COMMITTEE FOR FINANCE AND PERSONNEL

The Executive’s Position Report to
The Assembly: Developing The
Programme for Government and
The Budget for 2003-04

REPORT ON THE OUTCOME OF CONSIDERATION BY
THE STATUTORY DEPARTMENTAL COMMITTEES

Ordered by the Committee for Finance and Personnel to be printed on 27 August 2002.
Report 01/02 to the Northern Ireland Assembly from the Committee for Finance and Personnel on
Statutory Departmental Committees’ deliberations on ‘The Executive’s Position Report to the Assembly:
Developing the Programme for Government and the Budget for 2003-04’.

The Committee for Finance and Personnel is a Statutory Departmental Committee established in accordance with paragraphs 8 and 9 of Strand One of the Belfast Agreement and under Standing Order No. 45 of the Northern Ireland Assembly. The Committee has a scrutiny, policy development and consultation role with respect to the Department of Finance and Personnel and has a role in the initiation of legislation.

The Committee has the power to:

• consider and advise on departmental budgets and annual plans in the context of the overall budget allocation;
• approve relevant secondary legislation and take the Committee Stage of relevant primary legislation;
• call for persons and papers;
• initiate enquires and make reports;
• consider and advise on matters brought to the Committee by the Minister of Finance and Personnel.

The Committee was established on 29 November 1999 with eleven members, including a Chairperson and Deputy Chairperson and a quorum of five members.

The membership of the Committee is as follows:

• Mr Francie Molloy (Chairman)
• Mr Roy Beggs Jnr (Deputy Chairman) (appointed in replacement of Mr James Leslie on 20 February 2002)
• Mr Alex Attwood
• Mr Billy Bell
• Mr Seamus Close
• Mr Derek Hussey
• Mr Roger Hutchinson (appointed in replacement of Mr Nigel Dodds MP on 12 November 2001)
• Ms Patricia Lewsley (appointed in replacement of Mr Donovan McClelland on 15 January 2001)
• Mr Alex Maskey
• Mr Maurice Morrow (appointed in replacement of Mr Peter Robinson MP on 12 November 2001)
• Mr Peter Weir

TABLE OF CONTENTS

1. General.

2. Budget process

3. Indicative figures for 2003/04.

4. Implications of the Barnett Formula

5. Process and timetable.

6. In Year Scrutiny 11

7. In Year Monitoring

8. End Year Scrutiny

9. End Year Monitoring

10. Context.

11. Questions posed in the Executive’s Position Report.
Using resources more effectively.
Financing our future.
Executive Programme Funds.
Public Procurement.
Administrative Costs.
Use and disposal of assets.
E Government.

12. Common themes and major strategic issues.

13. Questions posed in the Executive’s Position Report.
Pressures and easements.
Rises in pay and prices.
Administration costs.

14. General

APPENDIX 1. Minutes of Proceedings of the Committee relating to the Report

APPENDIX 2. Commissioning Letters and Related Documents.

APPENDIX 3. Responses from Committees.

The Committee for Finance and Personnel agreed to collate Assembly Committee responses to the Executive’s Position Report on the resource and Budget issues. The Committee has carefully considered the strategic and departmental issues arising from committee responses and makes the following recommendations for consideration: -

1. The Committee recommends that adequate time should be provided for a full Assembly debate, initiated by the Executive, on the Needs and Effectiveness Evaluations.

2. The Committee recommends that some rationalisation is urgently required to reduce the number of strategic documents and to potentially amalgamate SDAs and strategic planning documents. The Committee would like to see a greater focus on a few key documents set within an agreed framework around the PfG and the Budget.

3. The Committee recommends that while there is no lack of material available to committees to facilitate the scrutiny process, early action should be taken to rationalise information flows to committees from departments. The Committee would wish to see a solid and coherent financial process established and for all committees to receive timely, relevant and appropriate financial information throughout the financial cycle.

4. The Committee for Finance and Personnel is concerned about the percentage of resource underspends in the 2001/02 financial year and the rate of increase in the last two financial years. The Committee recommends that departments and DFP should actively engage in identifying areas of consistent underspend. This information, provided at the earliest opportunity in the financial year, would enable committees to focus their scrutiny on departmental resource allocations against planned activities and outcomes and contribute to effective targeting of resources against high priority areas.

5. The Committee recommends that further consideration should be given to the format and content of Departmental Position and Executive Position Reports to enable Committees to give a more informed response. Consultation with committees and adequate but focussed information is essential if the recent and welcome improvements in the financial planning process are to bear fruit.

6. The Committee considers that there is currently a lack of clarity about the respective roles of the Strategic Investment Body and the Procurement Board and recommends that clear guidance from the Executive on this issue should issue as a matter of urgency. The Committee would also like to have clarification on which committee will be responsible for scrutinising the Strategic Investment Body.

7. The Committee recommends that all departments should be addressing efficiency and effectiveness issues through designated Business Improvement Units. The Committee also recommends that the work of the Improvement Units should be co-ordinated by DFP with the potential for involvement of the Economic Policy Unit. The lessons learnt should be shared through a co-ordinated inter-departmental body chaired by DFP. The conclusions of the inter-departmental group should be made available to committees to inform their views on the competing demands of departments for resources.

8. The Committee recommends that efficiency savings identified by Central Finance Group, Central Personnel Group and Corporate Services of the Department of Finance and Personnel are validated by Departments, particularly before they are submitted as part of bids for additional resources. Evidence of consultation should be required as standard.

9. The Committee recommends that the Executive should develop and introduce an asset management strategy as soon as possible. The Committee also recommends that guidance should be issued by the Executive to departments on departmental investment strategies including advice on monitoring and control systems. Relevant Assembly committees should be consulted on both sets of guidance.

10. The Committee has concerns about the potential for wastage through the replication of high project costs on individual departmental computerisation projects and recommends the need for a co-ordinated interdepartmental approach to procurement and systems development.

1. The Committee recommends that all committees should set aside planned time for financial scrutiny of departmental expenditure against expected outcomes. The Committee believes that this approach is essential if committees are to make a telling and informed input to the budget debate.

2. The Committee recommends that all Assembly departmental committees include scheduled scrutiny of their departments’ financial positions in advance of Monitoring Round statements by the Minister of Finance and Personnel.

1.1 The Minister of Finance and Personnel, Dr Sean Farren, made a statement to the Assembly on 4 March 2002 regarding the Budget 2002 timetable and arrangements on behalf of the Executive Committee. The Minister advised the Assembly and the wider public of the proposed timings for the key planning and financial events leading to the Executive’s Budget in December 2002. A copy of the Minister’s statement is presented in this Report as Appendix 2A.

1.2 In his statement the Minister said that he welcomed the suggestions which had been made to refine the Budget process. Among those suggestions were recommendations made by the Committee for Finance and Personnel in its Report on the considerations by Assembly committees of the Executive’s Position Report last year.

1.3 The Committee for Finance and Personnel welcomes the Minister’s positive response to its recommendation that Assembly Committees should be involved earlier in the Budget process.

2.1 The first stage of the process was the copying of draft Departmental Position Reports to Assembly committees for consultation and scrutiny. No consultation on Departmental Position Reports was available in the previous Budget cycle. The Minister advised the Assembly that Departments had been issued guidance to consult with Assembly committees on Departmental Position Reports before they were submitted to the Central Finance Group in the Department of Finance and Personnel and the Economic Policy Unit in the Office of the First Minster and Deputy First Minister.

2.2 The Minister of Finance and Personnel set the completion date for consultation and final presentation of Departmental Position Reports as 19 April 2002.

2.3 The Minister of Finance and Personnel accepted that the Chancellor of the Exchequer’s announcement on the outcome of his Spending Review 2002 in the third week of July 2002 could lead to consequential allocations under the Barnett Formula. Departments and Committees would not have an opportunity to comment on this announcement in this report but could do so later in the process.

2.4 On 5 June 2002 the First Minister and Deputy First Minister presented the Executive’s Position Report to the Assembly. Their statement is included as Appendix 2B.

2.5 The First Minister and Deputy First Minister wrote to Assembly committees requesting views on the resource aspects of the Executive’s Position Report by mid – August (see Appendix 2C). The Committee for Finance and Personnel agreed, as in previous years, to co-ordinate committees’ responses to the Minister of Finance and Personnel into a single report. This Report presents that response.

