End of Session Report 12 May 2011 – 31 August 2012

Committee Remit, Powers and Membership

Powers

The Committee for Finance and Personnel is a Statutory Departmental Committee established in accordance with paragraphs 8 and 9 of the Belfast Agreement, Section 29 of the Northern Ireland Act 1998 and under Assembly Standing Order 48.  The Committee has a scrutiny, policy development and consultation role with respect to the Department of Finance and Personnel and has a role in the initiation of legislation.

The Committee has the power to;

• consider and advise on Departmental budgets and annual plans in the context of the overall budget allocation;
• approve relevant secondary legislation and take the Committee Stage of primary legislation;
• call for persons and papers;
• initiate inquiries and make reports; and
• consider and advise on matters brought to the Committee by the Minister of Finance and Personnel.

Membership

The Committee has eleven members, including a Chairperson and Deputy Chairperson, with a quorum of five members. The membership of the Committee during the current mandate has been as follows[1]:

Mr Daithí McKay[2] (Chairperson)

Mr Dominic Bradley (Deputy Chairperson)

Mrs Judith Cochrane

Mr Leslie Cree MBE

Mr Paul Girvan

Mr David Hilditch

Mr William Humphrey

Mr Roy Beggs[3]

Mr Mitchel McLaughlin

Mr Adrian McQuillan

[1] Ms Caitríona Ruane was a member of the Committee from 23 May 2011 to 12 September 2011.

Mr Paul Maskey was a member of the Committee from 12 September 2011 to 2 July 2012.

[2] Mr Daithí McKay replaced Mr Conor Murphy MP with effect from 2 July 2012.

[3] Mr Roy Beggs replaced Mr Ross Hussey with effect from 23 April 2012.

Committee for Finance and Personnel

End of Session Report 2011-12

Primary Legislation

• Rates (Amendment) Bill

1. The purpose of the Rates (Amendment) Bill was to rebalance the non-domestic rating system by way of a levy on larger retailers, which would be used to fund an expansion of the small business rate relief scheme. The Committee had been notified that the Bill would require accelerated passage to enable the changes to be put in place from April 2012. Mindful of the importance of the Committee Stage of a Bill within the legislative process, the Committee undertook detailed scrutiny of the policy proposals in advance of the Bill being introduced to the Assembly, including the outcome of the Department’s public consultation. The Committee received evidence from a range of stakeholders, including large retailers, chambers of commerce, representative organisations for both large and small businesses, Assembly committees and the NI Local Government Association.

2. The Committee published a comprehensive report in December 2011 outlining its support, in principle, for the expanded small business rates relief scheme and the large retail levy. The report recommendations included a call for the exclusion of small businesses with multiple premises from the relief scheme, and this change was subsequently incorporated into the Bill before introduction. Assurances were also received that, as recommended by the Committee, an evaluation of the effectiveness of small business rates relief scheme will be undertaken and that the non-domestic revaluation will take effect no later than April 2015.

3. Following the necessary assurances that the Minister would take steps to minimise the future use of the accelerated passage procedure, the Committee agreed that it was content for the Bill to proceed by accelerated passage. The Bill was introduced to the Assembly on 16 January 2012, and received Royal Assent on 28 February 2012.

• Superannuation Bill

4. The purpose of the Superannuation Bill is to remove the requirement for DFP to secure the consent of trade unions to detrimental changes to the Civil Service Compensation Scheme, in particular the benefits that apply in circumstances of compulsory or voluntary redundancy. In place of this reform, new duties would be placed on DFP to consult with the unions with a view to reaching agreement and to lay a report before the Assembly on the consultation.  

5. During Committee Stage, which commenced in March 2012, several important issues were identified from evidence received, including the scope and requirements for meaningful engagement between management and the unions, the case for strengthening the consultation provisions and for providing a measure of Assembly control over future compensation scheme changes. Prior to the end of session, members commissioned several draft amendments to be prepared for consideration at the beginning of the next session.

• Budget Bills

6. The Committee considered three Budget Bills during this session. In June 2011, it considered the Budget (No. 2) Bill 2011, which included the Main Estimates for 2011-12 and Excess Votes for the Department of Agriculture and Rural Development and the Department of Education. To inform its deliberations, the Committee took evidence from DFP officials and sought the relevant Committees’ views on the Excess Votes. The Committee subsequently agreed to grant accelerated passage to the Bill.

