Official Report: Minutes of Evidence

The Chairperson (Mr McKay): I welcome to the meeting Joanne McBurney and Stephen Barrett from the central expenditure division (CED). You can begin with an opening statement on the monitoring round, and then we will go to questions.

Ms Joanne McBurney (Department of Finance and Personnel): Thank you for the opportunity to brief the Committee on the outcome of the 2014-15 October monitoring round as detailed in the Minister's written statement of 28 October to the Assembly. As you will recall, the main and non-ring-fenced resource departmental expenditure level (DEL) elements of October monitoring were outlined in the Minister's statement to the Assembly on 13 October. As a consequence, the Executive did not consider any further non-ring-fenced resource DEL bids as part of this round. Therefore, the written statement on 28 October focused on the Executive's capital DEL position. However, in addition, a number of movements relating to non-cash ring-fenced resource DEL and a number of technical issues relating to the non-ring-fenced resource DEL were addressed.

Turning first to capital DEL, the Executive entered the October monitoring round with an overcommitment of £38·6 million. Departments surrendered capital reduced requirements of £69·3 million, which left the Executive with unallocated funding of £30·6 million as they went into this round. As a result, the Executive agreed capital DEL allocations totalling £43·5 million. That included £4·7 million to DCAL for City of Culture legacy projects and museum maintenance; £13·5 million to DSD for co-ownership housing; £19 million to DRD, which included £15 million for road structural maintenance, £1 million for bus and rail infrastructure and £3 million for local transport safety measures; £2·3 million to DARD for CAP reform ICT costs; and £4 million to the Department of Health for medical equipment, ICT and health and safety measures. Following those allocations, the Executive exited the October monitoring round with an overcommitment on capital DEL of £12·8 million.

Turning to resource DEL, as detailed in the Minister's statement of 13 October, the Executive had an overcommitment on the non-ring-fenced resource DEL of £25 million. A number of small technical adjustments mean that the overcommitment carried forward into January monitoring has been reduced to £24·7 million. On the ring-fenced resource DEL, there were a number of adjustments to departmental allocations. Following that, the Executive exited October monitoring with an overcommitment of £4·6 million.

There are another couple of items to note. The Executive agreed that £1·5 million of resource DEL funding set aside for the childcare strategy could be used for Delivering Social Change projects this year. The Minister's statement detailed a number of allocations across Departments totalling £1·5 million. Some £12·9 million of capital DEL relating to the social investment fund was surrendered to the centre as a reduced requirement.

I will move now to financial transactions capital (FTC). The Executive exited the June monitoring round with unallocated ring-fenced financial transactions funding of £30·2 million. In that round, DETI declared a reduced requirement of £5 million relating to the agrifood loan scheme. No bids were received for FTC from Departments. As a consequence, the Executive exited the October monitoring round with £35·2 million of ring-fenced financial transactions capital unallocated. The Minister has highlighted the risk that some of that funding could be lost to Northern Ireland and, once again, has encouraged Ministers to come forward with suitable proposals that can utilise that funding.

I am happy to take any questions that the Committee may have.

The Chairperson (Mr McKay): In the Minister's statement, a condition is attached to the £20 million that was allocated to the Health Department, namely that the Department must demonstrate:

It was also pointed out that DFP officials:

What specific actions is the Department of Health taking on that? Has it provided the Department of Finance with the necessary assurance that it is not going to breach that budget control total again?

Ms McBurney: DFP officials have been working very closely with their Health Department counterparts in the period between the June and October monitoring rounds, and the Department of Health has produced a paper for us detailing the action that it would have to take forward to manage within those constraints. In addition, in a statement to the Assembly on 30 October, the Health Minister outlined a series of actions that are to be taken forward in the remainder of 2014-15. Unfortunately, I do not have the details here, but Stephen may have some of them. They reflect what is achievable in maintaining patient safety and minimising costs between now and the end of the financial year. As a result of the paper that we received on the ongoing work, DFP officials are content that the Department of Health is taking appropriate actions to try to live within its budget for this year.

The Chairperson (Mr McKay): What is the Department's up-to-date assessment of the risk of FTC funding being handed back to Treasury at year end? Why has there been such a reluctance from Departments to avail themselves of this?

