NORTHERN IRELAND ASSEMBLY Monday 3 March 2008 Ministerial Statement: Executive Committee Business: Oral Answers to Questions: Executive Committee Business: Private Members’ Business: Adjournment: The Assembly met at 12.00 noon (Mr Deputy Speaker [Mr McClarty] in the Chair). Members observed two minutes’ silence. February Monitoring Outcome Mr Deputy Speaker: I have received notice from the Minister of Finance and Personnel that he wishes to make a statement on the February monitoring outcome. The Minister of Finance and Personnel (Mr P Robinson): With permission, I wish to make a statement about the Executive’s decisions on the February monitoring round. This is the fourth and final monitoring round of the 2007-08 financial year, and Members will be aware that the role and purpose of the in-year process is to help the Executive to make the most of the resources at their disposal. At the Executive’s meeting on 28 February 2008, they decided on some reallocations of expenditure for the short time remaining in the current financial year. It is also important to note that this monitoring round follows the departmental spring Supplementary Estimates, which were debated in the Assembly on 12 February 2008. Departments are constrained by the spring Supplementary Estimates and associated Budget Bill position, because no allocation can be made in the February monitoring round above the position for which legislative authority has been sought. The first stage in each monitoring round is the identification by Departments of resources allocated in previous Budget processes that, for a variety of reasons, will not be spent in this financial year. In overview terms, reduced requirements declared by Departments in this monitoring round amount to £51·7 million in respect of current expenditure and £61·7 million in respect of capital investment. The level of reduced requirements declared in this round is much greater than the levels that were identified at the corresponding time in previous years. That continues the trend from the previous monitoring round, with the result that the amount declared for this financial year is some 41% greater than the reduced requirements that were declared last year. Although I commended Departments for the significant level of reduced requirements identified as part of the December monitoring round, the context for the February monitoring round is quite different, because there is significantly less scope to utilise the resources that become available in the February round than in earlier ones. I, therefore, urge Departments to redouble their efforts, as we move into the 2008-09 financial year, to declare reduced requirements as early as possible in the year so that the opportunity to redeploy funds into priority areas is not missed. Statutory Committees will have a key role to play by regularly monitoring the financial performance of their respective Departments and identifying, as early as possible in each year, those areas where less spending is expected to take place than had been planned for. I recognise that a primary focus of Departments is to spend as much of the moneys that have been allocated in the Budget process as possible at the first stage in order to deliver the associated improvements in public services. However, where that is not possible, there is an equal responsibility to ensure that any resources not needed by a particular business area can be redeployed. Although there is an issue that significant levels of reduced requirements reflect poor planning at the Budget stage, it is much better that Departments and Committees identify reduced requirements earlier rather than later in the financial year or, indeed, allow them to fall as end-of-year underspend. Details of all the reduced requirements declared by Departments are set out in table 1 of my statement, which is available to Members. The largest reduced requirement in current expenditure — £8·7 million — has been declared by the Department of Health, Social Services and Public Safety (DHSSPS), following on from the delay in the decision on the review of public administration (RPA). The Department for Social Development (DSD) has declared a £22 million reduced requirement in capital expenditure from additional land sales, and the Department for Regional Development (DRD) has identified a £10 million slippage in the funding required to Northern Ireland Water for this financial year. The December monitoring round concluded with some £57 million unallocated capital resources, which included anticipated access to our end-year flexibility stock in the 2007-08 block. In the context of such significant sums being available for allocation, but with no corresponding pressures expected, a prudent approach was adopted to minimise underspend and hence facilitate future discussions with the Treasury regarding access to end-year flexibility stock. Overall, therefore, £69 million was available for allocation in this monitoring round for capital expenditure, and £39 million could reasonably have been allocated for resource spend. Against that level of resources available for allocation, Departments have submitted current expenditure bids in the amount of £1·6 million and capital investment bids amounting to £63·4 million. Turning first to the position as regards current expenditure, in light of the late stage of the financial year, only two bids were put forward, both by the Department of Culture, Arts and Leisure (DCAL). The Executive have agreed that £0·9 million should be allocated for the purchase of additional book stock to assist library boards in meeting published targets, and a further £0·7 million has been allocated to provide for the winding-up of the Northern Ireland Events Company. With regard to capital investment, the Executive have agreed to allocate £58·9 million to Departments. That includes £6·9 million to the Department for Regional Development to meet a pressure resulting from delay in planned receipts from asset sales as well as additional cost from a change in accounting treatment for insurance costs associated with the first design, build, finance and operate (DBFO) roads capital programme. The most significant capital pressure, however, has arisen with respect to DSD because of lower than expected capital receipts from house sales as a result of the more constrained credit environment, and the sale of land at Ballee in Ballymena is not now expected to be finalised until 2008-09. Although DSD has taken measures to ameliorate the revenue shortfall, the Executive have agreed to meet the net capital pressure of £52 million. That follows on from the £50 million allocated in the December monitoring round to the Department for Social Development for a range of social housing initiatives, including co-ownership; the warm homes scheme; and the social housing development programme. The consequence of the level of reduced requirements and bids met is that for current expenditure, the level of planned overcommitment is now £13·3 million. This is significantly below our target of £50 million at the conclusion of the February monitoring round and highlights once again the need for Departments to declare all reduced requirements as early in the year as possible. In terms of capital investment, we now have unallocated resources of some £10 million. However, all underspend resource will continue to be available to be carried forward for use by the Executive in the future. Looking forward, 2008-09 will be the first time in a stable political environment that Northern Ireland Departments will be implementing the spending plans that have been developed by local politicians as opposed to direct rule Ministers. Although the main indicator of success will be improved services, a key milestone will be that resources are used for the purpose intended and in the timescales envisaged. In conclusion, I recognise the progress that has been made during 2007-08 to improve financial management and hence ensure a more effective allocation of resources. This work will need to accelerate next year in light of the more challenging fiscal environment faced by the Northern Ireland Executive. I commend the February monitoring position to the Assembly. The Deputy Chairperson of the Committee for Finance and Personnel (Mr Storey): I thank the Minister for his statement to the House. The Minister plans to reduce overcommitment, year on year, over the Budget period to £100 million in 2008-09; to £80 million in 2009-2010; and to £60 million by 2010-11. The high levels of reduced requirements declared by the Departments at this stage have been managed by overcommitment provision. Will the Minister comment on how underspend will be managed in the future if this pattern of returning resources late in the financial year continues, especially given the plan to reduce overcommitment? In addition to the important role of each Assembly Statutory Committee in scrutinising its Department’s monitoring round returns, to improve the accuracy and effectiveness of financial forecasting processes, is there also a need for the Department of Finance and Personnel (DFP) to challenge Departments more robustly on the reasons for return of resources and on the timing of those returns? Also, in a statement on the June monitoring round with regard to underspend, the Minister stated that the optimum would be to reduce current underspends close to 1%. Given that today’s statement marks the last monitoring round of the financial year, will the Minister comment further on the way forward to reduce current resource and capital underspend? Mr P Robinson: I thank the Deputy Chairman of the Committee for his questions. I wish that it were possible to give clear answers to them all. Mr Storey is right to say that there is a pattern: Departments are leaving their underspend declarations to late — almost too late — in the year. Unfortunately, that is where the patterns seem to end. As I indicated in my statement, the amount of underspend this year is significantly greater than it was in previous years. One can only judge the future by the past and present, and therefore DFP, in looking at the degree of overcommitment, looks at it in terms of what has been the previous pattern. That puts the Department in a difficult position if the pattern changes, because it has set the amount of overcommitment to eat up in the various monitoring rounds on the basis of previous patterns. If this year’s pattern were to be followed in future years, there might in the June monitoring round be more of an effort to spend some of the additional funds than was the case in June of this year, when we committed nothing. We need to watch the patterns very carefully. The Deputy Chairperson is right to say that there is a role for all the Committees — not just the Finance and Personnel Committee, although it has the key role — in monitoring the spend of their Departments to ensure that money is spent on time for the purposes that have been set out, and that any likely underspend is declared as early as possible. In that way, we can make the best use of our funds and have them reallocated for the proper purpose. 12.15 pm Mr F McCann: Is the Minister aware that the Housing Executive has, for a number of weeks, been suspending repairs until the new financial year? Will he tell us whether this monitoring outcome can be used to ensure that Housing Executive tenants have their repairs carried out, especially new-tenant repairs, without which people cannot move into houses? Mr P Robinson: The Member will know from my statement that we met all the bids that were made. If there had been an additional bid from the Housing Executive, it would have been looked at very seriously. The difficulty that the Housing Executive — and the Minister for Social Development — will have is that there is a very short period in which to spend this money. That is why it is important that underspending be identified earlier, so that programmes can be put in place, whether it be planned maintenance or whatever else. The only caveat that has to be entered at this stage is whether the Housing Executive could have spent the money, had it been allocated as a result of today’s monitoring round. With only a month left to spend the money, it is too late in the year. Also, the Assembly has already accepted the spring Supplementary Estimates. Mr Beggs: Does the Minister agree that, in an ideal world, there would not be under-expenditure on the part of Departments? Regrettably, that has happened. Given this continuing issue, there may be a need to review the amount of funding that is held back for over-expenditure, so that we can be certain that the money that is allocated to Northern Ireland is put to good use here. I am particularly interested in funding for children and young people. Why was £3·8 million returned unspent at this late stage? Mr P Robinson: Unfortunately, we do not live in an ideal world. No matter how well a Department might plan for the incoming year, there will always be legal issues, planning issues or other regulatory issues that will mean that plans do not go forward as quickly as expected. There will be pressures on Departments from various areas for more funding. One can never contemplate, a year — or, in many cases, three years — out, exactly how each Department will spend money. There will always be a level of underspend. What is important is that we have the best management systems, in order to identify as early as possible what underspend there is, so that we can reallocate the funds to priority purposes. I suspect that there is not one Government Department that, if notified back in June that funds were going to be available, could