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Official Report (Hansard)

Session: 2007/2008

Date: 12 March 2008

COMMITTEE FOR 
FINANCE AND PERSONNEL

OFFICIAL REPORT
(Hansard)

Response to Committee Report on Executive’s Draft Budget

 12 March 2008

 

Members present for all or part of the proceedings: 
Mr Mervyn Storey (Deputy Chairperson) 
Mr Roy Beggs 
Mr Simon Hamilton 
Mr Fra McCann 
Ms Jennifer McCann 
Mr Adrian McQuillan 
Mr Declan O’Loan 
Mr Peter Weir

Witnesses:

Mr Michael Daly ) Department of Finance and Personnel 
Mr Paul Montgomery )

The Deputy Chairperson (Mr Storey):

I welcome Mr Daly and Mr Montgomery to the meeting. Perhaps you could begin with an outline of your response to our report.

Mr Michael Daly (Department of Finance and Personnel):

I should first like to thank the Committee for agreeing to hear us at the beginning of this session. You will understand that, with the announcement of the Chancellor’s Budget today, we need to get back to Bangor fairly quickly to hear what he has to say and to work out what it means for us, and then do something about it.

We welcome the Committee’s report. The four general themes — spending priorities, budget allocations, reductions and efficiencies — are to be expected, but I was particularly interested in the “Information and Process” section. It is all too easy, when looking at draft and final budgets, to concentrate on how much money is going where, but it is important that we also look at the process of how we get there. That section was of particular interest, and it is an area on which I will return to the Committee next month.

In our response, we have tried to give as much information as we can on each of the recommendations. The Committee will appreciate that, in a number of cases, our response recommends work in progress; you will be aware of a number of areas where work is ongoing, and we hope to produce further briefings in due course. One such area that I have already mentioned is future Budget processes. Also, because of the complexities of the Budget, it is difficult to capture some of the detailed responses in a succinct way. However, we can take this opportunity to go through the various responses as the Committee sees fit, and we will try to provide further information as best we can. As always, if there is any issue on which you require further clarification, we can provide a written response.

The Deputy Chairperson:

I suggest that we go through the recommendations and responses individually, and take questions on each.

I will begin with recommendation 1: have sufficient funds been allocated to the various Departments to achieve the economic targets outlined in the Programme for Government? Last week, Department of Finance and Personnel (DFP) officials talked about playing a role in preparation for the investment conference in May. What outcomes are needed from the conference regarding the attraction of inward investment in order to meet the economic targets, and how will those outcomes be achieved?

Mr Daly:

To answer your first question, the Budget process is inextricably linked to the Programme for Government and the economic targets, so there would be a very difficult situation if targets had been signed up to that were not properly funded. Where additional funds were not allocated in the Budget to meet particular targets, the challenge is for the spending Minister to make sure that sufficient funds are actually allocated to achieve those targets.

Mr Paul Montgomery (Department of Finance and Personnel):

There will be a clear indication from the investment conference as to whether or not it will lead to additional inward investment. The conference should not be seen on its own, but it will clearly be very important, as will the outcome of the second Varney Review. As I understand it, there has been no identification of specific targets to be met by the investment conference, because we simply do not know at this stage what the outcome will be. However, the sheer fact that a number of key businesspeople from America will be attending this showcase for Northern Ireland should lead to clear outcomes involving possible investment projects.

The Deputy Chairperson:

Obviously there is a link between the Programme for Government and the investment conference. It is not just about having a conference attended by a number of high-profile visitors; there is a clear correlation between the targets that have been set in the Programme for Government — and how that process works out over the coming months — and the possibility of generating income from the investment conference.

Mr Montgomery:

There is a cumulative effect. A target has been set to create 6,500 jobs through inward investment; we do not simply expect 2,000 of those jobs to be generated as a direct result of the inward investment programme. The purpose of that programme is to get potential investors interested in the first instance, and there will then be a follow-up on that interest. It will be a broad range of factors that will determine the achievement of the increase in productivity and the employment rate. The public service agreement (PSA) delivery agreements that will shortly be published will set out in greater detail how each of the targets will be delivered in the context of the resources that are available.

Mr F McCann:

Recent news items have reported on the economic downturn in the USA, and the impact that that may have on the investment conference. Although much has been made of the conference — and it may well deliver some of the jobs that you mention — has there been any examination of the impact that that economic downturn might have on the outcome of the conference?

