Committee for Finance and Personnel Report (2007-2011 Mandate)
Budget and Expenditure (Departmental Response to the Report)
Department of Finance and Personnel Response to
Second Report on the Inquiry into the Role of the Northern Ireland Assembly
in Scrutinising the Executive's Budget and Expenditure
Mr Shane McAteer
Committee for Finance and Personnel
13 September 2010
Thank you for providing a copy of the second report on the Inquiry into the Role of the Northern Ireland Assembly in Scrutinising the Executive’s Budget and Expenditure. I note the key conclusions and recommendations of the report with interest and would share many of the Committee’s concerns and aspirations.
Since the conclusion of this second report in June, the Executive agreed (on 22 July 2010) the Review of 2008-11 Budget Process Action Plan and it was then forwarded to the Committee on 27 July 2010. It should be noted that the responsibility for delivery of the actions arising from the Review are not all within the remit of DFP. Those actions that are the responsibility of the Public Spending Directorate within DFP have either already been progressed or will be actioned at the appropriate time.
I would stress that there is much common ground between this Department and the Committee’s position - especially in relation to the early development of a Programme for Government to set the context for budget processes, engagement by departments with their committees and the provision of supporting information at all stages of the process.
I attach at Appendix A brief comments on each of the conclusions and recommendations of your Report. However, as the Committee will appreciate, the responsibility for some of the recommendations in your report andthe actions in the Budget Process Action Plan agreed by the Executive, are outside the influence of DFP.
I wish the Committee well with Stage II of its Inquiry and appreciate their support in further developing and refining a budget process that will best serve the needs of the Assembly.
DFP comments on conclusions and recommendations of Committee for Finance & Personnel (CFP) in their second report on the Inquiry into the Role of the Northern Ireland Assembly in Scrutinising the Executive’s Budget and Expenditure
(i) CFP conclusion in relation to DFP Review Recommendation 1 (‘The Committee firmly believes that there should be clear, visible linkage between the PfG, PSA targets and budget allocations, and therefore welcomes, as a step in the right direction, the DFP recommendation that “an exercise should be conducted at the start of the next Budget process to seek to determine the level of public expenditure underpinning actions to deliver each Public Service Agreement in the Programme for Government (PfG).” ’ and ‘Given its previously expressed concerns around the complexity of the current PfG and PSA framework, and in light of both the increased need for priority-based budgeting and the apparent move away from the system of PSAs in Whitehall, the Committee calls on the Executive to review the performance and accountability framework for NI departments, with the aim of establishing a more transparent and robust system for measuring and monitoring the relationship between public sector inputs, outputs and outcomes’)
The Committee will note, in the Action Plan provided in July 2010, the action already taken by DFP, prior to the commencement of the Budget 2010 process, with a view to determining the level of public expenditure underpinning actions to deliver each PSA in the PfG. However, the complexity of the PfG and PSA framework, as acknowledged by the Committee in its Report, presents difficulties in that not all areas of public expenditure link neatly to one PSA, leading to a maze of linkages that become impossible to track and readily comprehend. Changes to PfG structures and to departmental budget structures would be necessary in order to align the two and enable clear, visible linkage between the PfG, PSA targets and budget allocations.
In addition, any spending proposals submitted by departments in Budget 2010 must demonstrate a linkage to one of the PSAs in the PfG – see paragraph 2.9 (c) and the proforma at Annex B of the Budget Guidance issued to departments.
The PfG and PSA framework is outside the remit of DFP and will be taken forward by OFMDFM on behalf of the Executive. However, DFP shares the Committee’s objective of a transparent and robust framework against which budget allocations, efficient outputs and clear outcomes may be measured.
(ii) CFP conclusion in relation to DFP Review Recommendation 2 (‘Whilst recognising that the availability of resources will have a bearing on the targets underpinning the PfG, the Committee is strongly of the view that budget allocations should be driven by priorities and not the other way around. The Committee concurs with the DFP view that “there should at least be a clear indication of broad priorities at the beginning of the Budget process” and that the development of the PfG should precede the Budget’)
DFP have advised OFMDFM of this recommendation from the Review of the Budget 2008-11 Process and plan to work with OFMDFM to develop a complementary timetable for future PfGs and Budgets. The Review of the 2010-11 Spending Plans which dominated time and resources this Spring and the delay and uncertainty around the UK 2010 Spending Review process has meant that the preparation for Budget 2010 is less than ideal with the revision of the PfG taking place in tandem with the Budget process. However, in order that departments, (especially departments such as Health and Education) may plan their budgets and inform their arms length bodies of their budget allocations some months in advance of the incoming financial year, it is imperative that the 2010 Budget process is progressed and concluded in December 2010 January 2011 at the latest.