7. In February 2012 members considered the Budget Bill 2012, including the Spring Supplementary Estimates for 2011-12 and the Vote on Account for 2012-13. The Committee held two evidence sessions with DFP officials on the Bill and additionally scrutinised each of the monitoring rounds throughout the financial year. Having considered the evidence, the Committee agreed to grant accelerated passage to the Bill.

8. The Committee’s consideration of the Budget (No. 2) Bill 2012 was delayed by DFP not providing the relevant papers in time for either of the pre-planned evidence sessions. As a consequence, it was necessary for the Committee to schedule an additional evidence session with DFP officials, followed by a Ministerial briefing. The Committee also received legal and procedural advice on related issues. In addition, views were sought from the Culture, Arts and Leisure and Social Development committees on the Excess Votes for their respective departments. Having considered the responses from those committees and the evidence and assurances provided by the Minister and his officials, the Committee agreed that there had been appropriate consultation with it on the provisions of the Bill as required under Standing Order 42(2), and that the Bill could therefore proceed by accelerated passage.

9. The outcome of the Committee’s detailed deliberations on the Budget (No. 2) Bill 2012 was that it had achieved clarity on a number of key issues, including the consequences of not granting accelerated passage and the mechanisms within existing legislation which ensure that public spending does not cease in such circumstances. The Committee also established that a Ministerial briefing will be scheduled as standard in relation to future Budget Bills.

Legislative Consent Motions

• Finance (No. 3) Bill

10.  The Finance (No. 3) Bill, introduced at Westminster in March 2011, made provisions to implement the Mutual Assistance Recovery Directive (MARD), which was agreed by EU Ministers in 2010. The Directive means that EU Member States can provide each other with assistance in the recovery and enforcement of tax debts and other duties, including serving documents and exchanging information about debts. The Directive needed to be implemented by 31 December 2011, and failure to do so could result in infraction proceedings. An amendment to the Bill was tabled to extend the application of MARD to NI, which required the Assembly’s agreement by way of a legislative consent motion (LCM).

11.  It was noted that the Assembly’s consent was required by June 2011; otherwise, the amendment would not be included in the Finance (No. 3) Bill. During an evidence session with DFP and through follow-up correspondence, it was determined that DFP had not been made aware of the need for an amendment to the Bill until just prior to dissolution of the previous Assembly, despite the fact that the EU Directive was agreed in March 2010. This was due to an apparent lapse of communication with the devolved administrations, with the need for formal consent not being recognised until a late stage. The Committee considered that, moving forward, there is a need to refine the processes, timescales and lines of responsibility for notifying the devolved administrations of legislative or policy changes at a UK level that will impact on transferred matters.

12.  Having considered the correspondence from the Minister and evidence provided by DFP, the Committee agreed to support the Department in seeking the Assembly’s endorsement of the LCM. A short report was prepared to help inform all Assembly members in advance of the debate in plenary. The LCM was agreed on 27 June 2011.

• Air Passenger Duty

13.  On 5 March 2012, the Minister wrote to seek the view of the Committee on the provisions in the proposed UK Finance Bill 2012, which would devolve direct long-haul rates of Air Passenger Duty (APD) to the Assembly. As this involved the devolution of tax-setting powers, the Assembly’s consent was required via a LCM.

14.  To inform its deliberations, the Committee took evidence from panels of witnesses, which included representatives from the main airports, the travel industry, business organisations and the Consumer Council. Written submissions were also received from a range of organisations including a local council and a number of airlines. The evidence received covered a wider range of policy issues in respect of APD than those covered by the provisions of the UK Finance Bill 2012, including the impact on the regional economy and the further devolution of powers to cover domestic and short-haul rates. Arising from its scrutiny of the specific provisions of the Bill, the Committee pointed out to DFP that, if the Assembly sets direct long-haul non-standard rates of APD to £0, this will create an anomaly whereby luxury private aircraft flying from Northern Ireland could also automatically benefit from being liable for a zero-rate of APD. The Committee welcomed an assurance from the Department that it would liaise with HM Revenue and Customs with a view to amending the Bill to provide the power to set the private luxury aircraft APD rate at something other than twice the standard prevailing rate, should the Assembly wish to do so at a future date.