Mr Montgomery:

It is my understanding that we do not expect there to be a serious negative impact, as the downturn in America will, one hopes, be only transitory.

Mr F McCann:

I am sure that the Americans hope that that is the case.

Mr Montgomery:

The only way in which the US economy will be able to get out of the recession is by investing, growing and developing, and we are hoping that Northern Ireland can play a role in that. Although there has been a downturn in sales to America, and achieving consumer confidence will be difficult, the purpose of the conference is to encourage firms to invest in order to grow for the future. The anticipated short-term process should not, over the longer term, be a significant factor.

Mr F McCann:

The conference is in May, and a lot of store was put in inviting some major economic interests to attend, but the recent indications are that that may not materialise, and that the conference has been scaled down somewhat.

Mr Montgomery:

The investment decisions should be based on longer-term rather than short-term projections, so we hope that the economic downturn in the USA will not have a serious negative impact.

The Deputy Chairperson:

We will work our way through the recommendations. In relation to recommendation 2, do you envisage any revision of the Department’s PSAs as result of the regional economic strategy which will follow from the Varney Review II?

Mr Montgomery:

We will need to revise the PSAs at that stage. That is the primary reason why the review of the regional economic strategy has been delayed. We need to see what will come out of Varney II. If we get a good outcome from that, we will need to consider raising the targets for productivity.

The Deputy Chairperson:

Have we set a timeline for that? That strategy has been stalled on a number of occasions for different reasons and now, because of Varney II, it has been delayed again. Is there a terminal date when it will be brought to a conclusion?

Mr Montgomery:

It should be done as soon as possible after Varney II. It depends on what Varney recommends and the precise timings. It has to take place as soon as possible after Varney II, because we need to have the direction of travel in place for business and for Government Departments.

Mr O’Loan:

I have one general point, and one particular one, related to recommendation 3.

The greater the clarity about budgetary information — the consultation process, draft and final Budgets — the better. Sometimes, we have artificial debates. Assembly Members, Committees, the public and key groups within the public need the fullest information. At times there has not been absolute clarity as to what has been budgeted for.

My specific point is that we recommended the publication of Departmental bids and their outcomes. You have not responded to that. It is something that we take seriously and will pursue.

Mr Daly:

The publication of departmental bids in respect of the Budget?

Mr O’Loan:

Yes. The departmental bids, and then what is in and what is out in terms of the draft Budget.

Mr Montgomery:

The entire list of departmental bids was made available in the Assembly Library, in response to a question for written answer from Mr Beggs. All the spending bids are publicly available.

Mr Beggs:

The issue is why that had to be dragged out. Why is the process not more open and transparent, and why should DFP not publish all the results of bids made by each Department? A more transparent process would result in better decision-making.

Mr Daly:

We can pick up on that particular issue when we talk to the Committee about the future Budget process. As you say, one Department published that information widely, while others made less information available. The key thing is to increase transparency. Getting the balance right is difficult. It should not be a problem in this area, but we have talked before about the Estimates and how the Committee could be swamped with information.

However, we accept the point. That is something that we have to look at.

Mr O’Loan:

The remedy of simply placing in the Assembly Library after the event is not adequate. That is a point that needs to be looked at as we re-examine the process.

Mr Beggs:

We are getting a more helpful response today than in the written response. I am looking forward to engaging further on this issue.

Mr McQuillan:

I know that we are due to discuss this after Easter, but, in relation to recommendation 4, can you outline the initial proposals and the timetable arrangements for future Budgets?

Mr Daly:

I cannot at this stage, because the Minister is discussing that with his Executive colleagues. That item was originally scheduled for discussion today, but the Minister asked the Committee to move it to April so that the Executive could take their decisions on the matter. That is the reality. We have to let them consider the matter.

Mr McQuillan:

The Executive have to decide first?

Mr Daly:

The Executive will be considering the matter, hopefully tomorrow. Had there not been a recess, we could then have brought it back to the Committee quickly, but we have to let that part of the process take its course.

Mr Weir:

I know that you are going to give us another briefing after Easter, and you are obviously not in a position today to tell us what even the provisional timetable might be. Can you at least tell us the timetable for when you will be able to tell us what the timetable will be? [Laughter.]

Mr Daly:

I think that we are here on 2 April.

Mr Weir:

Do you expect that on 2 April you will have at least a provisional timetable?

