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Official Report (Hansard)

Session: 2008/2009

Date: 11 March 2009

COMMITTEE FOR FINANCE AND PERSONNEL

OFFICIAL REPORT
(Hansard)

Varney II and Strategic Economic Issues

11 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 
Ms Dawn Purvis 
Mr Peter Weir

Witnesses:
Mr Michael Brennan }
Mr Peter Jakobsen } Department of Finance and Personnel
Mr Richard Pengelly }
The Chairperson (Mr McLaughlin):

We turn to the Varney Review II and strategic economic issues. We are joined this morning by departmental officials whom we have met before: Richard Pengelly, the Budget director, Michael Brennan, the chief economist and head of the strategic policy division, and Peter Jakobsen, an economist in the strategic policy division.

We have agreed that this session will be covered by Hansard, so I remind witnesses and members to switch off their mobile phones, which can significantly interfere with the recording equipment.

Mr Richard Pengelly (Department of Finance and Personnel):

There has been some correspondence between the Committee and the Department of Finance and Personnel on this subject. The key point arising from the Committee’s letter of 13 February 2009 is its view that the Executive should not lose sight of long-term economic objectives by focusing too heavily on the short term. I reiterate that that is exactly where the Executive is on this matter, and that is evidenced by their perseverance with the Programme for Government, which sets out long-term strategic objectives for economic growth, supplemented by short-term economic-downturn interventions, as evidenced in December 2008.

Another point to highlight is that, in parallel with those measures, the Department of Enterprise, Trade and Investment is conducting a strategic review of economic policy and the Department for Employment and Learning is working with the newly-appointed Northern Ireland commissioner on skills.

All those bodies are considering the strategic, long-term position in order to ensure that the local economy is well positioned to be the first mover as the global economy begins to move out of recession. In parallel with those considerations, we are attempting to put some short-term measures in place. Nevertheless, the Committee has endorsed the view that moving to a total focus on short-term measures would be counterproductive and damaging to the long-term growth of the economy. That is all that I wish to say at this stage.

Mr F McCann:

The Varney Review II suggested that the time has come for action, rather than analysis. Scotland, Wales and the English regions have had economic strategies in place for some time. How do you respond to the view that Departments have reacted to Varney II by launching a series of reviews? Furthermore, how will the various ongoing reviews be co-ordinated, and when will they be brought together in a strategic document?

Mr Michael Brennan (Department of Finance and Personnel):

You are correct; all UK regions, including the English development agencies, have reviewed, or are reviewing, their economic strategies. The vast majority of the recommendations from the Varney Review relate to activities that are at the discretion of the devolved Administration. In addition, many of the activities contemplated by Sir David Varney are, in effect, already under way, such as asset disposals and reviewing industrial development policy. In many ways, therefore, Varney just stated the obvious in respect of things that we were already doing, so we were ahead of the curve in that respect.

Now is the perfect time to examine what we are doing with respect to economic development policy, and the DETI Minister has explained why the time is right to have a focused assessment of what agencies — in particular, Invest NI — are doing. A report is due before the summer, and that will be a key element of any wider economic strategy that might be put in place for Northern Ireland. Similarly, Bill McGinnis is reviewing the skills agenda for Northern Ireland.

If we are to construct an aggregate economic strategy for Northern Ireland, it is important that the key stakeholders, particularly DETI and DEL, are given an opportunity to review their policy contributions to the wider strategy.

Mr Hamilton:

Thank you for coming along today.

The last time we discussed this issue was before Christmas. At that time, there was an indication that the regional economic strategy would continue to be parked and that there would be some assessment of the economic targets in the Programme for Government. I presume that the shorter report, ‘Delivering Economic Growth in Northern Ireland’, that is proposed is coming off the back of that assessment.

Can you provide us with an outline of that assessment and what it is heading towards? What was the inspiration behind that report? Perhaps I am asking you to gaze into your crystal ball, but what resource implications arose from the report? How might they be tackled? Given the way that things have changed and the change of emphasis, I presume that some suggestions have resource implications. How will that be dealt with within current departmental budgets? Will there be any reallocation?

Mr Pengelly:

I will talk about our progress in respect of the strategic approach, and Michael will fill in some of the detail. Having concluded a long process that established the Programme for Government, we were keen not to have parallel strategies. Therefore, while there had been a strong push for regional economic strategy under the direct rule Administration, our firm view was that the regional economic strategy should be embedded within the Programme for Government and that economic growth should be at its heart. That view was endorsed by the Executive.

There is a change in emphasis. Notwithstanding the fact that the strategy is embedded in the Programme for Government, it would be useful to extract that and articulate it fully, but — at the same time — give a clear sense that it will not be a new parallel strategy or something that is different and in some way competitive with the Programme for Government. The new document will articulate that and perform a health check by assessing progress that we have made and by considering what can be achieved in the future. Mr Brennan can fill in the detail on where we have got to.

Your comment about the rebalancing of expenditure across and between Departments is key. Prior to the restoration of the Executive and the Assembly, the priority of direct rule teams with regard to the Budget tended to be high-quality public services such as health and education, and there was a rationale to skew resources in those directions. It is of fundamental importance to have a high-quality Health Service that supports the community, and a developing education system.

There is a subtle change in prioritising economic growth, but that is not to say that high-quality public services are any less important. As Mr Brennan said, the Executive have to use the limited levers of control available to them, and, of those, public expenditure is key. A focus on that must be achieved. In the most recent Budget, there was skewing towards the economic drivers in DETI, DEL and DRD’s infrastructure programme. That will continue. The health-check approach that we are adopting under the revised regional economic strategy will show us what progress we have made, particularly with regard to the four productivity drivers, and it will show how we can take that further.

Mr Brennan:

The first five public service agreements (PSAs) in the Programme for Government, as members know, are focused on economic development areas. Therefore, the stocktake that we are undertaking as part of ‘Delivering Economic Growth in Northern Ireland’ will reflect the work that we are doing with colleagues in DETI, DEL and DRD to see where they are with their skills review and their economic development policy review. We will bring that together.

As Mr Pengelly said, the key issue is identifying the short-term policy interventions that the Executive can make, such as the December monitoring statement, which addressed difficult current issues into which we can try to make some inroads — for instance, cashflow management and assisting small and medium-sized enterprises.