15.  Having taken into account the evidence provided, the Committee concluded that APD is a regressive tax and is particularly disadvantageous to businesses, consumers and the wider local economy. Given the cross-cutting relevance, a view was also sought from the Committee for Enterprise, Trade and Investment and confirmation was received that that Committee was supportive of the proposed LCM. The Committee therefore agreed to support the Minister in seeking the Assembly’s agreement that the provisions in the UK Finance Bill dealing with the devolution of NI long-haul rates of APD should be considered by the UK Parliament, and issued a report to inform all members in advance of the plenary debate on the LCM. The LCM was approved by the Assembly on 28 May 2012.  

16.  In addition to the provisions addressed in the LCM, the report made a number of wider policy recommendations. In particular, the Committee called for the Minister to recommend that the Executive commissioned independent expert research into the business case for reducing or abolishing APD on domestic and short-haul flights from NI, which would inform consideration of whether to press for the devolution of wider APD powers and how these might be exercised. 

• Local Government Finance Bill

17.  On 11 May 2012 the Minister notified the Committee of the requirement for a LCM in respect of an amendment to the Local Government Finance Bill, in advance of the Final Stage of the Bill in the House of Lords. The amendment would make provision for HMRC to provide information to Land and Property Service (LPS) and the Northern Ireland Housing Executive (NIHE) for rates purposes. Such a change would be necessary to enable the Executive to make local arrangements to continue with the current rates support system following the forthcoming abolition of the rates element of housing benefit as part of welfare reform changes.

18.  The Committee was advised that consent for the amendment must be obtained by the end of the 2011-12 Assembly session. As a consequence, consideration of the LCM was undertaken before the memorandum was laid and referred to it under Standing Order 42A(6). Additionally, whilst not normal procedure, it was subsequently necessary for DFP to lay the memorandum and motion for debate on the LCM in advance of the amendment to the Bill being tabled in Westminster to ensure that Assembly consent was received within the necessary timescale.

19.  In view of the role of NIHE, the Committee sought the views of the Committee for Social Development, which confirmed it was content with the proposals. Having considered this and the evidence provided by DFP, the Committee agreed to support the Department in seeking the Assembly’s endorsement of the LCM. The Committee noted, however, that a replacement scheme for rates support will be developed at a later stage and stated that its decision in respect of this LCM will not prejudice its future consideration of options for a replacement rates support scheme.

20.  A short report setting out the Committee’s deliberations and conclusions was issued to inform all Assembly Members in advance of the plenary debate. The LCM was agreed by the Assembly on 3 July 2012. 

Subordinate Legislation

21.  During the session the Committee scrutinised 24 statutory rules. Of these, the Committee sought further clarification and briefing on 1 proposal for subordinate legislation before subsequently agreeing. Eight statutory rules were subject to affirmative resolution and the Committee recommended that they be affirmed by the Assembly. Thirteen statutory rules were subject to the negative resolution procedure and, following scrutiny, the Committee agreed that it had no objections to the rules.

22.  The Committee also noted three proposals for subordinate legislation relating to pensions regulations which were not subject to Assembly procedure.

Inquiries

23.  The Committee identified a number of potential topics for a formal Committee inquiry, and received initial evidence and research to inform its selection in this regard. Following its preliminary investigations, the Committee agreed in principle to undertake an inquiry on Flexible Working and an inquiry on the Barnett Formula within the course of this Assembly mandate.

Budget Scrutiny

• Monitoring Rounds and Provisional Outturn

24.  The Committee scrutinised the DFP monitoring round position prior to the Department making its submission to the centre in June, October and January. In addition, the Committee received evidence from DFP officials on the outcome of the monitoring round at both Departmental and strategic level. The Committee also took evidence on the 2011-12 provisional outturn at both strategic and Departmental levels.

• Response to the Executive’s Review of the Financial Process in Northern Ireland

25.  On behalf of the Executive, DFP is taking forward a review of the NI Budget process, which aims to create a streamlined process that is more efficient, transparent, open to scrutiny by and accountable to the Assembly and which takes into account the needs of the Assembly. As part of this Review, DFP issued a discussion paper setting out fifteen initial recommendations to all key stakeholders, including all Assembly Members.

