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Official Report (Hansard)

Session: 2008/2009

Date: 04 March 2009

COMMITTEE FOR FINANCE AND PERSONNEL

OFFICIAL REPORT
(Hansard)

Outcome of February Monitoring

4 March 2009

Members present for all or part of the proceedings:

Mr Mitchel McLaughlin (Chairperson) 
Mr Simon Hamilton (Deputy Chairperson) 
Dr Stephen Farry 
Mr Fra McCann 
Mr David McNarry 
Mr Adrian McQuillan 
Mr Declan O’Loan 
Mr Peter Weir

Witnesses:

Mr Michael Daly ) 
Mr Paul Montgomery ) Department of Finance and Personnel 
Ms Joanne McBurney )

The Chairperson (Mr McLaughlin):

The next item on the agenda is the outcome of the February 2009 monitoring round. The Committee will be taking evidence from the Department. I remind members that the Committee is routinely briefed by DFP following the Minister’s announcement of the outcome of quarterly monitoring rounds. A copy of yesterday’s statement is in members’ papers. The Committee is joined today, again, by Michael Daly, Paul Montgomery and Joanne McBurney.

I remind everyone that mobile telephones must be switched off, and that this session is being recorded by Hansard.

Mr Michael Daly (Department of Finance and Personnel):

I will touch on some of the main points that were made by the Minister. The Committee is aware that this is the last monitoring round of the year, and, as I have said at previous Committee meetings, it tends to be a little more constrained.

Looking back, we came out of the December monitoring round with an overcommitment of £75 million on current expenditure and £10 million on capital investment. As I told the Committee during previous sessions, the priority for the February monitoring round is to reduce the overcommitment as far as possible towards the end of the year.

In the course of this round, Departments identified reduced requirements of £20 million in current expenditure and £4·3 million in capital investment, which included a reduced requirement of £1·5 million in the Department of Agriculture and Rural Development (DARD) due to the reduced costs of the cull-and-disposal element of the response to the dioxin-contaminated feed incident.

Departments also increased their estimates of forecast underspend to £18·1 million for current expenditure and £0·5 million for capital investment. While recognising that forecasting is not an exact science, but taking into account assurances that have been received from accounting officers, and some evidence of improved forecasting by Departments, the Minister concluded that the information provided represented a more realistic picture of the position during the February monitoring round.

To face a situation such as this is not unique, particularly in view of general improvements in financial management, but the position left little scope, if any, to make additional resources available at this monitoring round, while ensuring that we did not risk any breach of overall expenditure limits.

Turning to allocations that were made; the first call on any available resources is the Department of Health, Social Services, and Public Safety (DHSSPS). Over the year, and in order to assist the overall management of the Department’s position, the £20 million that was agreed by the Executive as part of the Budget has been staged. The Department of Health, Social Services and Public Safety has already received £15 million. Therefore, it was agreed that this monitoring round would provide the Department with the remaining £5 million.

Looking at bids; unusually, for this monitoring round, a large number of bids were submitted — £16 million in current expenditure and £72·5 million in capital. However, in line with the limited resources that are available, it was decided that there was no scope to make any additional allocations at this time.

I mentioned that DARD had identified £1·5 million savings in relation to the response to the dioxin incident, and it was decided that that £1·5 million would be kept to be put into hardship payments. The exact distribution of that money is to be decided by DARD and the Department of Enterprise, Trade and Investment (DETI).

The Minister also mentioned the fuel poverty initiative, and the decision to extend the scheme to encompass an additional 50,000 households.

However, since it was not clear that the payments would be sent immediately, no allocation was made. The Executive said that the additional £7·5 million would be provided when the payments crystallise. We are in the middle of March, and it looks likely that those payments will not go out until the next financial year, so, in budgeting terms, it is not an issue for now. That means that we leave the February monitoring round with an overcommitment on current expenditure of £63·5 million and £10 million in respect of capital.

Mr Hamilton:

I want to ask a couple of questions about capital realisations, or a lack thereof. Obviously, there has been pressure on the realisation of some of the anticipated income from asset sales throughout the year. Is there any evidence that a shortage in that income has resulted in lower levels of reduced requirements?

Mr Daly:

The Department of Health, Social Services and Public Safety had a shortfall for one property early in the year, which it addressed using its own budget. During the year, most of the large capital receipts that did not come in, for example in respect of Workplace 2010, were dealt with through end-year flexibility that was not allocated and through reduced requirements from earlier in the year.

Mr Paul Montgomery (Department of Finance and Personnel):

The only circumstance in which there will be lower levels of reduced requirements is if there are lower levels of gross capital spend — that is the only reason for lower reduced requirements.

In the case of the Health Department, it could have been concluded that the shortfall was a reduced requirement, because the Department had provided evidence of proactive management on the projects to compensate for the lower level of capital receipts. In general, we expect Departments to declare reduced requirements when they arise, rather than reallocating them themselves.

Mr Hamilton:

Obviously, a lot of the surplus and underutilised assets cannot be sold because of their low value in the current market. Those assets are sitting in Departments at a cost, despite having been identified as surplus or underutilised. Has there been any analysis of the lost-opportunity cost?

Mr Daly:

I am not sure about what analysis will be done about lost-opportunity costs, but one piece of ongoing work is a review of the whole capital realisation report. That review is being led by the Office of the First Minister and deputy First Minister and looks again at the different market circumstances to see how we should approach the issue. The review examines whether there are different ways of realising those assets, or whether we should prepare those assets so that they can be realised when the market changes.

