Official Report (Hansard)
Date: 14 November 2007
COMMITTEE FOR FINANCE AND PERSONNEL
Ministerial Briefing: Draft Budget
14 November 2007
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 Declan O’Loan
Mr Peter Weir
Mr P Robinson ) The Minister for Finance and Personnel
Mr Paul Montgomery ) Department for Finance and Personnel
Mr Leo O’Reilly )
The Chairperson (Mr McLaughlin):
Good morning. How are you?
The Minister of Finance and Personnel (Mr P Robinson):
I am very well.
You are very welcome. Thank you very much, Minister, and officials, for attending. Do you need any refreshments?
Mr P Robinson:
We are well provided for.
I am sorry that the chairs are not as comfortable as they are in your room; you must understand that this is a very hard-working Committee. Minister, you are most welcome. I invite you to address the Committee.
Mr P Robinson:
Thank you very much for inviting me to do so. I suspect that I will have to give very clear indications about why I have made Budget allocations in the way in which I have. At the same time, I want everyone to bear in mind that it is a consultative process that will stretch through to January 2008. Therefore, I do not want to give the impression that it is like the law of the Medes and Persians and cannot be changed. However, there are limits to the flexibility of the process because of fiscal restraints.
By way of introduction, I want to make the point that the Committee for Finance and Personnel is, perhaps, in a unique position — in one respect — with regard to other Statutory Committees. Committees and parties have a tendency to fight the case to which they have a particular allegiance when dealing with the Budget. Members will fight hardest for the Departments of which their party colleagues are Ministers, and Committee members will fight hardest for their Committee. That is as it should be. However, the role of the Committee for Finance and Personnel is distinct in that it has to stand above such considerations and consider the overall position for Northern Ireland as a whole; it must sift out the propaganda from the real arguments.
I welcome the opportunity to discuss the draft Budget and the strategic issues with the Committee. Members will appreciate that examination of detailed points is largely a matter for Departments. The purpose of the local Budget is to determine the spending plans for Northern Ireland Departments from 2008-09 to 2010-11. The process will be completed early in 2008 when the final report on the Budget will be published, alongside the Executive’s Programme for Government and investment strategy.
Additional funding, made available as a result of the UK-wide comprehensive spending review (CSR), is a major factor in determining resources for allocation to public services. Committee members will recall that, at the early stages, the Department made assumptions based on 1% real growth. Although the Treasury would have us believe that the allocation to Northern Ireland is 1·7% real growth, we have decided to be more transparent and to indicate that it is, in real terms, 1·2% real growth. The Treasury managed to reduce the baselines to give the appearance of greater growth, but we want to be honest with the people of Northern Ireland and, in particular, the Committee for Finance and Personnel.
The Chancellor announced the outcome of the comprehensive spending review on 9 October, which informed us what our block grant would be. Everyone will have noted that it is below the rate of growth for previous years. Although there is still growth of 1·2% in real terms, it does not match the 4% growth of previous years. Overall, the Executive will receive an additional £1·1 billion in resource and capital from the Treasury by 2010-11, compared with 2007-08. It is therefore imperative that efficiency savings be made to meet the public’s expectations for improvements in public services. An efficiency target of 3% was identified, and we have maintained it. We are setting up a performance and efficiency delivery unit that will look for areas in which further departmental savings can be made.
On the capital side, along with the Office of the First Minister and the deputy First Minister, the Department of Finance and Personnel (DFP) has provided the Committee with the remit of a capital realisation task force.
Mr Vernon is already working on that area. That is, perhaps, one area on the capital side in which it may be possible to identify some additional funding between now and when the final Budget allocations come before the Assembly.
There is little room for any additional funding on the resource side, unless some of the Departments want to adjust their figures, either because they think that something that they have put into the resource side should be put into capital or for another reason. However, the resource cake has been baked, and it is now largely a case of how it will be sliced up.
There are several points to make about allocations to Departments, all of which were constrained because of the decisions that the Executive had to take on water and sewerage services. As everyone is aware of the background to that debate, I will not go over it again, but those decisions limited the flexibility that the Executive might otherwise have had.
The Committee will know about the process of allocations to Departments. In early summer, my officials and I engaged with each of the Departments; they put forward proposals to the Department of Finance and Personnel for their bids for resource spending. We received about 270 proposals, which accumulated to a bid of £2·6 billion. The additional money available was considerably less than that, so decisions and choices had to be made. My officials and I worked with each of the Departments to develop an initial set of indicative Budget allocations. That usually concentrates the minds in each of the Departments as to where their priorities lie.