not have identified some worthy purpose, whether it be children and young people or some other issue. The money, however, is not lost. While it does go back, on paper at least, to the Treasury, we can, of course, negotiate with the Treasury in order to get access to it. I will be doing that. As far as this CSR period is concerned, we successfully negotiated to have all the end-year flexibility stock that is available to the Executive allocated within those three years. I assume that I will have to go back to the Treasury at the end of the financial year to argue for the inclusion of the money that will be underspent this year. Mr O’Loan: I thank the Minister for his statement. I welcome the fact that any money not spent during this financial year will be carried forward for use by the Executive. I welcome also the allocation of new money to the Department for Social Development, given that the Ballee land sale is not expected to go ahead during this financial year. As has been said, these are large releases of money at this time of the year, and that is to be regretted. The low level of bids, particularly on the resource side, indicates that Departments were not confident that they could spend the money during this financial year, and I welcome the indication that steps are being taken to improve the management of that aspect. What confidence can the Minister give us that receiving Departments will be able to spend the money during this financial year? It will not look well for the Assembly, after a Budget round in which there was a great deal of clamour for money and public concern in certain areas, if we declare a significant underspend at the end of the financial year. That will create a situation that the public will not understand. Mr P Robinson: The Member makes the point well. It is not just the public who will not understand that situation; I am the one who has sore ribs and a sore arm, having had it twisted up my back over the past few months by Ministers. They told me that they did not have half enough money in their budgets and that they needed more, and then I find that that they are handing money back to me during two monitoring rounds. It may be a bit difficult to understand, but, ultimately, it is down to financial management. It is essential that the Committees play a significant role: we did not have the benefit of them during the direct rule period. We are developing a template for Committees to enable them to examine departmental spending throughout the year, so that it is not left until the tail end of the year to find out that money that could have been used in a Department is not going to be used. The Committee for Finance and Personnel is co-ordinating that work. We will be in complete control of our Budget during the incoming financial year, having set it ourselves and having the opportunity to implement it ourselves, and we want to improve on the current end-year underspend. As regards the contemplated asset sale at Ballee, in many ways, we could welcome that situation because if the sale had gone ahead, it would have left more end-year flexibility to be dealt with. The present situation means that the money is likely to be available during the next financial year. Therefore, we will have to look carefully, with the Department, to see where to make the best use of those additional resources. Dr Farry: I return to the subject of patterns that was raised by Mr Storey. What investigation is the Minister carrying out into the pattern of some Departments regularly declaring large underspends and others regularly receiving additional moneys from those underspends? What consideration is he giving to ensuring that services could be funded in a more strategic way rather than their living, essentially, on scraps from someone else’s table? I have in mind the current situation in which quite a lot of Northern Ireland appears to be coned off due to roadworks. The public’s perception is that Roads Service is not only spending its own money but that of other Departments by carrying out roadworks at the end of each financial year. Mr P Robinson: I do not agree that £50-odd million could be said to be scraps. If we had a lot of such “scraps” we could do quite well. The Committee for Finance and Personnel will want to work with all the other Committees to ensure that underspends are identified as early as possible. I do not believe that Departments wilfully allow money to be underspent at the end of the financial year; I believe that they are over-optimistic about being able to spend the money and, therefore, do not want to return it to the centre in case another Department gets hold of it. However, from where I sit, looking across all the Departments, I would clearly rather that another Department used the funds than send them back to HM Treasury. That would mean that we would have to fight to get the money in a future financial year. Some Departments find it much easier to spend money quickly. DHSSPS and DRD are two such Departments. For example, money can be spent on road maintenance in a relatively short time — that is probably why the Member has encountered some difficulties when driving around Northern Ireland. However, I would not like to see what our end-year underspend would be if we did not have our present monitoring round mechanisms, particularly given our Health Service and health boards and the activities of DRD and its Roads Service. We should use funding wherever we can, and Northern Ireland plc would benefit from any improvements in those Departments. We will be interested to see what will happen as a result of the new treatment that is being granted to the Department of Health, Social Services and Public Safety. That will be very much a learning curve for all of us, given that that Department will be able to use and identify its own underspend earlier without fear of having to return the funds to the centre. Consequently, those funds can be used for other purposes, either because of pressures in other areas or, indeed, because the Department wants to develop new programmes. It will be interesting to see how that works over the year; indeed, it may provide a model that we can adopt in other areas. Mr Weir: How will the special dispensation that has been afforded to the Department of Health affect next year’s monitoring process? Mr P Robinson: Where the Health Service is concerned, the first point is that half of Northern Ireland’s Budget will not be part of the monitoring process. Obviously, monitoring will continue, but the benefits or losses in the Department of Health that might result from underspend or additional pressures will be borne by that Department. As I said to the Member’s North Down colleague, it is an interesting experiment, and it will be worthwhile examining its results. The Department need not be concerned that some other Department will walk off with any of its early declared underspend; it will be able to use those funds for its own pressures or to develop new programmes. That is a massive gain for the Department, and it will be interesting to see how that experiment works out through the year. Mrs McGill: Go raibh maith agat, a LeasCheann Comhairle. I am like other Members in that, when I hear of an underspend of so many millions of pounds, I wonder what is wrong with the system. I was heartened to hear some Members who know more about finance than me say that they did not understand the process. I was also heartened to hear the Minister of Finance and Personnel agree with Mr O’Loan that it is difficult to understand. Given that Office of the First Minister and deputy First Minister (OFMDFM) has set tackling poverty as a priority, is there any opportunity for the Executive to earmark any of the underspend — which goes across several Departments — in order that poverty specifically can be tackled? Go raibh maith agat. Mr P Robinson: The money is at the disposal of the Executive until the end of the financial year, when it goes back to the Treasury and we have to bid for it again. I share the Member’s view: when faced with constituents proposing various community schemes that require Government funding, I find it difficult to explain the situation. Through Departments, the Government will indicate to those people that they do not have the resources in this financial year to assist the proposed schemes. However, those people will then read in their newspapers or see on television that there is a massive underspend in the very Department from which they were seeking funding. In those circumstances, it is difficult to explain to people why their proposed scheme has not been given the go-ahead. 12.30 pm Departments have a massive fear of overspending, but I criticise them if they underspend, as do the general public. However, so far as the Treasury is concerned, overspending is the unpardonable sin: the wrath of the Treasury will be poured on Departments if they overspend. Therefore, there is always an attempt to err towards underspend than overspend, but that should be confined to much smaller amounts than is currently the case, and I believe that underspend to that extent comes down to poor financial management. If underspend were identified at an earlier stage, programmes such as those that the Member mentioned could have been funded at that early stage. However, now that the spring Supplementary Estimates have been dealt with and there is only one month left in the financial year, it will be difficult for Departments to spend in that constrained time frame. Mr Hamilton: I welcome the Minister’s statement. I note that, at this late stage in the financial year, there is a significant number of reduced requirements, and Departments will have grave difficulty in spending the results of that in the available time limit. I also note that that difficulty is much greater than it has been in the corresponding period of previous years. What action will the Minister take to ensure that future reduced requirements are declared much earlier in the year? Mr P Robinson: Committees will have a key role in ensuring that that happens. As I understand it, my officials are already working with the Committee for Finance and Personnel to develop a template that will allow each Committee to track how resources are working through the system. The Committees will be able not only to do that, but they will be able to question their Minister and departmental officials as to why spending is falling behind. In areas for which there has been no expenditure, each Minister and his or her officials must give commitments that the moneys will be used within the required time frame. The present financial year began under direct rule, with the result that Committees have not yet had that essential role to play. The Chairperson of the Committee for Culture, Arts and Leisure (Mr McElduff): Go raibh maith agat, a LeasCheann Comhairle. First, I note with considerable interest the £1·6 million — which is essentially for two projects — that has been allocated to the Department of Culture, Arts and Leisure. Will the Minister tell the House whether the £0·9 million that has been allocated for the purchase of additional books to assist the education and library boards is a recognition that, with the establishment of the single library authority, not enough money has been made available for books and for the delivery of front-line services? The Committee is hearing that message from all the education and library boards, and I hope that the Minister can confirm that there is an acceptance in the Executive that that has been the case. Secondly, following on from Claire McGill’s question, is the Minister concerned about the so-called culture of underspend in Departments? If so, what is he doing to turn that around? Mr P Robinson: The Executive have met the only two bids that were made for resource expenditure, both of which came from DCAL. My understanding is that the amount that was allocated to DCAL enables it to meet its book stock targets. As Chairperson of the Committee for Culture, Arts and Leisure, the Member will have considerable influence on future targets. However, that allocation has meant that the current target has now been met. I repeat: a process is being established to allow the Member and his Committee — and all other Committee members — to have a greater role in keeping their Departments to account and to ensure that they are meeting the spending targets that were allocated in the Budget. Departments fought for more money, they helped their Ministers to get the funds that are available to them, and now it is their duty to make sure that their Ministers spend the money within the set time frame. Mr Ross: I, too, thank the Minister for his statement. Several Members have mentioned the significant sums of money that various Departments are handing back. What actions will the Minister take to ensure that, in future years, there is access to the 2007-08 underspend funds? Mr P Robinson: The process is not automatic. The Treasury recognises and identifies a stock of end-year flexibility, and, in order to receive the underspend for a given financial year, the case must be argued with the Chief Secretary to the Treasury. However, such end-year flexibility stocks are counted as ours. We reached agreement with the Treasury concerning the significant underspends that had built up; those funds will be allocated over the three years of the comprehensive spending review. Therefore, all underspend that has been identified to date has been allocated to the next three financial years. In addition, this financial year’s underspend will be added to our end-year flexibility stock, and I will have to negotiate separately its