Mr Hamilton:

What progress has been made in general? I assume that you are talking about the Central Assets Realisation Team (CART).

Mr Daly:

Yes, I am. Joanne is working on that team and can provide an update on its timetable.

Ms Joanne McBurney (Department of Finance and Personnel):

The project team is working and plans to have its first report ready for the beginning of April. As Michael said, the team is looking at the assets that were identified as surplus to decide whether it is sensible, in the current market conditions, to dispose of them or to work on and prepare them for when the market improves. The team is also looking at other assets that could be disposed of in their place. It is very much a work in progress, and hopefully the report will provide more detail.

Mr Hamilton:

If would be very useful if report told us when the market will improve.

Mr Weir:

That would be extremely good forecasting.

Mr Hamilton:

Yesterday, I raised the issue of the review of the whole in-year monitoring process, which was due for completion fairly soon. Is that review still scheduled for publication this month?

Mr Daly:

Yes, it is.

Mr Hamilton:

When will the Committee see that? Obviously, we have shown some interest in whether the current process is the most effective process possible. We all have doubts and concerns sometimes about whether the early and late identification are useful.

Mr Daly:

The work is ongoing, and we plan to have it finished for the end of this year. It was called an “end-of-year surge” at one of your previous meetings.

The Chairperson:

“Splurge” was the word used.

Mr Daly:

We will finish our work at the end of the month, then it will have to go through the internal processes. I am not sure exactly when it will get to the Committee. We will get back to you with the date.

The Chairperson:

The Committee has a very active interest in this issue. We have our own programme of work on it.

Mr Hamilton:

May I ask whether you can update us on the rolling baseline reviews? Has there been any progress in respect of that? We were quite interested — almost excited — about it.

Mr Daly:

It is not something that I have information on. A different part of the finance group may have knowledge of it. We will get back to you on that. That involves the supply side: I will have to contact you about it.

The Chairperson:

I am intrigued about the issue of receipts from surplus assets. The Committee — and the Minister, in fairness to him — have had a very strong focus on performance, project management, forecasting, delivery of business plans and the impact on underspend. Has any assessment been made of the performance of Departments against those explicit performance targets in light of the lack of receipts? It can be a contributory factor, and may even camouflage underperformance. What might seem, on the baseline figures, like an improved performance might be partly attributable to the fact that there are fewer receipts from disposed assets. Is it intended to calculate that factor?

Mr Montgomery:

The underspend performance or percentage is set against the February monitoring position: because the February monitoring position incorporated the reduction in capital receipts, we do not expect it to be a material factor in underspend by Departments.

The Chairperson:

You do not think it a material factor?

Mr Montgomery:

Not in how we measure underspend against the February monitoring position.

The Chairperson:

I would have thought that it was almost certainly a factor. I am interested in the extent of it.

Mr Montgomery:

The level of capital receipts, and the fact that Departments have not been collecting them, has already been incorporated into the February monitoring position. Lower levels of capital receipts are built into departmental budgets.

The Chairperson:

That may be the answer. I am not arguing or concerned that it was not incorporated; I wonder whether, at the end-of-year assessments and possibly at the June provisional out-turn, we will be looking at the question of underspend. As a factor of that performance, surely, the lack of receipts which were initially projected as part of the baseline resource available to Departments has to be reflected in that out-turn in some way. I know that it is accounted for: that is not my question — I am interested in the impact on the headline figure of underspend per Department.

Mr Montgomery:

The difficulty is in distinguishing between a Department’s own performance and what efforts it has made, and the impact of the downturn in the property market. It would be exceptionally difficult to say that a Department did not bring in enough capital receipts because it did not put in enough effort, or it had unrealistic expectations — as opposed to changes in circumstances that no one had predicted when the Budget was set.

The Chairperson:

That sounds like a “no”.

Mr Farry:

Is the figure of £1∙5 billion for investment in this financial year a net or gross figure?

Mr Montgomery:

That is a net figure: the gross figure is over £1∙6 billion. We have figures from Departments, but, because of the remaining uncertainties over capital receipts, we do not view them as sufficiently robust to quote. We expect the gross expenditure figure to be between £1∙6 billion and £1∙7 billion.

Dr Farry:

The baseline of the investment strategy is £1∙85 billion. The effect of the loss to resources represents about £200 million in capital.

Mr Montgomery:

The gross figure is £1∙8 billion. However, the loss in receipts is greater than that, but the fact that we have additional resources — such as access to end-year flexibility and the resource-to-capital switch as of the December monitoring round — means that the full impact of the reduction in the level of capital receipts has not been reflected in the gross figure, where we have tried to compensate as much as possible, in view of the importance of the construction sector.

Dr Farry:

Are you presently calculating, within a certain margin of error each way, a gross figure in or around £1·6 billion?

Mr Montgomery:

Yes.

Dr Farry:

What standing do the figures within the Investment Strategy for Northern Ireland (ISNI) currently have? We are working from figures that were drawn from the net figures set out in the Budget. Once the capital receipts diverge from the initial assumptions, are the figures in ISNI still valid?

Mr Montgomery:

The ISNI was developed by the Strategic Investment Board, so we cannot comment in detail on that.

Dr Farry:

The ISNI figures reconcile with those in the original 2008 Budget, but because capital receipts have not matched initial assumptions, that reconciliation is now off course.

Mr Montgomery:

The investment strategy covers a 10-year period. One of the assumptions would be that, if you are getting less now, those are still surplus assets. Therefore, over the 10-year lifetime —

Dr Farry:

So, does ISNI need to be recast?

