How are public services paid for in Northern Ireland: painting a fuller picture (NIFC quick read no.1)
‘How are public services funded in Northern Ireland?’ would seem a straightforward question to which there must be a straightforward answer. However, the way in which the Department of Finance (DoF) conventionally presents this information in its Budget documents paints an incomplete picture because of the accounting rules it works to.
The Executive Budget says that day-to-day spending on public services and administration (which is covered by its ‘Resource Departmental Expenditure Limit’ or RDEL) is paid for by the Block Grant from the UK Government plus the Regional Rates, the Executive’s only significant source of tax revenue. As shown in the chart, on this basis the Executive spent £14.3 billion on public services and administration in 2022-23, with £13.7 billion financed by the Block Grant and £600 million by the Rates.
But this simple presentation ignores the fact that Executive departments and public bodies also receive income from fees and charges to cover the cost of some of the services they provide. In the conventional Budget arithmetic, this income and the spending that it finances net off against each other and do not appear in the published figures. But it is interesting to see how the picture of day-to-day spending alters if both are included.
This is easier said than done, as a Technical Paper published by the Council explains. Details of the fees and charges paid to NI departments and public bodies are published in HM Treasury’s annual Public Expenditure Statistical Analyses (PESA), but some are payments made by one part of the NI public sector to the other – they do not represent additional spending power from outside the Executive.
Combing through the details of PESA and the Whole of Government Accounts (WGA), we estimate that that fees and charges received by NI departments and public bodies totalled £997 million for 2022-23, but that £182 million of this represented ‘internal’ payments from one part of NI public sector to the other. This left £815 million of ‘external’ payments flowing into the NI public sector from outside. This is illustrated by the addition of the purple element in the second bar on Chart 1.
The table below illustrates the shows some of the most important internal and external flows.
| External fees and charges | £ million |
Total, of which: | 312 |
Water and sewerage charges (for non-domestic customers)1 | 92 |
Car parking fees at hospitals2 | 6 |
Forest Service sale of timber3 | 14 |
Fines collected by the NICTS4 | 12 |
Other | 691 |
| Internal fees and charges | |
Total, of which: | 182 |
Goods and Services provided by DoF to other Departments/bodies, including IT, procurement and legal services | 66 |
Recharging of seconded (on loan) staff salary and pension payments to DoF from other Departments/bodies | 11 |
Consolidated Fund Extra Receipt (CEFR) payments to DoF by other Departments/bodies* | 5
|
NI Water Road drainage services income from DfI Roads | 23 |
Other | 77 |
Sources:
All data from Whole of Government Accounts (WGA), unless otherwise stated
- NI Water Accounts
- Hospital Parking Charges Bill Explanatory and Financial Memorandum
- Forest Service Accounts
- NI Courts and Tribunal Service Accounts
*CFER refers to income received by a government department that is not part of its voted budget and must be surrendered to the Consolidated Fund rather than retained for departmental spending
How does including the external payments of fees and charges change the picture of day-to-day spending by the Executive painted by the Budget?
At one level, not much. The Block Grant remains by far the largest source of finance for day-to-day spending by the Executive – 90.7 per cent of the £15.1 billion total including spending financed by external fees and charges compared to 95.8 per cent of the £14.3 billion total excluding that spending.
But the £815 million figure is not trivial and exceeds the £600 million contribution from the Regional Rates – they finance 5.4 and 4.0 per cent of the broader day-to-day spending total respectively. This is a reminder that when thinking about how it could increase the amount of money it has to spend – should it wish to do so – the Executive has fees and charges, as well as the Regional Rates, as a lever it could pull.
Most obviously it could charge domestic customers for the cost of the water and sewerage services they receive from NI Water, which is publicly owned (in contrast to the private water companies in England). But, just in case they are tempted, Ministers and public bodies cannot charge individuals and businesses more for services than they cost to provide. These charges would then count as taxes and would require Treasury approval.
If you’re interested in the full technical detail — tables, departmental breakdowns, assumptions and caveats — you’ll find it in the published paper itself. We warmly welcome engagement, feedback and challenge on this piece of work, and others in our catalogue. Please do get in touch with us through info@nifiscalcouncil.org