On the capital side, my officials worked with the Strategic Investment Board (SIB) on the development of the investment strategy. That path is somewhat confusing because of the interrelationship between the SIB and the Office of the First Minister and the deputy First Minister, on the one side, and DFP on the other. However, the proposals have been worked up, and the investment strategy is the one area in which there is some possibility of movement as a result of the capital realisation task force.
I welcome the fact that — perhaps for the first time in many years as a result of the new era that we have been enjoying — we have had a debate about the issues arising out of the draft Budget. There has certainly not been a debate in such detail. I also welcome the generally positive initial view of the draft Budget, although there have been concerns, if not criticisms, in one or two areas. I will now touch on the areas that may be most in the mind of Committee members as they approach consideration of the Budget.
The first is the general charge that because the Budget is business-friendly, it is in some way an attack on public services. That, of course, is inconsistent with the data that the Committee will have seen. There is no inconsistency between wanting to improve public services while wishing to provide business with the kind of growth that our economy needs, in particular dealing with areas that encourage growth by improving skills and ensuring that we provide for the private sector. The incentive is to overcome the structural weaknesses in our economy, which is proportionately too heavily reliant on the public rather than the private sector. I will return to the general issue of economic growth later.
The one area of the public sector in which there has been some discussion is funding for health services.
Several commentators, some of whom should know better, have attempted to sell the inaccurate line that somehow our Health Service is less satisfactorily funded than England’s, for example.
The facts are that the Health Service in Northern Ireland receives 10% more per head of population than the Health Service in England. I realise that the argument can be made that there is greater need in Northern Ireland. Professor Appleby carried out an independent review of the Health Service that confirmed that there was greater need in Northern Ireland, but that that need was approximately 7%. Therefore, even taking into account the greater need as identified by the independent evaluator, we still have higher per capita funding than England.
It is evident from Professor Appleby’s review that an issue of concern is the lower productivity rates of health care in Northern Ireland compared to England. However, it is important to note that England is hardly a glowing example of a most efficient system.
The Northern Ireland Health Service is running at approximately 10% or 11% less efficiently than a comparator that itself is somewhat inefficient. The figures are easy to work out: if we could achieve even the same level of inefficiency as England, we would have hundreds of millions of pounds extra to spend on front-line services in health.
Professor Appleby’s review also draws attention to hospitals. In response, the draft Budget proposes an increase in funding of 11·9% for the Department of Health, Social Services and Public Safety in 2007-08. That compares favourably, for example, with Wales.
DHSSPS has been allocated 51% of additional resources. The charts show that more than half the additional funds available to the Department of Finance and Personnel for allocation have been allocated to the Health Service: DHSSPS will receive more than the other 10 Departments put together. That gives the Health Department total departmental spending of 48·1%. That means that the Minister of Health, Social Services and Public Safety will have more funds and a larger chunk of the Northern Ireland block grant at his disposal than any of his predecessors.
Current spend will increase to £4·3 billion by 2010-11, which is an increase of 18·8% compared with 2006-07; efficiency savings will add a further 9% to that amount. Those are telling statistics.
The efficiency figures show that staff productivity is approximately 11% less in Northern Ireland than in England. Over the past five years, the number of Health Service staff has increased by 21·4%, while hospital activity has increased by only 6·3%. That implies that productivity has fallen by 12·5%. The number of administrators in the Health Service has increased by 36·5% since 1997.
Those are important issues because a better Health Service, not a more expensive one, is needed for the future. That is a challenge for the Health Minister and for those who must provide funding for the Health Service, the Health Committee and the Assembly.
I could give the Committee several statistics — for example, that prescription costs are more than 10% higher in Northern Ireland than in England — that indicate that per capita of the population, and taking account of its greater need, Northern Ireland funds its Health Service better than the English Health Service is funded.
I must also deal with the misleading figure that some people throw about that Northern Ireland does not keep up with the increase in England. When people trot out that figure, they ignore the baseline. The baseline for the Department of Health in England was reduced, and its statistical increases are based on the reduced baseline figure; however, Northern Ireland’s Health Department’s baseline figure was not reduced. Departments took that hit right across the board. Therefore, there is a differential.
I am happy to discuss health. Despite the constraints, the Department of Health has been given a good allocation. Of course, I would love to have been able to allocate more money to the Health Department and, indeed, to all the Departments. However, the cake to be shared out is finite. Some people have advanced the argument that another £600 million should be given to the Department of Health. I urge them to examine the chart and tell me which four or five Northern Ireland Departments they would like to close down in order to do that. Should £600 million be taken from the education system? We must be realistic.
In a letter that was published by the ‘Belfast Telegraph’, Ed Curran recognised that if more money is to be provided for health, it must be taken from somewhere else. Unfortunately for him, he said that it should come by way of an increase in personal or household taxation, either through water charging or the regional rate. Personal taxation would probably have to be quadrupled in order to meet the figures that are being sought for the Health Service.
