Creating A World Class Northern Ireland - Draft Budget Signals Record Ł16 Billion Spend By 2008

25 October 2005
CREATING A WORLD CLASS NORTHERN IRELAND - DRAFT BUDGET SIGNALS RECORD Ł16 BILLION SPEND BY 2008
By 2008, total Government spending here will exceed a record Ł16 billion, a jump of more than 50% since 1997. Health spending will top Ł3.7 billion, the Secretary of State, Rt Hon Peter Hain, has revealed. Planned capital investment is now more than 40% higher compared with three years ago.
Making good today his pledge to lay the foundations for a world class Northern Ireland, Mr Hain launched a major package of investment over the next two years, which will see Health Service spending soar by Ł450 million.
Unveiling the Draft Budget 2006-2008 at Belfast's Science Park, he also revealed that Ł45 million next year and Ł55 million the year after is to be spent on new ring-fenced investment for three priority areas to support and enhance life and opportunity for the next generation:

Ł25 million in each of the next two years will go towards ensuring that all children in Northern Ireland have access to the best quality care, education and health facilities.

Ł15 million next year and Ł20 million the year after will be spent tackling youth unemployment and to promote top quality skills training.

Ł5 million next year and Ł10 million the year after, alongside Ł10 million and Ł25 million capital investment, will be spent on research and development on renewable forms of energy to safeguard Northern Ireland's clean and healthy environment.

