COMMITTEE FOR
FINANCE AND PERSONNEL
OFFICIAL REPORT
(Hansard)
Brief on Spring Supplementary Estimates and Vote on Account
30 January 2008
Members present for all or part of the proceedings:
Mr Mitchel McLaughlin (Chairperson)
Mr Mervyn Storey (Deputy Chairperson)
Mr Roy Beggs
Dr Stephen Farry
Mr Simon Hamilton
Mr Fra McCann
Mr Adrian McQuillan
Mr Declan O’Loan
Mrs Dawn Purvis
Mr Peter Weir
Witnesses:
Michael Daly ) Department of Finance and Personnel
Agnes Lennon )
The Chairperson (Mr McLaughlin):
I welcome Mr Michael Daly, head of central expenditure division in the Department of Finance and Personnel, and his colleague Mrs Agnes Lennon, and thank them for attending. To help the Committee understand the process, Mr Daly and Mrs Lennon will explain the purpose of the spring Supplementary Estimates and the Vote on Account.
Mr Michael Daly (Department of Finance and Personnel):
Thank you, Chairperson. As you said, we are here to help the Committee with the spring Supplementary Estimates, which are in respect of the current financial year, and to introduce the Vote on Account for the next financial year.
I apologise for being unable to meet the normal deadline — noon, last Friday — for getting material to the Committee. It was not possible to meet the deadline because the December monitoring round has been completed so recently. It was necessary to wait for detailed work from individual Departments and then have the document printed. Some delays in the process are inevitable.
As regards the spring Supplementary Estimates, the Department is seeking the Assembly’s approval for any additional resources and/or cash needed, over and above what has already been detailed in the Main Estimates, to finalise spending plans to the end of this financial year.
The second aspect is the Vote on Account 2008-09, which provides for the sums that will be needed to enable public services to continue during the early part of the next financial year, until the approval of the Main Estimates, and the next Budget Bill, which will be debated before the summer.
If public services are to continue, the associated Budget Bill must receive Royal Assent before 31 March 2008. The length of time it takes to work through the detail of monitoring rounds and produce figures for the spring Supplementary Estimates makes it essential that the Bill should progress through the Assembly by accelerated passage. The timetable is as follows: the Assembly will debate the spring Supplementary Estimates on 11 February 2008, and the Budget Bill will be introduced on the same day, but after the debate. The Second Stage of the Budget Bill will be on 12 February 2008; Consideration Stage on 19 February; Further Consideration Stage on 25 February; and Final Stage on 26 February 2008. Royal Assent will need to be given by the middle of March.
For all of that to happen, and as you have pointed out, Chairperson; under Standing Order 40, you — or a Committee Member acting for you — would need to inform the Assembly that the Committee is satisfied that it has been consulted appropriately on the public expenditure proposals contained in the Bill, and that the Bill can proceed by accelerated passage, thus removing the need for the Committee Stage. That will need to happen on or before the Bill’s Second Stage, which is scheduled for 12 February 2008. I understand that the Minister has already written to the Committee on that point.
We are here to work with the Committee on that process of consultation. Agnes and I are attending today and we will be attending again next week. We are at the Committee’s disposal, and are happy to provide members with what they need in the period up to 12 February. Those are the timescales; and for us, working with the Committee is our priority.
To help the Committee, I will introduce the two documents: the Vote on Account 2008-09 is the more straightforward of the two. That document sets out the sums required by Departments until the Assembly approves the Main Estimates and the corresponding Budget Bill later in the year. The expenditure sought is around 45% of that which will be needed overall and is consistent with the Executive’s Budget, which was debated yesterday in the Assembly. The detail will be debated further when the Main Estimates and the Bill are produced later in the year. At present, I have nothing more to say on that matter.
The other, more detailed, document before members is the spring Supplementary Estimates 2007-08. Its structure should be familiar to the Committee as it is similar to that of the Main Estimates, which the Committee considered in May 2007. The short briefing paper that we have given the Committee provides an overview of its main elements.
Although the Main Estimates, which were approved last year, set out departmental spending limits in detail, the Committee will appreciate that spending profiles change as the year progresses. There may be in-year changes both within and between Departments as a result of, for example, the monitoring rounds. Departments might also wish to change their levels of spending to reflect refinements in the original Estimates. Changes might also occur as a result of technical reclassifications that were not appreciated at the start of the year and which must be adjusted throughout the year.
The document includes other changes that are not subject to the normal monitoring round discussions, which would include changes in the level of demand-led services, such as social security benefits, which are in annually-managed expenditure (AME) and outside the departmental expenditure limits (DEL). Such changes, together with pension-related expenditure for example, must be picked up in the spring Supplementary Estimates to bring everything in line so that Departments can draw up their accounts accordingly.
There is a lot of detail in the document. However, it would be useful for the Committee to begin with pages 3 to 7, which provide a summary of the net changes for each Department.