‘Delivering Economic Growth in Northern Ireland’ will be a long-term agenda for economic policy in Northern Ireland. It will reflect where we are with DETI, DEL and DRD, and it will deliver on the five PSAs that I mentioned. It will require difficult analysis and difficult judgement, because the Programme for Government has ambitious targets with regard to attracting inward investment, the 6,500 foreign direct investment jobs, boosting exports from Northern Ireland and enhancing R&D activity in Northern Ireland. They were ambitious in a benign economic environment, and they are even more challenging now, but we cannot lose the focus that that is a long-term intervention on which we are seeking to achieve and deliver.

That is what our paper, ‘Delivering Economic Growth in Northern Ireland’, is about — an assessment of where we are now and where we want to move Northern Ireland to in the long term; benchmarked against the framework and the five PSAs that were set in the Programme for Government. As Richard mentioned, an environment that is likely to be increasingly challenging in public-expenditure terms will pose difficult decisions about skewing resources away from other areas to make a genuine attempt to boost economic development, and economic development policy, in Northern Ireland.

Mr Weir:

There are a couple of issues that I will touch on. Richard Barnett informed us that DFP officials would be actively involved in the economic policy review. Will you outline what the level of involvement of DFP has been, to date, in that economic policy review?

Mr Brennan:

The Barnett work is still only at stage one. The DETI team of officials that works with Richard Barnett has been engaged in evidence collection from various stakeholders. As I understand from DETI colleagues, that process is coming to an end. DFP officials sit on the working group that DETI established to take that work forward. The evidence has been collected, so the analysis will hopefully begin in the next few weeks.

Mr Weir:

OK. One of the recommendations of Varney II was the publication of an annual report on Northern Ireland’s competitiveness position. That is similar to arrangements that currently exist in the Republic. The briefing that we received from DFP officials was a reasonably positive response to Varney II. Can you update us on the publication of that annual report?

Mr Brennan:

I have no further information regarding a timescale for producing that report. A similar report was produced already. That work was undertaken by the economic policy unit of OFMDFM. It used to produce a publication that was known as ‘The Cost of Doing Business in Northern Ireland’, which was an assessment of Northern Ireland’s competitiveness across a range of indicators. The last report basically showed that Northern Ireland was in a favourable position in relation to competitiveness when it was benchmarked against the other UK regions.

That work is now quite dated, however — it is about two or three years old. Peter Jakobsen can correct me on that.

Mr Peter Jakobsen (Department of Finance and Personnel):

The Economic Research Institute of Northern Ireland (ERINI) produced that document about three years ago. It was entitled ‘Measurement and Benchmarking of Competitiveness — The Cost of Doing Business in Northern Ireland’. It may be premature to continue that work because of the ongoing ERINI review.

Mr Brennan:

The work was taken forward by ERINI, DETI and OFMDFM. As I understand it, the whole issue of competitiveness is embedded in the DETI review, so I like to think that the continuation of that work will be an outcome of that review.

Mr O’Loan:

Thank you, gentlemen. In relation to economic inactivity, Varney referred to the Executive needing support from the UK Government to deliver welfare reforms to reduce the stock of incapacity benefit claimants. He described that as challenging. How has that policy area developed recently? Have there been negotiations with the UK Government? What has been the nature of those negotiations to develop NI-specific policies? What are NI-specific policies in that area?

Mr Brennan:

That is an issue for DEL and DSD to address, but I know that they undertook significant work in relation to the pathfinder initiative. However, I am not sure where they are in relation to that work.

Mr O’Loan:

Is it possible for this Committee to receive some follow-up in relation to that matter?

The Chairperson:

Let me give some consideration to that. This section is being covered by Hansard, so I was going to suggest that we could circulate the report to other Committees, because of the cross-cutting nature of some of these issues. I am always very jealous about our own lines of responsibility, and I think that we must equally respect other Committees. I will give some consideration to how we will take that forward.

Mr O’Loan:

That is fine. The next issue about which I will ask questions may raise the same type of issue. My question is about skills, which are a key driver of productivity. Varney praised the Executive’s skills strategy and the document entitled ‘Success Through Skills’. He recommended that that should be prioritised to ensure swift action to improve skills at all levels.

I am wondering whether those actions have been prioritised. Recently, the Minister for Employment and Learning has, on a number of occasions, made reference to having to reduce targets and the need to put in more resources. How does all that tally?

Mr Pengelly:

Turning to the specifics for DEL, and our locus on that, I refer back to my introductory comments in which I explained that, at a strategic level, the Executive are very keen to focus on the longer term. The long-term future for Northern Ireland is clearly dependent on developing the skills base, on being sufficient, and, when FDI becomes prominent again, on being the first mover so that we can start to attract the successful export-orientated business that we aspire to. However, I think that it would be for DEL to provide details of the specifics.

Mr O’Loan:

Obviously, that is the general area of our remit, and DFP’s remit, and it will have to be given quite a bit of thought.

The Chairperson:

Declan, are you content at this point?

Mr O’Loan:

Yes, I will leave it with you.

Mr McQuillan:

Varney II recommended a planning review, but said that it should take place more rapidly. DFP economists had a role in the PEDU scrutiny of that. What progress has been made on that review and when will we see the evidence of that?

Mr Pengelly:

In the next evidence session, we will talk specifically about PEDU, and planning is one of the key elements of that.

Mr McQuillan:

Perhaps we should leave that question until then.

Mr Pengelly:

I will be staying on for the next session so I can deal with your question then.

Ms Purvis:

One of the Varney II recommendations was that the Executive should investigate the causes for the low uptake of the small firms loan guarantee scheme, and examine the case for further interventions to support the scheme. Has that investigation been done?

Mr Brennan:

Yes; the small firms loan guarantee scheme does not exist any more — it was replaced by the enterprise finance guarantee scheme, which was one of the initiatives brought forward by Peter Mandelson in January. Over recent months, Executive Ministers have been engaging with the local banks to very strongly encourage them to proactively sell to SMEs the benefits of using that scheme. Initial indications are that some of the procedures and rules of the new scheme are more complex than the old scheme, which gave a 70% guarantee. That has changed, I think, to an 80% guarantee; however, under the new scheme, the requirements to draw down money seem to be rather more complex than under the old small firms loan guarantee scheme. The banks have been pressed to be more proactive in selling the new scheme to local businesses.

Ms Purvis:

Have you any evidence that that is happening?

Mr Brennan:

Not at this point.

Ms Purvis:

One of the other recommendations from Varney II was for a review of the forms of financial assistance to businesses with a view to considering assistance that would reward performance. I know that there is a voucher scheme in place for businesses to encourage them to export; however, was any other work carried out in that area?

