Public Expenditure

Slide 1: UK PUBLIC EXPENDITURE SYSTEM Central Expenditure Division Department of Finance & Personnel Northern Ireland Public Expenditure System 1

Slide 2: Central Finance Group Account NI Accountability & Supply 3 Accountancy Services Division Central Supply 2 Expenditure Central Division Finance Group European Supply 1 Division Rating Strategic Policy Policy Division Division 2

Slide 3: Presentation Overview Objective  To provide an overview of the key elements of the Northern Ireland Public Expenditure System  Explain - UK Public Expenditure System - NI Public Expenditure System 3

Slide 4: UK Public Expenditure Structure UK Public Expenditure System Funding Devolved Administrations Priorities and Budget Process Estimates Monitoring 4

Slide 5: UK Public Expenditure Structure Total Managed Expenditure (TME) Departmental Annually Managed Expenditure Limits Expenditure (DEL) (AME) Resource Capital Resource Capital Budget Budget Budget Budget 5

Slide 6: HM Treasury Fiscal Rules UK Government’s approach to public expenditure is underpinned by the setting of the Fiscal Rules and the Code for Fiscal Stability: Golden Rule  Sustainability Investment Rule  6

Slide 7: UK Public Expenditure System National Spending Review Process: Replaced the annual Public Expenditure  Surveys Biennial reviews  Sets firm plans for 3 years ahead  7

Slide 8: Spending Review Coverage 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 1998 Comprehensive Spending Review Spending Review 2000 Spending Review 2002 Spending Review 2004 2007 Comprehensive Spending Review 8

Slide 9: National Spending Review Development of proposals HM Treasury proposals considered by Cabinet Committee Final decisions taken by Cabinet and announced by the Chancellor 9

Slide 10: Outcome of National Spending Review The Chancellor announces: UK National Expenditure  Resource and Capital DEL allocations  to Whitehall departments Allocations for the Devolved  Administrations – Scotland, Wales & Northern Ireland (determined by the Barnett Formula) 10

Slide 11: Worked example of the Barnett Formula Change in Comparable NI Comparability VAT X X X English Population %* Adjustment Programme % Example: Department of Health + £100 million X 0.995 X 0.0342 X 0.975 = £3.32 million * differs for each English programme, e.g MOD = 0 because it is a UK wide programme. 11

Slide 12: Funding Sources for Devolved Functions in Northern Ireland Borrowing (Reinvestment & Reform Regional Initiative) Peace Rates Funding available from the application of the Barnett formula 12

Slide 13: Priorities and Budget Process - Basis  Basis of Public Expenditure system in Northern Ireland:  Good Friday Agreement Strand 1, paragraph 20   NI Act 1998  Sections 63 & 64  Executive right of initiative 13

Slide 14: Preparation of Priorities & Budget June Strategic Context & Key Priorities for NI Guidance Issued to Departments Pre-consultation with key stakeholders Preparation of Draft Priorities & Budget Sept Public Consultation Nov Publication of Revised Priorities & Budget Dec 14

Slide 15: Public Service Agreements PSAs describe what a department will deliver in the form of measurable targets over the public expenditure review period in return for its resource budget. DRD – Road Service  By 2015 reduce journey times on the Key Transport Corridors by 2.5% compared to 2001. DEL – DETI – DSD  During period 2005-08 increase the percentage of NI working age who are economically active and increase the NI employment rate (taking into account the economic cycle) 15

Slide 16: Priorities and Budget 2005 Strategic Priorities: Economic Growth  High quality public services  Public sector reform  A society based on partnership, equality,  inclusion and mutual respect 16

Slide 17: Northern Ireland Allocations for 2005-06 to 2007-08 £millions 2005-06 2006-07 2007-08 Departmental Expenditure Limit 7,692.6 8,192.0 8,568.9 (DEL) Annually Managed 6,832.9 7,008.5 7,286.7 Expenditure (AME) Total Managed 14,525.5 15,200.5 15,855.6 Expenditure 17

Slide 18: Departments Expenditure: Current Expenditure 2006-07 and 2007-08 Other 13% Regional Health Development 45% 5% Social Development 7% Employment & Learning 9% Education 21% 18

Slide 19: Departments Expenditure: Investment 2006-07 and 2007-08 Health Other 15% 15% Education 25% Regional Development Employment & 28% Social Learning Development 5% 12% 19

Slide 20: In Year Monitoring  Traditionally 4 monitoring rounds a year  Assess current and future expenditure plans against plans agreed in the Budget  Opportunity to surrender resources and bid for additional resources  Recycles spare resources to urgent and unforeseen problems  End of Year Flexibility (EYF) 20

Slide 21: Main Estimates Reflect departmental Budget outcome  Approve areas of spending on which resources and cash may be used (Ambit)  Detailed Spending Plans – functional lines  Includes DEL and AME items  Votes the overall cash requirement  Base for system of physical cash control 21

Slide 22: Changes to Estimates Changes in provision from Main  Estimates called Supplementary Estimates Follow on from in-year monitoring  movements 22

Slide 23: Cash HM Treasury NIO NI Consolidated Fund Departments 23

Slide 24: Investment Strategy for NI 10 year plan for up to £16 billion of capital projects from 2005-2015 “Brings together the collective knowledge of all the relevant government departments to fashion a holistic vision for the future of the public infrastructure in Northern Ireland” Major programmes of work planned in the areas of education, transport, health, water, waste water and waste, housing, arts and sports 24

Slide 25: Summary UK Public Expenditure System Funding Devolved Administrations Priorities and Budget Process Estimates Monitoring 25

Slide 26: NI Public Expenditure System  Useful websites: www.dfpni.gov.uk www.pfgbudgetni.gov.uk www.hm-treasury.gov.uk www.sibni.org  Questions? 26