Official Report (Hansard)
Date: 28 May 2008
FINANCE AND PERSONNEL
Draft Budget (No. 2) Bill
28 May 2008
Members present for all or part of the proceedings:
Mr Mitchel McLaughlin (Chairperson)
Mr Mervyn Storey (Deputy Chairperson)
Mr Roy Beggs
Dr Stephen Farry
Mr Simon Hamilton
Mr Fra McCann
Ms Jennifer McCann
Mr Adrian McQuillan
Mr Declan O’Loan
Ms Dawn Purvis
Mr Peter Weir
Mr Michael Daly )
Mrs Agnes Lennon ) Department of Finance and Personnel
Mr Paul Montgomery )
The Chairperson (Mr McLaughlin):
The main purpose of this session is to receive a briefing on the 2008-09 Main Estimates and how the Committee should consider supporting accelerated passage to the draft Budget (no. 2) Bill. That is in accordance with Standing Order 40(2), which states:
“the Committee should be satisfied that there has been appropriate consultation with it on the public expenditure proposals contained in the Bill”.
I welcome the officials from the central expenditure division of the Department of Finance and Personnel to the meeting — Michael Daly, Agnes Lennon and Paul Montgomery. On behalf of the Committee, I thank you for the light reading that you provided. [Laughter.]
Mr Michael Daly (Department of Finance and Personnel):
We will be asking questions later. [Laughter].
Do you want it synopsised and written out on an A4 page?
Yes — using both sides of the A4 page.
As the Committee knows, the Main Estimates and the draft Budget (no. 2) Bill are the next stages in the 2007 Budget process, with which the Committee first became engaged last year. Although the stages are entirely routine, they are nonetheless essential parts of the public expenditure cycle.
The Budget Act ( Northern Ireland) 2008 included the Vote on Account, but that provides for only 45% of the budgeted expenditure for 2008-09. The draft Budget (no. 2) Bill aims to provide the balance, and it must be in place before the summer recess, hence the need for accelerated passage. I understand that the Minister of Finance and Personnel wrote to the Committee regarding that on 16 May.
Members will also be aware that, for accelerated passage to happen, the Committee must be satisfied that it has been consulted appropriately. The arrangements are the same as they were for the spring Supplementary Estimates. The Main Estimates and the draft Budget (no. 2) Bill contain the powers to issue sums from the Northern Ireland Consolidated Fund to the various spending authorities. It also sets limits on the accruing resources or receipts that will be brought in and provides the authority to use those against the various services.
The draft Bill will be introduced on 9 June, subject to the Assembly’s approval of two resolutions: one for the Main Estimates and the second for the excess vote. Royal Assent will be received by mid-July, subject to the Committee’s agreement to accelerated passage and to the Bill’s successful passage through the Assembly. Details regarding the timetable are included in a background paper that was provided to the Committee.
As with the Budget Act (Northern Ireland) 2008 and the Vote on Account, the Main Estimates and the draft Bill are based on, and are fully reconcilable to, year 1 of the Executive’s Budget for 2008-2011, as approved by the Assembly in February. The draft Budget (no. 2) Bill does not allow Departments to do anything new. The Committee for Finance and Personnel was consulted on the draft Budget and the final Budget, as well as on the Vote on Account for 2008-09. However, there are some important issues that are worth highlighting in order to illustrate how the draft Bill and the Main Estimates have evolved from the Budget, because there are some differences.
The excess cash requirement is an additional element in the draft Bill. That is required by the Department of Health, Social Services and Public Safety for the health and personal social services superannuation scheme in 2006-07, and it is provided for in clause 5. Details of that were reported to the Public Accounts Committee, which, in turn, recommended that the necessary sums should be provided by way of an excess vote, hence its inclusion in the draft Bill.
Although the Main Estimates and the draft Bill are based on the Budget that was approved by the Assembly in February, they must take some limited adjustments into account after a routine post-Budget exercise. The aim of that is to factor various technical issues into the Main Estimates and allow for any late adjustments that could not have been finalised in time for the main Budget process. To a large extent, those will involve, for example, allocating funding to the EU Peace programmes and technical transfers among Departments. They do not in any way attempt to unpick what the Assembly has already agreed in the Budget.