Mr Daly:

That is my expectation.

The Deputy Chairperson:

There are no questions from the members on recommendation 5, but the officials may wish to comment on it.

Mr Daly:

There is a lot in that recommendation. By and large, the responses by the various Statutory Committees on the draft Budget were very much in line with those of the Departments. There is, therefore, a great deal of information being received and a lot of recommendations about increased allocations. Not all of them can be dealt with; that is the nature of a Budget process. It is not a question of saying “yes, yes, no”. The information received from the Statutory Committees was considered in the round with the other information from what was a wide-ranging consultation process.

The Deputy Chairman:

What about recommendation 6?

Mr Daly:

I have nothing to add on that.

The Deputy Chairperson:

Recommendation 7?

Mr Daly:

The important point on recommendation 7 is ensuring that there will not be a negative impact on front-line services. The publication of the efficiency delivery plans (EDPs) will make transparent how those efficiencies will be delivered. Therefore, if they are to have an impact on front-line services, that will be apparent.

The Deputy Chairperson:

Did DFP approve the efficiency plans?

Mr Daly:

For each Department?

The Deputy Chairperson:

Yes.

Mr Montgomery:

We saw the original 90, and our supply colleagues commented on them. If there was something that was going to have an effect on front-line services, they suggested that perhaps the Departments should look at the matter again. However, because of the lack of time, Ministers are only just finalising the EDPs and the plans have not been much challenged, although there might be scope to return to them as the process develops.

Mr F McCann:

Efficiency savings are important. However, has the Department looked at what impact efficiency savings might have on the smooth running of a Department?

Mr Daly:

By definition, efficiency means doing the same with less or more with the same. If done properly, the expectation is that it will be for the good, making Departments run better or less expensively. Obviously, in theory, there would come a point when it could be said that we are working at maximum efficiency. However, can any of us say at the moment that we are working at greater than 97% efficiency?

There is always room for improvement. The EDPs should not affect the smooth running of Departments if they are carried out properly and if they are genuine efficiency plans. They should not be imposed like a salami slice across all business areas, telling Departments just to get on with it. That is where the benefits of the performance and efficiency delivery unit (PEDU) will be seen. It will work with Departments and try to help them identify where improvements can be made and help them to develop the implementation plans to achieve the efficiencies as smoothly as possible.

The Deputy Chairperson:

Recommendation 8 relates to the reform programme. The Committee has been waiting for some time to see the qualitative and quantitative benefits of the programme. How far has that work progressed?

Mr Daly:

The issue is the Northern Ireland Civil Service-wide model that is being developed by the delivery and innovation division. I understand that Peter Glynne, who is leading on that, will be coming back to the Committee with some more information. As I understand it, the model has been developed, and, as part of the next stage, it will be rolled out within the Department in order to map out benefits realisation and tracking across various programmes. Once that is place, the programme will be rolled out across the Northern Ireland Civil Service.

Recommendation 9 follows on from that. It deals with the Civil Service reform projects on which DFP is delivering. The work of the delivery and innovation division will be rolled out, initially, within DFP. There are extra arrangements in place as regards Civil Service reforms. Each of the Civil Service reforms is led by a senior responsible owner at around deputy secretary level. There are well-defined governance arrangements in place for each of the reforms. Prior to the approval of the business case, a benefits realisation plan will have been set out. Once the reforms are implemented, the procedures that are in place ensure that the benefits realised are identified, mapped and reported back.

In addition to that — and particularly for the Civil Service reforms — the Department has an oversight board that is chaired by one of the Department’s non-executive directors. It meets monthly, and it tracks the interdependencies and risks associated with the reforms. There is, therefore, a comprehensive set of governance arrangements in place — in regard to the individual reforms and at departmental board level — to ensure that benefits are realised and delivered. It is fairly well tracked.

The Deputy Chairperson:

Will the benefits that are accruing over the Budget period contribute to the 3% efficiency?

Mr Daly:

No. The 3% is taken off; Departments are required to do that. The Civil Service reforms that we are talking about — such as those relating to personnel and finance — are different in nature. For instance, the personnel reform is a 10- to 15-year programme. The next few years, therefore, will be spent implementing and completing the programme, and the benefits will start to accrue down the line. It is very much about putting in place arrangements and a platform that can be used to deliver the benefits in the future, rather than aiming for a short-term gain.