Mr Montgomery:

ISNI will be reviewed on a periodic basis.

Dr Farry:

Figures were set out for capital spend in each year in ISNI.

Mr Montgomery:

No; it was over the first three years, and then for 2011-12 to 2017-18.

Dr Farry:

The detailed figures that were included in the annexes to the Budget, where a profile of the gross expenditure over the three years of this Budget was set out, correlate with the figures in ISNI.

Mr Montgomery:

Yes.

Dr Farry:

I want to be perfectly clear about what is happening with the winter fuel payments. You say that the Executive have made a decision that they are going to extend the scope of those payments for people receiving pension credit at a potential additional cost of £7·5 million, but that no moneys have been allocated to cover that at this stage.

Mr Daly:

I will wind back a bit. You will appreciate that when the scheme started off, the suggestion was that there would be a fairly small number of recipients — at one stage, 65,000. The possibility of the payments being administered through NIE was discussed. In December, the number of potential recipients went up to 100,000.

Once the numbers started to grow, the Department for Social Development, together with the Office of the First Minister and deputy First Minister, had to examine the delivery mechanism that would be used to process the payments in a way that would make sure that it targeted the right recipients, but minimise, if not eradicate, any risk of fraud. It is true that the payments have not gone out as quickly as expected.

Dr Farry:

How quickly were the payments expected to go out?

Mr Daly:

At one point, the payments were expected to have gone out already, to the lower number of recipients who were dependent on income support. The number of recipients has grown, and the detail of the scheme is very much with the Department for Social Development. That Department has been designated to deliver the scheme. Given where we are now, in the middle of March, it is expected —

Dr Farry:

It is only 4 March.

Mr Daly:

Maybe I am just looking forward to the next bank holiday. [Laughter.] Given that we are now at the beginning of March, and that we have just over three weeks left —

The Chairperson:

Before the Easter holidays. [Laughter.]

Mr Daly:

I think there is a fair chance that a lot of the payments, if not most of them, will fall into the next financial year. In budgetary terms, therefore, the money will be allocated next year. The main point is that the scope of the scheme is now for recipients numbering 150,000, and the additional £7·5 million will be allocated as soon as it is needed.

Dr Farry:

That raises two questions. First, if the scheme does not crystallise within this financial year, does the £15 million that has already been allocated roll forward? It has been allocated under a monitoring round, which does not affect the baseline. If that money is not spent by DSD, that then becomes an underspend in that Department, rather than money carried forward.

Mr Daly:

We are in danger of getting into some of the technicalities of how the money will be treated: whether the actual recipients have been identified, and therefore the payments would be deemed to have accrued, in which case they could be accounted for.

I do not know a lot of the detail about how DSD intends to meet the payments. However, that is where this will come out.

Dr Farry:

From where will the additional £7·5 million be allocated, given that those resources have not been allocated, and will not be until the scheme crystallises?

Mr Daly:

At that point, the Executive will take a decision. If it turns out that that is needed next year, it will be dealt with from the in-year provision.

Dr Farry:

My take on this is that the first opportunity for the Executive to allocate £7·5 million is the June monitoring round. Is that correct?

Mr Daly:

If we were dealing with this in 2009-2010, that would be the first opportunity.

Dr Farry:

If it is dealt with in 2008-09, where does the money come from?

Mr Daly:

Additional underspends are expected to be identified.

Dr Farry:

Has the legal authority been granted through the spring Supplementary Estimates and the maximum headroom to allow that money to be allocated? My recollection is that the headroom for that scheme is £15 million, not £22·5 million.

Mr Daly:

If payments were to start rolling out and were properly due in 2009-2010, I was trying to explain that that would be during the spring Supplementary Estimates discussions. In general, when a Department wishes to spend more than the scope of what their estimates were constraining them to, it could apply to DFP supply for approval to vire from another part where it had underspent. There are a lot of options. However, the main issue is to ensure that all of the 150,000 people that are entitled to it actually get the money, and it would be for us to work through the detail as to how we make sure that we manage the financial aspects.

Dr Farry:

Basically, short of the June monitoring round, the only way in which that money can be allocated is if the DSD Minister surrenders, or is asked to transfer, £7·5 million from —

The Chairperson:

Or reprioritise —

Dr Farry:

Or reprioritise, or whatever way —

Mr Daly:

There are a lot of options.

Dr Farry:

I am not trying to make any political points. I am not trying to drop anyone in it or point the finger. I am just trying to figure out how it will be sorted out.

Mr Daly:

The DSD Minister has said that she would expect the payments to roll out in April anyway. Therefore, in budgetary terms, it will happen next year anyway.

Dr Farry:

That still begs the question of where the £7·5 million is coming from.

Mr Daly:

That will be the same situation as other additional resources that come from in-year provision. It will be dealt with as an in-year measure.

Dr Farry:

That means the June monitoring round.

Mr Daly:

That is when it would be formalised. The Executive have already decided that the money will be made available.

Dr Farry:

Can the Minister legally spend the money, short of the June monitoring round?

Mr Daly:

Yes.

Dr Farry:

When you talk about the monitoring process, the other difficulty is that there is already a commitment for £5 million to be given to the Department of Health, Social Services and Public Safety as regards the rolling £20 million first call on monitoring rounds.

The Chairperson:

Dr Farry, are you still on the same topic? Mr Weir wants —

Mr Weir:

My point is in relation to the winter fuel payments.