Mr Brennan:

That is one of the critical areas within the DETI review, and, therefore, DETI is probably better placed to go into the details of the change in focus with Invest NI, the assistance packages that it currently has, and those that it is looking to move to.

The Chairperson:

Growing the economy is a priority; however, since Varney II, there has been a significant downturn. One of the concerns is the low uptake of business support, and yet the need for business support has been greatly emphasised by the present circumstances. The system that replaced the small firms loan guarantee scheme is more complex, and yet complexity was one of the specific complaints made and the explanation offered for the previously low uptake. There is a set of circumstances in which growing the economy — a key priority that the Department has a direct interest in — does not seem to be serviced by the responses, or lack of responses, from the banks, or by the emergence of that new scheme. How do we deal with that and maintain the integrity of the priority of growing the economy?

Mr Brennan:

There are two issues. The first is that the enterprise finance guarantee scheme is a UK-wide initiative that is taken forward by the Department for Business, Enterprise and Regulatory Reform in Whitehall. The comments about its complexity were mainly anecdotal and were relayed to the Economic Development Forum (EDF) by the business community. In the early days, there was some confusion when the Mandelson announcements were made about how the scheme would operate. We have been seeking clarification about that.

The second level of assistance to SMEs is within the remit of the Administration here, and it includes, for example, the various initiatives that Invest NI has been rolling out, such as the series of roadshows that it has been conducting across Northern Ireland for SMEs. Those roadshows have been not only for Invest NI’s client companies, but for the wider SME sector in Northern Ireland. They have addressed specific issues, such as cash-flow management, drawing down assistance from the banks and utilising schemes such as the European Investment Bank initiative. Invest NI, DETI and others are proactively taking forward a range of issues, as that is within our discretion.

The Chairperson:

Varney stated that the Executive should take a more interventionist role, given the low uptake of the previous scheme. Do you regard the Mandelson initiative as having taken that responsibility away from the Department?

Mr Brennan:

Not really. The initiatives that were announced by Mandelson run in parallel to what the Executive can do. During the December monitoring round, the Executive and individual Ministers announced a range of measures that could run in parallel to those initiatives.

Mr Pengelly:

Fundamentally, Lord Mandelson announced policy initiatives on a reserved matter. The Executive’s role is to encourage businesses to take those up those initiatives and to encourage banks to play their part.

The Executive have initiated a dialogue with the banks: the head of the Civil Service is chairing an engagement with the four main local banks to try — in partnership with DETI — to continue the push on behalf of the business community. The Executive are trying to exert some pressure from both sides. Hopefully, there will be a positive meeting of minds somewhere in the middle and some access to funds.

The Chairperson:

God knows that I would not be one of those who would volunteer to invite Varney back again. If he were to assess the situation, would he think that the Executive had responded to that particular issue, given the changes in economic circumstances that make the initiatives even more urgent?

Mr Pengelly:

Without having full control over those policy levers, it is difficult for the Executive. In that specific area, the Executive — in many ways — are restricted to promoting, advising and cajoling. I certainly think that there is clear evidence that the Executive are doing that. There is very strong and positive engagement with the business community. Over the past number of months, there has been a series of engagements with the banks.

Mr Brennan:

Yes, and the Executive have also asked the Minister of Enterprise, Trade and Investment to employ the Economic Development Forum to assist in this area. A subgroup was established in the EDF to ask the business community to highlight any area in which the Executive might consider offering assistance. That work concluded in February, and a paper on it has been presented to the Executive for consideration of the range of measures.

I sit on that group. It was quite interesting that the Business Alliance and all sorts of key stakeholders made suggestions about things that they would like to see happening. There is a range of measures that the Executive can follow. There were also many things that they would like to do, but the power to do them is not within the Executive’s remit.

Mr McNarry:

Welcome, gentlemen. On 7 January 2009, the Finance Minister wrote to Yvette Cooper, the Chief Secretary to the Treasury, about Varney. In his letter, he said:

“This second Varney report has still not addressed the material question which is how Northern Ireland might be expected to achieve some degree of economic convergence with the UK national economy.”

Has the Chief Secretary to the Treasury replied to that letter?

Mr Brennan:

I have not seen a reply.

Mr McNarry:

The letter was dated 7 January, and today is 11 March; do you not think that it is about time that she replied?

Mr Pengelly:

I think that that is an issue for the Chief Secretary to the Treasury.

Mr McNarry:

I do not think that it is. Her response is key to what we are talking about. How can we move too far forward if we do not know what the Treasury’s view is in response to that letter, in which there are very pertinent questions?

We might, perhaps, through the right channels, ask someone to write to the Chief Secretary with a reminder. I would be interested to see the Chief Secretary’s response to that letter. It is an important matter.

Mr Pengelly:

It is not for me to speak for the Chief Secretary in connection with the letter. I suspect that the Chief Secretary’s view may be that the letter did not necessarily need a response from her. The Treasury’s position on the matter was clear through the Varney Report, and the letter set out the Executive’s position. The view that we are getting from Treasury officials is that the report is there; the Executive have clearly accepted that many of the issues are within their remit, and it is up to them to get on with it. It is clear that economic circumstances are changing. But, as Mr McNarry says, we could go back and say —

Mr McNarry:

Is the position the same as it was on 7 January when the Minister said that Varney II had not addressed that material question?

Mr Pengelly:

Varney II has not changed since it was published, nor have our views about it. It is what it is.

Mr McNarry:

You have a strange way of doing things, but no matter. It is no wonder that we do not have enough say with national Government.

Mr Hamilton:

I am sure that you are sorting that out for us, David.

Mr McNarry:

We will do so next time; you can rest assured of that, if that is what you wanted to contribute.

Varney recommended further disposal of assets where there was no economic or social case for retaining them and that the Executive should press the Chancellor for further flexibility to allow the proceeds from further sales to be retained. I have a series of questions about that, Chairperson, which you are aware of. What is the current situation with regard to asset disposals?

Mr Pengelly:

Are you asking about individual disposals or the ability of the Executive to retain the receipts?

Mr McNarry:

I am asking about the Varney II recommendations.

Mr Pengelly:

On the point that you made, there is an agreement that the Executive can retain the proceeds of all asset disposals. That was tied up in the financial package that was put in place on the restoration of devolution and was embedded again in the comprehensive spending review outcome of October 2007. The proceeds of the disposal of any and all assets under the Executive’s control can be retained by the Executive for recycling in Northern Ireland.