There has been a suggestion that health funding could have been sorted out had the regional rate not been frozen. In fact, if the regional rate had been kept at the rate of inflation, £7 million might have been freed up in 2008. The Health Service in Northern Ireland spends that before lunchtime. That is the quantum that is faced when dealing with Health Service funding. I am afraid that the ‘Belfast Telegraph’ did not provide the answers to the questions that it raised.
However, that poses a genuine question: if spending on health, or on any other area, is to increase, from which area will the resources be taken? I had to make that difficult choice when I submitted the draft Budget to the Executive and the Assembly. The Finance Committee and others must also make that difficult choice if they want to adjust the figures.
I welcome the debate on the Budget. Is it not so much better that Members discuss the bread-and-butter issues that matter to people in Northern Ireland than have the kind of debates that we had in previous generations?
It is good to get to that point. I believe that the allocations stand up to rigorous scrutiny. I am happy to stand by them, although not to the extent that I claim perfection. If changes can be made that are agreeable to people across the board, we can look at those in the final draft that will come before the Assembly. I suspect that such changes will be more agreeable to those who will gain than to those who will lose.
If Mr O’Reilly or Mr Montgomery have no initial comments, I invite Committee members to ask questions.
Thank you, Minister, for your presentation. You dwelt somewhat on the issue of health spending. That is ingrained in my mind as I look at the charts behind you. You will have noticed the criticism that has been made in some media circles and also by the Minister of Health, Social Services and Public Safety, who has raised the spectre of Northern Ireland’s Health Service sliding into Third World status. He has levelled at you the charge that you have failed to keep funding at UK levels. One UUP MLA has recently accused you specifically of that, and has demanded to know why you are not funding health to that level. I welcome the clarity that you have brought to that position in your opening remarks.
Could you elaborate further in respect of differences in productivity between the NHS here and in the rest of the UK? Could you describe how the allocation in the draft Budget to the Department of Health, Social Services and Public Safety relates to historic levels of spending in that Department? Have you any suggestions as to how the Health Minister could improve the situation in his Department with regard to the funding available to him for spending on front-line services?
Mr P Robinson:
You refer to a concentration on health. I do that only because health is the issue that has been most raised. Only one of the charts behind me deals with the health issue. The other charts may look as though they deal with that issue, simply because health dominates the spend in Northern Ireland and gets more than half the money available for allocation. It gets over 48∙1% of the overall Budget, and the bar chart shows how much money each Minister will have available. In case the chart cannot be seen, the purple colour represents the increase from the 2007-08 baseline; the light blue figure above is the additional spending power that comes through efficiencies. That leaves health with £800 million, additionally, to spend.
I draw the Committee’s attention to the chart on the far right. As a spending Minister in a previous Executive, I used to watch enviously during the Budget allocations as large chunks of money went to health. However, is anyone here prepared to say that, comparing the position in 2001, when we had just over £2 billion spent on health, to the position now, when £4 billion is spent, the Health Service has become twice as good? Is anyone even prepared to say that there has been a substantial improvement in the Health Service, for all the additional money that has gone into it? That is why I return to the premise that what we need is a better Health Service — not a dearer, more costly or more expensive one. Big issues must be dealt with.
No one expects the Health Minister to have solved all those problems after six months. To begin with, he was dealing with the Budget set by direct rule Ministers. Now he is in a position to set his own priorities. He has £4 billion a year to prioritise, and very significant savings can be made in his Department. He has a very difficult task; we all recognise that. If the Health Minister wants the immediate assistance of the performance and efficiency delivery unit (PEDU), it will be happy to assist in identifying those efficiencies for him, so that we can get down to the business of making sure that money is used where it will be most effective.
On the subject of productivity, the number of staff employed by the Health Service has increased significantly. Therefore, much of the health budget will be invested in staff resources. However, staff resources in Northern Ireland are significantly higher than elsewhere in the UK. We must ensure that the limited money in the Health Service goes to provide services and not simply to bloat the surrounding bureaucracy. Earlier, I stated the level of increase in administration. I am not singling out administration, but bureaucracy and administration must be closely examined to identify where savings can be made.
Thank you for your presentation, Minister. I want to touch on two fairly prominent issues in the draft Budget, which, to be fair, have been welcomed. The freezing of the regional rates at the current level was widely welcomed, particularly by hard-pressed councils. Will you give members some background on the rationale behind that decision and how much it cost?