(iii) CFP conclusion in relation to DFP Review Recommendation 3 (‘Whilst it considers that the setting of a clear timetable to include key milestones at the start of each budget process is of vital importance, the Committee believes that clarity is required on the shape, frequency and duration of future budget cycles. In noting that the Budget 2010 process will develop departmental spending plans for the four-year period from 2011-12 to 2014-15, the Committee recommends that a regularised annual budgetary review process is established within this framework, with a pre-determined timetable, to enable the Executive and Assembly to make interim reappraisals of departmental allocations against progress in delivering PfG priorities and savings’ and ‘The Committee calls on DFP to build in adequate provision for the Executive decision-making process and for the Assembly calendar when developing future budgetary timetables, with a view to ensuring sufficient time for engagement with the Assembly and other stakeholders.’)
DFP notes the conclusions of the Committee and would remind the Committee that a regularised annual budgetary review process in the form of the in-year monitoring rounds (with a pre-determined timetable) already exists, which enables the Executive to re-prioritise resources and meet unforeseen pressures. Any annual or biennual re-opening of an agreed 3 or 4 year Budget will be a matter for the Executive to consider.
DFP will continue to build in sufficient provision in Budget timetables to facilitate the Assembly calendar and consultation with the Assembly Committees, key stakeholders and the public but overall control resides in the hands of the Executive with regard to agreement of a Draft Budget for public consultation prior to final agreement by December/January. In a continued effort to address the ‘fait accompli’ perception, DFP will continue to conduct a pre-consultation exercise with key stakeholder groups before the start of each Budget process. In addition, the Budget Guidance to departments (see paragraphs 1.20 to 1.24) emphasises the importance of engagement with Assembly Committees and other stakeholders and the proforma for each spending proposal now includes details of the groups that the department has consulted in developing the bid for additional funding.
(iv) CFP conclusion in relation to DFP Review Recommendation 4 (‘Though strongly supportive of the DFP recommendation that “there should be early and more structured engagement between departments and Assembly Committees setting out the key issues and pressures facing NI Departments”, the Committee considers that decisive measures are needed to put this into practice’ and ‘the Committee concurs with the recommendation from the Education Committee that DFP should take the lead in developing “standard guidance to NI departments on the timing and provision of relevant information to Assembly statutory committees” and that this should be agreed at Executive level, with departmental compliance being monitored by DFP in consultation with the Assembly statutory committees’ and ‘in noting that the timetable for the Executive’s Budget 2010 process has an end date of “late December”, the Committee calls on DFP to offer flexibility on this deadline to provide sufficient time for engagement with Assembly committees and the wider public. The Committee found that good practice would indicate a period of 2 – 4 months should be provided for in this regard. The Committee considers this feasible given that the Budget 2008-11 was not agreed in the Assembly until 29 January 2008 and, more recently, the Revised 2010-11 Spending Plans were not agreed by the Assembly until 20 April 2010.’)
Previous comments in (iii) in relation to Budget Guidance to departments on engagement with Assembly Committees and the necessity for an agreed Final Budget by December/January apply. While DFP will continue to urge departments to engage early and fully with their Committees, both in Guidance and at regular meetings of Finance Directors, it is worth noting that DFP cannot compel departments to do so. The Budget Review Action Plan agreed by the Executive places responsibility on departments to engage early with their Committees. Perhaps the Assembly could also consider addressing the issue of engagement on the Budget through their Standing Orders?
In order that departments may plan their budgets and inform their arms length bodies of their budgets some months in advance of the incoming financial year, it is imperative that the 2010 Budget process is progressed and concluded in December/January at the latest. The slippage of agreement by the Executive to 20 April this year of the Revised 2010-11 Spending Plans was somewhat different in that spending plans already existed for 2010-11 as part of Budget 2008-11.
(v) CFP conclusion in relation to DFP Review Recommendation 5 (‘The Committee considers that greater influence can be brought to bear on spending plans at the earlier stages in the process, and therefore is supportive of the DFP recommendation that “there should be earlier engagement with key stakeholder groups by departments as part of the Budget process”. However, the Committee believes that care should be taken by departments to ensure that a wide spectrum of stakeholder interests are included at this time to ensure that it is not the larger interest groups only that have the opportunity to influence the spending plans.’)
DFP concurs with the conclusion of the Committee. The current Budget Guidance includes advice to departments in this regard with the proforma for each spending proposal now including details of the groups that the department has consulted in developing the bid for additional funding. The Budget Review Action Plan agreed by the Executive places responsibility in this regard on departments. In addition, DFP now undertakes pre-consultation with key external stakeholders in the early stages of the budget process and, at Finance Director meetings, continually urges departments to consult with key stakeholders from an early stage.
