Northern Ireland Assembly
Tuesday 25 September 2001
Contents
Northern Ireland Human Rights Commission
Traffic Demands in North-East Newry
The Assembly met at 10.30 am (Mr Deputy Speaker [Sir John Gorman] in the Chair).
Members observed two minutes’ silence.
Draft Budget 2002-03
Mr Deputy Speaker:
I have received notice from the Minister of Finance and Personnel that he wishes to make a statement on the draft Budget for the year 2002-03.
Mr Kennedy:
On a point of order, Mr Deputy Speaker. It is customary for a copy of a Minister’s statement to be available to Members on arrival at the Chamber. Unfortunately, Mr Durkan’s statement has not been made available to Members at this point -
Ms Lewsley:
It is available outside the Chamber.
Mr Kennedy:
It arrived at a very late stage. The statement has not been made available to some Members in the Chamber, and I ask that the matter be taken up with the Business Office to ensure that this does not happen again.
Mr Tierney:
On a point of order, Mr Deputy Speaker. The normal procedure is for the statement to be left at the Door for Members, which is exactly what happened today.
The Minister of Finance and Personnel (Mr Durkan): With permission, Mr Deputy Speaker, I would like to make a statement on the Executive’s public spending plans for 2002-03. I understand that the statement has been put in Members’ pigeonholes and that it is available outside the Chamber. I do not know exactly when it was left outside, but I shall follow up the matter given the understandable concern that has been expressed.
In accordance with paragraph 20 of strand one of the Belfast Agreement, the Executive agreed a draft Programme for Government, which incorporated an agreed Budget at its meeting on 20 September. In line with section 64 of the Northern Ireland Act 1998, I today lay the Budget before the Assembly for scrutiny and approval, after examination and debate in Committee and in the Chamber.
I wish to emphasise that the proposals that I announce today are made on behalf of the Executive as a whole. Following intense and serious discussions we have drawn together spending plans for all our services. Each Minister who attended the Executive has participated in thoughtful and constructive discussion on the public services that we oversee.
We are aware of the pressures that affect all Departments. We have a shared responsibility for the judgements that we have formed on the balance between competing demands and priorities. Therefore we must share the credit, and be prepared to share the criticism, from the implications of our plans.
All Ministers must deal with their own issues. They work within plans set by the Executive, and they should receive our support as they uphold and implement what we have agreed. I am grateful for assurances from those Ministers who have engaged in the discussions that they will uphold the conclusions reached. The clarity of the agreement that we have reached shows what can be achieved in our unique form of multiparty Administration.
I have also had useful bilateral talks with the Minister for Regional Development and the Minister for Social Development, who have both indicated their support for some of the proposals I present today.
My main purpose is to begin the important stage of consultation on the spending plans for next year. In response to the Committee for Finance and Personnel’s report from last December, the Executive have fulfilled their commitment to bring forward Budget proposals immediately after the summer recess. That is in order to maximise the opportunity for the Assembly to fulfil its scrutiny role, as envisaged in the Belfast Agreement and in section 64 of the Northern Ireland Act 1998.
When I presented the position report to the Assembly on 19 June 2001 on behalf of the Executive, I made it clear that the report was evidence of the Executive’s commitment to engage in meaningful consultation and to provide an opportunity for debate and comment in the Assembly and more widely on the issues. Many have availed themselves of the opportunity, and I am grateful to the Committee for Finance and Personnel for the attention they have paid to this issue. The Committee’s commentary on the position report has been helpful, and there has been extensive commentary from other Committees. Beyond the Assembly, we have received many important comments from social partner organisations and from other interested parties. I am grateful for the thoughtful input that they have provided.
The spending plans that I shall outline have been designed to deliver the priorities and actions in the revised Programme for Government, which was presented to the Assembly yesterday by Sir Reg Empey and Séamus Mallon. The Programme for Government has set the context for our budgetary decisions. The draft Budget’s development has been influenced by the Executive’s proposals on our policy priorities and programmes that are set out in the draft Programme for Government. This year we have further strengthened the link between policy making and financial planning, which ensures that our policies drive our expenditure and not vice versa.
We have been able to confirm and refine our actions and targets, as explained in the statement on the Programme for Government. In a few cases, due to prevailing constraints and other pressures, it has been necessary to defer planned actions. The Executive have agreed that if the resource position improves, first consideration will be given to fulfilling Programme for Government commitments that have been deferred.