allocation over following years. Mr Boylan: Go raibh maith agat, a LeasCheann Comhairle. Will the Minister confirm that discussions concerning the purchase of the former Forkhill military base are ongoing with Department of Agriculture and Rural Development (DARD) officials, and that no final decision has been taken? Go raibh maith agat. Mr P Robinson: Sufficient underspend funding was available to have covered what the Minister sought for the Forkhill site. However, before reaching that stage, a business case must be submitted and approved by Department of Finance and Personnel officials. That is a highly technical matter — I have not the slightest idea about how the figures are produced. However, I have met the Minister of Agriculture and Rural Development, who has been informed about the business plan’s failings, particularly about how costs might be reduced by additional funding from other sources and/or by reducing the amount of bells and whistles on the proposal. My officials will consider any resubmitted proposal. Of course, should a business plan be approved, funding is available for the Department. Mr McCausland: Will the Minister provide an assessment of this financial year’s underspend? Mr P Robinson: The Member’s question invites me to put my head on the block. I can tell him what the Departments have told me the year-end underspends will be, although, in the past, those Departments gave me figures that would not have led to the underspend available for this monitoring round. Therefore, I emphasise caution. However, the figures indicate that there will be £104 million in current expenditure and £49 million in capital expenditure. Both figures are considerably less than those for the previous year; however, I will wait until the end of the financial year to ascertain whether the Departments meet the figures that have been submitted. In addition, Committees should question their Departments about likely underspends for this financial year in order that, at the end of the year, they can compare those with the targets set. Mr O’Dowd: Go raibh maith agat, a LeaCheann Comhairle. If I may have the liberty to raise a couple of issues, I would first like to further explore the matter raised by my colleague from West Belfast Mr McCann. The Housing Executive has apparently run out of money for remedial work. The Minister did give a full answer, but I would like to know whether, in the past two monitoring rounds, the Minister for Social Development told the Finance Minister that the Housing Executive was in danger of running out of money for repairs. Housing Executive houses are sitting empty because the Housing Executive does not have enough money to repair them. In addition, what measures will the Department of Finance put in place to ensure that the public purse will get value for money from the land sale at Ballee, Ballymena? Mr P Robinson: Very often, I get criticised for control freakery and micromanaging Departments; yet there are times when people ask why I allow a Department to do one thing, when it should be doing something else. We cannot have it both ways. On the Housing Executive issue, all I can tell the Member is that, as he knows, every bid received from the Department for Social Development in relation to that matter has been met. If further moneys are required, it is up to DSD, in its discussions with the Housing Executive, to make a bid for those. I cannot second-guess what the discussions were in the Department. Those questions are more appropriately asked of the DSD Minister. As far as the more general issue is concerned, I again emphasise that I can allocate resources to Departments, but it requires them to put in bids. Departments will put in bids only if they are sure that they can spend that money during the course of the financial year. Therefore, the earlier that an underspend is recognised by a Department, the earlier we can reallocate that funding and make it available for the use of other Departments. I cannot spell it out enough; early identification is down to the Departments. I cannot do it myself — it must be done by the Departments. The Ballee land issue is a matter for the Department for Social Development. The funds will be available in the next financial year. That gives a longer opportunity for officials to look at how to spend that money, because it was expected that that money would be available in this financial year, rather than in the next. I hope that some financial-management benefits will arise from that. Mr Savage: As a member of the Agriculture Committee, I ask the Minister to explain the underspend of 5·9%, which amounts to £13·9 million, and the forecast for capital investment, which amounts to 25·4%. That is sad news for the agriculture industry. Will he explain how he arrived at those figures? Mr P Robinson: I did not arrive at those figures — they were provided by the Department of Agriculture and Rural Development. Throughout the monitoring rounds, we have been able to meet bids — with the exception of the Forkhill bid, for the reasons that I stated earlier. If there are specific issues that the Member wants to raise about the way that the Department of Agriculture has dealt with matters, I suggest, as diplomatically as possible, that he raises them with the Minister for that Department. Rates (Regional Rates) Order (Northern Ireland) 2008 The Minister of Finance and Personnel (Mr P Robinson): I beg to move That this Assembly approves the Rates (Regional Rates) Order (Northern Ireland) 2008. The Order today is not simply about setting the level of rates for the next financial year; it is about setting a new approach to how we address financial issues in Northern Ireland. The days of asking the people of Northern Ireland to make an ever-increasing financial contribution to efficient public services are over. Now it is time for Government to deliver. The Rates (Regional Rates) Order (Northern Ireland) is a vital part of the annual financial cycle. The form of devolution that we have in Northern Ireland means that most tax-raising powers remain with the national Parliament at Westminster. Therefore, this Order provides the Assembly with its only mechanism to raise additional resources to fund key areas of central expenditure. 12.45 pm As I indicated previously, devolution is about making a difference to the lives of people in Northern Ireland, and there is no clearer signal of that than our approach to the regional rate. The days of increases in the regional rate compounding to 62% over five years are long gone. Instead, we are steering a new direction for the future, which will benefit every household and business in Northern Ireland. For the first time in many years, instead of the householder being asked to bear the burden, our key focus is to ensure that the public sector delivers. In my speech to the Institute of Revenues, Rating and Valuation (IRRV) in Belfast in 2007, I stated that one of my priorities was to control the level of the regional rate in Northern Ireland. The Department of Finance and Personnel has delivered on that commitment. Northern Ireland faces major challenges, none more so than in our public spending plans, which must reflect reality and the fact that we will have to manage our finances within a framework that has, at its foundation, a commitment to delivery, innovation and efficiency. During the draft Budget debate, I highlighted that, in the last three years of direct rule, Northern Ireland had regional rate increases of 9%, 19% and 6% respectively, with more planned for the years to come. During the Budget debate on 12 February, I emphasised that a 60% increase in the regional rate over five years was unacceptable. In that context, and with the pending introduction of water charges in 2009, I announced that the domestic regional rate should be frozen for the next three years. The business regional rate increases have been more modest, averaging about 3·3% over the past five years. However, businesses will also be faced with water charges. Therefore, in the draft Budget, I announced an average increase in those rates of 2·7% a year for the next three years. That is in line with the expected rate of inflation and, therefore, in real terms, amounts to a freeze. That level of regional rate is expected to generate revenue of £530 million. At the same time, we must continue to consider our methods. There is a real challenge to address head-on the efficiencies that we need to make so that more resources can be redirected to the front-line services that need them. I want to see how we can achieve even greater efficiencies beyond the 3% a year targets that have already been set. Members are aware of how much emphasis I want to be placed on that matter. The new performance and efficiency delivery unit will be in the front line of the battle to strip out waste and identify where we can achieve significant savings of public money. Some Members have argued that, notwithstanding the 60% increase over the past five years and the introduction of water charges, householders should contribute even more to public expenditure. I disagree, not simply as a matter of political philosophy but because of the relatively modest contribution that such an increase would make to public expenditure. The regional rate contributes less than 6% of all funding available to the Executive each year. Therefore, if I had sought a 1% increase in the rate, that would have raised about £2·7 million of additional revenue. Similarly, some have suggested that the Department should maintain the domestic rates in real terms. To do that at the current inflation rate of 2·7% would raise only £5·86 million. Therefore, generating significant extra revenues through the regional rate would require increases in rate levels that no one would consider acceptable. The modest sums that could be raised through rate increases can be compared with the resources that will be released through efficiency savings made by Departments. Departments plan to deliver £790 million in efficiency gains by 2010-11. I now turn to the detail of the Order, and I shall briefly describe each article. This short statutory rule specifies the regional rate poundages for the financial year 2008-09. Article 1 provides the title of the Order and gives the operational date as the day after it is affirmed by the Assembly. Article 2 provides for the duration of the Order, and it will apply until 31 March 2009. Article 3 specifies 29·89 pence in the pound as the commercial regional rate poundage and 0·3608 pence in the pound as the domestic regional rate poundage. Today, we are not only setting the rates for Northern Ireland for the next year but, more fundamentally, charting a new direction for the people of Northern Ireland with our approach to Government. The Rates (Regional Rates) Order (Northern Ireland) 2008 not only gives the Northern Ireland householder a well-deserved break from large increases but it lays out a challenge for Departments to deliver a more efficient form of Government. I, therefore, commend the Order to the Assembly. The Deputy Chairperson of the Committee for Finance and Personnel (Mr Storey): I welcome the Minister’s statement, and I thank him for his opening remarks. The purpose of the statutory rule is to fix the amount of the regional rates for the year ending 31 March 2009. Members will be aware that, as part of the draft Budget announcement of 25 October 2007, regional rates for domestic properties were frozen for the next three years, and the rate for non-domestic properties was increased only in line with inflation. When the Minister announced the draft Budget, he mentioned that the past three years have seen regional rate increases of 9%, 19% and 6% respectively, and that the average regional rates bill had increased by 62% since 2002. The Committee for Finance and Personnel’s report on the Executive’s draft Budget welcomed the proposals not to increase the regional domestic rate, especially given the significant increase in that element of the rates during the recent period of direct rule. The Committee also acknowledged the proposal to hold the increase in the non-domestic sector in line with inflation and, therefore, minimise the burden on business. That is in line with the Executive’s wider priority of promoting economic growth. On 6 February, officials from the Department of Finance and Personnel briefed the Committee on the proposals contained in the statutory rule. The Committee formally considered the rule at its meeting on 20 February, at which a motion to recommend that the rule be affirmed by the Assembly was approved by a majority vote. I, therefore, support today’s motion. Mr Beggs: I wish to put on record that I am content that the rates should continue at the levels indicated. Mr O’Loan: I support the motion. Dr Farry: I shall not be as brief as the two Members who spoke before me. The Alliance Party is opposed to this statutory rule. Mr S Wilson: The Alliance Party says no again. Dr Farry: The Alliance Party says yes to proper public services in Northern Ireland and to taking a responsible and realistic approach on issues regarding taxation and expenditure. As the opposition in the Chamber, it would be easy for the party, on the one hand, to point out all the deficiencies about public spending and investment in sustainable public services and rebalancing the economy, and, on the other hand, simply buy in to decisions being taken on households and other taxation. However, that would be opportunistic and irresponsible. The Alliance Party has not provided a fully costed alternative to the Budget. It does not have access to the resources and the information to conduct such an