3.1 The Position Report highlighted the amount of money available to the Executive for 2003/04. This baseline was first set in the 2000 Spending Review. The figures have been revised to take account of technical adjustments and the Chancellor of the Exchequer’s April 2002 Budget and converted to Resource Accounting and Budgeting (RAB) classifications. The Departmental Spending Limit (DEL) is as follows [i]

3.2 When the Assembly agreed the Budget presented by the Executive in December 2001, it set indicative minima for Departments for the 2003/04 financial year. This approach was taken to offset the possibility of limited increases in public expenditure in 2003/04 from Treasury. The Executive would thereby retain a significant degree of flexibility to allow it to effectively target its resources to reflect local needs and priorities. The amount of resources held back through the Executive’s SR 2002 allocation was £125m.

3.3 The Executive has earmarked the £73.6m unallocated resources from the Chancellor’s April 2002 Budget for the Department of Health, Social Services and Public Safety.

3.4 The Executive has recognised that it will be necessary to restore some of the £125m held back from Departmental baselines for 2003/04 but this approach allows it to be more flexible in moving resources from lower to higher priority areas.

3.5 The Executive also retains unallocated ring–fenced resources in its Executive Programme Funds.

3.6 The resources available to each Department as set by the indicative minima and the unallocated resources held back by the Executive are detailed below.

4.1 The Committee notes that spending per head of population in Northern Ireland is substantially higher than in England. The Committee agrees with the Executive view that this is misleading as no account is taken of relative need, lack of absolute comparability between central government and local government spending areas and the particular characteristics present in Northern Ireland that are not present in England. Differences such as the higher levels of social deprivation and the relative size of the school population indicate a higher level of need for resources to meet the needs of Northern Ireland to the level present in England.

4.2 The Committee has been sensitive to the difficult issues that Barnett raises for the Executive and has been content to await the outcome of Executive discussions with HM Treasury. The Committee welcomes the completion of the Needs and Effectiveness Evaluations and hope that these will provide the detail to make a successful case for more resources. The Committee will be looking to the Executive to provide an update on the discussions with Treasury during a debate on the Needs and Effectiveness Evaluations.

5.1 The Northern Ireland Executive began the process to deliver its Programme for Government and Budget for the 2003/04 financial year on 4 March 2002. The Minister of Finance and Personnel announced a timetable leading to the presentation, debate and vote on these key documents by December 2002.

5.2 The Committee for Finance and Personnel had pressed for earlier consultation between departments and committees before priorities were set and bids submitted. The Committee therefore welcomed the Minister of Finance and Personnel’s decision to require departments to consult committees on Departmental Position Reports (DPRs) before submission to the Central Finance Group (CFG) and the Economic Policy Unit (EPU). The Committee recognises that this places a key responsibility on committees to provide substantive and informed input to the financial planning process.

5.3 Departmental Position Reports effectively start the annual Budget process but as the Minister of Finance and Personnel advised the Assembly, committees are free to scrutinise financial performance and budgetary issues at any stage.

5.4 The guidance issued by DFP regarding the Departmental Position Reports sought a broad analysis of how departments are delivering the Executive’s priorities. At this point in the process Assembly committees have the opportunity to examine and validate their Departments’ analysis. Ongoing in-year scrutiny of budgets and performance by Assembly committees would significantly enhance the scrutiny process and inform committee responses at the key planning stages. To carry out this scrutiny committees have access to Departmental and Agency Strategic and Business Plans, Public Service Agreements and Service Delivery Agreements and can request Ministers and/or departmental officials to update them on performance and financial issues (See Section 6). In addition, variation to spending plans is provided in quarterly monitoring reports by departments to the Minister of Finance and Personnel and by the Minister to the Assembly (See Section 7).

5.5 The Committee accepts that it is a key function of the scrutiny process for all committees to regularly consider and question departments about easements and pressures emerging in quarterly monitoring rounds. To this end the Committee has required DFP to provide regular briefings and updates on the position within the Department. The Committee has also successfully pressed the Minister to urgently review the in-year monitoring process to improve the level of performance in financial profiling against actual expenditure.

5.6 The Committee recommends that all committees should adopt a similar approach by setting aside planned committee time for financial scrutiny of departmental expenditure against expected outcomes. The Committee believe that this approach is essential if committees are to make a telling and informed input to the budget debate.

5.7 The second stage of the Budget process is the presentation of the Executive’s Position Report to the Assembly. Responses from Assembly committees and the wider public are sought, which assists the Executive Committee to consider and agree its priorities for the Budget and the Programme for Government (PfG). Resources to address the PfG are targeted towards those priorities through the Executive’s Budget. The Executive’s Position Report is therefore not a decision making document but provides a vital basis for consultation whereby Departmental Ministers present the strategic issues facing their departments and make bids for resources to support those programmes.

5.8 The Minister of Finance and Personnel announced in his Budget 2001 statement that the Executive had initiated Needs and Effectiveness Evaluations in five programmes involving health, education, housing, training and vocational education and financial assistance to industry. This was later increased to six to include culture, arts and leisure. In his statement announcing the Budget 2002 timetable on 4 March 2002 the Minister of Finance and Personnel referred to the assessment by the Executive of the Needs and Effectiveness Evaluations along with the Burns Report, the Hayes and Acute Hospitals Review, the Regional Transportation Strategy, the Task Force on Long Term Unemployment, the interdepartmental work on Research and Development, proposals in relation to the Water Service and the Rural Visioning Report before the summer. These documents also provide valuable information to Assembly committees to assist them with their responses to the Executive’s Position Report.

5.9 The Minister had indicated that five of the Needs and Effectiveness Evaluations would be presented to the Executive Committee in May and June 2002 and were to be released to Assembly committees before the summer recess to coincide with committees’ consideration of the Executive’s Position Report. However, the Needs and Effectiveness Evaluations were not available to committees before the recess and therefore committees have been able to provide only tentative analysis of performance by departments of their achievement to deliver the Executive’s priorities. The Committee for Finance and Personnel considered that the delay in providing the 6 Needs and Effectiveness Evaluations inevitably restricted committees’ ability to respond to the Executive’s Position Report in a more informed manner. The Committee does, however, recognise that the Assembly will have an extended opportunity to scrutinise and debate the Evaluations in the period leading up to the Executives’ Revised Budget in December 2002.

5.10 The Committee recommends that adequate time should be provided for a full Assembly debate, to be initiated by the Executive, on the Needs and Effectiveness Evaluations.

5.11 The Executive’s Position Report is presented in four parts. Part one sets the context of the document while Part two addresses the Executive’s endeavour to update its policy direction, plans and priorities for the years ahead through a revision of its Programme for Government. Part three addresses the strategic issues facing the Executive and sets out the financial resources and constraints involved with resource budgeting and the spending reviews. Part four addresses Departmental issues for 2003/04 and beyond.

5.12 Committees were asked to respond directly to the Office of the First Minister and Deputy First Minister on Part two – the Programme for Government. This Report concentrates on Part three – Resources, and Part four – Departmental issues for 2003/04 and beyond.

6.1 In its Programme for Government the Executive sets out in detail its plans and priorities for the coming year and beyond. The Programme for Government and Public Service Agreements contain the key objectives, outcomes and outputs that each Department is working to deliver in support of the Executive’s objectives. These objectives are presented along with resource allocation figures.

6.2 In addition, Departments and Executive Agencies produce Strategic and Business Plans and Service Delivery Agreements which link to the Programme for Government and provide lower level and more detailed information on the work within departments to underpin the PfG.

6.3 The Committee has been concerned about the proliferation of strategic planning documents. For example, the apparent duplication between Departmental Service Delivery Agreements and Departmental and Agency Strategic and Business plans. The Committee recommends that some rationalisation is urgently required to reduce the number of strategic documents and to potentially amalgamate SDAs and strategic planning documents. The Committee would like to see a greater focus on a few key documents set within an agreed framework around the PfG and the Budget.

6.4 These documents collectively provide a basis for scrutiny by Assembly committees and an opportunity to focus on departmental performance and budget management and/or service provision.

6.5 The Committee for Finance and Personnel is aware that some committees are carrying out structured in–year periodical reviews of performance on business areas within their departments to assess in-year performance in achieving objectives.