The draft Budget covers the second year of the period covered by the 2000 spending review. From the longer- term perspective, since the comprehensive spending review in 1998 there has been a period of rapid growth in public spending. Our departmental expenditure limit allocation, as set by the Treasury, shows a rise in public expenditure in 2002-03 of 5·8%, or around 3% more than general inflation. However, I recognise that many of the costs that affect public services are rising at a faster rate than general inflation. The allocations for 2002-03 build on the 5·5% real terms increase in 2001-02, which has allowed Departments to initiate the work started on the Programme for Government priorities.
It is important to stress that we cannot expect spending to continue to rise at such a substantial rate for much longer. Objectively and against the historic trend, the public spending context, at least in the context of the Barnett formula, is now "as good as it gets".
Given the problems faced by many public services, we can conclude that the rapid growth is necessary but that it falls short in that it does not match expectations for the delivery of services. That applies, in particular, to health spending, in regard to which it is increasingly clear that even the high rates of increase applied in England, which we cannot afford to match, leave serious needs unmet. As a result of the demand for public services, substantial bids have been made by Departments. Those needs are real and they need to be addressed.
The Barnett formula dominates the overall arrangements for determining public spending levels for our services. As there was no spending review in Whitehall this year, there are no new Barnett consequentials for 2002-03, other than the small amounts added in the Chancellor’s Budget in March. The Barnett formula results in less growth of our spending power than England’s, and that is apparent in issues that we have had to address in preparing the draft Budget.
The Executive remain determined to seek improvements to our position with regard to the Barnett formula. We need to seek change to help us seize the unique opportunities provided by devolution and the Good Friday Agreement. We must also address the backlog of underinvestment in infrastructure and the difficulties in funding for health, education, transport and other services that we have inherited; equivalent services in England are now being addressed with large amounts of money.
However, we must not overlook the most obvious point: the amount spent per person in Northern Ireland is much higher than in England. We need to recognise that the Treasury will point out areas in which our spending is high and that it will argue that we must reprioritise. I feel strongly that we must reprioritise in response to our own views and values, not in response to Treasury constraints. That is what the Programme for Government and the Budget are all about. However, we must be aware of the areas in which relatively high spending weakens our case for help with our most acute difficulties.
Proportionately, we raise much less revenue than in England, and we fund water and sewerage services from our departmental expenditure limit. The Assembly should note that if we were to raise rate revenue and water charges roughly to their equivalent pattern in England, we would have approximately £300 million of additional spending power for public services. Even if we make allowance for the greater level of social deprivation in Northern Ireland, our low rate revenue still makes it difficult to argue for additional money from the Treasury.
In last year’s spending review we set indicative figures for 2002-03 and 2003-04 that showed how the money might be allocated to services, subject to review this year. That accounted for all our spending power, except for the Executive programme funds.
In approaching the Budget, the Executive could simply have confirmed the indicative allocations set last year. We could have allocated the additional £19·3 million available from the Chancellor’s March Budget, and the £23·5 million available as a result of reduced requirements of Departments, which was derived mainly from additional receipts and further expected proceeds from the sale of Housing Executive property. That would have meant that the majority of the bids lodged by Departments, and summarised in the position report, would have been ruled out. Departments would have had to readjust priorities to cover new costs and forgo the developments implied by their other bids.
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However, we have looked at the more general needs and demands that services face and at the scope for better use of the available spending power. We looked seriously at the option of some redistribution within the indicative figures that had been set last year. Although, in the final package of proposals, only one Department receives less than the previous indicative allocations, we did consider the possibility of wider reallocations.
We also took careful note of the points that have been made about the levels of reallocation that have applied in all our monitoring rounds so far, and the high levels of end of year flexibility. We are aware that if the balance of loading between programmes is not right at the start of the year, that will exacerbate the problem of underspending. Moreover, it is more difficult to explain the need to raise money from the rates if that money is not being fully drawn down by our programmes. It would seem odd for the scope and extent of our changes in a full Budget round to be on a smaller scale than most monitoring rounds.
In considering those issues, we came to the view that health, education and roads were among the services that face the most acute difficulties, and they would have to be given a degree of priority. That does not give those functions pre-eminence in the Programme for Government, but simply recognises that, in the context of the draft Budget, they presented the most clear-cut cases for some increase in the indicative figures that we had determined last year. The key difficulty was to find ways to address those priorities without simply shifting the difficulty to another sector.