exercise. If and when the Alliance Party is in Government, it will be up to the party to make its own choices about how it will balance income and resources. However, party members want to highlight, with a greater sense of realism, the choices that have to be made and the potential consequences of the choices that those in Government are making. I want to stress two important points. First, the Alliance Party is opposed to the regional rate. It would replace it with an alternative measure that is based on ability to pay, such as local income tax. Property values are not an accurate assessment of ability to pay. We are all aware of those people who are asset rich and income poor. Secondly, like everyone else, the Alliance Party wants — Mr S Wilson: Given that the Member has identified an issue here — that some people are asset rich and income poor — surely that is an even more compelling argument to support this Order in that it is designed to help people to avoid huge rate increases? Dr Farry: If one is talking about an increase in the rates at the level of inflation, which is probably the most sensible way forward, then that would amount to 25p to 30p in the pound per week for the average household. That is quite a small amount. It is also worth recognising that not every household in Northern Ireland pays rates. Therefore, this benefit from the Executive will assist only some people. The people who do not pay rates tend to be those who are most dependent on public services, and the Alliance Party is concerned about the level at which public services have been funded. Mr Weir: The Member has indicated that he is concerned that ratepayers will be paying while others will not: is he advocating the introduction of the poll tax here? [Laughter.] Dr Farry: The Member is well aware of the Alliance Party’s proposals in this regard. My point is that some people will not benefit from what is, in effect, a cut in the level of the regional rate. However, there are some who very much depend on public services, in particular the Health Service, and who will suffer as a consequence of the underfunding of the Health Service. Mr Hamilton: Will the Member give way? Dr Farry: Just a moment, Simon. It is important that Members bear what I have said in mind, not least when MLAs from all parties are commenting on the lack of funding in the Health Service. Mr Hamilton: That was a good lead-in as the Member mentioned lack of funding. Precisely how much additional investment, on top of the many hundreds of millions of pounds of additional money that has already been poured in, does the Alliance Party want to pump into public services? Dr Farry: I have already addressed that point in my opening remarks, and the Member can look at previous Hansard Reports. It is interesting to note that Members from all parties are raising concerns about the amount of funding available to the Health Service. In the North Down constituency, a DUP councillor has been extremely vocal in pointing out the difficulties that the local health trust is having in dealing with so-called efficiency savings and is saying that they amount to cuts. He is calling for additional investment in the Health Service. Therefore, it is important to recognise that all parties seem to be concerned with the issue, although some seem to be a bit straighter with the people about the choices that are being advocated for Northern Ireland. In the past, the Alliance Party has criticised rates increases of between 8% and 19% and has voted against them in this Chamber. They are a huge burden on people, and we join with the Minister in recognising that. However, the Minister of Finance and Personnel, along with all his Executive colleagues and their parties, has now gone to the other extreme, with a freeze on the regional rate for the next three years. In practice, that amounts to a cut. Mr Beggs: Will the Member not acknowledge that although rating levels are being held for this year, that reflects the large increases of previous years? Does he not recognise that huge burdens will be placed on householders in the next two years with the introduction of water rates? Does he want higher household rates on top of water charging? Does he not recognise that that would be extremely burdensome and would cause particular hurt to the working poor — those who are just above the threshold for receiving rates relief? People who have to work and have to pay their full rates would accept that continuing to increase rates will adversely affect the working poor. Dr Farry: We are all conscious in this House of the ticking time bomb of water charges — an issue which, in many respects, puts this debate into context. However, there are fundamental reasons why we need to take a responsible approach to the level of the regional rates. On the one hand, going for large increases is irresponsible; however, at the same time, going for what is, in effect, a cut is also irresponsible in light of the pressing need for investment in public services. There is also the issue of the other financial consequences it will have in our dealings with the Treasury. 1.00 pm Mr S Wilson: The Member has given way a number of times, and I appreciate his doing so again. I am trying to understand his logic. An 8% increase in the rates was such a huge burden that the Alliance Party, and, indeed, the then Member for Lagan Valley Seamus Close opposed it vehemently during a previous mandate. However, Dr Farry is now arguing that a freeze in the rates, which, as he said, would save about 25p a week, should be opposed. The 8% increase represented a weekly increase of 75p — which was a huge burden that the Alliance Party was totally opposed to — but a saving of 25p per week is being dismissed. Will the Member explain the logic of that? Dr Farry: We want to avoid a situation in which we are swinging from one extreme to the other. A planned strategic approach should be taken on issues such as the regional rate. The regional rate is one element of public service funding in Northern Ireland, and it is important that it is addressed in a balanced and sustainable manner. The extremes of having major hikes and unrealistic freezes in the regional rate are unfair and will, potentially, have to be addressed. Planning for an increase in the regional rate of around the rate of inflation is the responsible approach and will fund public services. The people of Northern Ireland are intelligent: they realise what is happening. Northern Ireland faces a difficult financial starting point. Public expenditure here is already heavily skewed because of the distortions that result from trying to manage a divided society. It is worth putting on record that the Alliance Party will be meeting the Minister of Finance and Personnel next week to discuss how the cost of division in Northern Ireland can be addressed. Unnecessary duplication of services carries opportunity costs for the possibility of providing quality public services for the whole community. Sadly, the Executive are not yet prepared to face up to the challenge of creating a shared future despite the clear social, economic and financial imperatives for doing so. A shared future is a marginal theme in the Programme for Government and the Budget. The British Government have produced a tight comprehensive spending review (CSR) settlement for Northern Ireland — the Barnett formula gradually works against the interests of Northern Ireland also. The regional rate is supposed to reflect the differences between the sources of service delivery in Northern Ireland and Great Britain. In Britain much more is delivered by local authorities. The regional rate, therefore, is a vital component in the funding of local services. However, the Minister of Finance and Personnel and the Executive, through their decisions on tax, have made a tight financial settlement even tighter. Rather than investing in public services, or rebalancing the regional economy, they have used available resources as a tax giveaway. The Alliance Party has criticised the Budget for its shortcomings on investment in a number of service areas. Health is the major area of concern. By 2011, Northern Ireland will be £200 million behind where it needs to be to keep up with service provision levels in the rest of the UK. The Department of Health, Social Services and Public Safety is now getting the lion’s share of the Budget. Nonetheless, we are flatlining compared to those in the rest of the UK. People here will pick up on that point when they see the quality of the health services that are available to them. I have pointed out that the South Eastern Health and Social Care Trust is wrestling with the need to deliver the so-called efficiency savings. I am sure that other health trusts are in a similar position. Such efficiency savings appear awfully like cuts to services. In due course a lot of political parties and Members from different constituencies will be pointing out the problems in local health provision and will be making claims for additional resources or the retention of service levels. When that situation arises, I will say to them that they have made their beds and must lie in them. The Alliance Party has also highlighted mental-health provision. In Northern Ireland only 8% of the overall health budget is spent on mental-health provision. In the rest of the UK the figure is 12%. Everyone across the political spectrum is conscious of the need for additional investment in mental-health services in Northern Ireland. However, yet again, there is a reluctance to match rhetoric with actions where finance is concerned. I could highlight others issues including environmental protection; arts funding; public transport; transport infrastructure in general; and investing in the economy. The list of public services that are being underfunded is substantial. It is worth noting once again that several organisations, including the Economic Research Institute of Northern Ireland (ERINI), the Confederation of British Industry (CBI) and Northern Ireland Council for Voluntary Action (NICVA), have challenged the approach that has been taken in the Budget to household taxation. I appreciate that the Minister has outlined recently his reasons for disagreeing with those organisations’ analysis; he is perfectly entitled to do so, and, no doubt, I will also disagree with their analysis in some respects. However, it is worth recognising that important, credible organisations in our society believe that we have taken a populist, rather than an evidence-based, approach to local taxation. For different reasons, those organisations recognise that additional resources should be reinvested in either first, rebalancing the economy — the belief of the CBI and ERINI — or secondly, in addressing social problems — the belief of NICVA. The Alliance Party does not want to see the tax burden here become any more arduous than it currently is, but serious questions must be asked about an approach to local taxation that is based on populism rather than evidence. Clearly, the Alliance Party’s proposals would not be able to cover all areas of investment, but they would make more of a start than the Executive have done to date. To clarify the Alliance Party’s position on income issues, it would involve a focus on three areas. First, the cost of segregation would have to be addressed and funds for reinvestment elsewhere should be released, thus potentially reducing taxation in the long run. Secondly, the Alliance Party would also pursue efficiency savings, although in that regard a subtle distinction should be made — for the Alliance Party, efficiency savings do not involve merely doing the same with fewer resources, but rather ensuring that resources are transferred from inefficient old priorities to more efficient new priorities and to meeting new demands. Thirdly, we would follow an evidence-based approach to local taxation. Rather than going from one extreme that comprises rates hikes to the other, effectively cutting rates, we would take a balanced approach, striving to keep rates in and around at the level of inflation. Another consequence of the policy that has been adopted is that the parity principle may be under threat. For almost 60 years, Northern Ireland has matched the levels of social security provision in Great Britain. However, an assumption that the tax burden should be standardised as far as possible throughout the United Kingdom is behind part of the bargain that the Executive wish to make. How will the Treasury react to the approach that has been taken on local taxation? Furthermore, how will this — or any future — Executive be able to argue credibly for favourable funding, given that the resources that we receive are used for a populist approach to taxation, rather than for further investment in sustainable public services? That is a strange approach for unionists to take, to say the least. I am also concerned about the message that the Executive are sending out to wider society: they are creating unrealistic expectations regarding local taxation issues. The Executive may be placing themselves in a financial straitjacket. There will be a time when the Executive will need to raise funds from the regional rate to pay for local services, and I fear that they are making things more difficult for themselves in the long run. A rise in rates in or around the rate of inflation would be more sustainable and would be a way to avoid those difficulties. Above all, this argument is academic, given the debacle concerning Northern Ireland Water and the very steep charges that people in Northern Ireland may now be facing. The Executive have agreed what is effectively a right-wing