When it comes to the proceeds of assets, the reality is that, at present, the market is not conducive to selling assets. We are all aware of the difficulties that the Housing Executive has experienced in trying to give occupiers of social housing the opportunity to purchase those assets. Difficulties have arisen around the various pieces of surplus land that were earmarked for disposal.

There were two big issues: the Workplace 2010 receipt, which was not necessarily down to pure market conditions surrounding the disposal of assets, but was a more complex deal; and the Crossnacreevy issue, which will have an impact the year after next. The majority of issues are more about market conditions than any powers, or desire, on the part of the Executive to dispose of assets.

Mr McNarry:

I take it that, apart from those failed examples that you mentioned, assets have been identified for disposal, and that someone is waiting to decide when the market is right for disposing of them. Are there costs associated with retaining such assets?

Mr Pengelly:

There are a couple of parts to the answer to that question. The Programme for Government and Budget concluded with a three-year settlement for Departments. An element of each Department’s capital programme would have been financed by planned asset disposals. There is a plan for some assets to be sold.

If some assets are not sold, there is a cost — in the public expenditure environment there is a 3·5% per annum capital cost in holding an asset. The easiest example that comes to mind — without taking us too far into departmental territory — is that, in 2008-09, the Department of Health, Social Services and Public Safety (DHSSPS) had originally planned to dispose of the old Belvoir Park Hospital site. At the time when the plans were struck, that disposal was expected to generate approximately £50 million. As we moved into the year in question, however, the revised valuation was approximately £10 million to £15 million. Our view is that Departments must consider such situations case by case. Does one balance potential additional receipts of £35 million, which may be gained by waiting for a year or two until the market corrects itself, against a small holding cost?

Mr McNarry:

Basically, that is what I am asking, because I would love to know who is working out that balance. If a green light says go, then everything is going to go.

In normal accountancy terms, are those properties now written down? You have given an illustration of what you reckon the hospital was worth against what it is worth now. Therefore, in accountancy terms, has that asset been written down? Have all of them been written down, and is that a cost?

Mr Pengelly:

It depends on the specific type of asset. The public expenditure requirements for assets need to be carried on their value in use. If a Department has an asset that it is currently using, it is effectively valued according to its use — what it would cost to build or acquire a similar asset with the same operational capacity. In that sense, the market conditions do not point to a major write-down in value, because, although construction costs have dipped a little, an asset that one has a clear intent to dispose of, such as Belvoir Park Hospital, should be valued by reference to market value, and that will have come down.

Mr McNarry:

I realise that this is a lengthy issue, but I just wonder if it could be addressed. Chairperson, if you and the officials agree, could we get some written indications of the costs involved and what write-downs there are? I am not sure what we might see, but I would like to see it. I would like to know what the Departments intend to dispose of, what is the cost of retention, and whether assets have been subject to write-down.

What we are hearing about the hospital is quite serious. There could be all sorts of tricks. I could imagine an organisation such as Sainsbury’s having to, God forbid, close down some premises but still retain the property. Such organisations would very quickly write down the value of that property. I would like to know the size of the issue.

Mr Pengelly:

Many of those issues take us right back into the core of other departmental business, because those are issues for Departments. If you have an asset that you plan to sell, and market conditions prevent you from selling it, it should not be forgotten that the Executive still own the asset. Although there is a notional write-down, in many ways it is on paper. Now, some of those assets will be written down, because the market is at or near the bottom of the cycle. If they are held for another 18 months, the realisation potential of those assets will increase dramatically.

Individual Departments must make a judgement call on a case-by-case basis, taking account of all of the value-for-money considerations about whether to go ahead and sell an asset and realise a lower amount, but at least that amount can —

Mr McNarry:

If it is difficult, I am slightly surprised that that information would not be given to the Department that controls the purse strings in Government.

The Chairperson:

There may be some specific detail that is for a Department and a scrutiny Committee to pursue. It is quite obviously an issue in that, in preparing a strategic overview of the economy here, and the Budget projections and allocations, DFP ought to know what exactly is on the table and what is available when preparing those projections and negotiating agreements with individual Departments.

Is there a register of the surplus assets? Is there a cost set against that, because the task force prepared projections on receipts against the disposal of assets? That quite clearly takes us within the remit of DFP, as far as I am concerned. I think it is legitimate for the Committee to want to know how the Department and the Minister, in working with other Ministers, can take forward both the agreed Budget and the agreed Programme for Government in the light of changing circumstances, such as in the impacts of the disposal of surplus assets.

Mr Pengelly:

We would certainly take that away and speak to the Minister. However, I wish to make two points. The task force was commissioned by the First Minister and deputy First Minister; it is not a DFP task force.

The Chairperson:

However, is it not the case that the report is significant and relevant to the Finance Minister in respect of managing available resources and meeting departmental bids and needs?

Mr Pengelly:

It is of relevance, but we might dive too far into detail that the Department of Finance does not have. We will certainly look at that and see what can be pulled together.

My second point is that the ready availability of information is well-illustrated by the Belvoir Park Hospital example — although I do not want to focus too much on that. The positions of the DSD and DHSSPS were very different. DSD had a planned level of realisations from house sales. Those sales were not realised, and DSD’s approach was to present that as a specific issue to DFP in the course of in-year monitoring; therefore, the Department knows about that.

The Department of Health managed the Belvoir Park issue by deferring some capital expenditure, rather that presenting a bid for additional resources in order to plug a shortfall. Hence, that issue has never been presented to DFP or to the Executive. DHSSPS is managing its three-year capital spending programme on the basis that a bit less will be done this year, but that that will be dealt with by accelerating some projects next year. Therefore, it is not an issue that has been brought to DFP. That is the case across all Departments —DFP does not necessarily have all the detailed information on every individual asset. The Department is aware of issues that are brought to its attention.

Mr McNarry:

As far back as December 2007, the capital realisation task force called for a mandatory central asset register. What progress has been made on that?

Mr Pengelly:

Not all of those recommendations have been formally endorsed by the Executive at this stage. Ed Vernon, who chaired the task force, is —

Mr McNarry:

I banter you a bit, but I have a great deal of sympathy for you: how on earth do you do your work with half a sheet of paper?

In relation to current market conditions, was the emphasis originally on disposal and has that emphasis shifted to better asset management?