6.6 By carrying out this scrutiny on an ongoing basis Assembly committees can have an input to prioritisation and targeting of resources within their departments to achieve agreed objectives and to contribute to the strategic allocation of resources in the annual Budget process. The Committee for Finance and Personnel believes that all Assembly departmental committees should include scheduled and structured in-year scrutiny of business areas within their departments.

7.1 There are four Monitoring Rounds within the annual financial cycle at June, September, December and February. These Monitoring Rounds are opportunities for departments to reappraise their spending plans and to surrender surplus resources and/or bid for additional resources to meet emerging pressures or priorities.

7.2 The Executive has the discretion to retain some of those resources surrendered in Monitoring Rounds for reallocation in future years to higher priority areas than those arising in-year.

7.3 Departmental committees have the opportunity to be briefed by their departments on developing in-year financial position before Monitoring Round statements by the Minister of Finance and Personnel. By doing so Assembly committees can have an input to prioritisation of resources within their departments. This approach would avoid an excessive concentration on departmental bids by providing a balanced emphasis on outputs, VfM and the wider financial position within departments.

7.4 The Committee for Finance and Personnel is briefed by the Department of Finance and Personnel in advance of Monitoring Rounds on the financial position within the Department. Also, the Minister of Finance and Personnel briefs the Committee Chairman and Deputy Chairman in advance of Monitoring Round statements on behalf of the Executive. The Committee for Finance and Personnel recommends that all Assembly Departmental Committees include scheduled scrutiny of their departments’ financial position in advance of Monitoring Round statements by the Minister of Finance and Personnel.

8.1 At the end of each financial year the Executive produces an Annual Report setting out its progress in implementing the Programme for Government. In addition, departments and agencies produce their own annual reports and accounts. These documents provide analysis of the Executive’s performance against targets.

The Committee for Finance and Personnel considers that the information in these documents is a key and integral part of the wider scrutiny and monitoring process.

8.2 The Committee recommends that while there is no lack of material available to committees to facilitate the scrutiny process, early action should be taken to rationalise information flows to committees from departments. The Committee would wish to see a solid and coherent financial process established and for all committees to receive timely, relevant and appropriate financial information throughout the financial cycle.

9.1 Each year the Minister of Finance and Personnel presents a provisional statement on underspends by departments. Formal approval is sought (and usually given) from Treasury to carry forward underspends into the new financial year.

9.2 In his statement to the Assembly in July 2002, the Minister of Finance and Personnel told the Assembly that the total provisional underspend figure for the 2001/02 financial year was £365m. A large proportion of that amount related to ring-fenced funds for EU Funds, Executive Programme Funds, room to manoeuvre, planned carry forward and capital. A summary of departmental underspends and comparison to the previous year, 2000/01 is presented below.

9.3 It should be noted that the provisional underspend figures for each department relate to its final plan. Other amounts below the sub-total line have been secured from Departments’ baselines during the financial year.

9.4 Scrutiny of end-year underspend positions will inform Assembly committees of the level of resources which have become available to the Executive over the previous financial year and assist committees’ responses to the Executive’s Position Report and analysis of departments’ budget management.

9.5 The Committee for Finance and Personnel is concerned about the percentage of resource underspends in the 2001/02 financial year and the rate of increase in the last two financial years. The Committee recommends that departments and DFP should actively engage in identifying areas of consistent underspend. This information, provided at the earliest opportunity in the financial year, will enable committees to focus their scrutiny on departmental resource allocations against planned activities and outcomes and contribute to effective targeting of resources against high priority areas.

10.1 The Minister of Finance and Personnel asked Assembly Committees to "look at Departments from the widest possible context" and "not to lose sight of the full range of issues facing public services or become exclusively preoccupied with bids for additional resources".

10.2 In Part three of the Executive’s Position Report several questions were specifically posed to help committees address the wider context of resources. The Committee for Finance and Personnel found this approach helpful in its deliberations but has noted that not all Assembly committees adopted this approach and have concentrated their deliberations mainly on their own departmental issues.

10.3 The Committee is concerned about the limited capacity available to committees to address the strategic and detailed questions posed. The Committee believes that the level of expectation placed on committees to provide substantive and informed views to a tight timetable on broadly drawn planning documents such as DPRs and the Executive’s Position Report is unrealistic. The intervention of the summer recess adds to committees’ problems.

10.4 The Committee also believe that it was a little unrealistic of the Executive to expect a substantive policy input from committees on major policy areas, which were still in the process of review and before recommendations were available in reports.

10.5 The Committee recommends that further consideration should be given to the format and content of Departmental Position and Executive Position Reports to enable committees to give a more informed response. Consultation with committees and adequate but focussed information is essential if the recent and welcome improvements in the financial planning process are to bear fruit.

10.6 The Committee is considering whether it would be helpful to recruit a specialist adviser to assist it and other committees to provide effective and strategic input to the Budget process.

10.7 Committees’ responses are attached as Appendix 3 of this report.

11.1 Executive’s Position Report Paragraph 67 – Using Resources More Effectively.

Several committees called for the restoration of the resources removed by the Executive for its SR2002 allocation and expressed support in general terms for bids made by their departments. The Committee for Agriculture and Rural Development recommended that rural needs should be escalated as one of the Executive’s highest priorities because they were key in terms of economic, social and environmental issues in Northern Ireland and bear comparison with the Executive’s other highest priorities. The Committee for Agriculture and Rural Development also reiterated its recommendation that tackling animal disease should be made a sub-priority in the Programme for Government and called for greater co-ordination and financial and technical support for farmers dealing with the environmental aspects of farm pollution.

11.2 The Committees for Enterprise Trade and Investment and the Centre welcomed the Review of Public Administration to allow resources to be focused where they are most needed. The Committees for Education, Finance and Personnel and Health Social Services and Public Safety indicated that the Needs and Effectiveness Evaluations would provide a better measure of the effectiveness of current programmes so that resources could be targeted more effectively. The Committee for Finance and Personnel would like early sight of investment proposals from the Strategic Investment Body.

11.3 The Committee for Employment and Learning specifically identified three areas where it believed there was scope from within existing provision to be directed at the priorities in the Programme for Government.

11.4 Executive Position Report Paragraph 80 – Financing our future.

The Committee for Regional Development presented a substantial assessment of the bids submitted by its Department to address the infrastructure deficit. The Committee for Regional Development considers that all the bids submitted by the Department for Regional Development for infrastructure should be met. The Committees for Education, Finance and Personnel and Regional Development welcome the establishment of the Strategic Investment Body. This should ultimately achieve a deal flow of capital projects underpinning strategically financed economic development in Northern Ireland. The Committee for the Centre hopes to explore the potential of the Reinvestment and Reform Initiative in the next few months.

11.5 Executive’s Position Report Paragraph 86 – Financing our future.

The Committee for Finance and Personnel has no objections in principle to the use of private sector funding but has reiterated its view that the preferred form of funding is conventional public finance. Committees did not identify any specific project for private sector funding and several considered that it is largely beyond the competence of committees to provide an informed view on this question. The Committee for Regional Development and the Committee for Finance and Personnel have, however, stated that each capital project should be taken on its own merits and that the Strategic Investment Body should produce a strategic approach in providing funding options for a range of projects. The Committee of the Centre had some concerns regarding the availability of robust evidence to support the assertion that Public Private Partnerships can deliver value for money.

11.6 The Committee considers that there is currently a lack of clarity about the respective roles of the Strategic Investment Body and the Procurement Board and recommends that clear guidance from the Executive on this issue should issue as a matter of urgency. The Committee would also like to have clarification on which committee will be responsible for scrutinising the Strategic Investment Body.

11.7 Executive’s Position Report Paragraph 98 – Executive Programme Funds.

The Committee for Regional Development wishes to see the Infrastructure Fund and the Reinvestment and Reform Initiative helping to reduce the deficit in the roads and water infrastructure. The Committee for Finance and Personnel has previously recommended to the Minister that each Fund should have its own strategic direction and intent set out clearly by the Executive provided it does not create inflexibility or inhibit an imaginative approach. The Committees for Finance and Personnel and Employment and Learning want to see a more cross cutting approach to the bids by Departments. The Committee for Health Social Services and Public Safety has welcomed the recent changes made to the structure and management of the Funds.