The Deputy Chairperson:

If they have not been defined, is there a risk that they will be more difficult to realise?

Mr Daly:

They are defined. The benefits realisation plans — which were submitted as part of the business case — set that out. Supply colleagues in DFP would not approve a business case unless those plans met the standards.

There is not a lot to add to what we have said about recommendation 10. There are two aspects to rolling out shared service centres. First, there are contractual arrangements. Secondly, constraints can be placed on authorities if they jump on board with the Civil Service. The electronic human resources services contract — with which I am familiar — has been set up in such a way that any public authority can opt in to it. That means that the public authorities will not have to go through the lengthy procurement process that DFP had to go through; they can merely jump in.

However, that particular service has been designed specifically to deal with the pay and contractual terms and conditions of civil servants. Therefore, if an authority outside the Civil Service decided to opt in to that, a lot of change control would be required in order to map that into its terms and conditions. Therefore, it would still incur a cost, but there would also be a saving in procurement costs.

There is another issue about providing services for other organisations. Leaving aside personnel, it will be a challenge to get other organisations to buy into, and reach consensus on, the service for areas such as finance or IT. Every organisation would be required to work as part of the overall framework, and we would have to be able to contain any competing priorities in delivering the services.

Mr Beggs:

To date, have any outside bodies bought in to the shared services? If there are efficiency savings, what pressure has been applied on those outside bodies to encourage them to do so?

Mr Daly:

All of the Northern Ireland Departments are using the personnel service, as is the NIO. That option is available to other bodies such as the Assembly Commission; however, for various reasons, such bodies have decided that the time was not right for them to buy into it.

DFP’s focus is to promote the shared services as an option for other bodies to buy into. However, currently the main emphasis is on implementing it in the Departments that are already using it. The same would apply to, for instance, Account NI.

Mr Beggs:

Are you confident that any teething issues have been addressed? Furthermore, are you confident that you would be capable of dealing with the additional workload that would result from other bodies buying into it?

Mr Daly:

If other bodies agreed to, for example, the personnel services contract, it would be the responsibility of the private-sector partner to deal with any problems, not the Civil Service. We have our own contract for the shared service, and we have clearly defined performance indicators for the service that we expect to receive.

If another body were to agree a contract, our service delivery performance arrangements should not be affected. Penalties and so on are built into the contract to ensure that that does not happen.

Mr Beggs:

So no other bodies have bought into the shared services?

Mr Daly:

No. Apart from the 11 Departments, the only body to have bought into any aspect of the shared service is the Northern Ireland Office, which is using the personnel aspect of it. As I understand it, at this stage, only the 11 Departments are using Account NI.

The Deputy Chairperson:

DFP’s response to recommendation 11 of the Committee’s report on the draft Budget refers to the £175 million capital receipt from Workplace 2010 that was included in the final Budget calculations for 2008-09. Will there be Budget implications if that amount varies considerably, or if Workplace 2010 does not happen on schedule? Does DFP have any contingency plans?

Mr Daly:

Our expenditure plans have sufficient flexibility to accommodate any delay to Workplace 2010 or any change to that figure.

Mr Montgomery:

There is some fat in the projections in terms of our access to our EYF stock — the £100 million in 2008-09 — that might go towards that, because it has yet to be allocated. A lot depends on the slippage of other programmes. Given that it is such a large amount, if the £175 million did not materialise, we would have to instigate plans to allow slippage in other programmes, or to delay other programmes until perhaps 2009-10. That would mean that that expenditure would be not taken forward in 2008-09. Therefore, a range of measures could be taken should that £175 million not materialise, which would involve the management of the capital expenditure programme.

Mr O’Loan:

Given that the figure of £175 million has been made public and the bidders are aware of it, is this not a slightly artificial debate? Clearly, the market conditions at the time of the final bids are relevant. However, is there not a trade-off between the capital receipt and the recurring payment required from DFP by the bidders over the 20- to 25-year-period?

Mr Montgomery:

That is the point. The forecast of £175 million has been made clear, so that should remove a lot of the uncertainty with regard to the bidders.

Mr O’Loan:

That is a figure that they have recognised that they will have to play to.

Mr Montgomery:

Obviously, we will try to increase that figure in order to maximise the income to the Northern Ireland block grant.

The Deputy Chairperson:

You do not envisage that the figure will go any lower, but you can envisage that it could go higher.

