NORTHERN IRELAND ASSEMBLY
COMMITTEE FOR
FINANCE AND PERSONNEL
June Monitoring Round 2009
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
Witnesses:
Mr Adrian Doherty ) Department of Finance and Personnel
Mr David Orr )
The Acting Chairperson (Ms J McCann):
Members have a briefing paper from the Department in their packs. David and Adrian, you are very welcome. We will go straight into members’ questions, if that is OK with you.
Ms Purvis:
What proportion of the bids is a result of failed bids in the last monitoring round?
Mr Orr:
The last monitoring round was for the 2008-09 financial year. That year is now over, of course, and we are all square on it. This is the first series of bids for the 2009-2010 year. Perhaps your question relates to the funding for the shared services?
Ms Purvis:
Yes.
Mr Orr:
When the Executive agreed their Budget in January 2008, they recognised that there would be a requirement for funding for the shared services programmes and stated in the Budget paper that that would be dealt with by way of in-year monitoring. That is why the amounts are there for the shared services that we provide to other Departments — accounting, HR and IT services. You are right that that is a common thread throughout the various monitoring rounds.
Dr Farry:
Let me ask Dawn’s question in a slightly different way. To what extent are any of these bids a replication of bids that were made in the last financial year?
Mr Orr:
As I have said, there were bids for the shared services. Looking at the bids in relation to DFP pressures, the Performance Efficiency Delivery Unit (PEDU) bid is a new one, as are the bids from the properties division and NISRA. Land and Property Services (LPS) did have bids of £1·5 million that were met at the September monitoring round, so LPS is in for another bid. I am not certain about the EU division’s bid. The bid from Corporate Services Group (CSG) was met at the September monitoring round.
Dr Farry:
The reason I ask is that, if we see a pattern where different units are bidding for the same money year after year, it begs the question of whether the baseline was wrong and whether there is a system in which a unit gets a large proportion of its budget through the baseline and then tries to make up the rest through the monitoring rounds. Neither of those strikes me as being best practice of how to run Government.
Mr Orr:
The CSG bid, for example, emerged because the baseline did not include funding for many of the essential ministerial and Assembly support services that have come in since devolution.
Dr Farry:
How many of the bids would you describe as being inescapable? You said that NISRA’s bid was required to meet a contractual obligation. Presumably that is an inescapable bid, but what other bids would you term in such a way?
Mr Orr:
That is a relevant question: if the bids were not successful we would have to make difficult decisions.
Dr Farry:
I mean “inescapable” in the sense of there being a legal obligation to provide a service. On the other hand, efficiency can be affected if money is not spent. Both are equally valid, but one is stuck with the legal obligations.
Mr Orr:
The one inescapable bid is that from properties division for essential maintenance, much of which relates to health and safety issues. The bid from the European division is highly desirable, because it is required to enable the Department to meet its match funding obligations for money coming from Europe. If that bid were not met, European money would be lost. LPS is working on options to live without its bid, but a successful bid would help it in the administration of the new reliefs.
Ms Purvis:
The submission states that PEDU’s bid is inescapable. It says that the Department will have to consider cutting services elsewhere, which would have a detrimental impact to the running of its businesses. PEDU’s bid is for administration costs. Is that for consultants or for extra staff?
Mr Orr:
The bid is inescapable if one wants to have a performance and efficiency delivery unit. PEDU was set up under a ministerial commitment, but if the bid were unsuccessful, the unit might have to stop.
Mr Adrian Doherty (Department of Finance and Personnel):
Last year, the total cost of PEDU was £258,000. Salaries cost £146,000 and general administration expenditure (GAE) cost £113,000. I will have to come back to you to provide a breakdown of that.
Dr Farry:
My overall fear is that no reduced requirements are coming forward from the Department. I imagine that that will be replicated in every Department. Northern Ireland is to receive £50 million in Barnett consequentials to be spent in June 2010. Departments will come forward with a series of small bids that seem fairly consequential, but the cumulative impact of which will be quite large. Over the next two years, we will also need to mop up another £123 million in efficiency savings.
The Barnett consequentials arise from spending at a UK level to address the economic downturn. When that money comes to Northern Ireland, it is used to mop up the small items and the efficiency savings that we must make, rather than being invested on economic recovery, for which it was intended. That sits extremely uneasily with me. I do not expect you to respond to that; it is a general point that I wished to make.
Mr Orr:
I shall respond to that. I fully accept that the wider economic and financial picture is very difficult. The bids that were initially put forward were reviewed very critically, and we have put forward those that we think have the highest priority. However, those bids may not be successful in the monitoring round, and I acknowledge that.
Mr McNarry:
I am sure that you will not mind me saying that “pressures” are, in fact, “holes”. You are submitting bids of £26 million in total. To follow on from Stephen’s valid point; from where will you source the funds with which to plug those holes?