11.8 Executive’s Position Report Paragraph 102 – Public Procurement.

The Committee for Finance and Personnel wishes to see a co-ordinated approach in the PfG to address the infrastructure deficit. The Committee considers that the Procurement Board should utilise the scale of the investment programme to maximise value for money. The Committee for Regional Development welcomes the Central Procurement Directorate.

11.9 Executive’s Position Report Paragraph 105 – Administration costs.

Committees have identified the Review of Public Administration as an important opportunity to make real gains in efficiency. The Committee for Regional Development believes that all public institutions must proactively seek to improve their efficiency. The Committee for Finance and Personnel recommends that all departments should be addressing efficiency and effectiveness issues through designated Business Improvement Units. The Committee also recommends that the work of the Improvement Units should be co-ordinated by DFP with the potential for input by the Economic Policy Unit. Lessons learnt should be shared through a co-ordinated inter-departmental body chaired by DFP. The conclusions of the inter-departmental group should be made available to committees to inform their views on the competing demands of departments for resources.

11.10 The Committee recommends that efficiency savings identified centrally within Central Finance, Central Personnel and Corporate Services of the Department of Finance and Personnel are validated by Departments, particularly before they are submitted as part of bids for additional resources. Evidence of consultation should be required.

11.11 Executive’s Position Report Paragraph 107 – Use and disposal of assets.

The Committee for Finance and Personnel agrees that the Executive Committee should seek advice from, amongst others, the Strategic Investment Body for ways of making better use of its assets. The Committee recognises the potentially negative impact that the costs of capital and depreciation could have on departments’ DEL following Stage 2 implementation of Resource Accounting and Budgeting. The Committee notes that this will need to be fully considered when decisions are being made on the Review of Government Office Accommodation, Public Private Partnerships and other capital investment programmes. The Committee for Regional Development believes that a lack of investment in roads and water has led to major public assets being in poor condition. The Committee for Health Social Services and Public Safety is conscious of the need to hold its Department accountable for the good management of its assets.

11.12 The Committee recommends that the Department and the Executive should develop and introduce an asset management strategy as soon as possible.

11.13 The Committee also recommends that guidance should be issued by the Executive to departments on departmental investment strategies including advice on monitoring and control systems. Relevant Assembly committees should be consulted on both sets of guidance.

11.14 Executive Position Report Paragraph 108 – E Government.

The Committee for Finance and Personnel and the Committee for Regional Development recognise the advantages of E Government. The Committee for Finance and Personnel has concerns about the potential for wastage through the replication of high project costs on individual departmental projects and recommends the need for a co-ordinated inter-departmental approach to procurement and systems development. The Committee recognises that many committees supported the use of better and smarter ways of electronic working in response to the consultation on Government Office Accommodation. The Committee for Regional Development believes that every effort should be made to maximise the benefits of electronic delivery of service and the Committee of the Centre saw the Review of Public Administration offering a unique opportunity to exploit the use of E Government.

12.1 Part four of the Executive’s Position Report addressed new issues which had emerged in departments since the Programme for Government and the Budget 2002/03 allocations were agreed by the Assembly in December 2001.

12.2 Departments presented these new issues in their Departmental Position Reports and they are summarised in this part of the Executive’s Position Report. The Executive is therefore aware of the major issues and asks Assembly committees to identify common themes and for their assessment of the major issues.

12.3 The Executive asked committees to draw on their detailed work over the last year to give an assessment of departments’ policy and spending plans. The Executive hoped that committees would conduct a rigorous assessment of each department’s spending plans and priorities. To assist this assessment the Executive asked that committees should address several specific questions.

12.4 Once again the Committee for Finance and Personnel found this approach helpful in its deliberations but has noted that not all Assembly committees addressed the specific questions or adopted this approach.

13.1 Executive’s Position Report Paragraph 118 –Pressures and easements.

Many of the committees did not specifically respond to this question but supported the bids placed by their departments and called for the restoration of the amounts removed through the indicative minima imposition. Where comment was provided it made the point that committees relied on the financial management systems in departments and considered that the pressures and associated resource amounts were reasonable. The Committee for Finance and Personnel had reservations about the timing and resource demands and expenditure in relation to major reviews by its Department. Experience in the past had questioned the credibility and validity of certain bids. The Committee of the Centre expressed concerns about the levels of resources bid for certain programmes.

Only the Committee for Employment and Learning identified easements and called for these resources to be diverted to priorities within higher and further education.

13.2 Executive’s Position Report Paragraph 118 –Pressures and easements.

The Committee recognises that the Department of Finance and Personnel has made best efforts to plan for new issues and has placed bids for resources at what the Department sees as the most appropriate times. The Committee has monitored the movement of resources at Monitoring Rounds and has carried out some analysis of end-year positions and associated End Year Flexibility (EYF). The Committee is concerned about the high levels of EYF and called for a review of the Monitoring process, which was agreed to by the Minister. The Committee for Agriculture and Rural Development has no specific concern regarding resource planning and has seen marker bids for resources lodged. The Committee for Culture, Arts and Leisure is content that the Department can pick up unforeseen issues and inescapable bids at Monitoring Rounds.

13.3 Executive’s Position Report Paragraph 118 –Pressures and easements.

The Committee for Agriculture and Rural Development expressed the view that an additional bid for compensation for animal disease was in direct support of the objectives in the PSA. The Committee felt that the indicative minima already restricted the Department’s ability to re-prioritise. The Committee for Finance and Personnel would like to have assurance from DFP that the targets for delivery of new priority issues are realistic and achievable within the timeframes stated and the resource impact of new issues are in fact additional. The Committee for Health and Social Services and Public Safety wishes to have more effective scrutiny mechanisms before commenting on this issue. The Committee for Regional Development referred to previous underfunding in roads and water, which presented limited scope for re-prioritisation within its Department

13.4 Executive’s Position Report Paragraph 118 –Pressures and easements.

The Committee for Agriculture and Rural Development sees the case for additional funding for DARD as overwhelming and if that meant other departments receiving less then that should be faced. It also expressed the view that where departments had failed to meet expenditure expectations in the past that should be a basis for reprioritisation. The Committee for the Environment stated that there should be ring-fencing of its department’s resources to address transposition and subsequent implementation of the major backlogs of EU Directives facing the Department so that there is no impact on other important catch up work. The Committee for Employment and Learning identified three areas where it sees resources being available for re-prioritisation.

13.5 Executive’s Position Report Paragraph 118 –Pressures and easements.

The Committee for Finance and Personnel would welcome further developments in tangible performance measures and resource allocation methodologies. The Committee welcomed the introduction of a dedicated Business Improvement Team to examine processes with a view to enhancing the efficiency and effectiveness in its department. The Committee for Regional Development and the Committee for Agriculture and Rural Development also welcomed efficiency reviews and Business Excellence Programmes underway in their respective departments pursuing efficiency savings. However, the Committee for Agriculture and Rural Development also stated that it had not received details of specific improvements made and the Committee for Employment and Learning had not received details of planned efficiency savings or indeed achieved efficiencies despite its requests.

13.6 Executive’s Position Report Paragraph 124 –Rises in pay and prices.

The Committee for Culture, Arts and Leisure stated that its view was that departments should not have to deal with the additional costs, beyond planned price assumptions of centrally settled pay deals such as those experienced by its Department in the 2001/2002 financial year. The Committee for Regional Development questioned the adequacy of the block vote in matching pay deals agreed in GB and introduced in Northern Ireland. The Committee for Finance and Personnel stated that it saw an opportunity to address pay and prices by a strategic approach to three year pay bargaining which would support and facilitate the Executive’s policy of setting three year budgets.

13.7 Executive’s Position Report Paragraph 127 –Administration costs.

The Committee for Social Development accepted that savings in two Agencies in the Department had a part to play in reducing costs but also stated that it was important that services are not diminished. The Committee for Regional Development and the Committee for Finance and Personnel expressed the view that they would examine unit costs in their departments. The Committee for Finance and Personnel also stated its aim to examine the management and associated costs of sickness absence in the Civil Service as a means of addressing shortfalls in efficiency and resources. The Committee for Agriculture and Rural Development indicated that containing administration costs in some areas of the Department was beyond its control because they related to the administration of EU policies and the processes were dictated by EU requirements. The Committee for Agriculture and Rural Development welcomed a departmental management plan aimed at producing £3m savings but which would leave alone activities in the Department supporting the PfG/PSA.