Mr Pengelly:

I do not see disposal as a fundamental strand. My understanding is that better asset management is about having the appropriate assets to deliver one’s business objectives, but having no more than that set of assets. Therefore, achieving better asset management involves a programme of disposal — a point that is emerging from the work of the task force and its work with Departments in general.

Mr McNarry:

Are you saying that there is evidence of improved asset management, including transfers within the broad public sector?

Mr Pengelly:

Is that a reference to transfers between individual organisations?

Mr McNarry:

Yes.

Mr Pengelly:

There is evidence of improvements in asset management. As with many issues related to this matter, we are not where we want to be.

Mr McNarry:

Does that mean that it is a good idea, but perfection has not been achieved? If we were to give it marks out of 10, would we score five or eight?

Mr Pengelly:

I am not sure that I want to mark people’s homework on that. Bearing in mind that we have a huge and diverse asset portfolio, one of the key recommendations in the original task-force report was about developing a centre of expertise. Ed Vernon is looking at that issue again, and he will want to have further dialogue with the First and deputy First Ministers about it. The difficulty is that Departments must manage their business. For example, DSD manages the business of providing social housing to individuals in housing stress — it is not necessarily in the business of realising asset value and managing complex asset-management issues. In many ways, those issues are generic across the system. I believe that asset realisations and management would be improved by creating a centre of expertise, as opposed to trying to improve the techniques of individuals in 11 Departments.

Mr McNarry:

Are you saying that you can trespass in some areas but that there are other areas in which you do not want, or are not allowed, to trespass, and that that makes life difficult overall?

Mr Pengelly:

It is not about trespassing, what we are trying to put in place —

Mr McNarry:

Call it crossing demarcation lines instead of trespassing.

Mr Pengelly:

We must recognise that a Department’s power and responsibility are vested in its Minister. It is not for us to direct how Departments should act on the information that they hold. However, under its central strategic role, the Department of Finance and Personnel is obliged to provide support, advice and guidance on best practice to Departments. I do not see that as trespassing or crossing demarcation lines. Ultimately, it is up to the Minister and the Executive to endorse that as a collective and collegiate approach, and the evidence is that the Executive are very much on that pitch, but we continue to push best practice.

The Chairperson:

Can you give us a particular example of the way in which Departments have approached the issue of asset disposal through internal transfer? Has that happened?

Mr Pengelly:

The example that springs to mind at the moment involves the Department of Education (DE) and DSD. I think that DSD hopes to take a piece of land off DE for a housing development. Thus, there is a dialogue between them, and we can improve that.

I want to mention one point that DFP made at the time of the original task force report. There is a 10-year investment strategy, and we must bear in mind that that was undertaken when markets were rising quite substantially. Our point, which all Departments have accepted, and which goes to the heart of your point —

Mr McNarry:

Chairperson, thank you for getting that out of him; it is like pulling teeth, but no matter.

Mr Pengelly:

It would be madness for one Department to sell a piece of land to the private sector in year 2, and for another Department —

The Chairperson:

— another Department to buy it back again.

Mr Pengelly:

Yes, it would be madness for another Department to buy it back in year 6, after four years of inflation. We are trying to join that up, the ultimate aim being that every Department will know what is available and what is likely to go on the market. Indeed, we want to manage that process so that assets are put on the market on a phased basis, rather than everything being dumped on the market and prices being suppressed.

Mr McNarry:

It is a bit like digging a hole. One Department digs it and fills it up, and another one comes along and digs it up again.

The Chairperson:

Just to finish — you have put me off my point.

So, you cannot think of an example of an actual transfer of assets between Departments. Is there an example of the scenario that you have just described whereby a Department either starts negotiations or buys property that was previously another Department’s asset? I am sure that the Department of Finance and Personnel would have an interest in such a situation.

Mr Pengelly:

I can think of no such example. You will appreciate that I am glad that I cannot think of an example of a Department buying from the marketplace an asset that was previously under public control. The example that I gave is of two Departments, DSD and DE, working together with a common interest.

The Chairperson:

We can all readily see the benefits of such an arrangement — we just have to ensure that that is what happens in all cases.

Mr McNarry:

That was very interesting and very helpful.

In December, officials informed the Committee that their main economic concern was the lack of productivity and that they had been considering where best to focus policy to increase productivity. Can you outline for us today what those areas are, and how they are being progressed?

Mr Brennan:

The key to improving regional productivity lies in the nature of the jobs that are created in the regional economy. We want to create jobs that will deliver a significant element of added value to the local economy as regards gross output. We now have the benefit of hindsight: if you had asked me that question a year ago, I would have said that the key sectors were financial services and tradable services.

Mr McNarry:

Hang on, I am talking about December. I can understand what you are saying about the situation that existed a year ago, but I am referring to what we were told in December.

Mr Brennan:

Yes, but the situation has changed even since December. For example, the view that I held on financial services in December is radically different to my current view. I would be very reluctant to try to identify individual sectors on which I think we should concentrate in future or to say that we should put all our eggs in one basket.

It goes back to the issue of the skills agenda for Northern Ireland. The critical issue in enhancing regional productivity is ensuring that the skills sets of individuals are suited to the needs of the market as the global economy and the national economy begins to make an upturn. What will make Northern Ireland attractive to potential FDI companies is the ability to offer skills that tradable services and the manufacturing sector will need in the coming months and years. I do not think that we should try to pick a winner.

Mr McNarry:

What is it best to focus on? That is basically what we are trying to find out.

Mr Brennan:

As I said, I would not want to try to pick winners at this stage, because even three or four months ago —

Mr McNarry:

The Committee is of the opinion that that was exactly what was going to happen in December; someone was going to introduce a focus. I do not know whether it was you, but someone in your Department, was going to do that —

Mr Brennan:

Yes, the Department was going to examine sectors that it felt offered potential.

Mr McNarry:

Have you found any?

Mr Brennan:

No. As I said, the economic environment has changed so dramatically.

The key issue has always been to ensure that the skills agenda and skills policies that the Department has in place mean that Northern Ireland has an attractive package to offer to indigenous, and potential FDI, client companies as we move into the future.

The Chairperson:

Yes. The Department is investing in recovery, rather than expansion, at this point.

Mr Brennan:

Yes.

Mr McNarry:

However, the preparation is ongoing and the Department remains aware of the issue. You have talked about value-added jobs. However, the difficulty that I see — and in some ways I can understand what you are saying about the fluctuations that exist — is how we, as elected representatives, can help with job creation. What skills should young people who are currently in further education hone in order to get those value-added jobs? What direction should we be taking, if there is no focus at the moment?