Mr P Robinson:
As I indicated earlier, had the Department decided to increase the regional rate in line with inflation, an additional sum of just over £7 million would have been available, which is a very small proportion of the overall Budget. The rationale for the freeze was twofold: people in Northern Ireland have suffered significant increases in the regional rate: over the past five years, there has been a 62% increase, 37% of which was over the last three years. It is right to acknowledge that people have taken a fair bit of pain and to try to keep the rate as low as possible.
The introduction of additional funding for water must also be taken into account. People will receive a water bill, albeit as part of an overall household bill. All parties promised to identify the amount of money that people had already paid for water as part of the regional rate and to reduce the regional rate by that amount, so that people were not paying twice, and my Department has done that. However, despite that and the fact that my Department may seek to introduce charging for water on a phased basis, there will be additional pain. In those circumstances, it seemed right to freeze the regional rate to allow the new charge to be better assimilated by the community. Those are two factors that caused me to move in that direction.
However, there is still a danger, because the household bill also includes a district rate. I trust that councils will manage to curtail the district rate, so that the ratepayer will see the real benefit of a freeze rather than district councils taking up the slack.
The freeze on industrial rates also received considerable prominence in the draft Budget and was widely welcomed. The manufacturing sector had been pressing strongly for that, and there was concern that inaction would lead to the erosion of competitiveness and particularly of the manufacturing base in Northern Ireland. The freeze in the industrial rate was most welcome. However, will you comment on how you envisage the situation post-2011?
Mr P Robinson:
It would be better to allow the Committee to consider the matter and advise me on that. I examined closely the report by the Economic Research Institute of Northern Ireland (ERINI) on the industrial rate. That was helpful in providing background information, and it identified the difficulties faced by the manufacturing sector, although, the extent to which you can rely on data provided by that sector is an issue. Nonetheless, there is empirical evidence to suggest that that sector has severe difficulties, and that position is underscored by recent job losses.
At the end of the day, the decision must be political. It would be hard to convince people that we are serious about economic growth if that were the key element of the Programme for Government and, at the same time, we made it more difficult for people to work in the economy. It was on that basis that I took the decision, and I could only take it based on the Budget period.
I explained to the Chairman and the Deputy Chairman that I regretted having to take that decision before the Committee had a proper opportunity to consider the report, but the timetable required me to do so. I have not heard any evidence that would persuade me to increase that amount in future years. However, we are still in the process of considering that, and the Committee’s view will form an important part of that.
There is some interference with the electronics. Will colleagues check that their mobile phones are properly switched off? Simply switching them to silent does not protect us.
Mr F McCann:
I thank the Minister for his presentation. Although there has been a heavy concentration on health, the serious crisis in the provision of social and affordable housing is an issue that we have all had to deal with. The graphs show that the Department for Social Development (DSD) will get new money only after it makes efficiency savings. I understand that, lately, £20 million has been provided in that way, which is equivalent to about 120 new-build houses. Will the Minister explain how, given the current Budget allocations, we will get out of the social and affordable housing mess that we are in?
Mr P Robinson:
I am at one with the Minister for Social Development in wanting to reach the house-building targets. Funding will come from three sources. It will come from the departmental allocations, and members have the strategic investment board’s figures to illustrate our position on those. In the in-year monitoring round, I also identified a further £20 million of savings, which I hope will provide a few more than 120 houses. As time goes on, we will be able to free up additional funds in-year.
Planning policy is one of the other two areas in which I wish to assist the Minister for Social Development. In GB, the Republic of Ireland and many parts of Europe, developers are required to free up land for affordable and social housing in their development plans. That seems sensible, and I support the proposal. Although it will take some time to put the legislation in place, the Minister of the Environment has the article 40 provisions at her disposal, which allow for such agreements to be reached before planning permission is granted and which can be a sobering reality for developers who hope to get those permissions. Therefore, we are not without immediate power to start increasing in that area.
The other big area is, of course, asset disposal. The Department for Social Development has considerable assets at its disposal. However, we should not simply rely on the resources available in DSD. There is land and other areas of asset disposal that are possible, all of which can increase the amount of money that we have to spend for social housing. I have very publicly indicated to the Minister that I see that as one of the priority areas with regard to the work carried out by the capital realisation task force. I am looking for results from it, because that area would be a perfect candidate for making allocations from such additional resources.
Mr F McCann:
I have one further question about the DSD budget. Neighbourhood renewal has been one of the main Government strategies in dealing with social deprivation over the last few years and yet, going by the budget that has been outlined to the Committee this morning, there will be no new money available to allow communities to deal with the severe deprivation that exists. Is there any hope that money will become available for that purpose?