Dr Farry:

I am still addressing winter fuel payments. The Department of Health, Social Services and Public Safety already secured first call on the £5 million. In theory, there is another £7·5 million to be allocated for winter fuel payments.

Mr Daly:

At some point.

Dr Farry:

At some point. This is winter fuel payments in relation to 2008-09, not winter 2009-2010. Presumably, that money will have to be spent at some stage, because people have been promised the money and may well have made assumptions. Therefore, £12·5 million will have to be realised by the June monitoring round to allow the £5 million to be given to the Department of Health, Social Services and Public Safety, and the £7·5 million to allow the extension of the winter fuel payments. Based on previous trends, does the June monitoring round cough up enough returned money to allow £12·5 million for those two items alone, never mind anything else that may be in the system?

Mr Daly:

The £5 million that I was talking about earlier in relation to the Department of Health, Social Services and Public Safety is for this year.

Dr Farry:

It is only for one year?

Mr Daly:

No; that £5 million is in respect of this monitoring round.

Dr Farry:

Yes, but there will be another £5 million allocated in June.

Mr Daly:

No; the scope for the first £20 million of available resources will apply next year, but it could go out during the year or it could come later.

Dr Farry:

Yes, but in the past you phased that £20 million. Therefore, what you are saying is that rather than allocating £5 million, then £5 million, then £5 million and then £5 million, you might allocate nothing, then £10 million, then £5 million and then £5 million?

Mr Daly:

I do not know what the Executive will decide next year. When we say that we have phased it in the past, this is the first year of that.

Dr Farry:

OK. I presumed that if you phased it in four slots of £5 million, that you would do the same next year.

Mr Daly:

That was decided this year by the Executive, on the basis that a number of pressures had to be covered. Therefore, it was a better approach than managing the resources that were available. If the Executive decide to do that next year, it will de done.

Dr Farry:

A final point on the winter fuel payments: is there a scenario in which the Department sees those payments being handed out in tranches, with £15 million being in the system and some people getting winter fuel payments at the end of March or early April, and the remainder getting their payments in June? Will there be summer payments for winter fuel?

Mr Daly:

I cannot answer that, because DSD is designated to deliver on that scheme. It is for that Department to say.

Dr Farry:

That raises a big issue about when the Executive announce with a great fanfare that something is going to happen, and then the delivery takes place many months later. There are serious credibility issues over winter fuel payments. We are now talking about March or April — and potentially June — payments for expense incurred in December. What are we playing at?

Mr Daly:

On the earlier point that was made about the June, if that is when that money was allocated, it would simply be the case that that is when that is formally tied up. When Ministers talked about the fuel credits in December last year, the thinking was that those allowances would in time, for example, go through NIE, when winter electricity bills arrived, which was always going to be some time in the spring.

In relation to whether the payments go out in 2008-09 or 2009-2010, we have told the Committee in the past that what might be being talked about is whether a payment goes out in the last week of March or the first week in April. It is not winter 2009-2010.

Dr Farry:

It is a bit strange to issue a winter fuel payment at the end of March.

Mr Weir:

I will follow up on a couple of points. To be fair, at times, the media presentation of the winter fuel payments has not been helpful. The member opposite did not help in that regard.

The payment was consistently referred to as a fuel credit. It was not referred to as a winter fuel payment, which is a separate matter. A winter fuel payment has social security implications, whereas a fuel credit is not tied into a time. The timescale makes it clear that, although it may stray outside the financial year, the intention is for the payment to be made in April. The detail is in the hands of the Department for Social Development. Is that correct?

Mr Daly:

Yes.

Mr Weir:

Secondly, staggering the amount between £15 million and £7·5 million has been mentioned. I again appreciate that the detail is with DSD, but have you received any indication that the two will be separated in any way? To the best of your knowledge, will people receive the payments at the same time? Have you, at least, not heard anything to the contrary?

Mr Daly:

The Department has not heard anything. Our job in this matter is to make the funding available. We deal with the budgetary consequences. The mechanism for getting it out is with the Department for Social Development.

Mr Weir:

Yes. Also, to some extent, references to June are slightly misleading, because you are saying that the payments can be processed by a number of means, and fairly well immediately. It may appear in the June balance sheet, potentially, but whether it appears in June, or whenever, does not affect when it is paid or when the money is raised.

Mr Daly:

That is the key. The priority is to get the payments out to those who are expecting them. There may be monitoring rounds at later stages in the year in order to tidy that up through formalising the Budget position.

Mr Weir:

To some extent, the June issue is an accountancy tidying-up exercise. An analogy may be drawn with the early days of the Executive, when they committed to processing flood payments and there was some tidying up later. In a sense, June relates to accountancy, rather than raising the money, and a number of methodologies may be used.

The Chairperson:

It has been a difficult and protracted process to get to the point of agreeing the dispersement and its delivery mechanisms.

Has any consideration been made, because of the continuing economic difficulties and the volatility in the market, to introducing a contingency arrangement for the end of the year and the upcoming winter? Is that being thought about now?

Mr Daly:

Do you mean a contingency of holding funding back?

The Chairperson:

Yes, or the possibility of having to reach for funding. Presumably, the delivery mechanisms will be sorted out, but the economic conditions will develop an imperative to respond to circumstances.

Mr Daly:

I am not aware of any plans to deliver a similar scheme next year, and a contingency arrangement —

The Chairperson:

There were no such plans this time last year either.