We cannot allocate resources beyond our departmental expenditure limit, but we can look at the prospects for future room to manoeuvre. We have concluded that we can, without undue risk, allocate around £48 million of spending power to be carried forward into 2002-03, based on anticipated underspending this year. We are confident that it will be possible to manage resources in the next few monitoring rounds and through 2002-03, and to make good that assumption.
As a last resort, we have agreed that if the pattern changes and we have insufficient underspend to confirm the assumptions that we make today, we could draw on the provision held in the Executive programme funds. That means that we have a firm basis for additional allocations now, because the Executive programme funds provide security against the risks that affect our decisions.
However, neither the infrastructure fund nor the children’s fund will be included in that arrangement. We want to give particular priority to addressing the region’s strategic infrastructure, and it is important that we have the Executive programme funds available to fund more long-term developments, such as those announced last Friday and yesterday. We also want to protect the children’s fund because, as well as being intrinsically important, it is about to be the subject of a major consultation.
To use the £48 million in that way is not a cost-free option; it puts some limits on our scope to meet the pressures that may arise this year. However, I am confident that we have acted to manage resources as effectively as possible at the draft Budget stage by reducing the extent of reallocation necessary in monitoring rounds.
To use the £48 million and the additional money from the March Budget, and by recycling the reduced requirements from Departments, the total available for allocation is £92·6 million. That also includes a small reduction - £1·8 million - from the indicative allocation for the Department for Social Development. Of that, £13 million is required to deal with our proposed approach to the regional rate for 2002-03.
Therefore, the approach that I have described allowed us to meet a total of £79·6 million of the spending pressures in 2002-03 over and above the indicative figures. That is a much better scenario than had seemed likely in June, when the position report was published. However, all Departments will still have to act to absorb substantial additional costs that cannot be covered by additional spending power. That is not surprising or exceptional, but the norm for the management of public spending.
In reaching our decisions, the Executive examined a number of possible means to secure additional spending power. We focused on the need to control the level of spending on departmental running costs. All Departments will be required to examine how they can reprioritise to ensure that spending is focused where it is most needed - on public services.
We need to recognise that spending on departmental running costs includes some services provided directly by Departments. Therefore, an across-the-board cut in departmental running costs would be unhelpful. We also need to ensure that Departments can address the Assembly’s needs, give proper account to its Committees and meet their obligations under the agreement. The Executive will consider the issue further before the revised Budget is prepared.
We shall also continue to examine the scope for additional asset sales or other measures that would allow us to release more resources for services. We shall seek further information from Departments on that, and it would be helpful if all Committees would include examination of the issue in their discussions with Departments.
The draft Budget is not so much about increases to plans, but about how best to use the resources available. It is not about ordering up more, but about getting our priorities in order. That applies to the full range of services and also to each Department’s programme. We should not focus on bids for more, but on how we can get more from what we have. There are no free choices, but we can make real choices based on the values and principles that we wish to uphold. Making a difference does not depend only on having more money to spend. We can and should break further away from the patterns that we have inherited.
We have to be prepared for some allocations to go down as well as up. To get the most from public spending will mean that there is more to the process than sharing out additional money. We must focus more on what is being achieved and delivered. As we develop the public service agreements, as published in the draft Programme for Government yesterday, the outputs and outcomes can and must come to mean more to us than the amounts of money or the percentage increases in spending on programmes. That was what we wanted to achieve in the Government Resources and Accounts Act (Northern Ireland) 2001, and we need to ask Departments to engage in that with increasing realism.
I urge all the Committees to focus their attention not so much on what may have happened to bids that Departments lodged, but on what will be achieved through the Departments’ programmes. We need to work on the money that is there - as in the Executive’s proposals - and not on the money that we cannot allocate. It may be helpful in some cases for Committees to follow through with scrutiny of areas that have been questioned in the Public Accounts Committee’s hearings and reports, so that the spending plans can benefit from the detailed work already completed by that Committee.
In making choices, we need to focus spending on where the best advantage can be gained, or on where the needs are most acute. That means facing up to the fact that some spending is less essential and less beneficial. Benefits and effects can be indirect and long term, and, at times, we need to insist on resources being secured for long-term investment, even at the cost of short-term convenience.
We must focus on the evidence and make better informed decisions on the allocations for each Department for the benefit of the community and without regard for the party identity of the Minister concerned. It is important that that is seen by all as the dominant issue for consideration by the Assembly. Prioritisation will be the theme of the work that needs to be done between now and December.