Budget, and I congratulate the Minister’s success in getting the other three Executive parties to sign up to it. They have all made their choices in that regard. However, I remind the members of all the political parties that are in the Executive that they must be careful about how they argue for things over the months and years to come. They have all made their choices to sign up to the Budget, and, by implication, to the approach that has been taken to the regional rate. In so doing, they have no credibility when they raise issues regarding the underfunding of health, education or transport. People cannot have it both ways when they are in Government. I note that all the Executive parties have made that point in the past: we cannot have it both ways. The Alliance Party’s approach is the reasonable and realistic one, and I think that the people of Northern Ireland appreciate and understand it. my colleagues and I are hearing on doorsteps and in our constituency offices about people’s concerns for the future of the public services in Northern Ireland, particularly the Health Service. People need to be realistic when they consider the parties in this Assembly and the decisions that they are making. They must ask themselves whether those decisions add up. Mr Hamilton: Dr Farry’s contribution was longer than the two that preceded it. My contribution may be slightly longer than those of Mr O’Loan and Mr Beggs, but it will not be as lengthy as that of the Member for North Down. That will be another relief for the ratepayers of Northern Ireland. Mr S Wilson: It took that long for the Alliance Party to explain its position. Mr Hamilton: The Member is absolutely right. Lest there be any doubt, I welcome the introduction of the Order. It is my rule of thumb that if rates are to be frozen, it is a good idea to vote for and support that. One reason that I became involved in politics was to help, in whatever small way I can, to ease the burden faced by ratepayers, particularly hard-pressed working families, who have endured phenomenal rate rises in recent years. The rise in the regional rate of over 60% has been mentioned, and in one year there was an increase of almost 20%. In its own small way, and within the limited scope that it has, the Assembly is helping to ease that burden. When the Minister of Finance and Personnel announced the proposal in his Budget statement towards the end of last year, I thought that all parties would support it. However, much to my surprise and that of many others, the Alliance Party has consistently opposed the proposal. At meetings of the Committee for Finance and Personnel, the Alliance Party was joined by the PUP in voting against the Order and by the SDLP in voting against the cap on industrial rates that will be discussed later. If such a cap were introduced, businesses would not pay any higher rates than they do now. Many Members view the Alliance Party’s conversion to old-style tax-and-spend socialism as somewhat curious. It is a strange switch, and it has resulted in some DUP Members branding the Alliance Party’s spokesman on finance “Fidel” Farry. However, given the winds of change that are sweeping through Cuba, that is perhaps no longer an appropriate name. Even though this is a serious subject, the Alliance Party’s contributions have resulted in it taking on a comic quality, to the extent that a more appropriate title would be “Bruce Forsyth” Farry. Dr Farry takes every opportunity in the Assembly, at meetings of the Committee for Finance and Personnel or when addressing the general public to say “Higher, higher.” He wants people’s rates bills to be even higher than they are now. However, perhaps “Bruce Forsyth” Farry is not an appropriate name either, because not too many people will say “Good game, good game” or “Didn’t he do well?” to him when he talks to them on their doorsteps during the run-up to the next election. The Alliance Party states that it merely seeks a rise in the regional rate that is based on the rate of inflation, which, it argues would be a more measured option. However, when Members of the Alliance Party are pressed on how much the rise should be, they do not come up with an answer. Dr Farry repeatedly referred to health, and the Alliance Party subscribes to the claptrap that there is an annual £200 million shortfall in funding for health over the period of the Budget, totalling £600 million over the three years. To raise that money through a rise in the regional rate would require an increase of over 200%. Dr Farry: The figure of a £200 million shortfall in funding came from the Economic Research Institute of Northern Ireland: was it talking claptrap? Mr Hamilton: The amount of money that has consistently been allocated to the health budget over the years has resulted in the current situation in which, compared with the start of the decade, its budget has doubled. The money involved is not a small amount: it has doubled from £2 billion to over £4 billion. There are massive inefficiencies in the Health Service. Mr S Wilson: Does the Member accept that the Member for North Down said that the Alliance Party was perfectly justified and right in opposing an 8% increase in the regional rate during the Assembly’s previous mandate because it meant a 75p increase a week per household? Now, however, Dr Farry advocates that a further £200 million be raised through an increase in the regional rate. That would mean an increase well in excess of 8% in rate bills, but during the current mandate he can justify that. Mr Hamilton: Mr Wilson is correct. An increase based on inflation would raise a paltry figure relative to the massive increase in spending that the Alliance Party seeks. It would not even scratch the surface of the amount that their spending plans require. Even to raise the £200 million to meet the shortfall over the three-year period would require an increase of over 200% in the regional rate. The average bill would increase by £920 from the current figure of just over £400. The Alliance Party wants to inflict that burden on people. 1.15 pm Dr Farry: I understand that the Member studied accountancy at Queen’s at the same time that I read political philosophy, so I will perhaps challenge his point about socialism and communism later. He said that the Northern Ireland regional rate raises some £590 million per annum, and yet he referred to an increase of £200 million as a doubling of the regional rate. Surely £200 million is merely a fraction of £590 million, rather than a multiple? That is not to say, of course, that the Alliance Party advocates the funding of that gap from the regional rate. However, given that he has an accountancy degree, can the Member explain how he does his sums? Mr Hamilton: I thank the Member for his intervention. It is not, of course, a blanket total of £200 million that has been asked for; rather, the figure is £200 million per year, totalling £600 million over the period. When I heard of that demand coming from the Alliance Party, and from other Benches, I asked the Department of Finance and Personnel by how much that would increase the regional rate. The answer was that the regional rate would have to increase by 228% to £920. That is how much it would cost; that would be the burden on the taxpayer. Indeed, that is only a fraction of the burden that would be incurred if Alliance Members’ wishes were granted. They want a litany of things, from environmental protection to the arts, and everything in between. They want more and more — Mr S Wilson: Tractor farms. Mr Hamilton: Tractor farms in the Urals. [Laughter.] Mr S Wilson: Gulags for — [Laughter.] Mr Hamilton: Yes, maybe they could break down the cost of division with an integrated gulag. That £600 million, and the doubling or even trebling of the regional rate, would only be the start of the Alliance Party’s plans. Those of us who listened for years to the Alliance Party crying out for devolution under any circumstances, so that a difference could be made from the direct rule state of affairs, are bewildered by the latest nonsense coming from their Benches. This is a difference from direct rule. If direct rule had been in place today, the people of Northern Ireland would have faced a massive increase in their regional rate, on top of what they have already paid over the years. Businesses too would, undoubtedly, already be facing the prospect of 50% industrial rates, rising to 100% in a few years. That is the difference that this Assembly is making; that is the difference that devolution is making. I warmly welcome the introduction of this Order, and give it my wholehearted support. Mr Deputy Speaker: Mr Hamilton, thank you for the insight into your level of television viewing. Mr Shannon: I am glad of the opportunity to question the Minister on this subject. I welcome his report and the opportunity for local involvement, at Assembly level, on the issue of regional rates. Some time ago, I brought the matter of regional rates for properties with agricultural occupancy clauses to the Minister’s attention, and there was discussion between us and with other bodies about it. Estate agents have opined that the value of properties with such clauses is 40% to 50% less than it would otherwise be. Is the Minister now in a position to tell the Assembly whether he has addressed that anomaly in the rating system? It has already had, and will continue to have, a great effect on a number of people in my constituency of Strangford, and, indeed, on people throughout the Province. I am not sure exactly how many people are affected, but it impacts on anyone who has a property with an agricultural occupancy clause. Mrs Long: I welcome a couple of things in what the Finance Minister said. He said that this was about setting out a new approach to the regional rate so as to avoid the massive increases that we have had in the last number of years, and to ensure that the public sector delivers. I do not believe that there is an elected representative in this Chamber who would wish that we did otherwise. However, he also talked about controlling the level of the regional rate. Although the sentiment is admirable, my party’s concern is not about the current level of the regional rate but about the creation of a boom-and-bust cycle in which huge hikes for several years will be followed by a complete freeze that will then force another couple of huge hikes. The Alliance Party does not believe that that way forward is sustainable. My party’s concern is that, for the public’s sake, rates bills are properly managed. My party also welcomes efficiency savings. No one who sits in the Chamber believes that there is no room for efficiency savings in the public sector — no one is arguing otherwise. However, the Assembly must carefully consider areas in the public sector where the problem is underfunding, not lack of efficiency, and must confront that wherever it exists. No one argues against efficiency savings, because everyone wants to have efficient public services. However, to achieve efficiency, the Assembly must control spending and must not get into a negative cycle in which it freezes rates while knowing that doing so will put it under pressure later. It is a matter of long-term planning. Several Members asked valid questions during the debate. However, I disagree with them in interpretation. For example, everyone agrees that some of the rates hikes that occurred during direct rule were excessive. There is no question about that, and a particular political point was being made. Dr Farry made a significant point when he highlighted the fact that the Government, which still retains control of the Treasury and the allocations that the Assembly receives from that quarter, are the same Government who believe that the contribution level from local householders in Northern Ireland must be increased. The Assembly is now in control and cannot be forced to raise those funds through rates in the sort of measure that the Government have during the past three years. However, it will not go unnoticed if the Assembly freezes rates and then goes to the Treasury to ask for additional resources. The Assembly must be careful to ensure that when it approaches the Treasury, it does so with a rational and reasonable argument and can defend its position. Roy Beggs Jnr mentioned poverty and the working poor. It is right that those matters be raised. Part of my concern is that people who fall into the category of the working poor will be those most damaged by the unpredictability of their future finances; the boom-and-bust cycle in which rates are fine for two years and then become outrageously expensive at the next top-up. When those issues were debated in Belfast City Hall, colleagues who sit to my left in the Chamber made the point repeatedly that the problem was the lack of a measured approach towards rates — 19% increases and so forth — which damages people because they cannot plan for their future effectively. Therefore, for the sake of the working poor, there must be some predictability about what rates increases are likely to be — not only during the next year or three years, but in the long term. Simon Hamilton quite rightly identified the fact that it would be easy to support the argument for no rates increase. Of course, it would be easier to tell the public that the Assembly will not be asking them for any more money. If the Assembly stopped at that point, it would be incredibly easy. However, the Alliance Party believes that the Assembly must be responsible and must tell the public that rates must be managed in a regular and measured way in order that it can deliver public services. Dr Farry clearly explained the consequences of not