Mr Daly:

Yes, but the scheme is intended to deal with the situation. If the Executive decide to do something similar at a later stage, they will do so. When you referred to a contingency, I understood that you were asking whether there was a plan to hold back funding for such circumstances.

The Chairperson:

That was one element of my question. I want to know whether anyone is thinking ahead, given some of the problems that have given rise to the questions that Stephen Farry presented. I think that those problems are being worked out and resolved, but possibilities should still be considered, given the global circumstances.

Mr Daly:

I am not aware of any plans to hold contingency funds to deal with emergencies. The position that the Minister has taken up to now is that the preference is to get to get the money spent now. If we were to hold back a figure — in this case, £22·5 million — in case it were needed later, that would be money that was unable to be used now.

Mr McQuillan:

If the Executive decided to do that again next year, they could do so under the same legislation.

Mr Daly:

The legislation is in place, and it would be a matter for OFMDFM to designate a Department to make a scheme.

Mr O’Loan:

Yesterday, I asked a couple of questions to the Minister on his statement in the House. He did not really answer the first one, and he said that I was exaggerating the position on my second question.

My first question related to the Minister’s comments that:

“In the latest forecast, Departments are anticipating that some £18 million of current expenditure and £500,000 in capital investment will remain unspent at the end of this year.”

If Departments are making those statements, why was that amount not declared as reduced requirements?

Mr Montgomery:

When Departments set out their forecasted out-turn, it is their expectation; they do not definitely know. There is a difference between definitely knowing and expecting a reduced requirement. It is a forecast.

The Chairperson:

It is a virtual figure.

Mr O’Loan:

Thank you for your answer, which ties in with the next point that I made. The Minister responded that I had overstated the case, but when I read what he said and hear what you said, I am worried about the level of financial management in Departments and in DFP. The target is to spend the whole budget — overspend must not be done and underspend is to be avoided. It seems more like a game of blind man’s buff. Everyone is vaguely aware of a target, but there does appear to be any idea that people are heading for it in a managed way.

The Department is reporting on the February monitoring round in early March, and it is still sitting with an overspend of £65 million. There seems to be a feeling that that will disappear and come good, and the word “forecast” is being used. It is supposed to be a managed situation in which all expenditure is carefully planned and managed. I find it remarkable that that level of uncertainty around the end-of-year position exists at this stage of the year.

Mr Montgomery:

It relates to the degree of control that is appropriate to DFP over Departments, and to Departments over arm’s-length bodies. The team’s view is that it is important for Departments to be in control of their financial management. We ask them for information that is provided to us: we then go back and robustly challenge that. In the case of the February monitoring round, because of the importance of the position, we asked for assurances from accounting officers that they were content with the forecast information that was provided. In turn, they went to their arm’s-length bodies and asked for that information.

However, we can sit in DFP to the nth degree, determining — for example — how much each of 1,200 schools in Northern Ireland should spend, day by day. There is a limit to the monitoring and scrutiny we can do — beyond that point, it begins to inhibit the ability of bodies to manage their own resources.

Mr Daly:

The Departments have forecast an £18 million underspend. That is a big number, but taken out of £8 billion, it is only 0∙2%. It is only a proportion of a very big sum. No single Department is vastly underspending — that is the sum total of the underspend across all the Departments.

Mr O’Loan:

My view remains unchanged. I am not content and we, as a Committee, cannot be content with the level of financial management in Departments that produces such a level of uncertainty at this stage of the year. However, I cannot pursue the question further.

May I ask about the rules as regards the Department of Health? As we heard earlier, it is being given the first call on £20 million. Perhaps you could clarify this for me: can it re-absorb its own expenditure? It is not under the same duty as other Departments to present reduced requirements? I notice that it has offered a reduced requirement. What are the exact rules for the Health Department?

Mr Montgomery:

It is allowed to retain reduced requirements in its current expenditure, but that is different with respect to specific aspects.

Ms McBurney:

The reduced requirement it surrendered was in respect of non-cash. My information from the supply team is that the Department felt that it could not reallocate that elsewhere for spending, so it decided to surrender it and let the Executive decide how to reallocate it.

Mr O’Loan:

Has that concession been granted to the Health Department for the three-year period?

Mr Montgomery:

It was in the Budget.

Mr O’Loan:

Has any thought been given to the management of that, now that it has been working for a year? Has the prudence of allowing the Health Department that degree of freedom been considered? It is not subject to the same examination that other Departments are, in respect of how it uses its money.

Mr Montgomery:

It will be reviewed as a part of the next Budget process.

Mr O’Loan:

What do you mean by that? Do you mean after the three-year period?

Mr Montgomery:

No; when the next Budget process is considered by the Executive.

Mr O’Loan:

Will that not be after the three-year period?

The Chairperson:

The way you said that is interesting, Paul.

Mr Montgomery:

No decision has been taken as to when the next Budget process will take place.

Mr O’Loan:

Have you any thoughts on that? This might need more scrutiny than it is getting.

Mr Daly:

It is not something we have looked into. It will be interesting to see how, when we get to the end of the year, the Health budget fares. Such flexibility should, in theory at least, result in a much reduced underspend in that Department than would otherwise have been the case. It will be interesting to compare that Department with others that do not have such flexibility.

Mr F McCann:

I have a couple of questions. Tens of millions of pounds were handed back for allocated capital projects. Do the Departments automatically get that back?

Do the Departments automatically get that back, do they have to reapply for it through the budgetary process, or is it just taken for granted that they can roll that on into the next year?