In finalising the draft Budget proposals, the Executive have considered the views expressed by the Assembly on a range of issues. The Executive propose that the additional resources available should be used as explained in the Budget document and in the table attached to my statement. To outline the picture of the Executive’s Budget proposals, I will comment on the position for each Department in turn and set out briefly the changes to the indicative allocations that the Executive agreed last December.
The Executive programme funds are a key element of the Executive’s determination to ensure that spending plans are adjusted from previous patterns and spent in line with the Executive’s strategic priorities as is set out in the Programme for Government. They are also designed to promote cross-cutting working, in which proposals and initiatives can be proposed for consideration by an appropriate group of Ministers working together.
We believe that the special allocations from the funds managed and approved at Executive level will make a real difference from previous patterns of expenditure. Because some spending power has been placed in those new funds, it follows that the amounts shown for Departments in the draft Budget will understate the final spending power that will be available to functions in due course. I ask the Committees to bear that in mind when considering the proposals.
Negotiations on the new round of structural funds have now been completed for the Peace II and building sustainable prosperity programmes, and for the equal community initiative. The negotiations for the remaining community initiatives - INTERREG., URBAN and LEADER - are nearing completion. The detailed arrangements required under the programmes are nearly ready, and it is expected that bids for funding will be invited across the range of measures in the near future.
The allocations to functions and Departments in the Budget reflect the Departments’ responsibilities as implementing and accountable bodies for measures within the various structural funds operational programmes. The figures in the summary and the departmental tables illustrate the scope of the new programmes and how they complement the Executive’s own programmes. That helps to highlight the special contribution made to the region by European programmes, especially the unique assistance from the EU programme for peace and reconciliation. It is proposed that the new Executive programme fund for social inclusion and community regeneration will be managed alongside elements of the structural funds, and the community initiatives in particular, to maximise co-operation between the Executive, district councils and the European Union.
I will now turn to the main features of the departmental allocations. The allocation proposed for the Department of Agriculture and Rural Development is some £204 million. Following the foot-and-mouth disease crisis, the Executive wish to see how best to secure the future of the rural economy and the communities that depend on it. In particular, we will, over the coming months, examine the conclusions of the rural visioning exercise.
The allocation for 2002-03 includes an additional £2·2 million for a greatly enhanced programme of BSE testing of animals to meet EU requirements. That is in line with the Executive’s priority to attain a low BSE incidence status so that our farmers can regain access to export markets.
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Further provision has been made available to take forward the scrapie eradication programme, and provision for animal disease compensation is being aligned more accurately with need. Funding has been made available to maintain the beef quality initiative and take forward the Agenda 2000 reforms and the cod recovery plan. The Budget also provides for an increase of £300,000 in support of the Foyle, Carlingford and Irish Lights Commission - one of the North/South implementation bodies.
The Department of Culture, Arts and Leisure faces some cost pressures in respect of museums and in completing the establishment of the Department with its particular and distinctive role. The proposals include a significant boost in expenditure compared to 2001-02, especially for museums and libraries. The plans also provide appropriate provision for the operational costs of the languages body and Waterways Ireland. The proposed allocations will also cover the cost of the staffing necessary to allow the Department of Culture, Arts and Leisure to meet its wide-ranging portfolio of responsibilities.
The Budget proposals for the Department of Education support the Executive’s priority of investing in education and skills. Planned allocations will promote a substantial programme of support for the school sector, the youth service and community relations activities. That represents a significant improvement on the indicative plans announced last December, although the proposals will still call for a careful prioritisation of activities in the education programme.
The Budget plans will enable the Department to continue the drive to improve standards and promote excellence across the whole of the school sector, to achieve targets on GCSE and A level attainment levels and literacy and numeracy levels, and to reduce the number of pupils identified as poor attendees. The resources provided will protect classroom provision and initiatives that are key to assisting vulnerable groups.
Resources are included for ongoing initiatives to improve schools that are underperforming and to provide all schools with information and communication facilities that will increase access to new learning opportunities and learning materials.
The Budget proposals for the Department of Enterprise, Trade and Investment represent a slight decrease in spending compared with this year. The amounts required for support to industry and enterprise are difficult to predict at the budgetary planning stage, and those allocated for 2002-03 reflect the recent trend while taking account of evolving policies in lower grant rates and alternative types of support. The Executive remain sensitive to the possible need for significant investment, should some particular need or opportunity arise.