(vi) CFP conclusion in relation to DFP Review Recommendation 6 (‘In noting the DFP proposal that it “should take the lead role from the Strategic Investment Board (SIB) in developing capital investment allocations in the Budget process”, the Committee intends to take further evidence from the Department and also to invite separate evidence from SIB, to enable it to reach an informed position on this issue. There will also be a need to liaise further with the Committee for OFMDFM on the outcome of this work.’)
DFP notes the conclusion of the Committee and will provide further evidence on this issue as required by the Committee. The capital bids and resulting allocations in the Budget period are usually a result of the outcome of SIB’s much earlier engagement and strategic planning with departments and must be contained within the capital budget available to the Executive over the period. In addition, the resource consequentials of capital bids (eg depreciation, additional running costs, etc) must be factored into the Budget’s current expenditure and the availability of such current resources across the period is also critical to final decisions by the Executive regarding capital expenditure.
DFP hold regular meetings with SIB to ensure the sharing of information in respect of the available funding envelope over the Budget period and the longer term priorities and plans envisaged by SIB and their resulting financial consequences for current and capital budgets in the future.
(vii) CFP conclusion in relation to DFP Review Recommendation 7 (‘The Committee supports the DFP recommendation that “every departmental spending proposal should clearly state the impact on the respective PSA target, if successful.” However, the Committee also believes that this linkage between spending and PSA targets at the bidding stage should extend to the reporting stage, whereby the End Year Delivery Reports would enable performance to be tracked at a departmental level in terms of inputs, outputs and outcomes.’)
DFP notes the conclusion of the Committee and perhaps the issue of linkage to PSA targets at the reporting stage could be revisited during the wider Review of the Financial Process envisaged by DFP and floated by the Minister with the Assembly during the Final Stage debate of the Budget Bill last June.
(viii) CFP conclusion in relation to DFP Review Recommendation 8 (‘The Committee agrees with the DFP recommendation that “the Draft Budget document should include an easy to read summary at the start of the document.” ’ and ‘the Committee further recommends that all relevant financial documents, including Budgets, Estimates and Resource Accounts, are simplified and harmonised to increase transparency and enhance the relationship between allocations and performance and also to ensure that they are more readily scrutinised by Assembly committees and accessible to the wider public.’)
DFP welcomes the agreement of the Committee to the Budget Review Recommendation 8 and an easy to read summary is planned for the 2010 Budget document.
DFP agrees with the Committee’s recommendation regarding the transparency of publications and the alignment of Budgets, Estimates and Accounts as outlined by the Minister to the Assembly during the Final Stage debate of the Budget Bill last June. The Minister plans to circulate a paper to the Executive in the next few weeks on this topic. Further consultation with the Committee would be essential over the coming months on this issue in order to develop a financial process and publications that better meet the needs of the Assembly.
(ix) CFP conclusion in relation to DFP Review Recommendation 9 (‘the Committee welcomes the DFP recommendation that “the full list of prioritised spending proposals submitted by departments as part of the draft Budget process should be published alongside the draft Budget document, including details of which proposals will be funded from the draft Budget allocations.” The Committee notes that this aligns with the conclusion in its Report on the Executive’s Draft Budget 2008-2011, published in December 2007, that “there would be benefit, in terms of transparency and scrutiny, from fuller and more standardised information on departments’ bids and their outcomes being published as part of the draft Budget process.” ’)
DFP welcomes the agreement of the Committee to the Budget Review Recommendation 9 and the 2010 Budget Guidance issued to departments instructs them to publish alongside the Draft Budget, or as soon as possible after, their lists of spending proposals submitted (see paragraph 1.23 of the Guidance). In addition, the Budget Review Action Plan agreed by the Executive in July places a responsibility on departments for ‘summary table of spending proposals to be published alongside Budget documents’.
(x) CFP conclusion in relation to DFP Review Recommendation 10 (‘the Committee supports the DFP recommendation that “Departments should publish the High Level Impact Assessment for each spending proposal.” The Committee also recommends that departments should publish the results of the equality screening undertaken in respect of each spending proposal in fulfilment of the duties imposed by Section 75 of the Northern Ireland Act 1998.’
DFP welcomes the support of the Committee for the Budget Review Recommendation 9 and the 2010 Budget Guidance includes advice to departments in this regard with the proforma for each spending proposal now requesting departments to provide the date the EQIA/HLIA assessment was completed.