That said, there is a one-to-one match between all the capital expenditure in the Budget and that found in the Main Estimates. For several Departments, the departmental expenditure limit for resources is precisely as it is in the Budget. Departments that fall into that category are the Department for Employment and Learning, the Department of Enterprise, Trade and Investment, the Department of Education and the Department of Culture, Arts and Leisure. However, there are differences in the other Departments.
The resource departmental expenditure limit figure for the Department of Finance and Personnel is £185·9 million, but the corresponding figure in the Budget is £180·7 million. It has, therefore, increased by approximately £5·2 million. There are two reasons for that increase: first, it takes account of a transfer of approximately £4 million from the Office of the First Minister and the deputy First Minister to the Department of Finance and Personnel for central reform costs; and, secondly, it contains a £1·2 million adjustment for Peace funding.
Mrs Agnes Lennon (Department of Finance and Personnel):
There is a difference of £1·8 million between the Department of Agriculture and Rural Development’s resource departmental expenditure limit in the original Budget and the Main Estimates. As Michael said, that is due to an allocation of EU Peace funding that was not known at the time of the Budget.
There is a substantial difference of some £189 million in the resources of the Department of Health, Social Services and Public Safety, for which there are two reasons. First, the Treasury instructed that public pension schemes should be scored differently, so the central finance group negotiated the funding for that with the Treasury. That adjustment has been made, and the funding has been obtained from the Treasury. Secondly, the Office for National Statistics ruled that health and social care trusts should be treated as non-departmental public bodies rather than as public corporations — as they were treated in the past. That brought to light pressures of about £89·2 million. The central finance group negotiated the funding for that with the Treasury, as per the ruling by the Office for National Statistics.
There was a small difference of about £0·3 million in the Department of the Environment, which was due to a technical adjustment from the Office of the First Minister and the deputy First Minister to the Department of the Environment for sustainable development staff costs.
The difference of approximately £10 million in the Department for Social Development is due to the Treasury ruling to transfer the treatment of the independent living fund from annually managed expenditure to departmental expenditure limit. That, therefore, was a technical adjustment, which made a difference to the Budget position.
I have already mentioned the transfer of £0·3 million from the Office of the First Minister and the deputy First Minister to the Department of the Environment, and — as Michael mentioned — approximately £4 million was transferred from the Office of the First Minister and the deputy First Minister to the Department of Finance and Personnel for central reform costs. That explains the difference between the figures in the Budget and the Estimates.
There is a difference of £266·9 million in the Department for Regional Development resources, which is for the water subsidy. That was held at the centre when the Budget was agreed, and it has now been allocated to the Department.
That is important information. Can we have a short summary paper containing those details? How will the relevant legislation come before the Assembly? Did I see on the Order Paper that there are two separate Bills?
There is only one Bill — the draft Budget (no. 2) Bill.
Clause 5 of the draft Bill contains a ruling on cash excess. There is a separate statement of excess associated with that, but there will be two resolutions.
Therefore, there are two separate resolutions. The extra money for the Department of Health, Social Services and Public Safety that you mentioned is quite a substantial sum. From where does that money come?
The Treasury has funded that. We negotiated with the Treasury to get the funding.
Therefore, the Northern Ireland block is enhanced by that money?
Yes, it is. The Northern Ireland block has been enhanced by that amount of money — £189 million or £190 million.
Ms J McCann:
Has anyone made any representations for extra funding for some of the Executive’s priorities? Are those representations made by the Department, or does that happen at a later stage?
The purpose of this exercise is purely to obtain the statutory authority that is required by the Departments to spend the money.
Ms J McCann:
Therefore, that extra funding would not be included at this time?
No, it would not.
Ms J McCann:
I was thinking about the fuel poverty measures.
This process is purely to allow the Departments to spend the money that was allocated in the Budget and to deal with the technical issues that Agnes has just outlined.
I assume that there will be a report on the monitoring rounds and the pressures that Departments are encountering. However, that is separate from this process, which is simply to obtain the legislative authority to spend the money that was already agreed in the Budget.
There is an issue about the cash excess to be granted to the Department of Health, Social Services and Public Safety. Its net cash requirement for 2006-07 amounts to an extra £4·7 million. Where does that money come from?
The sum is about £7 million.
I am sorry; £7 million.