Mr Daly:

The monitoring rules are that reduced requirements are surrendered; that is automatic and it does not require the approval of the Minister. It has to go back, and then it is for the Executive, on the recommendations of the Finance Minister, to agree where it should be reallocated. There will be occasions when reduced requirements will be surrendered, the Department will bid back, but the Executive may, finally, agree that, no, the money must go elsewhere. Those are the budgeting rules, as opposed to the proactive reductions — which we have talked about before — whereby a Department might put forward a reduction in one area on the basis that it would be agreed that it could apply the resources, whether released capital or current, to another area. The Executive would then decide to take both ends of that together, so they would take the reduction pot allowed to go into the other area, or they would just leave it. Reduced requirements are surrendered and they are then subject to a bidding process. They just go into the pot that will be reallocated at the monitoring round.

Mr F McCann:

Are you saying that capital programmes that were built into Departments’ budgets last year and were surrendered as reduced requirements could be lost?

Mr Daly:

If it is a reduced requirement, in other words, it is no longer needed for the project, possibly because the project costs have turned out to be less, the rules require that to be surrendered. One still gets the same output that was agreed by the Executive, but at a lower cost. The money is not lost as such; it is handed back to the Executive, and they can then reallocate it.

There is another complication, or facility, built into the capital programmes, whereby within certain rules it is possible for Departments to accelerate one project and decelerate another project, so long as, within the period, the overall budget position remains the same. That is an additional flexibility that has been built in to help Departments. However, there are constraints within that.

Ms McBurney:

The constraints are possibly within the same sub-pillar from the investment strategy, and the overall project total in the investment strategy must not change. However, it allows the Department, where it has slippage in one project and where it does not want to surrender that as a reduced requirement because it will need the money in the future year, to accelerate a project from that future year and match that, and it allows the Department to manage that itself.

Mr F McCann:

For example, if a Department were to surrender capital projects worth £50 million or £90 million, and asked for that to be moved from one capital project into another element of the budget, and it says that that is a delay, can the next budget go back to the Executive, and the Department say that it surrendered £90 million, it wanted it allocated in its element of the budget, and it would now like it back to continue that capital programme?

Ms McBurney:

The Department can put it forward as a bid and state its case, but the Executive have the final decision. They have no commitment to give it back to the Department.

Mr F McCann:

I noted again, during most of the monitoring rounds, that there were millions of pounds in what is classed as unfilled staff vacancies. In the last monitoring round, I think that one Department had £4 million available from that, and in this term it is £3·8 million. How many jobs does that money equate to? Are Departments proactive in trying to recruit people, or does it show a lack of interest by Departments in trying to proactively recruit people?

Mr Daly:

I do not have the details on that, or even the number of posts involved.

Mr F McCann:

How might I get that information?

Mr Daly:

I can go back to the Department to see if it has anything on that. However, DFP may have to go to other Departments, but if my Department holds that information, I will pass it on.

Mr F McCann:

It seems strange, especially in today’s situation when there are so many people unemployed, that there are serious underspends, which are put down to unfilled staff vacancies.

Mr Montgomery:

That money is reallocated. That is the gross impact. The Executive can reallocate that money to new jobs.

Mr F McCann:

That is of no help to the people who are looking for jobs. There are posts to be filled, and it appears to be a considerable amount of money over a considerable period of time.

The Chairperson:

Would that be a year-on-year phenomenon? Is there any kind of blip in the trends under that generic heading?

Mr Daly:

I am not aware of any particular blips, but we may recruit 1,000 staff a year due to the normal churn in the Civil Service.

Mr F McCann:

My point is that there was £4 million handed back by one Department in the December monitoring round. Although that money came from across that Department, it still seems too much.

The Chairperson:

I am trying to establish whether in previous years that would be reflected as what Mr Daly called the normal churn of recruitment.

Mr Daly:

Our colleagues in central personnel might be able to shed some light on those trends.

Mr McNarry:

With reference to the knot over the Maze stadium, DCAL has indicated that it will retain the £59 million that most people thought was set aside for the project. DCAL now says that that money is for stadia generally. Where would that change show up in the monitoring? The Maze stadium project seems to have slipped off the agenda and £10 million of the funding was handed back by DCAL, but we are not going to build any stadia before the end of the year. Despite that, DCAL seems to be very clear that it will retain the £59 million of funding for stadia.

When Members voted in the Assembly for the allocation of that money to DCAL, most of us thought that it was for a national stadium at the Maze. DCAL has changed that and is saying that the money was for stadia. What will happen now? DCAL says that it is holding on to the money.

Mr Montgomery:

We are not fully aware of DCAL’s proposals, because they have not been formally passed by the Executive.

Mr McNarry:

The decision on the Maze stadium project did not go through the Executive.

Mr Montgomery:

If DCAL has taken a proactive decision to stop funding in one area and requested that the money be reallocated to a different project within the same sub-pillar area of ISNI classification, it is entitled to do so.

Mr McNarry:

I am talking about a specific case, but, hypothetically, any Department could say that it wants £59 million or £60 million for a certain project but give it a general term, in the same way that most people thought — I will not say that they were “misled” — that the funding to DCAL was for a specific stadium project. You are saying that that Department can hold that money and then decide to use it in a different way.

Chairperson, in the House both you and I recently asked the Minister of Finance and Personnel about a difficult situation in which a roads contract had to stop for a few months until money was — in layman’s terms — reallocated. That money could not be touched for all sorts of reasons, including legal ones, yet another Department can say that it want to hold onto £59 million for general stadia in the sheer and outrageous knowledge that nothing will be built or used for some time. Even if the stadium at the Maze that was originally planned had been built, the Minister of Culture, Arts and Leisure said that it would have been 18 months before a brick was laid. I am trying to see how the Department of Finance and Personnel can set money into a Budget and how it monitor that money. DCAL was originally allocated £69 million.