Mr Orr:
We will source those funds through the monitoring rounds. I draw a distinction between funding for shared services, which amounts to just over £15 million for resources and capital, because the Executive Budget paper recognised that those funds would be required and envisaged that they would be met in the monitoring round. We are bidding for just over £11 million in the monitoring round for other pressures.
Mr McNarry:
Will you put a percentage on those amounts? What percentage is £4·1 million on admin; £2·5 million on other resources, and £4·2 million in capital?
Mr Orr:
Yes. If I take admin and other resources together —
Mr McNarry:
As we are pushed for time, will you send those percentages to us?
Mr Orr:
Yes.
Mr McNarry:
There are additional amounts of £2 million and £1 million for LPS.
Mr Orr:
Those figures are additional to its baseline.
Mr McNarry:
Again, what percentage does that represent? Perhaps, it is not for you to say but are the people who are responsible comfortable with that? I understand that they have given reasons.
Mr Orr:
They have brought forward additional funding requirements in order to carry out their work. Those requirements have been critically reviewed. The Department is content that those are high-priority bids for LPS.
Mr McNarry:
Do you believe that it ends there? Is that it?
Mr Orr:
For 2009?
Mr McNarry:
We are paying for it.
Mr Orr:
Recognising the difficult financial circumstances that we are in, we have decided to put forward only our highest priority bids. That is what we have done for LPS.
Mr Doherty:
As regards the bid’s magnitude, the total resource for LPS is £24·6 million. That is its opening baseline.
Mr Orr:
That is just under 10%.
Mr McNarry:
That is why I ask whether people are comfortable.
Mr Orr:
We are concerned about the financial position.
Mr McNarry:
People have been fired for less. I know that, perhaps, it is not a sacking offence in this place. However, in other places, it is. Our job is to try to explain the management of public money to people, and these figures come before us.
Mr Orr:
Chairperson, so that the Committee is totally clear, I must reiterate that we are making those bids for additional resources.
Mr McNarry:
Have you cut those bids back? Were they higher previously?
Mr Orr:
Yes. We cut them back in order to meet only our highest priorities. They are bids, not overspends. If the bids are not successful, LPS will have to live within its budget.
Dr Farry:
What conclusion should we draw from the fact that LPS makes a bid year after year for, in effect, 10% of its running costs? It is not yet June.
Mr Orr:
You set out one of the main conclusions to be drawn. The Budget was set according to the many competing priorities and deserving causes across the block. LPS will argue that its budget was not set high enough to meet its needs. In 2009-2010, LPS is expected to make efficiency savings of £5·9 million.
Dr Farry:
That saving is in the context of LPS having increased, by approximately 15%, the cost of rate collection that it levies against councils.
Mr Orr:
That increase was related to the vacancy inspections.
Dr Farry:
No; it was an increase of 15% across the board in the cost of collection. It did not apply only to vacant properties.
Mr Orr:
I know that you speak to John Wilkinson frequently.
Mr McNarry:
To keep us right, who is John Wilkinson?
Dr Farry:
He is the chief executive of LPS.
Mr Orr:
LPS collected £940 million in rates last year, which was an increase of £60 million. It is, therefore, doing the best job that it can in challenging financial circumstances.
Mr McNarry:
Thank you; that was interesting. I despair when that kind of information comes before the Committee. I thank Adrian and David for their explanation, because it is our job to explain to the public, and that is not easy. Perhaps you will allow me this one question, because I cannot resist asking it: are Civil Service bonuses included anywhere?
Mr Orr:
The cost of Civil Service bonuses, if payable, will have to be met from administrative costs. No bid has yet been made for bonuses.
Mr Doherty:
They are not included.
Mr McNarry:
No bid has been made?
Mr Doherty:
No bid.
Mr McNarry:
OK. I will leave it at that.
Mr F McCann:
As a follow-up to that, we have been told that if LPS does not receive the £1 million or £2 million it will affect the service that it is expected to deliver.
Mr Orr:
It will, because that is the basis on which we made the high priority bids.
Mr F McCann:
It seems a bit crazy that we are told that the lone-pensioner allowance and disabled person’s allowance would be among those areas affected. It seems as though those are sometimes thrown into the pot to frighten us into making a decision. We were told that those who are probably most in need in society are the people that will be directly affected by LPS not receiving the £3 million.
Mr Orr:
If the current bid is not successful, LPS will have to review and consider further options for reductions, and the Minister would take a view on the services that would have to stop.
Ms Purvis:
Perhaps we could ask the Minister to rethink the cap on rates relief? That would recoup some money.
Mr F McCann:
The other point is that, although you congratulated LPS on increasing its collection by £60 million; that increase came only after years of serious difficulties. The problem should never have reached that stage in the first place.
Mr Orr:
I appreciate that.
The Acting Chairperson:
Are members OK with that? Thank you very much, David and Adrian.
Mr Orr:
I will come back to the Committee with the outstanding figures.
The Acting Chairperson:
David, is it possible to provide the Committee with a breakdown of what LPS wants the extra money for?
Mr Orr:
We will come back to the Committee with that information too.