Explaining the detail of the package, Mr Hain said: "For children and young people I am proposing to allocate an additional Ł25 million in each of the next two years to ensure that every child has the best start in life. This will include driving forward our policies in areas such as pre-school and extended/out-of-hours school-based activities, childcare and Sure Start, as well as measures to foster their health and well being.
"A key aspect of this will be the integrated delivery of programmes and activities to ensure real and effective joined up thinking and working by the key Departments and Agencies involved.
"Beyond school age around 24% of our working population has no qualifications whatsoever, compared with 15% in the UK as a whole. We are already committed to significant investment skills and training programmes. And we recognise the critical importance of ensuring a secure foundation for lifelong learning and employment.
"It is for this reason I am proposing to allocate an additional Ł15 million next year and an additional Ł20 million the year after to tackle economic inactivity and promote greater investment in science training and skills leading to employment - alongside investment in research and development. Our working population must have the skills to allow us to prosper in the new, more competitive and highly skilled international markets that will dominate all our futures."
The Secretary of State said that the quality of life for future generations depends on the maintenance of a clean and healthy environment: "I am proposing to allocate an extra Ł5 million next year and Ł10 million the year after to encourage the research and development of renewable forms of energy. I am also providing Ł10 million and Ł25 million over the next two years for capital investment in renewable energy. This will enhance the security and diversity of our energy supply and minimise the environmental impact of energy generation."
Health
Turning to Health and Education, he pledged almost Ł70 million extra over the next two years, tied to essential reforms and efficiencies:
"My proposals will increase Health spending by Ł450 million by 2007-08, a 13% increase on this year and Ł50 million more than previously planned. This means that Health spending in 2007-08 will exceed Ł3.7 billion.
"That is a massive increase and will help us to achieve the targets for reductions in waiting lists that Shaun Woodward announced earlier this year, and those targets will now also apply to out-patient waiting lists.
"There will also be expanded and enhanced services for dialysis, cancer and cardiac patients, while more elderly people will be able to live safely in the community. There will be additional funds for suicide prevention and help for those who wish to stop smoking as a result of our plans to ban smoking in enclosed public places."
The Secretary of State was clear that this extra funding must be accompanied by reforms to Health provision and administration. He cited the findings of the Independent Health Review completed recently by Prof John Appleby of the King's Fund, which showed that in some areas of health service delivery and performance, Northern Ireland is falling well behind the rest of the UK:
"While he made a cogent case for longer term sustained increases in Health spending, he was clear that we are not making the best use of the huge resources we spend on the Health Service - which now account for more than 40% of the total Northern Ireland Budget for local services.
Education
"My proposals for Education will also mean an increase in education spending of Ł100 million by 2007-08, a 7% increase on this year and Ł20 million more than previously planned.
"The challenges facing the education system have been debated widely over recent months. As well as tackling key education policy issues, there is also an urgent need for action to address the problems of over capacity and duplication that exist across the system.
"The impact of demographic change demands early action to reduce nearly 50,000 empty places that exist in the school system. The resources wasted in this way could be better applied to improve the standards of achievement in all parts of the education system. Angela Smith is working with the Education and Library Boards and other education bodies to release resources from duplication in administration and other overheads."
Public sector
The Secretary of State was clear that the accelerated pace of investment in public sector infrastructure will be maintained. Next year planned investment will reach Ł1.3 billion a year for the first time. He promised that more details will be revealed when the Investment Strategy is published shortly by the Strategic Investment Board: "This confirms our determination to invest for the future with accelerated programmes of investment in schools; in primary and community health care; in transport networks; and in ensuring compliance with the high standards we are rightly expected to meet on water and waste water quality."
However, a pressing concern, the Secretary of State pointed out, was how the Government's spending priorities are to be financed. Public expenditure is higher here than in the rest of the UK and with public sector pay levels growing faster than inflation, more Government money has had to be channelled away from service provision into meeting these costs.
"The challenge is not just to determine priorities, but also to take the difficult decisions on how to finance those priorities. With our much higher levels of public expenditure than elsewhere in the UK, we cannot expect our priorities to be financed by even larger resource transfers from the UK taxpayer.
"There is no national Spending Review this year. That means, like all other parts of the UK, we must operate within the same overall spending limits that were set last year.
"Public sector pay levels have been growing faster than inflation, meaning that more money has had to be diverted into meeting pay bill costs right across the public sector.
"We do not yet have the new revenues from water charges that will start to be phased in from 2007-08 onwards. And we must adjust our future commitment levels to ensure that we do not exceed our total spending limits.
"To allow me to allocate extra money to our top priorities of Health and Education, I have asked some other Departments to reduce spending on their lower priority activities by 3% next year and by 4% the year after."
Mr Hain said that the savings made will be re-directed to Health and Education programmes and to cover the cost implications of phasing in water charging over a three-year period from 2007 - 08, rather than introducing them in full straightaway.
Rates
However, efficiency savings on the part of Government will not be enough on their own to help pay for improved services. A greater contribution, he said, will have to be made by the Northern Ireland taxpayer: "Public expenditure per head of population here is by far the highest figure for any region of the UK and is 29% higher than the overall average. By comparison, Scotland is 18% higher and Wales is 11% higher.
"The fiscal deficit in Northern Ireland, the amount by which total public spending exceeds taxes and revenues collected, exceeds Ł5 billion a year. The revenue we raise for local public services from the domestic rating system is only half the equivalent figure for the rest of the UK. And without water charges, we are having to divert up to Ł300 million a year from other public services to pay for the water service.
"That situation is neither fair to taxpayers elsewhere in the UK, nor is it sustainable if we are to continue to improve public services here in Northern Ireland. If we do not contribute more towards the cost of our public services, then those services will suffer. And I am not planning on allowing that to happen.
"My reform agenda lies at the heart of my commitment to the people of Northern Ireland. I want to see society and the economy transformed by using public spending wisely to invest in the services that make real differences to people's lives - in health and education; in children and young people; in promoting long term economic growth through investment in training and skills and in protecting the environment by the research and development of new sources of renewable and clean energy.
"Income from domestic rates in Northern Ireland is only half the equivalent figure in Great Britain. Therefore I propose to increase the domestic regional rate next year by 19%. This will represent an increase of around Ł1.00 a week in the average domestic rates bill, but compared to previous plans will raise an additional Ł20 million in each of the next two years. This will help meet the costs of the new priority funding packages for children and young people, science and skills and the environment and energy.
"While this is a large percentage increase, the amounts householders contribute to local public services here will still be much less than 60% of the average for England. That gap will need to be re-visited in the future if we want to maintain local public services at the same level as elsewhere.
"But for the following year, in 2007-08 I have decided to maintain the level of rates increase planned at 6% because that will also be the year in recognition that this will also be the year we begin to phase in water charges."
Turning to the non-domestic sector, Mr Hain proposed to maintain the level of regional rates increase in each of the two years at 3.3%. This would recognise that business and commercial rates levels here are already broadly in line with levels in Great Britain.
Choices
Pointing to the forthcoming Review of Public Administration, he pledged that public sector waste and inefficiency would be targeted to ensure that costs are kept down: "We must only have as much administration and other overhead costs as are absolutely essential. Money wasted on excessive bureaucracy and inefficiency is money denied to frontline services and it is the users of those services - often the most needy and vulnerable in society - who suffer as a result.
"Waste and inefficiency never reduced a hospital waiting list or taught a child with special educational needs. That is why I will press ahead with the Review of Public Administration as quickly as possible. We need to implement radical changes in local government and to Health and Education structures. We need to reduce the number of district councils and quangos. I will also stick by the efficiency targets set for the public sector last year and the associated reductions in Civil Service numbers. Indeed the size of these reductions could increase as a consequence of the reductions of 3% and 4% in lower priority programmes.
"I promised a few weeks ago that I would take the tough decisions needed with public sector reform and investment going hand in hand, to equip Northern Ireland to move towards a better and a brighter future.
"I have not tried to duck difficult issues. The proposals I have set out for public spending will pose challenges over the next two years. My hope and expectation is that a new devolved administration will be in place well within that timescale, with local Ministers taking over responsibility for spending plans and public sector reform.
"My sincere wish is to use our public resources wisely to build a better and brighter future for the next generation in Northern Ireland,"Mr Hain concluded.

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