14.1 The Committee welcomes the responses received from Assembly committees and is keenly aware of the difficulties that consideration of the broadly based strategic issues raised by the Executive Position Report creates for all committees. The Committee would welcome views on the benefits that the appointment of a specialist financial adviser might bring to assist committee deliberations on financial matters.

14.2 Committees have made a large number of initial comments on the process, the Programme for Government and departmental spending plans. Committees have indicated that they intend to continue their discussions with departments into the autumn. This will facilitate informed debate on the Budget.

14.3 The Committee welcomes the growing co-operation between the Executive and committees in the development of the Executive’s spending programme. However, it stresses that access to the right information at the earliest possible time will benefit both the Assembly and the Executive. The Committee has therefore recommended a need to rationalise the amount of material that is produced and would wish to ensure that consistent good practice is adopted by all departments in providing timely and appropriate financial information to committees.

14.4 The Committee accepts that financial planning and scrutiny of departmental budgets is an essential and inescapable part of committees’ remit. A number of recommendations have been made to develop consistent practice across committees. The Committee accepts that committees will tend towards supporting bids from departments but hopes that an equal emphasis might be placed on scrutinising and monitoring by committees of the effectiveness and efficiency of departmental spending plans against allocations.

14.5 The Committee wishes to develop its strategic role in the Budget process and would welcome discussions with the Minister and other committees on the direction this might take. The Committee is conscious of the need to avoid second-guessing other committee’s views on departmental expenditure plans and allocations and believes that an agreed strategic approach would substantially add to the quality of the process.

Present: Mr Francie Molloy (Chairman)
Mr Roy Beggs (Deputy Chairman)
Mr Seamus Close
Mr Roger Hutchinson
Ms Patricia Lewsley
Mr Alex Maskey
Mr Maurice Morrow
Mr Peter Weir

In attendance: Mr Alan Patterson (Principal Clerk)
Ms Sheila McClelland (Clerk)
Ms Shauna McDaid (Executive Support)
Mr Jonathan Briggs (Administrative Support)

5.1 The Minister for Finance and Personnel and Departmental officials Mr David Sterling and Mr Richard Pengelly briefed the Committee and answered questions regarding the Executive Position Report.

5.2 The Minister stated that the Committee has an important role to play in this process and asked that they draw together the key preliminary conclusions of all Committees in relation to the Executive Position Report. The Minister concluded that he would look forward to receiving the Committees co-ordinated report by the end of August. Officials agreed to provide information on the receipts component of monitoring round easements for the previous financial year.

Resolved: The Committee agreed to place this item on the agenda for next week’s meeting.

FRANCIE MOLLOY
Chairman

NINETY FIFTH MEETING
TUESDAY, 18 JUNE 2002
COMMITTEE ROOM 144, PARLIAMENT BUILDINGS

Present: Mr Francie Molloy (Chairman)
Mr Roy Beggs (Deputy Chairman)
Mr Alex Attwood
Mr Billy Bell
Mr Seamus Close
Mr Derek Hussey
Mr Roger Hutchinson
Ms Patricia Lewsley
Mr Alex Maskey
Mr Maurice Morrow
Mr Peter Weir

In attendance: Mr Alan Patterson (Principal Clerk)
Ms Sheila McClelland (Clerk)
Mr Joe Sloan (Assistant Clerk)
Ms Shauna McDaid (Executive Support)
Mr Jonathan Briggs (Administrative Support)

4.1 The Committee was briefed by the Clerk on a proposed schedule for consideration of its response to the Executive’s Position Report and a co-ordinated response from the Assembly Committees to the Executive Committee.

Resolved: The Committee agreed to the proposed schedule.

4.2 The Committee considered the questions presented in the Executive’s Position Report in relation to the Department of Finance of Finance and Personnel.

Resolved: The Committee agreed that the Clerk should collate the responses by the Committee for further consideration at its next meeting.

FRANCIE MOLLOY
Chairman

NINETY EIGHTH MEETING
TUESDAY, 2 JULY 2002
COMMITTEE ROOM 144, PARLIAMENT BUILDINGS

Present: Mr Roy Beggs (Deputy Chairman)
Mr Alex Attwood
Mr Billy Bell
Mr Seamus Close
Mr Derek Hussey
Mr Roger Hutchinson
Ms Patricia Lewsley
Mr Maurice Morrow

In attendance: Mr Alan Patterson (Principal Clerk)
Ms Sheila McClelland (Clerk)
Mr Joe Sloan (Assistant Clerk)
Ms Shauna McDaid (Executive Support)
Mr Jonathan Briggs (Administrative Support)

8.1 The Committee considered a draft response to section 4 of the Executive’s Position Report.

Resolved: The Committee agreed the draft response subject to an amendment provided.

8.2 The Committee considered a draft response to section 3 of the Executive’s Position Report.

Resolved: The Committee agreed the draft response subject to the amendments provided.

8.3 The Committee considered the questions in section 2 of the Executive’s Position Report.

Resolved: The Committee agreed that the Clerk should draft a response taking account of a report by the Northern Ireland Council for Voluntary Action on New Targeting Social Need.

FRANCIE MOLLOY
Chairman

ONE HUNDREDTH MEETING
TUESDAY, 27 AUGUST 2002
COMMITTEE ROOM 135, PARLIAMENT BUILDINGS

Present: Mr Francie Molloy (Chairman)
Mr Roy Beggs (Deputy Chairman)
Mr Derek Hussey
Ms Patricia Lewsley
Mr Maurice Morrow
Mr Peter Weir

In Attendance: Ms Sheila McClelland (Clerk)
Ms Shauna McDaid (Executive Support)
Mr Stephen Ball (Administrative Support)

4.1 The Committee considered the draft Executive Position Report.

Resolved: The Committee ordered the Draft Executive Position Report to be printed subject to the amendments provided to the Clerk.

FRANCIE MOLLOY
Chairman

APPENDIX 2

INDEX OF COMMISSIONING LETTERS
AND RELATED DOCUMENTS

A. Statement to the Assembly, 4 March 2002 by the Minister of Finance & Personnel

B. Statement to the Assembly, 5 June 2002 by the First Minister and Deputy First Minister.

C. Letter dated 6 June 2002 from the Office of the First Minister and Deputy First Minister.

D. Letter dated 7 June 2002 from Chairperson, Committee for Finance and Personnel to
Assembly Committees.

E. Letter dated 10 June 2002 from the Minister of Finance and Personnel.

1. With permission, Mr Speaker, I would like to make a Statement on behalf of the Executive, setting out our proposed timetable for the key planning and financial events between now and December when the Budget for 2003-04 needs to be agreed. This year, the cycle will cover the period 2003-04 to 2005-06, as the Executive plans for the three year period covered by the Treasury’s Spending Review.

2. The Budget and the process which surrounds it is very much an evolving one. In presenting last year’s Budget to the Assembly, we endeavoured to build on and refine the processes which were put in place during the first Budget. In drawing up this year’s Budget, I intend to continue that process. I have considered carefully many of the comments and suggestions which have been made about the process to date and I have endeavoured where possible to take these into account in this year’s timetable.

3. Last year, we committed ourselves to ensuring that we presented the Draft Budget as soon as possible after the summer recess. This was intended to facilitate greater consultation on the Draft Budget. We found this additional consultation important in finalising the Budget and we would intend, therefore, to work again towards presenting this year’s Draft Budget again as soon as possible after the summer recess.

BACKGROUND TO BUDGET 2002

4. This year is an important year in budgetary terms as it is the year in which a UK Spending Review takes place. In July, the Chancellor will announce the financial envelope for the next three years for all Whitehall departments, and the three devolved administrations including Northern Ireland. Thus we will know the total level of resources which Northern Ireland can expect to receive for the years 2003-04, 2004-5 and 2005-6. To avoid confusion, I intend to use the term Spending Review or SR 2002 to refer to the UK wide exercise and the term Budget 2002 to refer to our own exercise.

5. At this stage we do not know what outcome we can expect from SR2002. The current signals from Treasury are not encouraging, but we are determined to make the strongest possible case. We also need to ensure that we plan in a realistic but flexible manner. I will say more about the financial considerations later.