Mr P Robinson:
Perhaps I should say a word, because that applies across all Departments and not just DSD. While in the first instance the allocations are made on the foot of bids that have been made for various programmes from each Department, after the allocation has been made each Minister will look at the priorities in that Department and decide if any of the programmes need to be adjusted. I cannot micromanage the Departments, so it will be entirely a matter for the Minister to decide what the Department’s priorities are.
In the course of the four monitoring rounds during the year — and particularly because we have managed to reduce the overcommitment for this year — funds will be able to be freed up for whatever purpose the Executive, collectively, decide. That is one of a number of areas where bids will be made during the course of the years.
Mr F McCann:
I appreciate that, but the bulk of the DSD budget is eaten up by one source, leaving a minimal amount of money for housing and for neighbourhood renewal, which deals with those most in need.
Mr P Robinson:
Those are arguments that can be made during the course of the consultation. The pressure upon DSD has not been directed so much towards its resource budget but towards its capital budget. That is the area where the Minister for Social Development indicated that she would like to see movement.
Thank you, Minister, for this morning’s briefing. In your estimation, how has the financial package impacted on the Budget settlement and the process that we are now in, particularly on the reinvestment and reform initiative (RRI) link break? Can you comment on that, because there are those who are still in denial about the benefit that will bring?
Mr P Robinson:
A number of people were seized by the opportunity that was lost during the previous spell of devolution, when we did not get anything that was particularly helpful out of the financial negotiations that took place. I always approved of the move made by the Ulster Unionists, and the SDLP in particular, to negotiate the RRI. I felt that it was a good vehicle; however, it had a very major flaw, which was the requirement that, to access borrowing from the RRI, it was necessary for Northern Ireland to keep ahead of the increases in local taxation in GB. As a result of that, we had the massive rate hikes over the intervening period.
Consequently, one of the priorities for the parties when they were negotiating financial issues arising out of the Leeds Castle talks, and the subsequent St Andrews Agreement was the reform of the RRI. I would not have been able to freeze the regional rate if it had not been for the changes that we got through the financial package where that restriction was removed. Indeed, there are other changes in the RRI that were helpful.
With regard to the overall financial package, I doubt that anyone characterises Gordon Brown as a generous man, but a Budget of £17 billion, which takes account not only of the departmental expenditure limits but of annually managed expenditure (AME), is a significant contribution to the funding of services for citizens in Northern Ireland.
We did, however, manage to wring additional end-year flexibility (EYF) from the Government, which was negotiated during the financial-package period. We have made full use of their agreement to give us full resources from asset disposal — during the three-year period we will take advantage of that to the extent of £1·1 billion — and we are not finished in that respect but continue to examine what we can further achieve. Asset sales will form a significant part in giving us the kind of flexibility that we need. Therefore, EYF, asset sales and the £100 million, some of which I have allocated in this Budget, and some of which had been used previously, all combine to make a satisfactory, but not generous, package. All of us would like to have more, but howling at the moon will not do any good. We must recognise where we are and make the best that we can of the provision that is there.
Minister, I too welcome the opportunity to get involved in a serious debate on serious issues. The Budget gives us a genuine platform for such a debate. Equally, no doubt you will reassure us that you will be receptive to making adjustments if genuine points are made through the political system, by outside groups or by individuals.
I endorse Fra McCann’s question in relation to social housing, but I will not ask you to revisit that question since it has already been asked.
On page five of the Budget document, there is a comment in relation to the Varney Review and our request to reduce corporation tax to the rate that applies in the Republic of Ireland. There is a surprising line at the end of that paragraph that says:
“This would have transformed the region’s attractiveness as an investment location.”
Does that public statement mean that the Minister has given up on the Varney process?
Mr P Robinson:
That is very perceptive of the member — I am sure that it was a typographical error. However, even if it had not been in that document the member will have picked up on my body language and some of the terms that I have used over recent weeks, which indicate that I am not expecting the Varney Review to make the kind of recommendation that the Executive and, indeed, this Committee urged it to make. All of us recognise that there is a strong case, but some people had doubts about whether the Treasury was open-minded in how it set up the review. The report is due to be published around the third week in November. Although I have not seen it, the system is such that it is possible to feel a vibration or two.
I thank the Minister for his answer. In regard to effective cross-departmental working, there are areas where financial contributions from a number of Departments are needed to deliver programmes properly. Will the Minister assure the Committee that cross-departmental initiatives will be fully funded by all the relevant Departments?
Mr P Robinson:
There are a number of areas where there is an overlap. That is a feature of having so many Departments and, perhaps, an argument for reducing the number to, in my view, six or seven. However, while that overlap exists, responsibility for wide-ranging areas — such as children and young people — will be delegated to at least two, but sometimes more, Departments. Where there are cross-cutting issues, it is, particularly, the role of the Office of the First Minister and deputy First Minister (OFMDFM) to ensure that the system works properly. DFP is responsible for ensuring that money is spent for the purpose that it is allocated, and we want to ensure that that is the case.