26.  In line with convention, the Committee co-ordinated the Assembly’s response to the discussion paper. A number of Review recommendations were broadly welcomed by Assembly committees, including those in respect of the alignment of budgets, estimates and accounts. Concerns were raised however in respect of other aspects, such as the ongoing review of arm’s-length bodies by the Executive’s Budget Review Group; the need for closer linkage between the Programme for Government and the Budget; and provision for pre-budget consultation.

27.  In its Report, the Committee made 19 key conclusions and recommendations. These were debated and endorsed by the Assembly on 13 February 2012. However, a formal written response to the Report recommendations is still awaited.

• Discussion Paper – Maximising the Assembly’s Contribution to the Executive’s Budget Process

28.  Arising from its consideration of the Executive’s Review of the Financial Process, the Committee undertook to prepare a discussion paper on options for improving the Assembly’s input to the budget process. The discussion paper set out the value of effective Assembly scrutiny of public expenditure, and outlined a range of issues that had been repeatedly identified by Assembly committees as impediments to fulfilling their financial scrutiny and advisory functions. The paper proposed the preferred option of a Memorandum of Understanding (MOU) between the Executive and the Assembly, which may be underpinned in the Assembly’s standing orders. Stakeholder responses – including from other Assembly committees, the NI Audit Office, the NI Assembly Commission and DFP – were widely supportive of the Committee’s preferred approach and at its meeting on 4 July 2012, the Committee therefore agreed that work on the MOU should be progressed.   

Policy Scrutiny

29.  As noted above, the Committee undertook in-depth scrutiny of policy proposals relating to the large retail levy and the extension of the small business rates relief scheme, which were included in the Rates (Amendment) Bill. Similarly, APD was considered in detail in advance of the Assembly debate on the related LCM. Some of the other key policy issues examined, included:

• Rating issues

• Rates Deferment Scheme

30.  Following consideration of the Department’s evaluation of the rates deferment scheme for pensioners, members agreed that the scheme did not appear to be either effective or provide value for money. The Committee therefore agreed that it was content with the proposal to close the scheme from 1 April 2012, and recommended that the required subordinate legislation was affirmed by the Assembly. 

• Non-domestic revaluation

31.  In its Report on the Proposed Large Retail Levy and the Expansion of the Small Business Rate Relief Scheme, the Committee concluded that non-domestic revaluation is a more transparent and fair way of distributing the rates burden; it was therefore considered essential that the next non-domestic revaluation takes effect from April 2015. Subsequent to the Report’s publication, the Committee has maintained a keen interest in this issue, receiving a briefing from Departmental officials on 9 May 2012 and assurances that regular updates on progress will be provided.

• Rate Collection

32.  Rating is one of the primary mechanisms available for the Executive to raise revenue, and the Committee has therefore taken a keen interest in the role and performance of Land and Property Service throughout the session. As well as maximising in-year rate collection, members have sought assurances that all necessary measures will be taken to reduce the level of rating debt.

• NICS Equal Pay settlement

33.  The Committee continued the work of its predecessor in examining residual issues arising from the 2009 NICS Equal Pay settlement for staff excluded from the terms of the settlement, including NICS retirees and staff seconded to the PSNI and NIO. As well as taking evidence from DFP officials, members heard from a range of stakeholder groups, including NIPSA, PSNI representatives, the Civil Service Pensioners’ Alliance, NIPSA Retired Members and solicitors representing retirees. The Committee obtained estimates from the Department of the costs of including these groups in the equal pay settlement and discovered that £26 million set aside for DOJ/PSNI equal pay claims may no longer be available from the Treasury if not used for that purpose within this financial year.

34.  Having considered all the evidence, the Committee called on the Minister of Finance and Personnel to recommend that the equal pay settlement should be extended to cover these cases, which would also avoid additional legal costs in defending claims which are subject to legal proceedings. In response, the Minister advised that it remained the Department’s intention to defend all pending court cases on the basis that the “settlement terms have a firm rationale.”