6. In setting our first two Budgets, we have concentrated primarily on the following financial year and included only broadly indicative figures for subsequent years. This does not secure a satisfactory planning position for public services, because departments’ financial position is not confirmed until the finalisation of the relevant Budget in December. Many aspects of our key services such as capital projects and the education system do not run on a financial year basis and we need to make the transition from year to year as smooth as possible.

7. This year, the Executive will seek to establish as firm a three year planning position as possible in our circumstances. In drawing up this year’s Budget, we would aim to set out our expenditure proposals for the next three years. This will be helpful for departments in relation to longer term planning as they should have firm figures for 2003-04 and indicative allocations for 2004-05 and 2005-06. Our intention then would be to revisit these allocations in the Budget exercises in 2003 and 2004, but if we achieve a better strategic plan for the Programme for Government and the Budget this year, there should not be a need to have as fundamental a review of spending plans in 2003 or 2004 as we envisage this year.

8. The process of preparing the new Budget runs from now to December when we will seek to settle an agreed Budget in line with our revised Programme for Government, which will form the basis of spending plans for all Departments and other public sector bodies. I would also remind Members of the need to complete our work on the spending allocations for the financial year 2002-03. Last week we passed the Budget Bill which covered the Vote on Account for 2002-03 and which is intended to enable expenditure to proceed until the Main Estimates are agreed and the related Budget (No 2) Bill is passed. We would intend to present the Main Estimates and introduce the relevant Supply Resolution in late May or early June.

THE BUDGET TIMETABLE

9. Mr Speaker, the management of the budget timetable this year will be very demanding and will need to be managed carefully if the expectations of Members and Committees for consultation are to be met and if we are also to meet our Section 75 obligations.

10. The position is complicated by the fact that the Chancellor will not announce the outcome of the UK Spending Review until the third week of July. This means that we will not know what resources are available to us in the next three years until then. Nevertheless, the Executive wishes to begin now to examine the strategic issues and priorities confronting us both across and within departments. The next few months will be very important for the Executive in assessing its priorities and in drawing up a strategic framework for use once we know the outcome of the SR 2002.

11. We will still need to complete the budgetary process before Christmas. With that in mind, the approach I am setting out today will ensure that the Assembly has as much time as possible to consider the Budget proposals contained in our Draft Budget 2002, in the context set by the Programme for Government, so that the spending proposals can be approved by December after an acceptable period of scrutiny. This step should be seen as the main authorisation of spending plans, and it follows that we should provide the best possible procedures for that purpose.

ASSEMBLY SCRUTINY OF THE BUDGET

12. Mr Speaker, the proposals set out in the indicative timetable before you today will provide for a much earlier involvement of the Assembly Committees in the budgetary process than was possible last year. To-day’s Statement marks the start of that process although I have made the point on other occasions that Committees are free to scrutinise financial performance and budgetary issues at any stage.

13. To set the process in motion guidance is being issued which requires all Departments to submit a position report providing a broad analysis of current performance in delivering the Executive’s priorities and future requirements. The position reports will provide each Department with an opportunity to set out its overall purpose and strategy, identify its role in delivering the Executive’s priorities and set out the financial context which it faces. It will also identify areas where departments anticipate any reduced requirements or expect to make savings and re-deploy resources. Clear linkages between the Programme for Government and PSAs will be drawn out and the focus will be on the assessment of output and outcomes.

14. Equality and social need input will also be considered as central issues in the Budget cycle. As before, we will consult on the equality and New TSN implications of the Draft Budget in the autumn. But these issues will need to receive attention at every stage of the process within Departments and in the consideration of the issues by the Committees, so that the Draft Budget can fulfil our determination to promote equality of opportunity and New TSN.

15. Mr Speaker, the guidance states clearly that committees should have a proper opportunity to scrutinise their department’s position reports before they are submitted to my Department and the Economic Policy Unit. This meets a concern expressed last year by committees that they wished to be involved in the process at an earlier stage in the cycle than was possible last year.

16. In providing this opportunity for earlier engagement and scrutiny I would hope that Committees look at their department’s position from the widest possible context including the likely level of resources that may be available. Mr Speaker, I would also urge committees not to lose sight of the full range of issues facing all our public services or become preoccupied with the bids for additional resources that may emerge. We need at this stage to focus on determining what our strategic priorities should be, indeed that is the very reason why we decided to produce a Position Report early in the financial planning cycle.

17. We need to form a more strategic view of departments’ overall spending. If we are to make a much more substantial difference to spending patterns, we need to examine what is being secured for the large amounts of spending that are going on mainstream public services. We are working on several means to help with this process. For example the Public Service Agreement targets set out in the Programme for Government, provide a good basis for some inquiries. The Needs and Effectiveness Evaluations will provide a more systematic analysis of the issues in six major sectors. These tools do not provide multiple choice answers that we as politicians can simply mark with a tick or a cross: they can inform our judgements, but the judgements must, Mr Speaker be made first by the Executive – when we prepare the Draft Budget – and then by the Assembly.

18. To do so I suggest Committees may wish to consider departmental plans and the Public Service Agreement targets set out in the Programme for Government. Committees will also need to think about how priorities set out in the Programme for Government may be refined and developed in the light of experience in the last year. I consider it important that Committees also take a view of the implications for equality and New TSN and that they should be informed by scrutiny of other material available to Committees. In this way we can ensure effective examination and identification of changing financial priorities at departmental level and, at a wider strategic level

19. Mr Speaker, to put all this in context it is worth remembering that we will not know the implications of the 2002 Spending Review until the Chancellor’s announcement in late July, though current signals from the Treasury are that that this will be a tough Spending Review. We will, of course, be making our case to the Treasury over the coming months but we need to be realistic about the possible outcome.

20. In preparing for this year’s Budget, that is why the Executive established "indicative minima" for departments. By doing this, we were able to set aside an allocation of £125m to be known as the "Executive SR allocation". Regardless of the outcome of the SR2002, we will need to make decisions about this allocation. Our decision to hold back the allocation represents a prudent approach to financial management, as well as clear signal of our determination to look for change in the way spending is allocated.

21. Mr Speaker, we need to recognise that this allocation of £125 million, plus the consequences of any allocations made by the Chancellor in his April 2002 Budget and any reduced requirements declared by departments, could be the main resources available for allocation. I would therefore emphasise the need for realism in our approach to the task ahead.

BARNETT AND OTHER STRATEGIC ISSUES

22. Before then we will of course need to conclude our consideration of the Barnett mechanism. Over recent months we have been undertaking a detailed and rigorous scrutiny of the Barnett formula, looking carefully to see whether it is meeting our needs sufficiently both now and, more importantly, in the future. We clearly cannot accept a situation where the provision for priority services here such as health, education and transport is markedly less favourable than in England – which appears to be the consequence of Barnett. I am sure members will accept that now would not be the time to state publicly all that we have in mind in relation to the negotiations with the Treasury that are about to begin – but I can reassure the Assembly that we are determined to seek a fair and appropriate outcome to SR 2002, and that the case will be pressed at the highest levels.

23. But challenging Barnett is not something we will undertake lightly and it is not, as I have said before, a "no risk" option. We can be sure that any challenge will lead to strong pressure from the Treasury that we should pay our own way more fully – and I do not have to remind members that that will mean looking hard at the issues of rating and the financing of water and sewerage. This will apply especially if the Chancellor increases taxation to finance health spending.

24. We will also in the months ahead be assessing the outcome of the six Needs and Effectiveness evaluations before the summer covering Health and Social Care, Education, Training, Housing, Selective Financial Assistance and Culture, Arts and Leisure – in total the Evaluations cover some [75%] of our total expenditure. We will also be considering a number of other strategic issues including the Burns Report, the Hayes and Acute Hospitals Review, the Regional Transportation Strategy, the Task Force on Long Term Unemployment, the interdepartmental work on Research and Development, proposals in relation to the Water Service and the Rural Visioning Report.

25. These are complex pieces of work which will provide us with a good deal of information about what we are achieving with what we are spending and will serve to inform our future expenditure decisions. However, we do not expect that the Evaluations will provide us with easy answers. In reality, they are more likely to identify areas where we will need to review our policies and what we are doing. Nevertheless, they will provide a very valuable analysis of what we are achieving with our current expenditure and will provide us with very valuable information which will inform our future spending decisions.