The situation under devolution will be somewhat different than it would have been under direct rule, because this Committee, and the various departmental Committees, will have an important role in ensuring that there is joined-up government. If that co-ordination falls down, it will be identified earlier and exposed more quickly under devolution.
A number of agencies that work in the area of fuel poverty have expressed concern that the Budget does not adequately fund the programmes, such as the warm homes scheme, that deal with the problem. Poor quality, damp and cold housing leads to significant costs to the Health Service, so fuel poverty is an area where investment could end up rapidly saving money. Will the Minister provide some assurance that that is an issue that could be revisited in the funding stream?
Mr P Robinson:
I have read a number of similar comments that relate to various Departments, and I am not sure how anybody can reach those conclusions. I indicated earlier that when Ministers receive their final allocation, they identify the programmes that they want to fund and the extent of that funding. I cannot indicate what other Ministers will do with their allocation; although I have been led by their bids, I am told that shifts between the bidding stage and a Minister’s decision about spending plans are a consistent feature of budgeting.
No small part of that is the strategy and tactics adopted by Departments when they put in their bids. It is not unknown for Ministers to put an issue that is sexy to the community well down in the bidding stream so that its ranking order will get down to that level in order to be funded. Obviously, it is a matter for Ministers to revisit the bids that they made, and the spending plans that they have, to see what is most appropriate. I cannot make those decisions for Ministers; they will have to make those decisions and justify them.
With regard to Declan’s point about cross-cutting issues, do you accept that there is a danger that some areas that straddle two Departments — such as children’s services and issues — may not be high on the priority list of either, even though they should be? Without the mechanism for funding children’s services, which encouraged the cross-working of issues, there is a danger that some of those priority areas will lose out. How will that be addressed?
Mr P Robinson:
I can combine several previous answers to respond to those concerns. During the bidding process, I was concerned about that issue, but it did not seem to have the same ranking with some of the Ministers as I expected it to have. As a consequence, it partially worked because between the indicative Budget and the draft Budget I provided another £21 million for that area of activity, because it is important. There is a danger that a cross-cutting issue that falls between two Departments may lose out, but the Office of the First Minister and the deputy First Minister has a statutory responsibility for it. Services for children and young people have been delegated to the junior Ministers for their consideration. Children’s issues should not pose a problem, because the Office of the First Minister and the deputy First Minister has an overarching statutory role.
The Department of Finance and Personnel has identified priorities for expenditure, and some Departments have received allocations above inflation for areas that DFP is keen to fund. One such is the Office of the First Minister and the deputy First Minister. Why are its allocations above inflation when it no longer has funding for children’s services? It has received significant increases since last there was devolution.
Mr P Robinson:
The issue is simple. We are moving from a baseline that existed when devolution was not up and running to a devolution baseline; therefore significant additional costs are required to service the Executive. The Office of the First Minister and the deputy First Minister baseline budget was small; therefore any increase in it will look significant. However, the graph shows it that takes a very small slice of the cake. The additional funding was, therefore, necessary because of the start-up of devolution — funding was required for victims, for example. I am sure that Mr Beggs will accept that that is worthwhile.
I accept that the start-up of devolution will mean additional costs, but the Office of the First Minister and the deputy First Minister has already received significantly increased funding compared to the previous period of devolution.
Mr P Robinson:
What time are you talking about? What significant increases are you talking about? If you compare it to the health budget, you will see that — proportionately — it is a small fraction of the increase.
Capital realisation is another important area. I can think of several instances in East Antrim where property is not being used efficiently: an under-utilised Roads Service depot that is preventing the expansion of park-and-ride facilities; an under-used former depot of the Water Service; and significant amounts of Housing Executive land that have lain vacant and undeveloped for many years. It would be better to have improved park-and-ride facilities, lower water bills and additional social housing. Will the task force report quickly so that those assets can be used for the benefit of all?
Mr P Robinson:
I did exactly the same thing as Mr Beggs is doing when I met Mr Vernon: I identified areas of derelict land in my constituency, which people had approached me to buy but which had not been released for sale. Gathering the 108 Members together would provide the task force with plenty of suggestions for its remit.
Along with the First Minister and the deputy First Minister, I would like to consider giving the task force a longer-term role than it has at present. The immediate job of the task force is to provide us with advice before we finalise our Budget. That work will be done over the coming weeks, and we expect it to report to us. I suspect, however, in those circumstances that the task force may provide only a cursory glance at the situation and will pick only the low-hanging fruit. There may, however, be work for the task force beyond its immediate remit. There is no point in our having assets that are not being used when we need funds for purposes that will benefit the community. That is a no-brainer. The task force will complete its work in time for us to make changes, if we can, to the capital element of the Budget.