They give back £10 million, and it is clearly stated that that is because the project is not going ahead. However, £59 million of the money is held on to. Where are we? Can you help me or not?

Mr Daly:

I do not have the details of that with me today. I will have to follow up on that.

Mr McNarry:

We have just concluded the February monitoring round, and the issue of the £59 million — big money — has not surfaced.

Mr Montgomery:

But the £59 million is not for this year.

The Chairperson:

It was not for this year, David.

Mr McNarry:

How much is the figure for this year?

Mr Montgomery:

It was the £10 million that was handed back as a reduced requirement.

Mr McNarry:

I see.

Mr Montgomery:

Just for clarification; it was agreed in the Budget allocation document that the money would be allocated under the unit of service entitled “sport”. Therefore, it was within that sport unit.

Mr McNarry:

So, even though the Minister said that they would not have been able to lay a brick in 18 months, the return of that £10 million was an admission that the Department now does not need the £69 million to meet that budget requirement. Moreover, according to the information that you have in front of you, only £59 million is now needed.

Mr Montgomery:

As Michael said, we do not know the precise details. I am just explaining how the mechanism works.

Mr McNarry:

If you were able to unearth those precise reasons, it would be very useful.

The Chairperson:

A certain difficulty has arisen in that we do not have direct responsibility for that particular Minister or Department. The general principle is whether the global sum that had been allocated for that particular heading has been treated properly, and the Committee is allowed to establish whether that principle has been set aside or violated. The matter has not even gone to the Executive, and we do not know what the Minister will propose, so the witnesses cannot really help us with any of the actual detail. However, as far as the Department is concerned, it would seem that what has been done so far is not raising any red flags.

Mr Weir:

I would like clarification of one point: what precisely was the £10 million for? Perhaps the answer will be part of the overall information that the witnesses will provide to the Committee.

Mr Daly:

It was surrendered.

Mr Montgomery:

That happened in an earlier monitoring round.

The Chairperson:

It was not in this monitoring round.

Mr Weir:

I appreciate that.

Mr McNarry:

I can tell you that it was for the Maze stadium.

Mr Weir:

Hold on a wee second —

Mr McNarry:

I am the Deputy Chairperson of the Committee for Culture, Arts and Leisure. I understand what is put in front of me.

Mr Weir:

With respect, this is not the CAL Committee. I am trying to establish whether the £10 million was for revenue expenditure, for example, consultancy fees and so on. Is that different from the treatment of the £59 million, which presumably was for capital expenditure? I am simply trying to establish whether the £10 million is for revenue or capital and whether, in that sense, it falls under a different Budget heading. That is the more directly relevant question. Obviously, the CAL Committee will also have questions. However, rather than search for an answer now, you could provide us with further information later, if it is available.

Mr McNarry:

The CAL Committee could not get answers to those questions, which is why I thought that I might get some answers here.

Mr Weir:

I am just seeking some more information on the matter.

Mr McNarry:

I think that the Chairperson’s sense of direction is very helpful. If there has been a change of definition, we would be interested to find out about it. To pick up on Peter’s point, I would certainly welcome some more information on the £10 million. The figures in front of us do not show how the Department has paid the £4 million in consultants’ fees — they were certainly not paid for out of that £10 million sum.

Mr Weir:

Presumably, that information is not shown here because the matter is not part of the February monitoring round. The £59 million was allocated for a particular Budget heading, but the money may be spent slightly differently within that heading, provided it still used for the same area or unit. I presume that that is the case with every other allocation. I will await the further information.

Mr McNarry:

It is just interesting to see things go off the radar and then come back on it.

The Chairperson:

It is partly our job to explore that.

Mr McNarry:

It is. I would be grateful if the witnesses could address those issues.

The Chairperson:

When the Committee was briefed on the spring Supplementary Estimates on 4 February, it was advised that additional headroom of £342 million of resources and £96 million of capital had been built in to facilitate allocations in the February monitoring round. The Committee was informed that that was to cover bids that had been submitted in the February monitoring round, which appeared to be reasonable. Subsequently, as you have confirmed, only £20 million current and £4 million capital were returned, and no significant allocations were made.

I have a few questions. In retrospect, was it necessary to build in headroom? Has the need for the spring Supplementary Estimates to be realistic and taut been met? How will reasonable bids covered in the £440 million headroom be met in the future? Why was the headroom overestimated to such an extent?

Mr Daly:

The headroom was built in because we were given an early indication that Departments were putting forward a number of bids that would have been released, had there been sufficient room to manoeuvre.

The Chairperson:

When you say that you were given “an early indication”, what do you mean? Can you give me a date?

Mr Daly:

In the run-up to the February monitoring round, when our supply colleagues are in regular contact with Departments as regards —

The Chairperson:

Was it this financial quarter, or are we talking about the start of the financial year, which is coming to an end?

Mr Daly:

It was this financial quarter. We were aware of a number of issues that were put on the table, and we went over some of those with the Committee on 4 February. We needed to build into the Estimates something to ensure that, had funding been available and allocated, the Departments could have spent that.