Mr Brennan:

There is a range of skills that individuals can equip themselves with in order to enhance their human capital. Those tend to be skills that have a commercial application or that will be of interest to employers in future. That is as far I could go with that.

A year ago there was a concept that we required better jobs, not more jobs. That has changed because of the present economic situation. For example —

Mr McNarry:

Although jobs have been lost and jobs have come into the market, jobs are jobs and I am grateful that they exist. They may not be value-added jobs in the true sense, or the best paid jobs, but they are jobs nonetheless.

If a skilled engineer has become a bin man in order to put food on the table — which I am not knocking, because it is good for that person and he is providing a service — we have lost a skilled engineer. That is where the Department’s problem lies; it is the selling of it, the explaining of it and the detail of it. If we are preparing for the market, and if we are crystal-ball gazing — which is dangerous — what advice should we be giving about what the focus on jobs and employment will be in three year’s time? What should people be honing their skills for? I realise that it is very difficult to do that, but there should be a focus on it.

Mr Brennan:

As I said, individuals who are enhancing their skills or looking forward should be encouraged to focus their investment on those areas that genuinely have some commercial applicability.

Mr McNarry:

I appreciate that. Thank you.

The Chairperson:

The Minister for Employment and Learning indicated in the House that the assumptions that could have been made two or three years ago in respect of the growth areas of the economy have changed very significantly. Although the focus continues — and it is a welcome focus on skills and retraining et cetera — clearly we must be very flexible and light on our feet until we realise what direction the economic recovery will take. Perhaps those assumptions will not stand up.

Mr Pengelly:

The point was made earlier that, less than twelve months ago, we had the lowest unemployment in the UK and the lowest unemployment on record in Northern Ireland. At that stage, people were beginning to look less favourably on call centres, as we felt that we were better than that and that we were moving up the value chain. That is exactly the right place to be and where we want to position ourselves. However, we have moved into a downturn, and one can only commend individuals who are prepared to make that sort of move that Mr McNarry alluded to. That is the context that we are in, and we need to build on that so that when we start to come out of recession —

The Chairperson:

— we make sure that the skills are there.

Mr Pengelly:

Frankly, we do not know what sorts of industries and sectors will start to move and grow.

At this stage, I think that it is more important not to close off any routes.

Mr McNarry:

I do not want to prolong the discussion; however, the markets will know. The market dictates everything and will know which sectors are going to move.

The Chairperson:

The market might not know yet.

Mr McNarry:

That is because the investors have not decided where they are going to risk their money — or, more than likely, your money and my money. The market is the finger on the pulse that we need. What you are doing is right; however, it seems to me that the demarcation lines that are coming in are disruptive to the way that we manage our affairs, because they cannot react quickly enough.

Mr Pengelly:

That is a very real risk that we face. However, as Mike mentioned earlier, there is a real and constructive engagement, which DETI is leading the way on, in the Economic Development Forum, and DEL is part and parcel of that dialogue. Although there are clear departmental boundaries, there is a tremendous amount of information sharing.

The Chairperson:

It is a complete imperative that those two Departments, in particular, are collaborating.

Mr Brennan:

DE is critical. There is no one individual in the EDF subgroup, or the wider EDF, who could put up their hand and identify the sector that we should focus on. However, there is widespread agreement that the best that we can do is ensure that the skills policy agenda focuses on making sure that the package that we can offer is attractive to the FDI market in the coming years and months. In a year or two, we do not want to be in a position where someone is looking, for example, for ICT specialists or nanotechnology specialists, and we do not have any.

The Chairperson:

That might be indeterminate at this point. Perhaps Stephen is going to ask about what can be done in the area of infrastructural development and investment.

Dr Farry:

Welcome, gentlemen. I want to go back to the letter that was sent to the Chief Secretary. I take a different angle on that than David; that letter is, I think, in effect, the close of correspondence. Can you confirm that that one page is the sole response of the Northern Ireland Executive to the Treasury on the Varney Review II?

Mr Pengelly:

Yes.

Dr Farry:

Tactically, is that wise? I am conscious that there are aspects of Varney II that we do not agree with and that there are matters that have been left out of it. Nevertheless, it is a substantial piece of work, and the Treasury did go to the trouble of commissioning two reviews of economic policy for Northern Ireland. At the moment, we are involved in very sensitive discussions around trying to avoid the additional 2% efficiency savings. There are issues regarding end-year flexibility; there is a potential review of the Barnett formula coming up; there will be discussions regarding the financial package for the devolution of policing and justice. It strikes me that even though we do not terribly agree with a lot of the review, a one-page response to something of that magnitude is rather dismissive of the effort that was put in on our behalf. Do you see that that approach puts at risk the wider relationship that we are trying to build with the Treasury?

Mr Pengelly:

Mike may want to add more detail, but, essentially, the work of Varney II concluded with a detailed report that put in place some mechanisms. I read that note as saying to the Treasury that the review is a very positive piece of work, that there is broad agreement across the Executive to much, but not all, of the review, and reflects that that work has now been factored into the evolving Programme for Government and distilled down to departmental level so that action can be taken forward. In a sense, the brevity of the note gives the signal that it is now time to stop talking about strategic analysis and to get down to business.

Dr Farry:

You are trying to pitch the letter in positive terms; however, at the end of paragraph 3 it states that there is nothing new or helpful in that regard.

Mr Pengelly:

It states “in that regard”, as opposed to “in any regard”.

Mr Brennan:

That reflects the fact that when the Executive Ministers were asked to comment on Varney II, all the responses that came back flagged up the point that that is work that we are already doing. Yes, Varney II conducted an extensive and detailed analysis; however, it was telling us what we already knew.

Dr Farry:

Does a paper exist that lists the Varney II recommendations and categorises, in the form of a checklist, whether those actions are already under way; which Department is taking the lead; which other Departments are involved; and what action needs to take place?

Mr Brennan:

The Finance Minister wrote to his Executive colleagues and asked them to consider the recommendations. The Ministers responded, each tending to focus on the recommendations that applied to him or her. For example, the Social Development Minister focused on the recommendations relating to social housing. The responses were all brought together into a collective response, reflecting the acceptance and understandings of the individual Ministers. However, as I said earlier, the bottom line is that the Minister said that we are already doing these things and there is nothing new here.

Dr Farry:

There is, then, no single checklist of the Varney II recommendations — only the disparate responses of Ministers. Is there any intention to publish those?