raising the required amount of money. It would be easy and popular for the Assembly to simply back the notion of having no rates increase. It would be easy to put one’s hand up in favour of such a move. However, what is difficult to do is to articulate a constructive argument as to why rates must be managed differently. The Alliance Party has been accused of saying no again — in fact, that is not true. My party does not want to be destructive and negative: it wants to put forward constructive, alternative arguments, which is the opposition’s role in this place. My party has also been accused of wanting to spend a huge amount of money. Frankly, that makes me want to laugh. If one examines the manifestoes of every party in the Chamber, it is clear that all of them made considerable commitments to the public. The difference is that the Alliance Party thought through the consequences of the commitments that it made and was aware of what must be done differently in order to meet those commitments. Realistically, all parties must be serious when they write their manifestos and make their promises, because — since devolution — private Members’ motions have consistently called for more money for this, more money for that and more investment in the other. Those motions have come from all the parties, and the majority of them have not come from the Alliance Party — that is a false statement. Members constantly call for extra money, and I look forward to future private Members’ motions that explain from where the money will be taken. That is the challenge that has been put to those of us in opposition, and I put it back to those in Government. Mr P Robinson: Believe it or not, I am grateful to all the Members who contributed to the debate. As I said earlier, the Order provides the Administration with a vital tool to raise much-needed additional revenue to fund public expenditure on key services and provisions. Therefore, it is imperative that we use it wisely and get the correct balance between what is reasonable to levy on households and commercial premises, while raising sufficient funds to meet our spending requirements. We have that balance right this year and in the years of the CSR period; the public will see an Administration that makes a difference to their lives by delivering on its promises and being in touch with what is required to improve our services. As custodians of the money raised through the regional rate, it is our job to ensure that that money is used to its maximum potential. That way, we will be able to realise a more vibrant economy and better quality services for all our people. The main arguments on the amount set in the Order have been covered in previous debates on the Budget. Dr Farry used the same speech that he used on two or three occasions — it does not improve the more that one hears it. He stated, correctly, that parties cannot have it both ways. However, while he was saying that he was attempting to have it both ways. We must have an open, transparent and honest debate on the issue. Dr Farry deliberately does not say how much additional revenue is required to meet his aspirations for health, transport and education. Every now and again, he makes inaccurate quips about the amount of underfund. People in Northern Ireland have 7% more money a head spent on them in health than people in Great Britain — not less. If Dr Farry is going to enter the debate, he should at least do so with accurate figures. Dr Farry: Will the Minister give way? Mr P Robinson: I will give way in a moment. However, the Member might want to wait for a while because, as I continue there will be a few more questions for him to answer. I agreed with one thing that Dr Farry said. The public are intelligent and able to see what politicians are up to. We have seen what the Alliance Party is up to — they try to show that they can meet their requirements for health, education and transport with an inflation-based increase in the regional rate for householders in Northern Ireland. In my statement, I said that — taking inflation at 2·7% — an inflation-based increase would realise £5·86 million. Will Dr Farry tell me how the £5·86 million, which — as he says he wants — would be raised by an inflation-based increase in the regional rate, will pay for the £200 million that he wants to spend in health, not to mention the millions he wants to spend in education or transport? His shopping list may be even longer than that. The Member must be straight with the people of Northern Ireland — if he asks for large sums of money for those worthy causes, the cost of which he would add onto the rates, he must tell people that he will treble their rates, rather than double them. 1.30 pm The answer to the question that he put to my colleague is that the £590 million is not the amount of money from the regional rate from households but from households and non-domestic properties. Therefore, my friend is right to say that the £200 million would have doubled the regional rate. That is what the Alliance Party wants. Not content with a 62% increase over the past five years, it wants to more than double the regional rate for the next few years. Dr Farry: I have two points to make. First, I freely recognise that more money is spent per capita on health provision in Northern Ireland than is spent elsewhere in the United Kingdom. The reason for that is, sadly, that we have greater health need per capita in Northern Ireland, and, therefore, the Budget allocations reflect that need. The Alliance Party’s point is that, as a result of the current Budget, our inability to keep up with healthcare standards in the rest of the UK has led to our falling behind. We are flatlining. Secondly, I made it clear that the Alliance Party does not have the resources or access to the detailed information that is needed to provide a fully costed Budget. However, I have sought to highlight three areas to do with income: first, the costs of a having a divided society must be dealt with, and no doubt we shall return to that point in our meeting with the Minister next week; secondly, possible efficiency savings must be highlighted; and, thirdly, a more responsible approach to the regional rate must be sought. The Alliance Party has not sought, at this stage, to address how it would fund the underfunding of our public services. However, the several different income strands that we have set out for Northern Ireland can be dealt with. Mr P Robinson: The Member has no shame whatsoever. He tells us that he does not possess the resources to garner together an argument, yet he states his approach as if it were fact. He has admitted that he does not have the resources at his disposal to realise what the real financial position is. Perhaps he should use Assembly facilities —Committee and Library resources — to obtain the facts so that he might return with answers. However, I suspect that to do so would scuttle his argument. The Member accuses me of adopting a popular rather than an evidence-based approach. Let me give him that evidence. The increases under direct rule have been significantly higher than anybody in Northern Ireland should have been asked to bear. A 62% increase over the past five years is unacceptable, but the Member evidently does not think so. If we are to redress the balance, we are right to do what we have done — freeze rates. I would have thought that, after his recent radio broadcast, the Member would have recognised that people do not support his stance. I do not know what doors he has been knocking on, but people to whom I have spoken welcome the fact that they are to experience some relief from the massive rates hikes of previous years. I listened to the contribution from the deputy leader of the Alliance Party. She should have listened to the old saying that one never refers to rope in the house of a hanged man. It was unwise for her to start to refer to manifestos. She has obviously forgotten that the Alliance Party’s manifesto for the local government and Assembly elections stated that there should be rates reductions. Her party advised people to watch out for the parties that would be in Government, because they would attempt to hike the rates in Northern Ireland. The exact opposite has now happened; the parties in Government want to freeze the rates in Northern Ireland. The Alliance Party has torn the page out of its election manifesto and now wants to hike the rates in Northern Ireland. I will take no lectures from her about the need to show consistency on the issue. She argues that to have a hike one day and a freeze the next day leads to a hike in the future. She should know — if she does not, she should speak to her husband, who will tell her — that Castlereagh Borough Council has dealt with precisely those issues. That is why Castlereagh Borough Council has the lowest rates in Northern Ireland and the lowest increases. The council consistently gives the best value to its ratepayers through precisely the same programme that the Assembly is adopting. We cannot simply pull more money out of the pockets of the people of Northern Ireland. Mrs Long: Will the Minister give way? Mr P Robinson: I will be happy to give way to the Member in one second. We will get the additional required resources by making efficiencies in the system. We will save £790 million through efficiencies. That is the way to do it, rather than asking for more money from people before we remove the waste from the system. People will welcome that policy. Mrs Long: The Minister has drawn a parallel between his budgetary approaches for Castlereagh Borough Council and Northern Ireland. Will he concede that the difference is that, unlike in Castlereagh, where people can hop on a bus and go to Belfast to use the services that are provided there, people in Northern Ireland will not have the option to go elsewhere when times become difficult and service provision is low, as it has been in Castlereagh? Mr P Robinson: If the Member knew a bit more about the subject, she would know that more people hop on buses to go to facilities in Castlereagh than the other way around. Recreation facilities in Castlereagh make money for the council, whereas facilities in Belfast lose money. The Member might wish to take some lessons from Castlereagh in that respect. The Member for East Antrim Mr Wilson found it so difficult to pay the rates in Belfast that he decided to move to Larne, so Mrs Long should not try to egg him on to intervene in the debate. Mrs Long raised the issue of unpredictability. How can she talk about the unpredictability of future rating when — for the first time ever — a Minister has given predictability to the business sector and to householders in Northern Ireland? We have told people what the regional rate will be for the next three years. That is total predictability until the end of the mandate of this Assembly. No previous Minister has offered householders or the business sector that degree of predictability so that they can plan their finances in the longer term. I would have thought that, instead of criticising that, the Member would have thanked the Executive for providing people with a longer run-in time in which to assess their finances for the next three years. The Member for Strangford Mr Shannon mentioned what I will describe as a “horticulture allowance”, which would be an extension of the existing farmhouse allowance. The Member came to see me with one of his constituents, and he made a strong case. He pointed out the similarities between the horticulture and farming sectors. My officials have been tasked with assessing how widespread that issue is and examining ways in which we might best address it. Addressing the matter in the way in which the Member has suggested will probably require primary legislation. Therefore, my Department is gathering evidence, and officials have written to the Department of the Environment’s Planning Service about the number of houses that have user restrictions imposed by the planning system for horticultural reasons. I have covered the issues that were raised during the debate, and I hope that I have at least covered Members’ substantive points. If, on reading Hansard, I discover some issue that I have not covered, I will write to the Member concerned. Mr Deputy Speaker: I remind Members that the motion requires cross-community support. Question put, The Assembly divided: Ayes 79; Noes 8. AYES NATIONALIST Mr Attwood, Mr Boylan, Mr D Bradley, Mrs M Bradley, Mr P J Bradley, Mr Brady, Mr Brolly, Mr Burns, Mr Butler, Mr W Clarke, Mr Dallat, Mr Doherty, Mr Gallagher, Ms Gildernew, Mrs D Kelly, Mr G Kelly, Mr A Maginness, Mr P Maskey, Mr F McCann, Mr McCartney, Dr McDonnell, Mr McElduff, Mrs McGill, Mr McGlone, Mr Molloy, Ms Ní Chuilín, Mr O’Dowd, Mr O’Loan, Mrs O’Neill, Ms Ritchie, Ms Ruane. UNIONIST Mr Armstrong, Mr Beggs, Mr Bresland, Lord Browne, Mr Buchanan, Mr Burnside, Mr Campbell, Mr T Clarke, Mr Cobain, Mr Craig, Mr Cree, Mr Dodds, Mr Donaldson, Mr Easton, Mr Elliott, Sir Reg Empey, Mrs Foster, Mr Gardiner, Mr Hamilton, Mr Irwin, Mr Kennedy, Mr McCallister, Mr McCausland, Mr B McCrea, Mr I McCrea, Mr McFarland, Mr McGimpsey, Miss McIlveen, Mr McNarry, Lord Morrow, Mr Moutray, Mr Newton, Mr Paisley Jnr, Rev Dr Ian Paisley, Mr Poots, Mr G Robinson, Mrs I Robinson, Mr K Robinson, Mr P Robinson, Mr Ross, Mr Savage, Mr Shannon, Mr Simpson, Mr Spratt, Mr Storey, Mr Weir, Mr Wells, Mr S Wilson. Tellers for the Ayes: Mr Bresland and Mr Storey. NOES UNIONIST Ms Purvis. OTHER Dr Farry, Ms Lo, Mrs Long, Mr Lunn, Mr McCarthy, Mr Neeson, Mr B Wilson. Tellers for the Noes: Dr Farry and Mr McCarthy Total Votes 87 Total Ayes 79 [90.8%] Nationalist Votes 31 