In addition, the Budget Review Action Plan agreed by the Executive in July places a responsibility on departments ‘to publish HLIAs as soon as possible after the publication of the draft Budget document’.
DFP notes the Committee’s recommendation that departments publish the results of the equality screening undertaken in respect of each spending proposal.
(xi) CFP conclusion in relation to DFP Review Recommendation 11 (‘The Committee would reiterate the recommendation made in its submission to the DFP review that supporting documents, such as draft PSAs and draft delivery plans for efficiencies and investments, should be published alongside the draft Budget, as this would inform committee scrutiny and could provide some assurance regarding deliverability. Whilst recognising that such draft supporting documents may require development before being finalised, the Committee believes that, with careful planning and given the proposal to develop the PfG in advance of the Budget, it is reasonable to expect these draft documents to accompany the draft Budget.’)
The 2010 Budget Guidance instructs departments to publish alongside the Draft Budget, or as soon as possible thereafter, supporting documentation such as their Savings Delivery Plans (see paragraph 1.23 of the Guidance). In addition, the Budget Review Action Plan agreed by the Executive in July places a responsibility on departments to ‘publish supporting documents as soon as possible after the publication of the draft Budget document’.
DFP would support the ideal of publication alongside the draft Budget but must recognise the practicalities of finalising Savings Delivery Plans for publication (alongside other work pressures relating to the budget publication) within the short time-frame available from final agreement of a draft Budget by the Executive to the publication date. Moreover, Committees and other key stakeholders should already have become familiar with the supporting documentation, such as Savings Delivery Plans, through engagement with departments throughout the development of the draft Budget.
(xii) CFP conclusion in relation to DFP Review Recommendation 12 (‘The Committee does not support the DFP recommendation that “Assembly Committees should have the lead role in the consultation on the Executive’s draft Budget proposals, with responses to the Executive co-ordinated by the Committee for Finance and Personnel.” In noting that other statutory committees have also voiced concern with this proposal, the Committee believes that this would be an inappropriate role for Assembly committees to fulfil, especially given that they would not have the authority to act on the outcome of such consultation.’)
DFP notes the Committee’s conclusions on Budget Review Recommendation 12. It should be noted that this recommendation within the Budget Review Action Plan was endorsed by the Executive in July.
(xiii) CFP conclusion in relation to DFP Review Recommendation 13 (‘The Committee notes with interest the recommendations from DFP that “in responding to the draft Budget, any proposal to increase spending on a particular service by a Committee should be accompanied by an equally detailed proposal as to how this could be funded”; and that “the Committee for Finance and Personnel, in responding on behalf of all the Committees, should identify whether it views the funding proposal to be realistic or not.” The Committee, however, sees such an approach as more applicable in the context of a reformed system of Assembly financial scrutiny; whereby departmental committees would have access both to the necessary financial information held by departments and to additional specialist support and where a central budget committee existed with the requisite powers. The Committee believes that such a scrutiny model warrants more detailed consideration by the Assembly in future.’)
DFP notes the Committee’s conclusion on Budget Review Recommendation 13 and awaits with interest the outcome of any further consideration by the Committee. A fundamental principle of budgeting is that any spending proposal is set in the context of affordability - the expectation would be that any proposal put forward by a Committee would already have been discussed in detail with the department and/or has already been costed by the department. It should be noted that the Budget Review Action Plan agreed by the Executive in July places a responsibility on the Committee to implement this recommendation.
(xiv) CFP conclusion in relation to DFP Review Recommendation 14 (‘The Committee is, in principle, supportive of the DFP recommendation that “the Final Budget Statement and debate should be combined with the Main Estimates process” as this should make for a more streamlined and harmonised approach. That said, the Committee looks forward to being consulted on the detail of this proposal and firmly believes that such change should only be made in the context of a settled future budget process, which will require to be agreed between the Executive and the Assembly.’)
DFP welcomes the support of the Committee for Budget Review Recommendation 14. The Finance Minister will shortly be putting a proposal and terms of reference to the Executive to take forward a Review of the NI Financial Process. It is envisaged that such a Review would encompass this recommendation and investigate further:
- aligning the Budgets, Estimates and Accounts, as far as practicable, to improve transparency, and
- synchronizing the presentation of the Budget, the Estimates/departmental expenditure plans, the Budget Bills, the Rates legislation and the Accounts in order to create a single co-ordinated public revenue and expenditure process.
The strategic aim of such a Review would be a simplified and streamlined financial process designed to suit the needs of the Assembly. Such a Review would involve close consultation with the Assembly via the Committee for Finance and Personnel and the Public Accounts Committee.