It is not yet clear what effect the expected economic slowdown will have, and it is intended that the Department of Enterprise, Trade and Investment will keep the matter under review and report at the earliest opportunity should changing circumstances reduce the budget needed in 2002-03. In setting this allocation, the Executive remain confident that the Department will still be able to meet its main Programme for Government priorities and public service agreement targets.
It is also important to note that the Budget provision does not take into account possible major infrastructure projects such as the recently announced natural gas pipelines and the provision of broadband telecommunications in Northern Ireland. Those will fall to be considered for support from the Executive programme funds. It is expected that the grant for the gas pipelines will come mainly from the Budgets for 2003-04 to 2005-06, so it is not a matter for the Budget for 2002-03.
The budget for the Department of Finance and Personnel will support the Executive’s drive to provide modern and efficient public services. The resources provided will enable the Department to provide advice and assistance to the Executive and the Assembly, helping them to manage the public expenditure system and decide how to allocate scarce resources adequately to finance Northern Ireland’s public services. The Department will also provide a range of central services to other Departments and complete major reviews of rating policy; public procurement policies; the arrangements for promotion and recruitment to the senior Civil Service; accommodation policy; and the scope for the decentralisation of Civil Service jobs.
The Department for Employment and Learning’s allocation will enable the planned expansion of student support schemes to continue and allow the delivery of other higher and further education services to be maintained at current levels. Changing needs and patterns of demand have led to a planned reduction in employment programmes, but levels of service to individuals will be secured. The additions made will support the Programme for Government priority of investing in education and skills and its supporting actions to broaden access to higher and further education and employment opportunities. An extra £30·4 million is included in the Budget plans to provide for the expansion of further and higher education places, and to broaden access to these places through revised student support measures, which target those on low incomes and those who need additional support because of their age or need for childcare support. The Department will also seek to raise attainment levels.
The employment programme will continue to provide a full range of services to companies and individuals to promote economic growth and help increase the number of accessible employment opportunities. Helping people to move from welfare to work; encouraging lifelong learning through individual learning accounts and other measures; and improving attainment levels within the Jobskills programme will all remain priorities.
The largest programme within our departmental expenditure limit is the Department of Health, Social Services and Public Safety. The proposals make provision for an increase of 8·1% in 2001-02. This reflects the Executive’s commitment to developing the service to meet the needs of our population, although this includes a technical change of £19 million from the social security budget, so the effective increase is 7·3%.
In our discussions in the Executive there was recognition of the significant demands on the Health Service. The Health Service needs increases of 7% or 8% simply to maintain standards of care due to the cost structure of the service. Such increases are afforded in England, yet noone would say that their provision is adequate for the needs of the community. However there is increasing evidence that provision here is falling behind that available in England.
We should not allow the complexity and range of issues that we face in the Budget to obscure the central fact that we have to find ways to provide adequately for the Health Service. This is probably the largest Budget issue that we face now and in the coming spending review. Change and hard choices lie ahead to make sure that the service’s structure, organisation and management serve the public interest.
I was struck by the consensus that it is right that we should increase the relative amount we spend on health and provide substantial resources in the Budget now. Our plans will enable the Department of Health, Social Services and Public Safety to maintain the existing level of services; respond to the increasing demands of an ageing population; and address the rising costs of modern medicine. However, it must be understood that we do not have all we need to allow the Department to implement all of its planned service developments. It is impossible to find sufficient additional resources to cover all of the Department’s pay and price pressures.
The Executive were advised that a consequence of the proposed allocation for the Department of Health, Social Services and Public Safety would be the deferral of the introduction of free nursing care for the elderly. It would also be necessary to re-deploy the savings in fundholding administration, which we had planned would support the management costs of the proposal local health and social care groups and other Programme for Government commitments. The Executive found that it was not possible to provide adequately for other services, set an appropriate rate of increase and avoid these deferrals. This shows clearly the nature of the difficult decisions that faced the Executive.
On a more positive note, the spending plans will allow continued support for smaller hospitals and cover the cost of the temporary transfer of services to other hospitals pending the outcome of the Hayes review. Provision is also included for the continuation of essential service commitments to address winter pressures and waiting lists.
Planned allocations will maintain the improvements in personal social services, including community care, children’s services, Sure Start and residential childcare places. Provision will also be available to address care for people with severe mental illnesses and learning disabilities.
I again emphasise that many aspects of health programmes will be eligible to be financed under the Executive programme funds, and thus there is scope for these allocations to be increased.