Mr Brennan:

No. I do not think so.

Dr Farry:

I refer once more to Varney II. It was stressed that many of the recommendations are already under way. However, the Minister also said that Varney II has been largely “overtaken by events”. That is a paradoxical situation: contradictory messages are being sent out by the Executive. First, they say that Varney II reflects what is going on in the Programme for Government; secondly, they say that Varney II has been overtaken by events; and, thirdly, that our Programme for Government does not need to be revised, due to the fact that it foresaw the economic downturn and gave priority the economy. I am trying to get my head around those three different views that emanate from the Executive.

Mr Pengelly:

I think that it is logically coherent. Michael will keep me right, but Varney was “overtaken by events” in this sense: we have a suite of Varney II recommendations, many of which are within the control of the Executive or are enshrined in the Programme for Government. In that sense, the Programme for Government becomes the key strategic document to which the Executive is working. Therefore, Varney II is “overtaken by events” because everything in it that is of direct value is incorporated into the Programme for Government.

I want to be clear. We do not mean that Varney has been “overtaken by events” in the sense that the economy is now in a different place and therefore we can dismiss everything that was relevant in Varney. Rather, it is still relevant today, but particularly relevant in the long term. It is in the Programme for Government. Earlier, we discussed shorter-term issues: regular dialogue between the Assembly and the Executive on the response to the economic downturn. “Overtaken by events” really means that relevant issues — the Executive’s control of policy levers — have been embraced by the Executive and enshrined within their own planning documents. Therefore, we focus on those documents, rather than on Varney.

Mr Brennan:

The way that you can reconcile your three statements is by being able to differentiate between the long-term aspirations of the Programme for Government and the shorter-term need to address interventions in the economy, such as the December monitoring statement. That is the difference: between a short-term direct need to act now, and the longer-term aspirations of the Programme for Government.

Dr Farry:

I return to the concept of a regional economic strategy. I note that you have now moved away from producing a regional economic strategy along the lines of the draft that was formerly produced under direct rule, and we now have a document entitled ‘Delivering Economic Growth in Northern Ireland’, which draws heavily on the Programme for Government. I respect and recognise that, within the Programme for Government, the Executive gave priority to the economy. However, that document is extremely short. Only three pages are effectively given over to the economy. While that may be appropriate in a headline, global document for public consumption, to my mind there is a big difference between a three-page statement and what was the former draft economic strategy, flawed as it was, which ran to well over 100 pages. If we need something narrower and more concise, that is fine; but I would expect it to run to at least 40 or 50 pages, not something that short.

Mr Brennan:

When I say that ‘Delivering Economic Growth in Northern Ireland’ will assess the Programme for Government, I do not mean that it will assess only that three-page document. Rather, it will assess how we deliver, for example, the first five public service agreements in the Programme for Government. There is a wide range of daughter documents: for example, a key element in the Programme for Government is promoting innovation and enterprise. That includes Northern Ireland’s regional innovation strategy which is produced by DETI, and DRD’s regional development strategy. A wide range of daughter documents are therefore embedded within the concept of the Programme for Government and in economic growth as envisaged in the Programme for Government. That is what we are working towards, what DETI is working towards, and what DEL is working towards through the skills commission.

Dr Farry:

I wish to discuss the PSAs. In a sense, the headline performance target for the Northern Ireland economy is the issue of gross value added (GVA) conversions, on which we hope to narrow the gap with the UK average, minus the south-east of England.

There is currently a risk of a false positive emerging with respect to GVA convergence. I imagine that the PSA on that was devised on the basis that all regions would continue to grow, albeit at different levels. It was not drawn up with economic recession in mind. It strikes me that when there was some GVA convergence between Northern Ireland and the UK average in the early 1990s, it occurred in the context of recession in the rest of the UK, while Northern Ireland did not enter recession.

Today’s recession may result in a 2% drop in growth in Northern Ireland and an average of 3% across the UK. That may lead to GVA convergence occurring indirectly, but that would be achieved on the basis of a negative when the absolutes are considered. How do you finesse the target to take account of those subtleties?

Mr Brennan:

Your point about a false positive is correct. The old GVA productivity measure for Northern Ireland was measured against the UK average, and if that had been retained, the figure would have moved from 81% to closer to 100%, but that would be for all the wrong reasons. Therefore, we initially decided to remove the figures for London in order to get a better reflection of how Northern Ireland performs against the standardised English, Scottish and Welsh regions.

Dr Farry:

Surely that rationale for removing the figures for London was that the figures were skewed because of the financial services sector.

Mr Brennan:

That was the rationale. Like was not being compared with like.

Dr Farry:

You now have the advantage because, although removing London from those figures for a different reason removes a false positive to a certain degree, there is still a risk of a certain false positive occurring.

Mr Brennan:

The magnitudes of regional GVA variation are probably minimised. However, people may presume that Northern Ireland will start to converge against the new benchmark that excludes the south-east of England, and I am worried by that because of the nature of the industrial structure of Northern Ireland.

For example, the boost to the retail sector is always presented as a benefit of cross-border shopping, but that does not have much impact on the regional GVA. For a start, most of the jobs in the retail sector tend to be poorly paid, but at least they are jobs. The benefit of those jobs will not be reflected in regional GVA, because they are low-paid jobs. In addition, any profits that Tesco or Sainsbury’s, for example, make are not attributed to Northern Ireland but to their headquarters elsewhere in the UK. Cross-border shopping will not bring about a GVA convergence effect.

The real gross value added in an economy comes from the manufacturing sector, which is proportionately smaller in Northern Ireland to any other UK region. That is my worry about the presumption that GVA in Northern Ireland will converge. Even in these times of recession, Northern Ireland will not get that bounce-back effect.

Mr Pengelly:

Dr Farry’s substantive point is well made. A simple GVA measure will not show whether we have succeeded or failed in a year’s time. That is one of the reasons why the Executive initiated PSA delivery frameworks. Although Departments have key PSA measures, they need to set out their actions and measures. A judgement of success or failure will be based on all the measures and interventions that have taken place. Even when convergence or divergence takes place, the reasons for that will be considered, analysed and split out.

Dr Farry:

Are there plans to revise the PSA targets in that regard? The situation must be avoided in which people, on a simplistic level, can pat themselves on the back because they have ticked a box if that means nothing. It is a sign of complacency for people to celebrate the fact that the GVA gap has been narrowed if it is for entirely the wrong reasons.

