Yesterday the Finance Minister published a proposed draft multi-year budget for Northern Ireland Departments for consultation. It sets out proposed resource and capital allocations for the next three years (2026-27, 2027-28, 2028-29, plus capital only in 2029-30). The draft budget hasn’t been agreed by the Executive.
Annex C (see table below) gives Resource DEL allocations (day to day spending) for NI departments for the next three years.
Standout figures from this:
Total day to day spending will increase by only 0.8% in 2026-27 compared to this year. That is barely an increase in cash terms, so it will be very difficult for departments to continue to deliver services as now, particularly when pay awards and other cost increases are taken into account. Increases for 27-28 and 28-29 are slightly higher, although still only 2.0% and 1.8% overall. These very low annual increases are unprecedented and will be impossible to manage without significant change to what departments do - for comparison, total funding has increased by around 5 to 6% annually in recent years.
Education gets the biggest increase in in 2026-27 at 1.2%. Infrastructure gets 1%, Health gets 0.8%, Justice gets 0.7%. Communities, Economy and TEO get no increase in cash terms, and DAERA gets less than this year.
These numbers do not include any reductions to take into account overspends this year. So departments’ allocations may be even less than this (e.g. Health and Education's funding will be much lower in cash terms than this year if overspends are as forecast at present).
Elsewhere in the Finance Minister’s statement, there are allocations for earmarked spending (see Annex B) including childcare, health waiting lists, welfare mitigations, PSNI workforce recovery and the PSNI data breach. There are also allocations for specific capital programmes (Annex E) including the A5, Mother and Baby Unit, Casement Park, sub-regional stadia, schools estate, social housing and waste water. Many of these allocations are linked to priorities in the Programme for Government.
There is a proposed increase to domestic rates of 5% each year and non-domestic rates of 3% each year. This will generate some additional revenue to spend on public services. Worth noting that the Executive has chosen a lower non-domestic rates increase to reduce the burden on businesses.
Some initial comments from Pivotal below. More analysis to come in the next few days:
Agreeing a budget is a fundamental role of any government. Publishing a proposed draft Budget is a step forward. Despite the extremely difficult numbers, it is essential the Executive works together to get to an agreed position by the start of the financial year. The 8-week public consultation is important, but the most important thing is that Executive Ministers spend the coming days and weeks working together to find an agreed budget that is realistic and deliverable. Leadership, joint working and difficult decisions will be needed.
The funding available is extremely tight, as has been known since the UK Spending Review last June. The increase in total non-earmarked day to day funding in 2026-27 is only 0.8%. This translates into increases for individual departments for 2026-27 ranging from -0.2% to 1.2%. No department receives anything near what they would see as sufficient funding. It will be impossible to manage this without big changes to what departments do. Presumably the reason the Budget hasn’t been agreed is because Ministers can’t see how they can manage the delivery of their departments’ functions within the funding allocated. There are certainly no easy answers here given the very limited amount of additional funding available.
A multi-year budget is an important opportunity. The Executive should make sure it doesn’t miss it, despite the challenges. It offers a chance to plan on a longer term basis for service delivery, investment, transformation and workforce. In particular, it gives time and space to plan for reforms that will make public services more effective and affordable in the longer run. While the budget numbers are very tight, it would be a very disappointing if this opportunity for longer term planning was not grasped.
The Finance Minister will be looking for alternative proposals for how to make the budget work, rather than just criticism from other Ministers about the inadequacy of their allocations. There are really only five ways in which the Executive can either reduce spending or increase revenue in order to balance the budget: review the approach to public sector pay awards; reduce spending through efficiencies or cuts to services; review ‘super-parity’ measures where NI funds greater provision than elsewhere in UK; make longer term savings through reforms to how services are delivered (but this will take time to produce results); and/or raise more revenue locally. In practice, a combination of these will be needed. Again, there are no easy answers and tough choices will be needed.
This situation is demonstrating clearly that providing good quality public services in Northern Ireland is not affordable within existing budgets with services in their current configuration. This is likely to get even worse as demographic and other pressures increase demand for services further. Transformation is essential and long overdue. Continuing with current systems and approaches will only lead to further deterioration in standards, repeated budgetary crises, and potentially drastic cuts or collapses in services.
There is little prospect of any additional funding for Northern Ireland from the UK Government. The three-year Spending Review was completed last June, and NI has also received an uplift to the Barnett formula to better reflect higher need for public spending here. The Secretary of State has repeatedly said that it is up to the Executive now to make its own choices in order to manage within its budget.
There is a very little detail in the information put out yesterday. It’s impossible to tell at this stage what these proposed budget allocations would mean for services delivered by each department, beyond the earmarked items that are mentioned specifically. So we can’t tell at present what the impact of these allocations will be on departments and what choices will be made between different areas of spending. Proper scrutiny and analysis will require more information from departments about the implications of these allocations. A full Budget document is due later this month, so perhaps this will enable more detailed assessments.
So far there isn’t obvious strategy, ambition or new ideas in these proposed budget allocations. This is disappointing given that a multi-year budget is an opportunity to stand back and set a longer term direction. Overall, the allocations look like ‘doing more of the same’, with some new additions to reflect the priorities in the Programme for Government (e.g. housing, childcare, health waiting lists). Perhaps an overall vision will become clearer when the full Budget document is published.
The Finance Minister is planning for an oral statement to the Assembly on Monday 12 January including a time for MLAs to ask questions.
There is a 8-week consultation period. You can view the proposed draft Budget and see how to respond here https://www.finance-ni.gov.uk/news/odowd-encourages-public-help-shape-multi-year-budget
Pivotal’s recent paper on the Northern Ireland’s multi-year budget provided analysis about a lot of these issues. You can read it here https://www.pivotalpolicy.org/assets/files/publications/20251205-myb-final.final.pdf