Planned expenditure by the Department of the Environment will enable the Department to continue its programme of work on waste management and the control of pollution to help ensure that Northern Ireland meets the EU Directives on waste management for which extra provision was made in the 2000 Budget. Additional funds are being made available in this Budget to help advance work in this area and in transport regulation where the Department has also to ensure compliance with EU regulations. Additional provision was also made in 2001-02 for road safety in response to the alarming accident levels on our roads. The Budget maintains an enhanced level of investment in that area to enable this important work to continue.
The 2000 Budget provided an increase of around 25% for planning services in 2001-02 to help meet growth in demand; this enhanced level of service will continue to be supported in 2002-03. Provision has also been made for local government services to fully meet the costs of the de-rating policy to district councils and to provide for resource grants to less-well-off councils, though it has not been possible to increase this in line with inflation this year.
The spending plans for the Department for Regional Development will sustain the investment programme for public transport, which shows a 36% increase over 2001-02, reflecting the major investment needed following the decisions on rail safety last year. This reflects the Executive’s commitment to improve and modernise Northern Ireland’s infrastructure. The plans also include provision for free travel for the elderly, following on from the allocations made for 2001-02 in February.
Key to this is the need to invest in structural maintenance of our road network, which is a vital asset that has suffered from a lack of investment in the past. The Executive have agreed that this deterioration must be arrested and have made provision to help maintain current levels of investment. We will also continue to press the Chancellor to exempt Northern Ireland from the aggregates tax, because that will increase the negative environmental impact of quarrying and put a large number of jobs at risk in that sector of our economy.
The Department for Regional Development will continue to invest in the development of the water and sewerage infrastructure to ensure that European quality standards on drinking water and waste water discharges can be met. The 2001 Budget confirms continued capital funding for 2002-03 at the enhanced level that has been built up over the past few years.
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The allocation made to the Department for Social Development will cover the administration of social security benefits, child support, housing, urban regeneration and community development. Those resources will enable the Department’s Social Security Agency to provide services to high standards of accuracy and to implement the welfare reform and modernisation programme in line with its public service agreement (PSA) targets.
After a successful pilot, and in conjunction with the Department for Employment and Learning, a single service will be rolled out, and a new joint jobseekers allowance process will be introduced. Customer satisfaction levels will be maintained, and measures to reduce fraud will continue. The resources will also allow the continuation of a substantial programme to promote measurable improvements to housing. Specific actions will be taken to reduce fuel poverty; to ensure that the Northern Ireland housing stock is maintained to the recommended standards of fitness and to build new homes that are accessible to people on low incomes.
An active programme of urban regeneration and community development will continue. A new neighbourhood renewal strategy will be developed, and community support plans for all district council areas will be introduced.
The Office of the First Minister and the Deputy First Minister will receive a modest increase in provision, which will be used to fund key research on equality and policy effectiveness and the expansion of several existing programmes. The plans will enable the Office to continue to provide effective support to the Executive and to develop and implement actions relating to anti-discrimination law, improving community relations, a children’s strategy and the effective implementation of New Targeting Social Need (TSN) policy. Representative offices will be maintained in Brussels and Washington.
Finally, the Budget proposals also include appropriate provision for the Assembly, enabling the development of the services planned by the Assembly Commission and building on the good work that has already started. Provision for the smaller Departments will cover the administrative costs of the independent Northern Ireland Audit Office, the Assembly Ombudsman for Northern Ireland, the Northern Ireland Commissioner for Complaints and the Office for the Regulation of Electricity and Gas (OFREG).
Those are the main features of the spending proposals. The plans are also supported not only by the Treasury allocation for Northern Ireland but revenue from the regional rate. That revenue represents only about 6% of our spending power. I doubt whether it will be dealt with in 6% of the time that we spend on considering the Budget. I ask all Members to keep the issue in perspective.
The Finance and Personnel Committee concluded in its report that any increase in the regional rate for 2002-03 should be linked to the rate of inflation. If we had taken that approach we would have had to use all the additional money that we received in the March Budget. We received that money as a result of a boost to the health and education budgets. It would be difficult to explain to the Treasury and, more importantly, to patients and pupils that we had diverted our share of that money to ease the position on rates.
The Executive have decided to repeat the increases of 7% in the domestic regional rate and 3·3% in the non- domestic regional rate, which they agreed and which were endorsed by the Assembly for this year. Our plans are based firmly on the conclusion that the increases will be necessary to sustain the spending levels on public services that I propose today and to show that we are looking to ratepayers to contribute a share to the growing costs of public services. Given that the standard rate of inflation is insufficient to meet the cost of services, it is impossible to make it the going rate for revenue. Although the cost of services will rise by 7% - and our total departmental expenditure limit will rise by 5·8% - under these proposals, the total income from rates will increase by only 4·8%.