Mr Montgomery:

That is our intention, although one can never judge market conditions. It could be that because we have informed the market that our expectation is £175 million, the bidders may simply say that the figure is too high, in which case we will have to reconsider, and the bidders will either come in with a lower bid or not bid at all. Based on the advice that we have had, it is clear that £175 million is deemed to be a reasonable figure.

Mr Daly:

The market is pretty well informed about major projects such as this, or major procurement projects — and must be, in order to participate in the exercise. It must be sure about the targets that we are aiming at, or it will be wasting its time.

Mr Beggs:

I understand that the contracts are due to be signed in March 2009. Is that correct? Are there any other landmarks on the road towards that date, so that the Committee can be better informed as to whether everything is going according to schedule? Are there any other points in time that will clearly indicate whether or not you are on schedule?

Mr Daly:

We will have to get back you about that. You are looking for the key milestones leading up to the award of the contract. We will come back to you quickly on that matter.

The Deputy Chairperson:

What about recommendation 12?

Mr Daly:

There is nothing really to add. The key is that the savings that will come out of procurement will simply be built into the efficiency delivery plans.

The Deputy Chairperson:

Will the work in relation to the efficiency plans be in place?

Mr Daly:

The work on developing the efficiency plans?

The Deputy Chairperson:

Yes.

Mr Daly:

To be honest, most of the efficiency plans should have been published by now, but not all of them have been. That work is at a fairly advanced stage.

Mr O’Loan:

I may be going beyond these budgetary considerations, but it will do no harm to air a couple of points. The argument for central procurement is that we get economies of scale and better practice because of the expertise that is developed. Recently, I have heard significant counter-arguments — that we are getting worse results out of central procurement, and that it can lead to people at the centre making bad decisions and getting bad value because they are not in touch with the particular business area. Central procurement can also result in a highly bureaucratic process that is unresponsive to the needs of local businesses and to the opportunities that those local businesses offer.

Mr Daly:

I am not sighted on any decisions that have been made that represent bad value. If there are instances that you are aware of, I will be happy to examine them. The level of bureaucracy should be commensurate with the scale of the procurement. Procurement processes, particularly when it comes to big Government projects, are governed by EU directives. They can be lengthy and seem bureaucratic, but that is the business that we are in; we simply have to do that. If there are any particular issues with regard to the nature of decision-making, perhaps you will pass those on to us.

The Deputy Chairperson:

Recommendation 13 concerns the performance and efficiency delivery unit (PEDU). The Committee was told that PEDU would be in place by the start of February. Where are we with that, and to what extent have the Committee’s recommendations been implemented in finalising the plans for PEDU?

Mr Daly:

Work is being finalised at the moment and the arrangements for PEDU are being put in place. Some announcements should be made towards the end of this month or in early April. The issues that were raised by the Committee have been factored in to that process.

There is nothing else that I can add, other than to say that the work is at an advanced stage. It would have been preferable to get the work done earlier, but due to the nature of the business, it is taking longer than we had expected.

The Deputy Chairperson:

Recommendation 14 of our report relates to the ongoing issue of underspend.

Mr Daly:

I take the Committee’s point about setting a target for reducing underspend. However, as the response states, there are no plans to set a target at this stage. There is a balance that must be struck here. Some years ago, if Departments here and in GB did not spend their budgets, they would be allocated less money the following year. It became a case of use it or lose it, and there was an incentive to use up the budget regardless of the outcomes. For that reason, around 10 years ago, end-year flexibility arrangements were introduced to prevent Departments from rushing into unnecessary end-of-year spending and to allow them to carry forward money to the following year. Such arrangements can have the opposite effect, in that Departments may not try to deliver their plans within a specific year if they know that the money will still be available the following year. Therefore, it is a matter of trying to strike a balance. It is not appropriate to set a target across the board to reduce underspend from 2% to 1%, because of the risk of those perverse consequences. It would also be difficult to set a target that would meet the needs of all Departments.

Mr O’Loan:

With regard to achieving that culture change, it might be helpful if DFP acted as a champion and managed its affairs well. It could be seen to set and meet the kind of targets that we are seeking.

Mr Daly:

DFP does set a target internally. It started doing that during the current year, and it may do so next year. However, the Department feels that it can set such a target due to the nature of its business. No doubt, departmental colleagues will review the impact of that, as will we.

