NORTHERN IRELAND ASSEMBLY
COMMITTEE FOR
FINANCE AND PERSONNEL
Budget ( No2) Bill 2009
Main Estimates 2009-2010
27 May 2009
Members present for all or part of the proceedings:
Ms Jennifer McCann (Acting Chairperson)
Dr Stephen Farry
Mr Fra McCann
Mr David McNarry
Mr Adrian McQuillan
Ms Dawn Purvis
Mr Peter Weir
Witnesses:
Ms Agnes Lennon )
Mr Paul Montgomery ) Department of Finance and Personnel
Mr Stephen Rusk )
The Acting Chairperson (Ms J McCann):
I welcome Stephen Rusk, Paul Montgomery and Agnes Lennon. We are short of time and some members have to leave, so please provide a brief presentation, which will be followed by questions.
Mr Paul Montgomery (Department of Finance and Personnel):
As the Committee will be aware, the Main Estimates and the draft Budget (No 2) Bill are the next stages of the public expenditure process for this financial year. Although the stages are routine, they are, nonetheless, essential parts of the expenditure cycle. Earlier this year, the Budget Bill included the 2009-2010 Vote on Account, which provided for 45% of Budget expenditure in the current financial year. Although the draft Budget (No 2) Bill aims to provide the balance for the remainder of 2009-2010, any changes that are made to expenditure plans during the course of the in-year monitoring process will be reflected in the Spring Supplementary Estimates (SSEs) in January/February 2010.
The Bill must receive Assembly approval before the summer recess, hence the need for accelerated passage. The Minister of Finance and Personnel wrote to the Committee about the matter on 21 May 2009. Members will be aware that for accelerated passage to happen, the Committee must be satisfied that it has been consulted appropriately.
As with the 2008 Budget Acts and the Vote on Account, the Main Estimates in the draft Bill are based on and fully reconcilable to the Executive’s Budget for 2008-2011, as approved by the Assembly in 2008. That means that the draft Budget (No 2) Bill does not allow Departments to do anything new in relation to the Budget and the Vote on Account over and above the position on which the Committee was consulted. However, there are some limited changes as part of the routine post-Budget exercise. Those are technical issues that were not finalised in time for the main Budget. The Committee will be aware of most of those from the corresponding evidence session last year.
The only other point is that we had previously produced a high-cost, colour, glossy, all-singing and all-dancing document, but, because of the need to deliver efficiency savings, we have adopted a plain, black and white document. That will save the Department £13,000 this year as part of the overall departmental efficiency target.
The Acting Chairperson:
Will you explain the need for accelerated passage and what would happen if the Committee were to decide not to grant it?
Mr Montgomery:
The Vote on Account gives 45% of Departments’ expenditure requirements for 2009-2010. If accelerated passage is not granted and the Bill is not passed now, Departments will start to run out of money during the summer, and they will be unable to provide public services. Departments need legislative authority to spend the money, which is what the Bill will provide.
Dr Farry:
This situation is completely frustrating. In practice, the Committee has little choice but to grant accelerated passage. The issue concerns a Budget that is part of a three-year package that was consulted on in public and signed off by the Executive but that which many Members feel is now not relevant to the current situation in Northern Ireland. There is no real way for us to change that.
The issue has been tabled today, and the Committee has 15 minutes to say that it is happy with accelerated passage and happy that it has been consulted. There is a need for the type of presentation to be brought to us a few weeks earlier, because the programme suggests that this is our only meeting before the First Stage of the Bill and, therefore, our only opportunity to sign it off before the June deadline. Your comment that the draft Bill is largely technical because it refers to something that was signed off two years ago was a telling one.
Mr Montgomery:
The draft Budget (No 2) Bill is a procedural vehicle; it will not result in any significant changes. However, a parallel process will allow changes as part of the in-year monitoring process. It is not as though we are saying that the Budget is set and there can be no changes. There can be changes as a result of in-year monitoring.
Dr Farry:
I want to come to that point. In a sense the two are interrelated to some extent. First, the monitoring rounds are limited with respect to the nature of the response that can be made to changing circumstances. They are governed purely by what Departments are prepared to surrender and whatever Barnett consequentials come to Northern Ireland.
Mr Montgomery:
That is not necessarily the case.
Dr Farry:
How else can they be affected?
Mr Montgomery:
The Executive could agree a pro rata reduction in departmental allocations and make money available for addressing other pressures.