From page 11 onwards, the document provides detailed information about each Department. Each departmental section comprises an introduction, which provides an overview of the main changes that the Department must put in place; "Part 1", which gives an overview of the changing resource position, together with any changes to the overall cash requirement; "Part II", which provides more detailed line-by-line changes and, importantly, recasts the original Main Estimates with new figures; and, finally, supplementary tables containing the new figures, which will replace those in the Main Estimates.
The document contains much detail and, given that the figures refer to each Department on a line-by-line basis, I may not have answers to all of the questions that the Committee might have. We undertake to get back to the Committee as soon as possible on anything that we cannot answer, and we will be attending again next week.
The Chairperson:
As the Committee has been monitoring the Department of Finance and Personnel’s approach and input to the budgetary process, it could take that Department as an example and look at page 4, which contains the Department’s summary position, and then examine the detailed figures on pages 133 and 134. That would help make it easier for the Committee to access information on other Departments. Do you have any specific comments to make on DFP’s contribution?
Mrs Agnes Lennon (Department of Finance and Personnel):
I do not have any particular comments to make, but I will answer any questions that the Committee may have.
Mr Daly:
A large area of the Department’s budget relates to the pension fund that it runs for the Civil Service. In that area, there have been some large changes, costing around £160 million, and one might wonder why those have not been seen before. As I said earlier, they are outside the departmental expenditure limit and are to take into account changes on the liabilities of the pension fund after the actuaries have examined it.
Therefore, it is inevitable that when the spring Supplementary Estimates is produced each year, there will be big changes — for example, in the pension fund figures. Although I have said that the figures are large, £160 million, the underlying sums that those are based on are in billions of pounds, when pension liabilities are considered. Small changes in discount factors and interest rates result in large changes. Therefore, although it looks like the changes would make a real impact on public expenditure, they are made as a matter of course. The money and the figure work are adjusted to show the true liabilities facing those funds.
Although departmental changes reflect factors such as monitoring rounds, technical changes and adjustments around budgets, it may not be obvious where a particular allocation sits. That is because the information must be summarised to prevent the Estimates document from becoming too large. Overall figures are provided in the document of, for instance £20 million or £30 million, but those figures comprise increases and decreases many areas, and would be summarised to make the information as brief as possible. We are conscious that we must present figures in a way that makes the document easier to read. However, a balance must be struck between providing a high-level document and one that is easy to follow but enormous.
The Chairperson:
I appreciate that point; it is a very dense piece of work.
Mr Beggs:
I apologise if I expose my ignorance by asking this question, but I am trying to trace the figures for DFP. If I understand it correctly, page 4 shows an additional £74 million under column 3(b) "Cash — Change proposed". I tried to trace that figure, but I am having difficulty in doing so. I would appreciate any guidance that you can give me.
Mrs Lennon:
I can talk you through how we arrived at that figure. Pages 138-40 provide the core detail of the Estimate. On page 140, the figure of £203·601 million, which is in column 6 in the "Total" line, represents the net total resources required by the Department of Finance and Personnel.
As the Committee knows, we resource accounting. Therefore, in order to arrive at the cash figure, the figure of £203·601 million becomes the starting point for the revised column at the right of the table entitled "Resource to Cash reconciliation". To that figure, we added the capital, because the cash must follow the capital, and we then subtracted from that total any non-cash charges, such as depreciation; cost of capital; and other non-cash items such as provisions to give the revised figure for cash required. Finally, the figure for "Present" cash required was subtracted from the "Revised" figure. The difference between the two comes to £73·937 million, which is the cash figure that the member was trying to trace.
Mr Beggs:
Thank you.
The Chairperson:
Do you feel better now, Roy? Pay attention, because there will be questions on that next week.
Dr Farry:
I have a general question to which I may already know the answer. Yesterday, the Assembly signed off on a three-year Budget, but is it the case that that will have no formal effect on the process? Am I correct in thinking that, although we now have a final three-year Budget, the Assembly will have to go through exactly the same process for the next three financial years as regards Budget Bills, Votes on Account, spring Supplementary Estimates, etc?
Mr Daly:
Yes. The Vote on Account seeks an initial allocation only for the incoming financial year, but these processes have to take place for the later years.
Dr Farry:
Therefore, even though the Assembly signed off on a three-year Budget yesterday, we will go through the in-year management process every year?
The Chairperson:
Yes.
Mrs Lennon:
It is important to add that yesterday’s vote was on three-year plans. The significance of the spring Supplementary Estimates and the Budget Bill is that the Assembly will be giving its authority to spend. Therefore, the Assembly is setting control limits above which Departments must not spend.
Dr Farry:
Essentially, the Department has approved the framework and the broad policy on public expenditure, but the detail will be revised each year.
Mrs Lennon:
The significant thing is that it allows the Assembly to set limits and subsequently hold Departments to account against them.
Dr Farry:
Thank you.
The Chairperson:
Do members have any further comments or questions? Thank you very much for your assistance this afternoon, Michael and Agnes. There will be a follow-up discussion and briefing next week, which will be an appropriate time to resolve the issue of accelerated passage.