Will that happen in six months’ or a year’s time?
Mr P Robinson:
I want that to happen before the end of this year.
What about possible future financial difficulties? Workplace 2010 has a cashback proposal, and under the new reform and reinvestment initiative (RRI) borrowing arrangements, the Department will have to find funds from the block grant to meet the cost of borrowing. Have you considered the difficulties that we may be storing up for the future?
Mr P Robinson:
Our borrowing under the RRI arrangements is fairly predictable, so all the calculations are easy to make. The Workplace 2010 proposal, once the courts dispose of the issue, will provide significant capital that will assist us in meeting the challenges of the capital programme. That is one of the areas in which difficulties may arise. We make assumptions about the capital programme on the sale of assets. Should some of them drag on longer than is expected, that could damage our programme, and that is why it is more valuable for the capital realisation task force to provide us with additional possibilities in case there are delays. Let us be clear: Workplace 2010 adds to our resources; it does not detract from them. By and large, the resource spend for Workplace 2010 will be within the present baselines.
Ms J McCann:
May I ask about the public procurement process? The declared purpose of the Programme for Government and the Budget is not only to grow a dynamic and innovative economy but to reduce poverty and disadvantage and to empower communities. What direction or encouragement will be given to Departments to give priority to unemployed people when jobs created through the public procurement process are to be filled?
Mr P Robinson:
That is a priority, and not just for the jobs that are created. The labour market is such that if we attract the higher-value-added jobs that we want, it is more likely that skilled people who are not best using their talents in their existing employment will move into those jobs, freeing up positions for the economically inactive. We must engage in a major drive to reduce the number of economically inactive people, which is much higher in Northern Ireland than in either the Republic of Ireland or Great Britain. Northern Ireland’s unemployment rate is low compared to anywhere else in the British Isles.
However, there are still people who need to develop the skills required for jobs. For example, the new shopping facility that is being built in the centre of Belfast will provide hundreds, if not thousands, of jobs. There will be massive opportunities for people to develop skills for those jobs.
We need to drive that forward. My colleagues Reg Empey in the Department for Employment and Learning and Nigel Dodds in the Department of Enterprise, Trade and Investment are working together on those areas. The Executive recognise the issue, and part of the Programme for Government deals with it. There will be an overarching role for the First Minister and the deputy First Minister to ensure that we deliver on our targets.
Ms J McCann:
My question concerns Civil Service reform. Although I welcome any cutback in bureaucracy and improved delivery of services to the community, how will you ensure that the savings of 3% that have been proposed will be put back into front-line services and not used simply to meet departmental targets?
Mr P Robinson:
Each Minister must ensure that the money in his or her Department is used for front-line services. The money will not go back to the Treasury, nor will it go to the Department of Finance and Personnel. Each Department has examined where it can make savings, and it can redirect the money that is saved through making efficiencies to front-line services. I cannot make decisions on behalf of other Departments, and it will be up to the Committees to examine them closely to ensure that services are receiving the added value.
I can hang another hat on the issue that was raised in the ‘Belfast Telegraph’. I was appalled to read an article claiming to outline the woes that the Health Service would suffer due to the Budget. The first point was about the loss of jobs in the Health Service. It is not the Administration’s intention to increase the number of jobs in the Civil Service or in the public sector for the sake of it. People are employed as civil servants or in the public sector in order to provide the most efficient and effective service for the least cost. The Government is not a job agency. We want to move people out of the public sector and into the private sector, because our economy requires us to do so.
I want to reduce the number of civil servants and the number of people working in the public sector. That will be anathema to the unions, because they seem to think that there is merit in simply increasing the number of people who are employed in public service. That is not the case; the service is what is required. If we can achieve the same, or better, service using fewer people and resources, we must do so. The people and resources that are freed up can better serve the community.
I welcome the Minister and congratulate him on his Budget. Although I might not agree with some of its contents, I recognise that it was a substantial piece of work this far into the Assembly’s mandate.
First, what is the status of the regional economic strategy? I think that the Minister is on record as saying that the Budget for 2008-11 would encompass the formal strategy. There was much criticism of the draft strategy that was published in January 2007. How have things changed since then?
Mr P Robinson:
I will let one of my officials respond to the precise details. The regional economic strategy is being revisited because it lacked ambition. The Programme for Government has distinctly more ambitious figures than those in the strategy. Perhaps Leo will take up that issue.
Mr Leo O’Reilly (Department of Finance and Personnel):
As Dr Farry said, concerns were raised about the draft regional economic strategy when it was published.