Dr Farry:
Let us say that the Executive decides to change underlying baselines. At what stage does that become a re-writing of the Budget? It strikes me as being a re-writing the Budget without admitting that it is such.
Mr Montgomery:
It is simply revising in view of changing circumstances.
Dr Farry:
Why not just do that, if that is the case?
Mr Montgomery:
The difficulty with a full-blown revised Budget process is as follows: we are looking at the Budget process for the years 2011-12 to 2013-14. For that, we will need at least over a year and a half. A Budget exercise is not something one just does and is completed next week. It involves a significant amount of work and it is a massive bureaucratic process. The same alterations can be made, effectively, as a part of the in-year monitoring process. It is possible if it were agreed by the Executive. There are no constraints on the Executive.
Dr Farry:
I dispute that. I do not see any real process at large in the Executive in which existing departmental policies and programmes are reviewed. One must ask the question: are those as relevant to the current situation as they were when they were signed off two years ago? Can the money be better invested in other programmes that might have a more relevant outcome for society as a whole? That is my position.
As regards the scale of the Barnett consequentials that will become available to Northern Ireland as a consequence of the April UK Budget — £116 million over two years — how does that figure compare to those we have received in recent memory? Is it at the top of the scale, or is it par for the course as things trickle in?
Mr Montgomery:
That depends. In some years, we have received £100 million in Barnett consequentials, but those days are gone. In the 2008 UK Budget and pre-Budget reports for the position for 2008-2009, we have about £20 million from those two UK Budget processes.
Dr Farry:
That was last year’s UK Budget?
Mr Montgomery:
That was 2008.
Dr Farry:
Yes, but it was the pre-Budget report?
Mr Montgomery:
Yes, it was the Budget — whereas, the 2009 Budget gives us around £50 million for this year.
Dr Farry:
And then we get £66 million for next year.
Mr Montgomery:
Yes.
Dr Farry:
So those are of a greater scale than has been the case in the past?
Mr Montgomery:
Yes, for 2008; though not necessarily in previous years, when we could have had more.
Dr Farry:
The Executive has still to determine how it will invest that money, if at all. That will be dealt with purely through the monitoring round and then subsequently tagged onto the Budget Bill for 2010, as a part of the SSEs. Will that impact upon the current legislation in any shape or form?
Mr Montgomery:
It could possibly impact on the SSEs if the Executive decides to use the Barnett consequentials for 2009-2010 to supplement expenditure plans for this year, as opposed to using the Barnett consequentials for 2009-2010 to offset the efficiency savings for 2010-2011.
Dr Farry:
If they decide to spend that money —
Mr Montgomery:
Then that will impact on the SSEs.
Dr Farry:
However, it will have no impact on the Bill that we are discussing today.
Mr Montgomery:
That is correct.
Dr Farry:
It will only be addressed by legislation coming forward at the beginning of next year?
Mr Montgomery:
That is correct.
Dr Farry:
Thank you very much.
The Acting Chairperson:
Does anyone else want to ask a question? OK, as there are no more questions, thank you —
Mr McNarry:
I apologise — [Laughter.]
What are we on — would you refresh my memory? [Laughter.] Are we still on our inquiry into public procurement policy and practice in Northern Ireland? [Laughter.]
The Acting Chairperson:
The subject is the draft Budget (No 2) Bill.
Mr McNarry:
I see that the Department has the power to borrow an identified sum. How is that sum compiled? How is it put together?
Ms Agnes Lennon (Department of Finance and Personnel):
It is 50% of the amount of cash voted from the Consolidated Fund in clause 1.
Mr McNarry:
Is that normal practice?
Ms Lennon:
Yes. It gives the Department of Finance and Personnel the facility to borrow temporarily.
Mr McNarry:
Has anyone worked out that we need that amount?
Ms Lennon:
We never need as much as that; it is merely a limit.
Mr McNarry:
How much might you need?
Ms Lennon:
We probably need hundreds of millions a month.
Mr Montgomery:
Agnes can correct me on this, but this is not the same as reinvestment and reform initiative (RRI) borrowing, where we pay interest on the money. This is short-term borrowing in order to fund services; we do not pay any interest on it.
Ms Lennon:
We allow the Consolidated Fund to dip into the red, but there are about 120 Northern Ireland public accounts that are in the black. Therefore, overall, we are not in the red.