Nationalist Ayes 31 [100.0%] Unionist Votes 49 Unionist Ayes 48 [98.0%] Other Votes 7 Other Ayes 0 [0.0%] Question accordingly agreed to. Resolved (with cross-community support): That this Assembly approves the Rates (Regional Rates) Order (Northern Ireland) 2008. Rates (Industrial Hereditaments) (Amendment) Order (Northern Ireland) 2008 The Minister of Finance and Personnel (Mr P Robinson): I beg to move That this Assembly approves the Rates (Industrial Hereditaments) (Amendment) Order (Northern Ireland) 2008. The Order will enable us to hold the rates for commercial premises at 30% for the next three years. It is a short but important Order that marks a significant break with the direct rule policy. The Order is a sign that devolution is delivering for the people of Northern Ireland. There are some who have said that devolution is no different than direct rule and that we may as well be governed from Westminster. However, those who wanted to see a continuation of direct rule, and the Labour Party setting policy in the Province, were playing a part in punishing the manufacturing sector and costing Northern Ireland much-needed jobs. The agenda of this Administration is not the same as that of the direct rule Labour Government. Those who oppose devolution are supporting the return of a failed Labour Party policy in Northern Ireland. That agenda was to increase taxes on business: our agenda is to ensure better delivery from the public sector. Making the economy the Executive’s top priority is not only about words, but actions. Therefore, the Rates (Industrial Hereditaments) (Amendment) Order (Northern Ireland) 2008 is not only important for the much-needed relief for the manufacturing sector but for the message that it sends from the Administration to those who want to do business in Northern Ireland. The policy of industrial derating dates back to 1929. The decision to phase out that relief was announced in April 2003 by direct rule Ministers who wished to phase it out entirely. That process began on 1 April 2005, with full rates on industrial property due on 1 April 2011. Members will be aware that, since then, there has been concern that the measure will have a detrimental effect on business. As a result, the Department of Finance and Personnel commissioned a review by the Economic Research Institute of Northern Ireland, which was published in early November 2007. I am grateful to the institute for its work, but, as its report emphasised, the decision on the level of industrial rates must lie with democratically elected politicians. During the debate on the draft Budget, I announced that we should hold the current level of industrial rates at 30%. The Order will facilitate that until 2011, and changes will have to be made to primary legislation to deal with the issue beyond that date. I have already stated that the Administration have set economic growth as a top priority. We must demonstrate that to our manufacturing sector, and, by approving the Order, we will do precisely that. In making my decision in October, I was confident that the Assembly would support such a move, because I had read carefully the views expressed by all the parties during the June 2006 debate on freezing industrial rates, when the motion was passed unanimously. I see that the Member for North Down is getting a little cautious — and so he should be, in case he takes the same line as he took in the Committee and hears quoted back to him some of the things that the Alliance Party and others said during that debate in June 2007. 2.00 pm Furthermore, I am grateful to the Committee for Finance and Personnel and to the Executive, who have endorsed my position on both the policy and the draft legislation that I present to the House. Although it is not a perfect solution, few ways remain open to us to support local industry, given the extent to which our hands are tied by the European Union. In fact, EU state aid rules do not allow us to return to 100% derating. With regard to the longer term, I hope to bring before the Assembly an amendment to the primary rating Order to deal with the situation after 2011 and to hold the level of industrial rates at 30% for the longer term. Our current provision is, to quote the ERINI report, a “blunt instrument”. Were we starting from scratch, we might not introduce such a provision; nevertheless, in providing relief to our manufacturing sector on an annual fixed cost, this Order will give industry some confidence in financial planning. We must give a positive signal at this time. The ERINI study included a survey of manufacturing firms, which revealed what a significant number said they would do in the event of future rate increases. Approximately 25% thought that they would transfer production to locations outside Northern Ireland. Other consequences included abandoning or scaling down future expansion plans, as well as pay freezes or reducing employment. Most firms who responded said that full implementation of industrial rates would have adverse effects on employment, with a freeze on replacing employees who leave and restrictions on recruitment. Given the tough time our manufacturing sector is experiencing, we cannot ignore the comments of those in the front line who, in partnership with Government, are creating wealth and revitalising our economy. Equally, when there are serious issues of political and administrative bureaucracy to address, we should not ask the business sector to pay for such inefficiency. I shall briefly describe each of the articles of the Order. Article 1 provides the title of the Order and gives its operational date as the day following that of its affirmation by this Assembly. Article 2 amends the current provision in schedule 7 to the Rates (Northern Ireland) Order 1977, which provides the level of industrial rates for the next three financial years. The level will be 30% of the net annual value of for each of those years. The current levels set out in the legislation are 50% for the year beginning 1 April 2008, and 75% for the years beginning 1 April 2009 and 1 April 2010. I commend the Order to the Assembly. The Deputy Chairperson of the Committee for Finance and Personnel (Mr Storey): I thank the Minister for bringing the motion to the House. The purpose of the statutory rule is to determine that the non-domestic rates on an industrial property will be assessed on 30% of its net annual value over the next three financial years from April 2008. Members will be aware that, when devolution returned, the Minister of Finance and Personnel decided to await the outcome of ERINI’s review of industrial derating before taking any decision on the issue. Having studied ERINI’s preliminary report, and in light of ERINI’s assessment that to phase out derating would indeed pose a risk to some of our manufacturing firms, the Minister announced as part of his draft Budget statement that the current level of rates would be held at 30% over the next three years. Following the Minister’s announcement, both DFP officials and ERINI briefed the Committee on 14 November 2007 as part of the Committee’s consideration of the draft Budget. The Committee considered the proposal carefully and concluded in its report as follows: “The proposal to freeze industrial rate liability at 30% across the Budget period is in keeping with the increased focus on the economy. However, [...] the ERINI report found little evidence to suggest that full industrial rating would lead to a collapse in manufacturing with substantial loss of output and jobs beyond existing trends in the sector. [...] ERINI also suggested that proceeding to a 50% liability would incur only a relatively small risk to industry as a whole.” The Committee, therefore, noted in its report on the draft Budget: “scope exists for a future review of the 30% liability.” However, it supported the Minister in proposing the retention of the 30% manufacturing liability for the time being. The Committee emphasised in its report that, though mindful that industrial derating represents one of the few fiscal tools at the Executive’s disposal, it considered this policy to be: “outdated and a blunt instrument in terms of promoting economic development and sustainability in the long term.” The Committee therefore formally recommended that DFP further consider: “the scope for modifying the industrial derating scheme in the longer term to encourage increased business activity in areas which would lead to higher productivity” such as research and development and exporting marketing. In the event that the scheme could not be modified without contravening EC state aid rules, the Committee further agreed to support ERINI’s suggestion that the Executive take: “the opportunity afforded by the review of industrial derating to build a new concordat between industry and Government which will specify what each can expect from the other in obligation and support.” DFP’s response to the Committee’s report on the draft Budget is being presented to the Committee on 12 March. Members will look forward to what is being proposed in relation to this recommendation. In relation to the provisions in the statutory rule, DFP officials briefed the Committee on the proposals on 6 February and the Committee formally considered the rule on 20 February. At that meeting, a motion to recommend that the rule be affirmed by the Assembly was approved by a majority vote of the Committee. As the Deputy Chairperson of the Committee, I therefore support the motion. Mr Beggs: The Ulster Unionist Party and I support the retention of industrial rating at 30% and oppose the escalator that had been implemented in the direct rule Ministers’ legislation. In the last couple of years I have visited a number of industrial sites, and I have learned that the increased cost of rates for industrial manufacturing companies would result in a reduction of R&D and put at risk future investment in sizeable plants, and even smaller ones. Ultimately, it would reduce employment. This is a real issue; it is not a theoretical question as to whether it would have an effect or not. Anyone who speaks to most of the companies in Northern Ireland will understand that they have to make profits in order to spend money on R&D and make investments in the future. In Committee, the Alliance Party opposed the freeze at 30%. I warn the public, and Alliance voters, that the implementation of that policy would be unfortunate. I support the retention of rating at 30%. There are a limited number of things that this Assembly can do, with immediate effect, to improve the prospects of local companies. The Varney Review II is under way, and we all hope that it will identify some tax changes to assist the local economy. This matter is within our remit and control, and so I urge the Assembly, particularly in the run-up to the investment conference in May, to give a clear direction that it wishes to encourage private business. That will mean real jobs in the economy. For that reason, I support the motion. Mr O’Loan: I agree with the Minister that our manufacturing industry requires support. Although this measure is a blunt instrument, it is one of the few available to the Minister. Manufacturing requires long-term assurances, and the ERINI report recommended that, whatever the level struck, industrial rates should be held for several years. Therefore, I support the Minister when he refers to considering the long term. My only one concern, which I expressed in the Committee, is that an issue raised in the ERINI report has not been adequately addressed. It is not my intention to allow that to cause a Division; on the contrary, I support the Order’s intention to freeze industrial rates at 30%. I mentioned that point during the Budget debate, and I quoted from the ERINI report. In essence, when gathering industry evidence, ERNI’s experience, particularly with the manufacturing industry, was that the relationship between industry and Government was poor and that industry was not understood and supported. I therefore welcome the emphasis on that matter from the Deputy Chairperson of the Finance and Personnel Committee, Mr Storey. The Committee’s ‘Report on the Executive’s Draft Budget 2008-2011’ states: “The Committee recommends that DFP considers further the scope for modifying the industrial derating scheme in the longer term to encourage increased business activity in areas which lead to higher productivity (e.g. research & development, export marketing). In the event that the scheme cannot be modified directly without contravening EC state aid rules, the Committee would support the approach, suggested in the Economic Research Institute of Northern Ireland (ERINI) report, of the Executive taking the opportunity of the review of industrial derating to build a new concordat between industry and government, which will specify what each can expect from the other in obligation and support.” To that end, I call for action from the Assembly, and, given that ERINI’s report came first to the Department of Finance and Personnel and that the Committee has expressed its desire for the Department to play a role, it clearly must do so. In addition, the Department of Enterprise, Trade and Investment (DETI) and the Department for Employment and Learning (DEL) are also fundamentally involved. All those Departments must acknowledge that a real need exists and begin to put in place measures that might create such a concordat. Forming a new relationship between industry and Government is not just a task for Government; the manufacturing industry also has a responsibility. The Northern Ireland Manufacturing Focus Group campaigned powerfully on industrial derating, and it now has an opportunity, and a challenge, to do a much more interesting and, in the long term, significant job, which will be to work alongside the Government here in order to put the manufacturing industry in a better position to compete in the global marketplace. Dr Farry: It always strikes me as a paradox that we debate Private Members’ Business for hours, with many Members contributing, whereas, when it comes to discussing formal legislation and making it a reality, the debates are rather limited. I recognise that both the Ulster Unionist Party and the SDLP have contributed a little more to this debate than they did to the last; however, I note that Sinn Féin members have still to speak, and I hope that that will be addressed later. It is important that these matters are not only debated by the Alliance Party and the DUP and that other parties nail their colours to the mast. The Alliance Party has major concerns about this statutory rule, and there is neither a sound economic nor financial rationale behind the policy articulated by the Minister. In his introductory remarks, he articulated a very selective reading of the ERINI report. It is worth noting that the report suggested that it was safe to raise the level to 50% and that the risks would be minimal. It pointed out that not doing so would lead to opportunity costs for the public purse and for wider economic policy. ERINI also raised concerns about the nature of the survey that it conducted with the manufacturers. 