As I recall, the primary concern that elected representatives expressed at the time was about the lack of any meaningful fiscal incentive in the package to stimulate economic activity. Of course, the Minister mentioned earlier that he and other colleagues have pursued with the Treasury the possibility of enhancing the financial package by including some further fiscal incentives that would enable economic development, particularly in the private sector. We must await the outcome of the Varney Review to see whether the Treasury has moved in that direction in its response to those arguments, either through a reduction in corporation tax or some other form of tax relief that can incentivise business.
The draft strategy is being revised to take account of the types of fiscal measures that we can take, and the Minister has already referred to rates and property tax on business. There is also a significant additional stream of issues around funding that is becoming available for innovation over the next three years and beyond. The balance of the £25 million that is available from the Chancellor’s package will be rolled out, and that will go towards innovation. Significant funding is also coming onstream from the European Union through its competitiveness and employment programmes. Furthermore, the Irish Government have also allocated £36 million for the development of joint partnerships in areas of innovation. A new agenda has come on the table since the draft strategy was published under direct rule, so we are now revising the strategy to take account of those matters. We intend to bring forward a revised strategy for the approval of the Minister, the Executive and the Assembly.
Are we still talking about making a step change in the economy on the back of the draft Budget, even without corporation tax coming to the fore?
Mr P Robinson:
We will look at the findings of the Varney Review, but, more importantly, we will await the response from Her Majesty’s Government. I continue to be in contact with the chief secretary to the Treasury on those issues because even if the Varney Review does not recommend a reduction in corporation tax, there is a responsibility on the Government to provide us with another fiscal instrument that will enable us to make a step change.
As I said in the Assembly — I think in response to a question from the member — I believe that our economy will grow and that there will be considerable improvement in our gross value added over the years ahead. The difference will simply be that if we have to deal with the matter within our own confines as opposed to being given an additional instrument by the Treasury, that improvement will occur more slowly.
I believe that it is hoped that some £790 million in efficiency savings will be generated over the three-year period. That is a very exacting target — we have that in common with our counterparts across the water. What are the consequences if those targets are not met?
Mr P Robinson:
I do not intend to start by expecting failure. The Committee will be aware that far from expecting not to meet those targets, I have set up a unit to ensure that we surpass them.
Anyone who has been a Minister — and I know that the member has not — will know from their day-to-day experience that significant savings can be made in Departments. Although thus far we have not heard Departments squealing about reductions as a result of efficiencies, we are always told that a measure will cause great problems in the future. There is a great deal of waste in the system; many programmes do not deliver the value that the community expects for the money that is being spent on them; we could improve the processes to get work done much more cost effectively. We have to drive those efficiencies through the system. DFP is considering how that can be achieved in the Civil Service through the reform programme and by using new technologies to assist in the process.
Workplace 2010 is another area where we are driving efficiencies, and the review of public administration can make a contribution. Rather than consider what we will do if things do not turn out as expected in the draft Budget, I am moving in the other direction: I want to do better than the efficiencies proposed in the draft Budget.
Many of the individual departmental commitments on efficiency savings are geared towards internal administration or procurement. Is there any pressure on the Department of Finance and Personnel to examine how other Departments deliver services and whether there is a more efficient and rational basis on which they can deliver those services? For example, the sustainable schools policy is still on the Department of Education’s back burner. The school estate could be delivered in a more rational, cost-effective manner. However, that does not feature in the draft Budget.
Mr P Robinson:
Without dealing with that specific issue, I agree with the general context of the member’s question. When I was considering how I might make greater efficiencies, I decided to move towards setting up an efficiency unit. However, I reconsidered that and decided to set up a performance and efficiency delivery unit to examine performance as well, as it is important. If Departments do not voluntarily consider efficiencies and performance, we will gain advice from the performance and efficiency delivery unit on whether there are ways of improving performance and delivery.
The Minister stated that the Departments made 270 bids. How many of those have been met in the draft Budget?
Mr P Robinson:
The difficulty in answering that question is that those bids will be further adjusted by Ministers in their spending plans as opposed to their bidding programme. However, we had £790 million from efficiencies and about £750 million from the comprehensive spending review, so we had about £1·5 billion in resources against bids, and that came to about £2·6 billion. In quantum terms it is probably about a half.
Thank you, Minister. As usual, you provided full answers to the questions. Inevitably, issues will arise, which we will forward for written response, as usual. On behalf of the Committee, I thank you and your officials for the useful information that you provided. These are stimulating and challenging issues.
Mr P Robinson:
Thank you, Chairman. For your information, the charts that we used today will also be used during the public consultation process. All that money was not spent merely for one day’s presentation. [Laughter.]