Mr McNarry:
Forgive my naivety or ignorance on this subject, but you have identified a sum, and then you have added access to another sum, which is 50% of the first sum. Is the second figure merely arrived at through an easy calculation, or is it something that you do all the time? Have you sat down and considered that you need a particular amount of money on top of the first sum? This seems to set a lot of money into a position for which I am accountable to taxpayers, but that I am unable to account for.
However, you must have a reason for doing it, but I have no idea what you might borrow in that sense. The draft Bill contains the phrase “with any interest due thereon”, and you say that there is no interest. Have you not sat down and considered what figure you need and that you need another figure on top of that?
Mr Montgomery:
This is not about conferring additional spending power on Departments; it is simply about end-year cash management and drawing down money from the Consolidated Fund. It does not mean that we need £7·6 billion balance and the ability to borrow a further £3·7 billion. It is set up to enable Departments to draw down the £7·6 billion, and there needs to be borrowing power to enable the money to be available to them.
Mr McNarry:
However, you will need some of that money.
Ms Lennon:
No. Clause 1(2) says that the £7·6 billion is:
“appropriated for the purposes specified in Schedule 1”.
Therefore that amount may be spent on the purposes set out in schedule 1. Clause 2 does not give any spending power. There is no such similar subsection in clause 2, so there is no additional spending power attached to that borrowing facility. The Departments draw down this supply of money in millions or to the nearest five millions. I think that you would be criticising us —
Mr McNarry:
I am not criticising you; I am trying to find a reason for it.
Ms Lennon:
You would be criticising us if we allowed money to sit in the 120 bank accounts in Northern Ireland and kept money in the Consolidated Fund. To balance the credit balances that are in the other public bank accounts, we do, at times, allow the Consolidated Fund to go into the red, and this system gives us that facility. We must ensure that, when we draw down money, that back at the Treasury, they are not at the same time borrowing against money just sitting in our bank accounts.
Mr McNarry:
OK. However, I cannot understand why you cannot make more sense from the first figure. You have given yourself the protection of the second figure, but you really do not have an idea how much you might eat into the second figure.
Ms Lennon:
Do you mean how much we might borrow?
Mr McNarry:
Yes.
Ms Lennon:
It is simply a limit that is set.
Mr McNarry:
I understand that. However, you cannot tell me how much you will borrow. That seems a strange way to do business. It is perhaps your way of doing things, but it is strange to me because it is unusual to me. At the moment, you have no idea what you might borrow. You have set a limit for borrowing that you cannot go above, but you cannot tell me that you may use a half, a quarter, or perhaps 45% of that £3·7 billion. It is strange that you have not worked out why you have inserted that figure: if you have done so, you must have need of it.
Mr Montgomery:
There is no differential. As regards inserting a more precise figure, there is no additional cost in putting in £3·7 billion as opposed to £3·4 billion or £3 billion. It simply provides extra —
Mr McNarry:
Why have you not increased the £7 billion?
Mr Montgomery:
The £7 billion is based on the departmental expenditure limited that is set by Treasury, and which is based on the available funding. It is an actual figure and we have an actual limit in relation to the funding available to the Executive.
Ms Lennon:
It is also based on the Budget that was approved in 2008; therefore it is exactly that.
Mr McNarry:
I am aware of that, but the Budget, as far as I am concerned, is a no-no. Let us not get into the Budget, in that sense. Can you provide a break down of how much of that figure you have used in previous years?
Ms Lennon:
From memory, hundreds of millions of pounds are borrowed on a monthly basis under the banking contract.
Mr McNarry:
Hundreds of millions of pounds is a very round figure. With the Chairperson’s permission, would you oblige me, by coming back specifically —
Ms Lennon:
Would you like a breakdown for each month?
Mr McNarry:
Rather than saying “hundreds of millions of pounds”, will you tell me how many hundreds of millions of pounds the Department might need? It seems to me that inserting such figures does not make sense unless one is going to use them.
Mr Montgomery:
We can provide the Committee with that.
The Acting Chairperson:
If you wish to obtain some further information, the Committee will have another opportunity to discuss this issue on 10 June 2009.
Mr McNarry:
Perhaps we could have that information by then.
The Acting Chairperson:
No other member has indicated that they wish to ask a question. Paul, Agnes and Stephen thank you for appearing before the Committee today.