That is a cash requirement. The eighth report of the Select Committee on Public Accounts referred to this matter. This is to do with the way in which the Department handled some additional receipts that it had not forecasted in 2005-06. The Department got the extra receipts in and paid them over to the Consolidated Fund. It did that the following year, but, in doing so, it had to make provision for the extra cash to make the payment. It did not do that then, so it has to do so now. That does not impact on any of the other expenditure plans.
I wish to return to the issue of the cash excess. The Minister of Finance and Personnel has been at great pains to stress to the Assembly the importance of Departments staying within the agreed departmental expenditure limits. If anything, those limits are set with the assumption of a margin of error. Consequently, we get reports of underspends, and there is a constant battle to minimise underspends in Departments. How unusual is it for a Department to ask for a cash excess allocation? I also note that these figures refer to the 2006-07 financial year. Is there a one-year lag, and has that been brought to the attention of the Assembly?
This is the fifth time that an excess vote has been asked for since we converted to resource accounting in 2001. Time is required when the 2006-07 financial year closes to prepare and audit those accounts and lay them before the Assembly. After that, the Comptroller and Auditor General’s report gives details of that excess to the Public Accounts Committee so that it can meet and prepare its own report. The normal time lag is about 15 months from the end of the financial year, and those figures are normally presented alongside the Main Estimates for the following year.
The spring Supplementary Estimates that we put through in February were for 2007-08, so we are referring to something that happened under direct rule.
Yes; they refer to 2006-07.
Is the additional money for the Department of Health, Social Services and Public Safety a Barnett consequential? Is it moving right across the system?
It is a technical matter and is due to a different ruling in the accounting treatment in the two cases of the trusts and the superannuation schemes across the UK.
If we are making comparisons between levels of spending on health across the UK, they will all shift in comparison with one another.
Yes, they will, in proportion.
Does the Treasury apply any sanctions on excess applications?
An excess vote this year would usually result in a reduction in expenditure the following year. However, this is a cash issue and concerns only cash management.
Therefore, there is an agreed transfer process? Or is there a sanction? What will the impact be either this year or next year?
In this case, there will be no impact on the Department. It is putting in place arrangements, which are referred to in the Public Account Committee’s report, to ensure that the situation does not happen again. There is a difference between that situation and a Department exceeding its departmental expenditure limit by spending money that it does not have — the consequence of that next year could be a corresponding reduction. However, this instance is purely to do with cash management.
The cash comes from the Northern Ireland Consolidated Fund, which is similar to a loan until the excess vote is passed 15 months later when it is paid back from Supply.
I understand the way in which the adjustment is made. Is that regarded as a departure from good practice?
Are you asking whether an excess vote is regarded as a departure from good practice?
Yes, it is.
Are there sanctions or criticisms? If so, how are they recorded and dealt with?
One example is when the Public Accounts Committee examined the Department, and the Audit Office issued a report — there is no financial penalty.
Out of courtesy, this information should be copied and sent to the Committee for Health, Social Services and Public Safety. We will ask for that Committee’s views before we decide on accelerated passage. I suggest that we pass the report, including the Department of Finance and Personnel papers, to the Committee for Health, Social Services and Public Safety and ask it to respond before next week’s meeting.
What ramifications does that have for the timetable?
It means that the timetable is just about achievable. However, as it comes under the remit of the Committee for Health, Social Services and Public Safety, we have an obligation to refer the matter.
The Committee Clerk:
The Committee must write to the Speaker formally about accelerated passage before the Bill’s Second Stage, which is on 10 June. Therefore, next week will be the last opportunity for the Committee to decide on accelerated passage.
Are members content that the matter be referred to the Committee for Health, Social Services and Public Safety?
Members indicated assent.
With regard to the change in the accountancy rules for health trusts in Northern Ireland, the figure of £89 million was mentioned. Are health trusts here being treated differently from health trusts elsewhere in the United Kingdom?
Mr Paul Montgomery (Department of Finance and Personnel):
No; it is in the consolidated budgeting guidance that all health trusts be treated as non-departmental public bodies.
Michael, we cut you off in mid-stride. Do you have any additional points to make?
Not unless you want us to take you through the Main Estimates. The points that I initiated and that Agnes went through in more detail are important because they help you to move from the Budget to the Main Estimates. We are happy to provide the Committee with a paper that details those points.
We might arrange for Stephen Farry to receive a special brief to be taken thorough the Main Estimates on behalf of the Committee. [Laughter.] Thank you for the presentation.