Mr Pengelly:

Later this year, OFMDFM plans to carry out a stocktake review of progress on the Programme for Government. I suspect that one of the issues that will come out of that will be that there is a need to continue to refine and tweak PSAs. The core point is that we must remain focused on the economic growth agenda and the other agendas the next time there is a formal substantive Programme for Government process. My experience is that, when circumstances change, we have been too quick to amend targets, rather than to focus on the things that need to be done to achieve success, however that is defined. If one is too focused on change, it provides an alibi for failing.

Dr Farry:

I would draw a distinction between how the Civil Service and some politicians react to PSA targets, but that is another matter, on which I do not expect you to comment.

On 10 December 2008, you told the Committee:

“A concerted effort is being made to reprioritise the investment strategy to develop projects that can be started very quickly and be of specific benefit to the constructions industry”.

How are you getting on with that? Will you give us examples of what has happened?

Mr Brennan:

That was one of the key matters raised in the EDF subgroup, the report from which, as I mentioned earlier, has gone to the Office of the First Minister and deputy First Minister, strongly pressed by the Business Alliance, which is examining, for example, procurement procedures, with a view to breaking up the framework directive in order to allow specific projects to proceed. That recommendation is in the report that has gone to OFMDFM.

Mr Pengelly:

The best example is the decision taken following discussions between Margaret Ritchie and Nigel Dodds concerning DSD’s plans to acquire a piece of land before the end of the financial year. The only person affected by the decision to defer the purchase until next year was the landowner. Instead of being used to acquire land, the money was put into newbuild and social housing, which will benefit both those in housing need and the construction industry.

The nature of big capital projects means that it is sometimes difficult to bring them forward when one is well into the financial year. Nevertheless, the Executive were collectively considering ways in which to do so.

Dr Farry:

Will there be opportunities after 1 April?

Mr Pengelly:

We hope so.

Dr Farry:

Finally, I want to ask about public-sector pay, although I promise not to ask any personal questions. Varney recommended that the Executive seek confirmation from the Treasury that Northern Ireland would have the flexibility to use public-sector pay to close the present public/private pay differential, particularly at Senior Civil Service level, in order that public-sector pay here better reflects local labour market conditions, unlike the south-east of England, where private-sector pay massively outstrips the top public-sector pay rates. Here, we have the opposite situation. Has that confirmation been sought, and received, from the Treasury, and what further consideration has been given to the subject?

Mr Brennan:

We work closely with the Treasury on policing public-sector pay policy in Northern Ireland. In addition, the Finance Minister must personally approve all pay remits for all public-sector organisations. When seeking that approval, a business case must be submitted, and a key element of that is the extent to which discretion is afforded to particular organisation to set pay levels. Furthermore, we strictly ensure that organisations do not breach the Treasury’s set limits. Those negotiations are carried out at a general level.

With respect to senior Civil Service pay, there is new data from the annual survey of household earnings that highlights significant year-on-year variations. For example, last year, the difference between public- and private-sector pay for some grades was as much as 20%; whereas, the latest data shows that the differential has fallen to 1% or 2%. So, there are significant year-on-year variations, as well as a difficulty with matching private-sector and public-sector occupation classifications.

Dr Farry:

Indeed, but are we seeking the flexibility to do things differently in Northern Ireland, if we chose to do so?

Mr Brennan:

We have that flexibility within Treasury rules, and the Finance Minister polices that through the business-case process. The key aims of that process are to ensure that we achieve value for money and that proposals are affordable within departmental budgets.

Dr Farry:

No doubt we will return to that subject.

The Chairperson:

In previous sessions, we were told that DFP would be making a significant contribution to the Varney Review. In hindsight, how much of your input was reflected in the report?

Mr Brennan:

A large part of the analysis, data gathering and number-crunching was carried out by DFP staff members, who, working with Treasury officials, made a significant contribution. That information was handed over to Sir David Varney, who then produced a summary. Consequently, the paper that was published is his interpretation of the analysis and data with which he was provided. Economists and statisticians from throughout the Northern Ireland Departments collated that information and worked with Treasury colleagues.

The Chairperson:

In hindsight, how valuable has Varney II been? What tangible benefits has it produced?

Mr Brennan:

On the positive side, Varney II confirmed that the policy focus of the Programme for Government, for example, was heading in the right direction. That may have been stating the obvious, because those things were being done anyway, but we can take comfort from the fact that an external commentator said that what we were doing was right.

The Chairperson:

Has it given us any additional leverage with the Treasury that we did not have before?

Mr Pengelly:

I do not think that any additional leverage has been gained. As Mr Brennan said, the Treasury’s view is that this work is the Executive’s responsibility. The real benefit of Varney II for the Executive is that it provided a dispassionate and remote evidence-based analysis of where we are going, which is in line with the views that have been coming up through the system.

Mr F McCann:

Varney II mentions the need to reduce the number of people who are on incapacity benefit. We are in the midst of welfare reforms at present. To what extent does Varney’s attitude determine what we are doing about incapacity benefit?

Mr Pengelly:

Without being that close to the detail of the matter, I do not believe that Varney II guides what we are doing. Incapacity benefit has parity as a national initiative. When it comes to benefits in general, the Department of Work and Pensions (DWP) gives the policy lead. It is interesting that there has been a formal acceptance by the Treasury that, despite the fact that the comprehensive spending review was set in a period of rapid and buoyant economic growth, the DWP budget had taken a massive hit. The Treasury has now formally concluded that DWP should operate on a counter-cyclical basis against economic growth. My understanding is that DWP is locked into dialogue with the Treasury in order to try to secure additional resources, because the claimant count has increased, and it is trying to support the additional number of incapacity benefit and unemployment benefit claimants. Our colleagues in DEL and DSD are more clued in about that, but I do not think that Varney II, per se, has had a substantive influence.

Mr F McCann:

It was mentioned in Varney II. It seems that the purpose of the Welfare Reform Bill is to get as many people as possible off incapacity benefit.

The Chairperson:

In such a broad discussion, cross-cutting issues will arise, and Mr Pengelly has drawn attention to them on a couple of occasions. I suggest that we circulate the Hansard report of this discussion to the other scrutiny Committees. It is possible that when we take a look at the Hansard report, we will identify follow-up issues. If that is the case, we will come back to you in the normal way. Thank you very much for your contribution. I believe that Mr Pengelly is staying with us for the next session. He is a glutton for punishment.

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