Mr O’Loan:

Is DFP’s target as tight as the target that we are seeking?

Mr Daly:

The target for the current year is 2%; I have not seen the business plan for next year.

Mr O’Loan:

So it is not as tight as we are looking for?

Mr Daly:

No; you were seeking to go to 1% next year. If a Department felt that it could meet a target, it would not simply be a matter of letting the Department get on with it. Systems would need to be put in place to modify behaviour and to improve plans for working out the necessary resources and the arrangements for spending them, and then the target could be achieved. The target would be meaningless unless the financial, planning and management issues were not addressed at the same time. If the target were missed, would you simply impose a sanction, in which case you are back to poor decision-making in order to achieve the target?

The Deputy Chairperson:

Recommendation 15 relates to end-year flexibility. Your response does not cover the Committee’s call for steps to be taken on capital projects.

Mr Daly:

Capital programmes are different. We said earlier that capital expenditure can be lumpy, and it can slip back and forward. We are looking at some degree of flexibility for capital programmes, recognising that, for various reasons, capital projects can slip or accelerate, and that can have a consequence on the actual expenditure profiles.

The Deputy Chairperson:

Do you think that we need to reverse the trend of huge underspend on capital projects? Something must be put in place to reverse that trend, as it is a real problem.

Mr Daly:

One of the areas that is being considered is the monitoring arrangements for capital programmes, particularly where lots of individual projects make up a programme. We need to get to the situation whereby we have good information management systems available that are considered at the most senior levels in the Department. We are working with the Office of the First Minister and deputy First Minister and the Strategic Investment Board to develop an arrangement to accommodate situations in which a Department already has its own sophisticated systems. The Roads Service, for example, tends to be extremely good at managing its capital projects. However, members will be aware of areas in which there have been major underspends. The Departments like the look of the system that is being developed to help them to keep an eye on their projects.

The Deputy Chairperson:

Have you any comment on recommendation 16?

Mr Daly:

The central finance group is doing a great deal of work with Departments to try to raise their level of financial management. DFP has a detailed action plan that I can make available to the Committee.

The Deputy Chairperson:

The PKF report was published in 2007: to what extent have its recommendations been implemented?

Mr Daly:

The action plan that I mentioned sets out the progress that has been made. A series of seminars has been organised for senior managers who do not work directly in finance. The Department is also working with the Centre for Applied Learning to develop more detailed and rigorous training programmes, and further seminars are planned. Therefore, a fair amount of work is going on. It may help the Committee to see the action plan of the work that has been done and what is planned for over the next year.

The Deputy Chairperson:

Your response states that a subgroup is examining the quality of the financial information used by departmental boards. Will any of that financial information help to facilitate the scrutiny of statutory Committees?

Mr Daly:

Yes, it may help such scrutiny. We are working with the Committee Clerk to improve the information that is available, primarily to this Committee. Committees probably need access to the same fairly high-level information as the departmental boards. It is a question of striking a balance: the Committee does not want to examine the budgets of individual branches and examine the areas in which they are, or are not, spending. The Committee needs a high-level progress statement.

Ms J McCann:

With regard to recommendation 17, you say that Ministers and Departments are taking decisions on programmes that were formerly centrally funded — an issue that the Committee has discussed previously. There is a lack of clarity about funding for organisations in the voluntary and community sector, and there seems to have been a lack of consultation between Departments and the groups that deliver services.

How can those groups be assured that they will be able to access continued funding for projects that they currently deliver? For instance, several projects will be finishing either at the end of this month or in June 2008, and there seems to be no avenue via which groups can apply for funds to continue providing those services. Has any work been done to clarify the situation? Have groups been consulted and directed to the relevant Departments that will now finance their projects?

Mr Daly:

I am not sure what individual Departments have done about that. At a recent conference, Mr Montgomery and I advised the voluntary and community sector that, in order to access funding, organisations had to approach Departments at the appropriate time.

Mr Montgomery:

Even when there was central funding, specific Departments were responsible for the management and distribution of that funding. The Department that had responsibility when there was central funding retains that responsibility now. Therefore, any organisation that is concerned about funding for its project should contact the same Department, which should be able to provide clarity.