26. Clearly, we all face an intensive period of work which will culminate in the presentation of the Executive’s Position report to the Assembly in late May. It is important that we conclude this work as soon as possible before the summer, so that the Executive’s conclusions about the key issues facing the Administration are understood and can be the subject of debate and dialogue within the Assembly and between Departments and the Assembly Committees.

MAIN ESTIMATES 2002-03

27. Mr Speaker, it is likely that the publication of the Position Report in late May will coincide with Assembly business on the Main Estimates for 2002-03. I want to make it clear that these are two distinct processes, and I hope that the timing of the business can be managed in a way that helps that distinction. In brief we will need to debate and vote on the main resolution seeking approval of the Main Estimates for 2002-3 and then consider the stages of the Budget (No 2) Bill. The key point is that these concern 2002-03 while the Budget process which is set out in the timetable I am announcing today is the beginning of the cycle for 2003-04.

28. Mr Speaker, the Committee for Finance and Personnel will have an important role to play throughout this next phase and may be able to assist by drawing together some of the key themes and conclusions of each Committee. I would welcome the advice and assistance of the Committee throughout the process and especially at several key stages and will be talking to them in detail about this.

BEYOND THE POSITION REPORT AND THROUGH THE SUMMER

29. Mr Speaker, once the position report has been published the timetable before the Assembly today will allow the Committees until August to consult on and consider the Departmental proposals. Obviously we want to achieve as much as possible before the recess so that the Executive may be properly informed during the summer months as it considers the revision of the Programme for Government and begins to construct a Draft Budget. We will again be looking to the Committee for Finance and Personnel Committee to play a key role in co-ordinating any views expressed during this period and I look forward to receiving any comments or conclusions before the end of August when we will be preparing the updated Programme for Government and Draft Budget.

30. Last year we used the period between the end of August and mid-September to develop further, and refine, proposals for the Programme for Government and the Draft Budget before introducing these documents in draft to the Assembly in late-September. For the Autumn period, we would propose to follow a similar process to last year. In particular, the Executive found the full debate on the Draft Budget on foot of a motion from the Committee for Finance and Personnel very helpful in hearing some of Members’ concerns about the Draft Budget.

31. This debate would again supplement the work of the Committee for Finance and Personnel which will in parallel be taking evidence from other Statutory Committees on the Draft Budget during the Autumn. Consultation on equality implications would take place in October/early November when Committees would also consider the revised Programme for Government and Public Service Agreements.

32. I would hope that the Committee for Finance and Personnel would again be able to report its views on the Draft Budget to me as early in November as possible. This would allow me to ensure that their views were fully taken into account when drawing up a paper on the Revised Budget for consideration by the Executive in mid-November. We are working towards making a Budget Statement to the Assembly in early December with an Assembly debate and vote by 10 December.

RESOURCE ACCOUNTING AND BUDGETING

33. In preparing our Budget 2002, we will also have to take account of the final stage of the implementation of resource budgeting in the Budget 2002. This will involve a number of changes to the budgeting regime for departments including the movement of a significant element of non-cash costs (depreciation, cost of capital, management of assets and provisions) from the Annually Managed Expenditure to the Departmental Expenditure Limit. In addition, capital grants by central government to the private sector will score as resource rather than capital expenditure.

34. This is going to have a profound effect on the management of our resources. From the Assembly’s perspective it should provide better information on how resources are used to meet objectives and whether taxpayers are receiving value for money. It will provide better-focused information resulting in enhanced accountability to the Assembly. Mr Speaker, I am aware however that the move to resource budgeting has been seen to add complexity to some of our financial processes and clearly it will take time for us all to become familiar with the new concepts and presentations of information and figurework. I want to work with the Assembly to help get to grips with this. My officials have already held two seminars on some aspects of this work and will be holding more in the coming weeks and months. I would urge Members to become as familiar as possible with these issues.

35. The preparation of the annual budget is normally a complex and challenging exercise. This year will be especially difficult. We will be seeking to put in place a three year budgetary framework and we will need to take account of the Needs and Effectiveness Evaluations and consider how best to address the issues which they will raise. We will also be considering how to deal with the increasing difficulties associated with the Barnett formula. We must also be realistic about the signals which are emerging from the Treasury and prepare ourselves for a situation where we do not have sufficient resources to fund all the activities which we would wish.

36. Mr Speaker, I need to ask for the forbearance of the Assembly and the Committees in this process. There will be limited time available at each of the stages in the first part of the year. But I must stress that all of those stages are in practice preparations for the main statutory stage of Assembly involvement in the autumn. Hence we do not need the final views of Committees in the constrained periods for, first, input to the Position Reports from Departments in April, and secondly in response to the overall Position Report in the late spring and early summer. At both of those stages, Departments and the Executive will have to move the work on at or very close to the stated times.

37. It may appear that those stages are very rushed, but they are not the decision making stages. If there is one point I would emphasise most strongly, it would be the value and necessity of the Committees providing clear views on priorities so that the Committee for Finance and Personnel can advise me on those issues by mid August. That will mean that when the Executive addresses the issues of allocations within the DEL in early September, we can reflect on the views of the Assembly. Even if that means in practice completing that work before the summer recess, clearly there is substantial time before then for that to happen, and all the other stages should serve rather than obscure that key point.

38. To summarise, the main events associated with the preparation of the Programme for Government and Budget 2002 include: -

• the preparation by departments of position reports setting out the main issues they will face in the three years from 2003 - 04
• the presentation of the Executive’s Position Report to the Assembly in late May which will then be available to the Committee for Finance and Personnel, other Departmental Committees and the wider community
• I will seek the views of the Committee for Finance and Personnel by the end of August on its consultations with other Committees.
• The outcome of the six Needs and Effectiveness Evaluations will be carefully considered in drawing up the Programme for Government and the Draft Budget.
• The Programme for Government and Draft Budget (which will seek to put in place a financial framework for the next 3 years) will be developed, and considered by the Executive in early September.
• An updated version of the Programme for Government and Draft Budget will be introduced to the Assembly in late September.
• This will be followed by the Committee for Finance and Personnel taking evidence from DFP and other Statutory Committees on the Draft Budget. The Executive would again very much welcome a further debate on the Budget should the Committee for Finance and Personnel decide to introduce this.
• There will be consultation on the equality implications of the Programme for Government and the Draft Budget.
• Concurrently, Committee consideration will be taking place on a revised Programme for Government and Public Service Agreements, reporting back on these to the OFMDFM.
• Our aim will be that the revised budget will be announced to the Assembly in early December and debated and voted upon a week thereafter.

39. I hope that Members will find this explanation of intended procedures and timetable helpful.

INDICATIVE PFG AND BUDGET 2002 TIMETABLE

STATEMENT BY FM AND DFM ON
EXECUTIVE POSITION REPORT ON PROGRAMME
FOR GOVERNMENT & BUDGET

1. Mr Speaker, with permission, the Deputy First Minister and I would like to make a statement about the issues that will affect the Executive’s work to develop the Programme for Government and Budget for the 2003/04 financial year and beyond.

2. In his statement to the Assembly on 4 March, the Minister of Finance and Personnel identified the main stages for this year’s Programme for Government and Budget cycle. A key first phase is the development of the Executive’s Position Report on the Programme for Government and Budget which has been made available this morning to all Members.

3. The Position Report reflects the commitment we signed up to as part of the Belfast Agreement to agree each year a Programme incorporating an agreed Budget. The Report provides the Executive with the opportunity to set out for consideration by the Assembly the key issues affecting our public services that should influence the preparation of our next Programme for Government, and the Budget that will support it. The issue of this Position Report therefore formally launches the consultation with the Assembly and others on the next Programme for Government and Budget. We will also be producing towards the end of this month an annual report on how we have performed over the past year on our first Programme for Government.

4. The Position Report also sets out how we might roll forward the Programme for Government and refine our priorities so that we can target resources more effectively in the Budget to delivering progress across these priorities.

5. The development of the Programme for Government, has been continuous. It is less than six months ago that the Assembly endorsed the current Programme for Government, which focuses on the 2002/03 financial year, and we are just over two months into its implementation. However, the current cycle represents a particular and very important opportunity. For the first time, we are intending to set plans for a three-year period, informed by a much more thorough analysis of the needs and effectiveness of our major public service programmes than before.