2.15 pm Industrial derating is an old-fashioned and outmoded form of industrial support, as the Deputy Chairperson of the Finance Committee recognised in his opening remarks. It was introduced on a UK-wide level in 1929, the year of the Great Depression — although I am not sure whether there is a direct link between those two events. The practice was phased out in England in 1963 and in Scotland in 1995, and few other modern economies deploy it. Thus it is an old-fashioned form of support. It is too much of a blunt instrument to be effective. It is not about creating a modern economy; frankly, it is about preserving what we have rather than trying to rebalance the economy and engage with the new global realities. There have been comments on the Varney Review’s very sound analysis of the situation in Northern Ireland — although its recommendations were not overly sound. It is worth noting that it does not view industrial derating as a major advantage to the Northern Ireland economy. I am concerned about remarks that have been made about this policy being critical as we look towards the investment conference. Frankly, industrial derating is not a major issue for investors. They want to see a modern-looking, forward-thinking economic policy, not one that is designed to hold back the tide of international trends. Mr Beggs: The Member has said that he believes that the policy is not critical. Does he accept that as well as determining whether there will be new investment from foreign direct investors, this policy can impact on where existing companies invest? Many Northern Ireland companies are linked to sister companies in other parts of the United Kingdom or in the Republic of Ireland. Whether those companies decide to invest will be determined by a range of factors. Regrettably, our energy and transports costs are generally slightly higher than the costs in the rest of the United Kingdom. Does the Member accept that, in order to ensure that there will be continued investment in R&D and plant — thereby making our economy efficient — it is important to encourage existing local companies that operate in Northern Ireland? Dr Farry: I would encourage the Member to read the ERINI report. It sets out that the major cost issues facing manufacturing in Northern Ireland are labour, transport and energy. Property is quite far down the list. The analysis from ERINI — and also in the regional forecasts — pointed out that the level of risk was quite minimal in that respect. If the argument is being made that this policy should be in place as some sort of counter-subsidy for our energy, transportation and labour costs, the answer is to address those problems rather than allow this policy to create a further problem. As regards the investment conference, rather than look backwards, it is important to look to the future competitiveness of Northern Ireland and how well it sells itself. The policy is not an effective way of attracting foreign direct investment or of engaging with the global economy. It is also worth reflecting that industrial derating applies to some sectors of the economy but not others. Some commercial activities benefit, while others do not. That in itself is not fair, but it also begs the question as to whether the correct sectors are being subsidised. Indeed, while manufacturing contributes a considerable amount of gross value added (GVA) to the Northern Ireland economy, it is worth noting that many of the potentially higher GVA-producing activities would not be covered by the industrial derating policy. In that respect, it does not help to rebalance the economy and to encourage those GVA conversions that the Executive are rightly talking about. The EU market rules mean that industrial derating would be classified as a form of state aid. Industrial derating is permitted only as a legacy policy that predates the UK’s accession to the European Union. Mr Hamilton was handing out quite a lot of labels this morning, particularly in my direction. The DUP and the other parties that have been vocal in supporting that policy are effectively defending an industrial policy that is old fashioned and that has an element of statism about it. The Alliance Party is articulating a pro-market and liberal approach. When I was speaking during the previous debate, I was also reflecting a liberal approach to economics. Mr B McCrea: Will the Member tell the House what industrial experience any member of the Alliance Party has? I have rarely heard such an amount of drivel from people who do not know what they are talking about. Dr Farry has rehashed issues that have been gone over and over again. Had he talked to people, he would understand the challenges that the manufacturing industry is faced with. He simply does not understand what he is talking about when he refers to sunset industries and so on. The key challenge facing Northern Ireland is productivity. The only area that enhances productivity is manufacturing. The GVA is £49,000 per employee. Dr Farry is completely wrong. Will he please tell Members what he bases his arguments on? Dr Farry: It was a relief that towards the end of his intervention Mr McCrea got round to some points of actual substance, as opposed to simply engaging in abuse. The Member should read the ERINI report, which was commissioned by the Department of Finance and Personnel. Although I have stated that the manufacturing industry makes a considerable contribution to GVA, the Member is ignorant in making the comment that only manufacturing contributes to productivity. That statement is patently false. If the Member had any understanding of the nature of the UK economy — Mr B McCrea: On a point of order, Mr Deputy Speaker. I think that there is a misunderstanding, and I ask that the Member withdraws his remarks. I actually talked about productivity increases. I did not say that manufacturing was the only contributor to productivity. Perhaps the Member should listen more carefully. Mr Deputy Speaker: The Hansard report can be read to clarify that. Dr Farry: That was more of a point of information under the guise of a point of order. The biggest increase in GVA in the UK economy over the past 10 years has come in the areas of financial services, which have become the main driver of productivity across the UK. Although some aspects of the service sector produce low GVA, other aspects produce high GVA. Therefore, I am suggesting that although it is important that Northern Ireland continues to have a strong manufacturing presence, it is also important that the economy is further balanced by appealing to a wider range activities. It is important to consider the differences between the Northern Ireland economy and that of the Republic of Ireland and the nature of economic activity in both jurisdictions. Radical changes have occurred in the Republic of Ireland over the past 20 years. Unfortunately, few changes have taken place in Northern Ireland during the same period. The arguments for the retention of the policy are weak, and that was highlighted in Mr Storey’s opening remarks. The ERINI report stated that: “if Northern Ireland was starting from a clean sheet and could choose what form of support to provide for industry there is not the slightest possibility that we would suggest adopting a policy of industrial derating.” That is an important point. The main argument for retention is essentially about the alleged damage that could otherwise be caused to the economy. Of course manufacturing is still an important element of the local economy. The fear is that an increase in industrial rating will have a negative impact on employment and output. Although that may be the case in some areas, the analysis from ERINI and Regional Forecasts Ltd suggests that those dangers are significantly overstated; they are perceptions rather than realities. It is forecast that, at a rating of 50%, no more than 10% of companies would face rates bills that equate to more than 15% of their profits. Labour, transportation and energy costs are bigger issues for industry. Some may argue that although, under EU state rules, industrial derating cannot be introduced, it is permitted as a legacy policy. Therefore, if Northern Ireland were to reduce the level of subsidy to manufacturing, it could not return to the current policy. The biggest risk lies in not changing policies. The more responsible approach is to seek to rebalance the economy — not to preserve the status quo. There is a risk involved in not taking the opportunity to do so using the available resources. Industrial derating of 30% produces £22 million per annum, and full derating would produce approximately £70 million per annum. The Alliance Party proposes a level of 50%, as suggested by ERINI, as the more responsible approach. That would produce a further £13 million per annum for the local economy, which equates to approximately £40 million over the period of the incoming Budget. The critical economic argument is that the lost resources and income could be better invested in economic drivers for the general good of the economy, including manufacturing. I am not a fan of selective financial assistance, but the ERINI report makes it clear that investing resources in that way would be a more effective means of providing financial support to the economy. At a more general level, the central issue in relation to business taxation is corporation tax. Members often talk about foreign direct investment. An adjustment in the rate of corporation tax would greatly transform the economy. The Alliance Party remains concerned by the lack of fiscal and tax-varying powers that could be used wisely to modernise and rebalance the local economy and address the regional disparities in the UK economy and the economic imbalances on the island of Ireland. It is worth nothing that the Executive seem to have given up the fight when it comes to corporation tax. No statement has been made to the Assembly either by the Executive or the Minister of Finance and Personnel. Mr Deputy Speaker: Order. Members are aware that Question Time begins at 2.30 pm and nothing — not even Dr Farry — will get in the way of that. Dr Farry, you may continue your contribution after Question Time, when you will be called to speak again. Members, please take your ease until 2.30 pm, when Question Time will begin with questions to the First Minister and deputy First Minister. The debate stood suspended. On resuming (Mr Speaker in the Chair) 2.30 pm office of the first minister and deputy first minister Lifetime Opportunities Strategy 1. Mr McCartney asked the Office of the First Minister and deputy First Minister to detail when a decision will be made in relation to the lifetime opportunities strategy. (AQO 2374/08) The First Minister (Rev Dr Ian Paisley): The Executive’s commitment to tackling poverty is clearly outlined in public service agreement (PSA) 7 in the Programme for Government entitled ‘Making People’s Lives Better’. The PSA includes challenging commitments to work towards a 50% reduction in child poverty in Northern Ireland by 2010 and its elimination by 2020. In line with its statutory obligation under section 16 of the Northern Ireland (St Andrews Agreement) Act 2006, the Executive Committee will soon receive proposals for the adoption of a strategy to tackle poverty, social exclusion and patterns of deprivation in Northern Ireland based on objective need. First, however, the adoption proposals will be presented to the OFMDFM Committee in advance of the Executive Committee’s considerations. Mr McCartney: Go raibh maith agat, a Chéad-Aire, as an fhreagra sin. Did the Office of the First Minister and deputy First Minister take into account the recommendations of the all-party Preparation for Government Committee when devising the strategy? The First Minister: Our ears are open to all. All suggestions that are fed into OFMDFM will be considered seriously, as they need to be. We hope to produce a plan that is acceptable and that is capable of achieving the objectives. Mr McClarty: The lifetime opportunities strategy was introduced in 2006 against a background in which 327,000 people live in poverty, of whom 102,000 are children and 54,000 are pensioners. With th |