Ms J McCann:

That is not happening. I know of organisations that were previously funded out of the children and young people’s fund and cannot find out which Department is going to take over responsibility for their funding. There is a large gap and a lack of clarity in the information available to the organisations and groups on the ground. My concern is that that will lead to a large gap in the provision of services — if they do not disappear completely — that will have a knock-on effect on the local communities. Is there an avenue down which people can go to be assured that they can access that funding? They should be signposted to a central body and directed into the right Department or funding programme.

Mr Montgomery:

I do not know the specific case. However, it is departmental. The money did not come directly from the centre. It went to Departments and then went out to the group. Whether it came from the children and young people’s funding package or the Executive programme fund for children, it should have come from a Department, and that Department should have been clear to each group.

If that is not the case, and if there were individual projects, then if we are told what those programmes are, we can try to find out which Department it is. We will try to chase up the matter. It is unsatisfactory for a group not to know its funding position. Whether it could have the funding or not, it should still have that clarity.

Mr Beggs:

You said that the relevant Ministers are taking decisions on cross-cutting issues, and that they will look at relative prioritisation and effectiveness. That misses the whole point: many of those applications for funding were cross-cutting issues, particularly affecting young people. There is a danger that the priority in a particular Department may not be as high as it otherwise would be — because it may not reflect the other cross-cutting issues. How are the Executive collectively ensuring that that does not happen?

You said that the lead Departments are currently taking decisions. Like Jennifer McCann, I have had representations from individual bodies that have yet to learn whether they are being funded. Some are hearing whispers that they will be funded, but there is nothing official. It would be much better if there was clarity, so that staff could start to move on — if they have to move on. Groups and individual employees still do not know what will happen in three weeks’ time when the funding may end, and that is an atrocious situation.

Mr Montgomery:

We cannot push Departments to make decisions, and we cannot push Ministers to make decisions. However, the two junior Ministers in the Office of the First Minister and deputy First Minister (OFMDFM) have written to the relevant Departments asking them what projects they will fund and take forward. That work is now being taken forward by the children and young people’s unit in OFMDFM.

Mr Beggs:

That is another area that must be improved in future budgetary processes.

The Deputy Chairperson:

What about recommendation 18?

Mr Daly:

I have nothing in particular to add.

Mr O’Loan:

What contact has there been between DFP and the Department of Enterprise, Trade and Investment in order to move the situation along? The matter first surfaced with us, and we had a significant response from the Economic Research Institute of Northern Ireland, which we amplified. We are concerned about the situation, and want to ensure that something happens.

Mr Montgomery:

I am not aware of the situation. We are not part of the rating policy side. However, we will follow that up and get a response.

Mr O’Loan:

OK. Thank you.

The Deputy Chairperson:

In relation to recommendation 19, your response is not in favour of allowing Departments to retain a share of the proceeds from asset disposals. That sits contrary to the capital realisation task force report on incentivisation schemes, which rewards Departments for realising underused assets.

Mr Daly:

I appreciate that. However, as we have said, if a Department is very asset rich, and it disposes of those assets, is it right for the Executive to say that the programmes that the Department was responsible for should be the main beneficiary of that disposal of assets, or should those assets come back into the centre and be reprioritised, so that they can go to a programme run by a Department that is not asset rich? That is what that issue is about. The proceeds of the sale of assets should be dealt with in the same way as any easement that comes out — say, on resources — where, if something is allocated for a particular purpose to a Department, and it is no longer needed, then it goes back into the centre. That is how the process currently works, and it is the most effective way of running all 11 Departments’ programmes.

Mr Beggs:

Do you accept that some form of incentive might improve the speed of the process? I am not necessarily saying that all proceeds from asset sales should go back to the Department that released that asset, but how can a commitment to proactive engagement from individual Departments be ensured if all proceeds are to be returned to the centre?

Mr Daly:

I support the concept of an incentive in principle, but it depends on what that incentive is. Does someone need an incentive to manage public assets properly if that is their job? When resource accounting and budgeting were brought in, one of the built-in incentives was that, if a Department was sitting on assets, it had to get a return on that investment, so the departmental expenditure limit could be hit.

That does not seem to be enough of an incentive, but I am not sure that saying that a Department can retain the proceeds of an asset is the right direction to go in — they cannot be regarded as the family silver. I take the point about providing an incentive, but the question is how to define that incentive.

Mr Beggs:

Incentives can take the form of sticks or carrots. Is there not a need for some form of clear incentive to make sure that it happens?

Mr Daly:

Yes, there needs to be some form of incentive, but we have to just decide what that is, and, as you said, it could be sticks or carrots.