6. The approach we can take will depend on the conclusions we reach in the current negotiations on the Treasury Spending Review, which will be known next month. But we signalled very clearly in December, by the approach we took to spending plans for 2003/04, that we were determined to make room to make changes in the pattern of public services to reflect more fully the priorities of the Programme for Government than has been possible up to now. On top of that, the Reinvestment and Reform Initiative, launched on 2 May, adds several new dimensions to the debate that needs to take place on how our public services develop under the Executive and the Assembly, and in co-operating through the North/South and wider structures of the Agreement.

7. The development and the annual revision of the Programme for Government, incorporating the Budget, is the core process of our administration. Through it we set out the overall policy direction, plans and priorities of the Executive for the years ahead, plans and priorities which in turn inform budgetary decisions. In it we seek to develop, across the four parties in the Administration, across the 11 departments, a sense of collective direction, of agreed priorities. Through it, we continue to build the basis of our new democracy.

8. And through discussion, debate and consultation – both within this chamber and further afield – we seek to draw together the views of the Assembly and wider civic society, agreeing on the priorities for Northern Ireland.

9. The Position Report reflects very clearly the Executive’s desire to focus debate on the quality of our public services, fairly and effectively administered. Within this debate, we feel that we need to emphasise:

• The need for investment in our infrasture.
• The desire to improve service delivery.
• Tackling social exclusion, in particular poverty.
• Working in partnership with others.

10. We want to deliver re-investment and reform that will result in high quality public services. The Reinvestment and Reform Initiative provides a real opportunity for us to invest substantially in improving and modernising our infrastructure.

11. In allocating resources – from whatever source – we need to identify more closely what reforms might be required and what outcomes might be achieved from such reforms. We are already committed to reviewing the structures of public administration, looking at the types of structures that might best serve the needs of Northern Ireland and at how we might make real gains in efficiency that would allow resources to be focused where they are most needed. As we indicated when we made the statement on the Reinvestment and Reform Initiative, resources and reform must go together.

12. The Position Report makes this clear and sets out our determination to articulate the vision that we have for public services and to explain how we might reform them and improve their quality.

13. The Position Report also underlines our commitment to ensuring that everyone in Northern Ireland has an opportunity to share the benefits that should flow from the investment and reforms that we want to see. We recognise that, for too long, poverty has blighted the lives of too many people. We remain committed, in developing our policies and programmes and in allocating the resources to support them, to focusing on those people and areas in greatest objective social need in line with our policy on Targeting Social Need.

14. The Position Report recognises too, Mr Speaker, the need to address how different departments can best work together in this process, and how best we might work with other partners. We rely on others – including in local government; in business; in the voluntary and community sector – to work with us to deliver our Programme for Government and it is right that we should be working to develop our relationships with these partners.

15. Of course our work to develop and agree a Programme for Government and Budget does not take place in a vacuum. There are important contextual issues that need to be understood and reflected in the Executive’s work and take account of by the Assembly and others in responding to the Position Report.

16. Turning first to the financial context, the Position Report explains that the spending power available to the Executive for the period 2003-04 to 2005-06 will largely be determined by the outcome of the 2002 Spending Review. We understand this will be announced by the Chancellor of the Exchequer in July.

17. Our key reference point – the baseline – for the entire process will be the spending plans for 2003/04. These were first set in SR 2000, and have been updated and converted to Resource Accounting and Budgeting State 2 classifications to provide the foundation for the Spending Review, which will set revised plans for 2003-04 and new plans for the succeeding two financial years.

18. The Chancellor’s Budget announcement on 17 April has already provided significant additions for Northern Ireland for the period 2003/04 to 2007/08, arising from the application of the Barnett formula to the allocations to the NHS in England. Gordon Brown has also provided some signals as to the likely outcome of the national Spending Review.

19. He has confirmed that the Treasury envisages some real growth in spending over the Spending Review period, over and above the provision already set aside for the health service. This suggests that there will be limited further additions for UK public expenditure in total, and hence for Northern Ireland, through the Barnett Formula, or otherwise, depending on the outcome of the present discussions with the Treasury.

20. Even limited real growth in spending could lead to substantial additional spending power for us in 2004/05 and 2005/06 if the Chancellor applies the increase to spending areas which are comparable with our own programmes. However, if he is obliged to use the spending power available for Annually Managed Expenditure, such as social security benefits, debt interest or for spending on defence or other non-comparable programmes, the additional amounts available to the Executive could be much more limited.

21. There are of course other contexts for our work. Turning to the economic context, it is encouraging to note that, over the past year, the Northern Ireland economy has performed generally well. Employment is at a record high and unemployment approaching the lowest level for a generation. That said, however, the impact of the Foot and Mouth outbreak and the global economic downturn has constrained progress in some areas with Northern Ireland firms facing difficult trading conditions, particularly as a result of the decline in the growth in world trade. This has contributed to the decline in manufacturing output.

22. The agriculture and tourism sectors have also seen declines in earnings as a result of the Foot and Mouth outbreak as well as of the wider economic and fiscal environment – while there has been a modest improvement in farm incomes over the last year, for example, they are still well short of the levels seen in the mid-1990s.

23. The outlook for the economy over the next few years is, however, reasonably benign with growth expected to accelerate in 2002 and 2003. But we need to understand the conditions in which we currently operate and we need to be able to identify the economic challenges we are likely to face and develop our proposals for tackling these challenges as we take forward work on the Programme for Government and Budget.

24. We also need to be aware of the social and environmental contexts for the work of the Executive. We know only too well the challenges that need to be faced. I have already highlighted our determination to focus on tackling poverty and social exclusion. But our work to develop the Programme for Government also needs to reflect our responsibilities to promote good relations within and between communities. We need to be aware of wider environmental issues and to ensure that the principles of sustainable development underpin everything that we do.

25. The Position Report that you will be considering in Committees over the weeks ahead recognises the importance of ensuring that the Programme for Government reflects the economic, social and environmental challenges we face and provides an appropriate, relevant and evidence-based policy framework for decisions on financial allocations and for the work programmes of departments. For this to happen, we believe that the Programme for Government needs to set out a thorough analysis of the context in which we work.

26. The Position Report also explores and seeks views on the Executive’s priorities and sub-priorities. It is important that the priorities we set reflect and keep pace with the changing environment in which we find ourselves. We believe that our current priorities, priorities that have received broad support from the Assembly and among the social partners, continue to provide a useful framework for our work. However, we want to explore ways in which we might refine our overall economic and social strategies.

27. The Executive, of course, is not solely content with setting out a work programme for the years ahead. We are also committed to maintaining a focus on measuring results and assessing the impact we make. Our first two Programmes for Government have not just sought to explain the policy priorities we have identified; they have also set out very clearly the actions we want to deliver in support of these priorities and the sub-priorities that support them.

28. They have also gone further, incorporating Public Service Agreements that aim to set out targets reflecting the key outcomes that departments want to achieve with the resources voted to them through this Assembly.

29. These Public Service Agreements, in turn, are now being supported by Service Delivery Agreements for each department that explain the action each department will take to deliver its Programme for Government commitments and Public Service Agreement targets and to raise service standards.

30. Open and accountable government, Mr Speaker, is and should be a defining characteristic of this Executive. We want to be responsive, to listen to the views of others and to ensure that this Assembly and the public can see the benefits that a locally accountable Executive can deliver for the people of Northern Ireland.

31. The Position Report, therefore, seeks views on the current arrangements for measuring results and the effectiveness of these arrangements.

32. To underline further this commitment to open and accountable government, we will shortly be bringing to this Assembly a full report on the progress we have made during the first year of our Programme for Government. It will provide information on the actions contained in that Programme and the targets in the 11 departmental Public Service Agreements. We will also be making this report more widely available so that the public too can assess our progress.

33. We are determined that our Programme for Government should continue to reflect our responsibility to promote equality of opportunity and good relations. The Position Report therefore seeks views on the equality aspects of the issues we have raised and on how these might best be taken into account as we develop the Programme for Government and the Budget.

34. Mr Speaker, today’s statement not only provides a starting point for the Assembly’s consideration of the Position Report – it also represents the start of a process of wider consultation on these issues. It is crucial that we have the views of the Assembly on the issues raised in the report. But, in keeping with the theme of partnership I mentioned earlier, it is worth noting that we recognise also the value of a wider debate. For that reason, we plan, following this statement, to make the Position Report more widely available, sharing it with our social partners, with our colleagues in local government and with other interested orga