That reflects the need to hold the business rate as close as possible to the rate of inflation, as it is not out of line with the position in England. The combined effect of the lower increases agreed last February for 2001-02 and these proposals is that we will forgo £13 million of revenue.
It is estimated that the proposed rates increase will cost the average ratepayer about 29p a week. People in comparable circumstances elsewhere pay several pounds a week more than ratepayers here. Rate revenue is also substantially supplemented from housing benefit, which comes from annually managed expenditure outside the departmental expenditure limit. That not only ensures that the rates do not lead to hardship for those most in need, but also means additional income for the regional economy. Lower rates would mean that we would get less from the Treasury.
The Executive have agreed that it would be inappropriate to make major changes on the rating issue before the review of rating policy is completed. A consultation paper is being prepared that will provide fuller analysis of how our position compares with other regions and the options for change. A serious debate on those issues is needed. It should take place as soon as possible, outside the immediate Budget context, and inform our future plans alongside the spending review next year.
Last year, I said that agreement on the Programme for Government and the Budget represented a very important step in the evolution of the new institutions. That is no less true now. This draft Budget marks a further step in breaking away from pre-devolution patterns and priorities. I hope that it will prepare the way for a much more fundamental review of priorities in the forthcoming spending review next year. Indeed, it is a sign of our growing economic maturity that we have been able to work together as an Executive in a tighter financial context, while having full regard for the broad range of responsibilities of all Departments and the services that are provided for all people in the community.
In its report on the Budget last year, the Committee for Finance and Personnel urged that in future the presentation of the draft Budget should take place as soon after the summer recess as possible. I agreed that that would be the best way to ensure that the Assembly and Committees have as much time as possible to scrutinise the Budget. I am pleased that at least an extra two weeks have been secured for Assembly scrutiny, in addition to the consultation that has already taken place on the position report.
I therefore look forward to the Assembly’s scrutiny, in Committees, of our spending plans and proposals as set out in the draft Budget, and particularly the role of the Committee for Finance and Personnel in drawing together and facilitating the consultation. As Sir Reg Empey and Séamus Mallon said yesterday, this process will also include opportunities for debate in the Chamber on the Programme for Government and the Budget. Those are likely to take place in October or November.
Today’s statement is also the start of a wider consultation process. The draft Programme for Government and the draft Budget will be widely circulated among our social partners in business, trade unions and the voluntary and community sectors and will also be made available to other interested individuals and groups. I commend the Budget proposals to the Assembly and invite all Members to consider them carefully. I look forward to working with the Assembly to complete the process of settling next year’s spending plans in December. We will then increasingly see that we can make a difference for the better and deliver the benefits of devolution.
Mr Deputy Speaker:
There is one hour for questions. I remind Members that this is not a time for discussion of the content of any particular part of the Budget. It is a time for questions.
The Deputy Chairperson of the Finance and Personnel Committee (Mr Leslie):
I welcome the Minister's very detailed Budget statement and, in particular, his action to address the Committee's concerns last year on the timing of the scrutiny process. The extra time available can be well used.
In the allocations, the Minister referred twice to the Executive programme funds. I was somewhat concerned that he was, in effect, treating those as a provision against uncertainty rather than as ring-fenced items in their own right.
I also note that in his later remarks on the Executive programme funds he referred to the importance of cross- cutting. However, cross-cutting was not particularly apparent in the allocations that he announced. Can the Minister therefore comment on the extent to which the Executive programme funds will be ring-fenced and on the strictness of the cross-cutting criteria that he intends to apply?
Mr Durkan:
Mr Deputy Speaker, you observed that this hour is for questions; unfortunately, it is also for answers.
The Budget has addressed departmental spending plans. The Executive programme funds are used more specifically to bring forward cross-cutting ideas and suggestions. Several Departments are leading cross-cutting initiatives such as the public health strategy, the task force on unemployability and work by the Department for Social Development. We should not therefore ignore the fact that some of the spending allocated to Departments will support cross-cutting activity. Obviously, other Departments should use their expenditure to support their own engagement and involvement in cross-cutting activities.
With regard to further evidence of the cross-cutting approach, we should not lose sight of the fact that the Executive have agreed the draft Budget. Ministers, who are conscious of their own pressures and the needs of those sectors which depend on their departmental budgets, have also been able to take account of the pressures and needs facing the broad range of Departments.