Ms J McCann:

Several weeks ago the Committee discussed the matter of engaging with local communities. Sometimes it is not a good idea to sell a site, as that site could perhaps be out to social and community use. How will the Department deal with that?

Mr Daly:

Engagement with local communities should be done appropriately. As we may have said to the Committee before, that is a matter for the authority that currently owns the asset. There is no one-size-fits-all answer. We do not want to issue an instruction stating that every time a Department sells an asset it has to consult fully with communities, because that may not be appropriate. However, circumstances where an asset disposal involves social issues cannot be ruled out, and in such cases it is entirely appropriate to consult with the communities, but the Department or authority dealing with that asset is responsible for undertaking that.

Ms J McCann:

How do you envisage that happening? For instance, should representatives from the Department approach the local communities to consult them, or is it left to the local communities to identify instances when they should be consulted?

Mr Daly:

I cannot give a one-size-fits-all answer. If the Department or relevant authority owns the asset and is planning to dispose of it, there is an onus on them to consider whether consultation is necessary, and then to proceed as appropriate.

Mr F McCann:

The last time that this issue of the sale of land in or close to communities was raised, several questions were asked. Obviously, the Committee believes that it is essential that communities are consulted, because the decision to sell off a piece of land can have an adverse effect on local communities. Until now, the rule of thumb has been to stick a “for sale” sign up and move ahead with a sale, regardless of the detrimental impact that it may have on local communities. It is essential that communities are taken into consideration. Many pieces of land that may be sold off are situated in areas of high social deprivation, and it may be the case that community use of that land can have a more beneficial long-term impact than selling the land off for sheer financial gain.

Mr Daly:

The same point applies regarding consultation. However, in relation to your point about the better use of land for social benefit, as we have said before, it is the capital realisation task force, not the capital disposal task force. The aim is to make better use of land and property. That might mean disposing of land in some cases, but in other cases, such as the circumstances that you highlighted, it might mean putting the land to better use.

Mr F McCann:

Sometimes the capital realisation task force does not go into the communities that could benefit most from it, and that is perhaps why hard-to-reach areas exist.

Mr Daly:

I take the point.

The Deputy Chairperson:

In relation to recommendation 20, is it possible, in future project documents, to detail the level of planned reinvestment and reform initiative (RRI) borrowing in respect of capital expenditure plans for each of the Departments — rather than what we have had to date, which is a total, per annum, in relation to RRI?

Mr Montgomery:

It depends very much on how that is treated. It is possible to do that, but, to a large extent, it depends on the proposed projects. In the Budget process, there is a range of projects — from those that we know will almost certainly be taken forward, to those that are more speculative.

For those that are more speculative, it is often not clear at Budget stage whether they will be treated as RRI, or whether they will go through PFI. Therefore, it is not possible to say with any degree of certainty. It is something that we will look at. If it is possible to do that, we will certainly include that information.

The Deputy Chairperson:

How can capital projects and investment plans for each Department be accurate if there are no firm projections for PFI?

Mr Montgomery:

To varying degrees, all Budget proposals that are put forward are speculative. We do not definitively know how much each will cost — they are rough approximations. It is the same for capital as it is for resource. That is why we have subsequent budget rounds and in-year monitoring, so that those can be revised.

Deputy Chairperson:

And finally, recommendation 21.

Mr Daly:

I have nothing to add, other than to say that we will keep that under consideration.

The Deputy Chairperson:

What has DFP done to assess the implications of the future of the Barnett formula in Northern Ireland, especially given the increased focus on the issue, particularly in Scotland?

Mr Montgomery:

We periodically go through needs assessment work, because the most likely outcome of any review of Barnett would be a formal needs assessment, whereby, instead of an automatic formula where we get a population-based share, they will look at the overall need for expenditure in Northern Ireland compared to the rest of the UK. We have periodically done work updating and examining the need in the various expenditure programs in Northern Ireland compared to England, and we do that on an ongoing basis. The difficulty is that, if that is progressed too much, the Treasury will be prompted to undertake a review. We certainly have a broad idea of what the relative need for most of the expenditure programmes is.

The Deputy Chairperson:

Thank you for having the patience to go through that in the way that we decided to deal with it. If there are any other issues that the Committee has, we will forward those to you. A number of issues were raised this morning.

Mr Daly:

Yes.

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