In hindsight, that was the right decision, because had the funds come out, we would have been able to allocate the money, and it could have been spent. The alternative would have been a repeat of the situation that has arisen in previous years: large sums of money would have been surrendered, and we would have been sitting with a large pot of money and no legal way of dealing with the important issues that the Departments wanted to have addressed. It was right to build in headroom.

The Chairperson asked also about the need for the Estimates to be taut and realistic. In an ideal world we would have written the Estimates to the December monitoring position, but due to the need for the Estimates to be taut and realistic, we felt that we should not relax the degree with which we write the Estimates and, at least, put in a control over and above that. On 4 February, we explained that Departments were advised that although we were building in the headroom, they would not have any scope to use that for any other purpose in the event that funding was not provided.

All the Committees were advised of the headroom and that we would be keeping a good eye on it. We will not agree to Departments trying to use the virement process to get additional funds.

We wanted to ensure that the process was transparent and that, where funding became available, it could be distributed and spent. In hindsight, it was the right decision.

The Chairperson:

Can you provide us with an update on the discussions with the Treasury on the Civil Service equal pay issue and the potential for further efficiencies in 2010-11? Is an estimate available as to the costs in those two areas?

Mr Daly:

I know only what is already in the public domain on the discussions with the Treasury regarding efficiencies or the potential for efficiencies to be imposed in 2010-11. The Minister has made his position clear on that.

There are detailed discussions ongoing with the unions on the equal pay claim, so it would not be appropriate for us or the unions to make any comments on that. Both sides are committed to resolving the issue as soon as possible. I cannot give you a date, but I would like to think that we were talking about a couple of months at most. It is a complex area, but both sides are committed to trying to resolve it without the need for any litigation.

The Chairperson:

I am aware that all the MLAs and parties are being lobbied heavily on that issue and pressure is building.

Mr McNarry:

Mr Daly has not answered the Chairperson’s questions about costs for the equal pay.

Mr Daly:

The costs will be part of the negotiated settlement, so it would be improper for me — or the unions — to quote figures.

Mr McNarry:

A figure of £100 million plus was bandied about. Is that accurate?

Mr Daly:

The figure could well be of that magnitude, but I do not want to get drawn into saying what it will be, because that would compromise our discussions with the unions. Those discussions are intensive and ongoing. For example, when I leave this meeting, I will go to a meeting with the unions, and I will meet with them again tomorrow.

The Chairperson:

The figure that David McNarry referred to came from the Minister.

Mr Daly:

Yes, it did. However, I do not want to get into any more detail.

Mr McNarry:

It is getting a bit scary, because some people are talking about £200 million. I understand that the matter is progressing well, but, even in the short time that I have sat on the Committee, I have heard that at every meeting. Is there any indication as to when the process might conclude?

Mr Daly:

It will be concluded when it is concluded, but, as I said earlier, if it is anything to do with both of the sides involved, it will be a matter of a few months. In their statements, the unions are saying that the matter is complex and will not be settled quickly. They are making the same point to their members. If we are going to be fair to all sides, reaching a deal will take a bit of time.

Mr McNarry:

There was reference to people being lobbied, and a number of my constituents regularly lobby me on the issue. The lack of information that I have prohibits me from doing my job properly — I am telling them what you are telling me. There is quite a bit of dissatisfaction, and it seems that both sides are not communicating to the best of their ability.

The Chairperson:

There are three sides, because we are talking to HM Treasury, the union and Civil Service management. The process is complex and dates back a long time.

Mr Daly:

That is the nature of the issue. In a normal pay round, when negotiations with the unions are ongoing, the offer will not be seen until those negotiations are completed so as not to compromise them. We are in detailed discussions with the unions, and, as I said, they put out a statement to their members saying that the nature of the matter is such that they will not be able to reveal a lot of information.

The Chairperson:

Is it possible for the three parties involved in the negotiation, who will produce the solution between them, to provide an agreed update? That will help everyone, including those members of the union who are extremely concerned about the issue. If everyone is briefing separately, but using the same baseline, would it not make sense for there to be an agreed update?

Mr Daly:

The matter is primarily between management and the trade unions — HM Treasury is separate. The Minister had discussions with HM Treasury last year, but the focus of the discussions is between the trade unions and Civil Service management. There is a possibility of joint communication, and it has been considered, but it is a question of detail.

The Chairperson:

Management can go only as far as the current arrangements with HM Treasury permit, because it cannot print money.

Mr McNarry:

I do not want to misquote him, but the Minister indicated that he went to London and came back with £100 million for Civil Service pay. It was then suggested that he did not get £100 million for that purpose. There came a further suggestion that the £100 million cannot be used for Civil Service pay.

Mr Daly:

In reference to the £100 million, the Minister had discussions with HM Treasury on a range of pressures, including equal pay.

Mr McNarry:

I know that the Minister does not have the £100 million, but he has access to it.

Mr Daly:

The Minister has access to £100 million for a range of issues, including equal pay. HM Treasury did not provide £100 million for equal pay alone.

It discussed the range of pressures that were facing the Northern Ireland Executive. As part of that, the Chancellor agreed to provide access —

Mr McNarry:

If he were to use the access to that just for the pay, then he would use it all up and there would be nothing to relieve any other pressures?

Mr Daly:

The Executive would decide how that facility would be used. As we have explained to the Committee before, it is made up of a combination of additional borrowing and early access to some capital expenditure. The Treasury did not allocate £100 million to deal with an equal-pay issue.

Mr McNarry:

I am very glad that you said that. Thank you.

The Chairperson:

Thank you, Mr Daly, Mr Montgomery and Ms McBurney. No doubt, we will speak to you again.

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