The supreme cross-cutting activity has been the ability to deliver the draft Budget. I could also make the observation that many of the exchanges in relation to it have been both cross and cutting, but we have still emerged with an agreed draft Budget.
Ms Lewsley:
I welcome the Minister's statement and the increases in the departmental budgets. Can the Minister confirm that the children's fund will be protected? When will allocations be made from the fund?
Mr Durkan:
I am happy to confirm that the children's fund and the infrastructure fund are not counted in the amounts of money that may be treated or regarded as security for the projected carry forward. That does not mean that those other Executive programme funds are jeopardised. We have a fair degree of confidence in our assumption that the money will become available in monitoring rounds. Indeed, some money has already been held over, as Members will know if they recall my statement in respect of the June monitoring round.
We felt that it was important to remove the children's fund from any part of that equation because of its intrinsic value and because it will be the subject of a major consultation exercise on how best the community and voluntary sectors should access it. Next year we will have the feedback from the consultation exercise, and there will be no further tranche of allocations from the children's fund until then.
11.30 am
Rev Dr Ian Paisley:
The Minister emphasised that the budget for the Department of Agriculture and Rural Development would be boosted by almost £9 million by the EU peace and reconciliation programme. He is aware that an international conference on agriculture is taking place in Belfast. Last night I spoke with Commissioner Byrne. He pointed out that there is additional money in European coffers that could be made available. However, that must be matched with money from the Treasury. The Minister is aware that the farming community wishes to see the creation of a retirement programme. According to the Commissioner, there is money available for that from Europe. Will the Minister start a study to see how much matching money could be obtained from Europe, if the other money were available? Every possible penny should be brought to Northern Ireland from Europe.
Mr Durkan:
Northern Ireland should optimise any possibility of public expenditure support. That is why we need to make the case for a stronger future allocation for Northern Ireland to the Treasury. I work on the premise that, if European money is available for us, we should pursue and explore that possibility.
We must remember that we cannot make our own bids to the EU for the funding; that can only happen in a UK context. That is not within my immediate remit, as is reflected in today's Budget consideration about the departmental expenditure limit. The other money falls into annually-managed expenditure. However, as the Member raised the issue, I am sure that both my Department and the Department of Agriculture and Rural Development will look at it to see if, based on the Commissioner's insights, there are some possibilities that have not occurred to us. However, I do not believe that that is something that will be distinctively available to us as a region or something that will be directly amenable to intervention by my Department.
Mr Maskey:
Go raibh maith agat, a LeasCheann Comhairle. I welcome the draft Budget and the Minister's statement. I commend the Minister and his Executive Colleagues for the strenuous efforts that they have made to square the circle of the lack of public finance and to meet the needs of our community. It is important to acknowledge that the Minister has focused attention on the serious pressures that the Department of Health, Social Services and Public Safety faces. He also dealt significantly with the Barnett formula.
What proper and vigorous steps are the Executive taking to address the issue of the Barnett formula, given that we have all acknowledged that that formula has serious disadvantages for our community?
Mr Durkan:
I agree with the main thrust of the Member's point and recognise the pressures that exist. Those pressures are not only on the Health Service's budget, but they are particularly acute there. That is reflected in so many comments that are made in the Chamber and elsewhere.
The 2000 spending review highlighted the problems with the Barnett formula in funding the devolved territories.
Following the full introduction of resource accounting and budgeting during the 2002 spending review, the Executive will continue to seek changes to the Barnett formula. We shall also press for recognition of the level of need in Northern Ireland and the structural differences between the public sector here and that in Great Britain.
The problem that we face with the Barnett formula is not simply a matter of whether the formula used to allocate funding adequately reflects our need; it is also that, under resource accounting and budgeting, capital charges and depreciation costs will move from annually-managed expenditure into the departmental expenditure limit. We have a much broader capital asset base than England; under that system road services will be funded from within the departmental expenditure limit. That is not the case in England where many of the roads are local authorities responsibilities.
Unlike what happens across the water, our capital charges and depreciation costs for water and sewerage assets will also be covered by our departmental expenditure limit. The difficulty that we already face is that the Barnett formula gives us nothing for water and sewerage - we must fund those from our departmental expenditure limit. That problem will be compounded, and several issues must be addressed. However, there are also many strong retorts and challenges for us to face. We will not get a free run at the rickety wheel when it comes to challenging the Barnett formula.