believe it may be at risk.

If they lose funding, 43 per cent have said, it will result in redundancies.

Seamus McAleavey, the council’s chief executive, said more than £500 million of public services in areas like mental health, health prevention, children, support to vulnerable people and end-of-life care is at stake..

Funding boost

The lack of a budget also raises a question mark over what is happening to the extra £120 million funding boost that the UK chancellor promised the North in his spring budget. Will Philip Hammond just leave it lying in a box until politicians manage to sort a budget out?

In the meantime, despite the budget void, there is still a desperate attempt to keep the train on track when it comes to the local economy. Earlier this week, Invest NI confirmed it is to establish a presence in Singapore for the first time in an effort to publicise what the North has to offer potential investors from southeast Asia. And it continues to promote the proposed new lower rate of corporation tax scheduled to be introduced next year.

The Department of Finance is also actively looking to recruit a financial firm to manage the new Northern Ireland Investment Fund – which in the last NI budget was allocated £100 million. The fund was designed to inspire and support new infrastructure investment projects. At this stage, even its future might be in some doubt.