35.  The Committee accepts that the final decision in respect of this issue rests with the Minister and the Executive. Members recognised that the groups concerned will be disappointed with the DFP response; however, the Committee believes that its endeavours have, at the very least, provided a public forum by which the issues and concerns relating to the equal pay settlement could be examined in a detailed and transparent manner. The Committee notes that there are a number of court challenges to the DFP position, and will consider the outcome of these cases in due course.

• Corporation Tax

36.  The Committee has a continuing interest in the campaign to devolve corporation tax powers and has monitored the progress of the joint ministerial working group. Members have pressed the Department for clarity over the anticipated economic benefits as well as the estimated cost to the Executive of a reduced rate of corporation tax. Towards the end of session, the Committee noted that a formal UK Government decision on the matter was now not likely until autumn 2012 due to the need for further work to address unresolved issues, particularly in terms of the cost to the Executive. The Committee intends to continue to pursue the matter early in the next session.

• Senior Civil Service Disciplinary and Accountability Arrangements

37.  In February 2012 the Committee took evidence from DFP on proposed revisions to the NICS Handbook to establish disciplinary policy and procedures which would apply to the posts of Permanent Secretary and Head of the Civil Service. These proposals arose after the Committee had identified a gap in the existing policy and procedures in this regard. The Committee subsequently secured the agreement of the Minister to amendments to the Handbook, including to ensure that any board of inquiry set up to deal with a disciplinary case involving the grade of Permanent Secretary or equivalent will be comprised of suitably experienced individuals from outside the civil service. The Committee has also decided to examine the wider issue of the accountability arrangements for civil servants, including arrangements which exist in other jurisdictions, in the next session.

• European Structural Funds

38.  Members scrutinised the work of both DFP and the Special European Union Programmes Body (SEUPB) in relation to European Funding programmes. During oral hearings and follow up communication, the Committee pressed both DFP and SEUPB to improve the process and timescales for approving funding applications, particularly in respect of INTERREG IVA. Members subsequently examined proposals to address the delays in the decision making process and to streamline current arrangements and the Committee intends to pursue this important issue in the next session, in light of the development of future PEACE IV and INTERREG V Programmes and the need to ensure that lessons are learned and applied going forward.

39.  Other key policy and performance areas scrutinised during the 2011-12 session include:

• Role of the Performance and Efficiency Delivery Unit in relation to the PfG;
• Departmental Corporate Plan 2012-15 and Operational Plan 2012-13;
• NICS HR issues, including sickness absence and the comprehensive pay and grading review;
• Public procurement;
• State Aid issues; and
• Civil Law, including the law on damages/claims for wrongful deaths and vulnerable witnesses in civil proceedings.

Engagement - Informal meetings/events

40.  In addition to routine meetings with local stakeholder groups, the Committee met informally with the Commission on Devolution in Wales during its visit to NI on 21 May 2012. The Commission has been established to review the financial and constitutional arrangements in Wales and this useful engagement provided an opportunity to discuss issues of mutual interest including the devolution of corporation tax powers.

Committee motions

41.  Committee motions on the following matters were debated in plenary during the session:

• Devolution of Corporation Tax powers – joint motion with the Committee for Enterprise, Trade & Investment;
• Response to the Executive’s Review of the Financial Process;
• Extension of Committee Stage of Superannuation Bill.

Likely key priorities for the next session

42.  The Committee’s key priorities for the next session include:

• Committee Report on the Superannuation Bill;
• Draft Memorandum of Understanding on the Budget process;
• Inquiry into Flexible Working;
• Air Passenger Duty Bill;
• Progress on devolution of Corporation Tax powers;
• Financial Provisions Bill;
• Legal Complaints and Regulation Bill;
• Progress on future PEACE and INTERREG funding; and
• Inquiry into Barnett Formula.

Detail of Committee Meetings

43.  The Committee met on 43 occasions during 2011/12. Of these 43 meetings, 25 were held in open session and 18 were held in open/closed session. In terms of the latter, most of these related to the consideration of draft committee reports which, following the normal procedural convention, take place in closed session. Privileged legal advice was also taken in closed session.

44.  One combined visit and Committee meeting was held at NI Direct, Causeway Exchange, Bedford Street, Belfast.

Committee for Finance and Personnel
Expenditure for the period 23 May 2011 – 31 August 2012