Ms McBurney: It is a risk, and I think that we are acknowledging that. There is a concern that that may have to be handed back to Treasury. I think that there may be some reluctance, because FTC is a very new funding stream for Departments and they are trying to get their heads around it and to identify projects that are suitable for it. It has to be used as a loan to earn equity investment in the private sector entities, and that is a step change to the way that Departments are used to funding projects. It is just taking a while to work that through and to get suitable proposals on the table. I think that a few proposals are being considered, but I do not have the details of them yet. However, you are right to say that there is a risk that that may be lost this year.

Mr Weir: On that point, I appreciate what you said about the Minister encouraging and trying to stimulate other Departments to do this. I appreciate that bids have got to come through other Departments, but is there any other way that the Department could highlight this in a wider sense? I do not mean that it should cut out the other Departments, but, to some extent, it should try to get the message out, because part of this will essentially be about encouraging private equity funding in partnership with Departments. Perhaps it could get the message out more directly to the private sector to tell it that there is potentially something there, and it might need to knock on other Departments' doors to say so. I am wondering how that could be pursued more proactively.

Ms McBurney: The Strategic Investment Board (SIB) is putting that message out there with the private sector to try to encourage that, and some projects are coming forward. Of course, the development of the Northern Ireland investment fund that the Minister announced will also help to utilise that funding once the feasibility study is complete.

Mr Cree: On the same point, I have been knocking on about this for about two years now. We need some sort of a recognised and viable process to deliver on this. So far, there is not such a process, but there is talk about this investment fund being a way of usefully mopping up any FTC that is about. Is there any reason why all FTC could not go into that initially?

Ms McBurney: Obviously, the feasibility study still needs to be completed to determine the scope and scale of it, but, off the top of my head, I do not see any reason why that could not be the case.

Mr Cree: At least that way it would be protected.

Ms McBurney: Yes.

Mr Cree: Are there any other processes that are being thought about on how it could be utilised to the maximum?

Ms McBurney: There are a number of ongoing discussions with Departments about specific projects, but I think that the Northern Ireland investment fund is probably the most ideal for finding a mechanism to get a lot of it out the door.

Mr Cree: When will we know whether that can be safely done and that all FTC can go into that fund initially and will therefore not be lost?

Ms McBurney: A feasibility study is about to be commenced, and, once that is completed, we can report back.

Mr Cree: Will that include financial competence and the idea that it does not breach any legal —

Ms McBurney: Yes, that will all be considered as part of that study.

The Chairperson (Mr McKay): A significant amount of money is going back as reduced requirements from DRD on road projects, including the A2, the A26 and the A8. I think that that totals some £13 million to £14 million. Is there a concern about the level of capital moneys that are being surrendered there?

Ms McBurney: I think that it is inevitable with capital projects that there will be an element of slippage, so that is quite expected.

Stephen probably has some more detail on the specifics of the DRD projects.

Mr Stephen Barrett (Department of Finance and Personnel): There has indeed been some slippage across some of the schemes that are detailed in the tables; however, some of the reduced requirements relate to additional EU funding being captured by the Department in line with the monitoring role. It has to surrender that to the centre, but you are right that there has been slippage across a number of the schemes that have been detailed.

The Chairperson (Mr McKay): There is an overcommitment of £12·8 million in capital and £24·7 million in resource. How prudent is that level of overcommitment at this stage of the financial year, especially given the financial environment that we are in?

Ms McBurney: Turning first to what is probably the easier of the two figures, the capital figure of £12·8 million is reasonably prudent for this time of the year, because we expect an element of slippage in capital projects. So, I do not see that being an issue.

As for the £24·7 million in resource, as you correctly said, we are in a very difficult financial position this year. However, we would still expect there to be a number of reduced requirements coming up later in the year and in January monitoring, and we are relatively content that that will be able to be managed downwards.

Mr Cree: There is a lot of concern now about ring-fenced moneys. Up until this point, it was taboo to review them or to look at them at all, but now we are seeing ring-fenced moneys being released. Is it not time to bring in a proper review of ring-fenced moneys as well?

Ms McBurney: Have you any specific details on which ring-fenced moneys are being released?

Mr Cree: There is reference in the monitoring round to one, but I am more concerned about a general picture, because it applies in resource and in capital. There is a lot of talk now in the business world about it. Ring-fenced moneys were always locked up, and that was it. They need to be reviewed. Do you subscribe to that view, and are there any plans to do that?

Ms McBurney: I am not aware of any plans to review ring-fenced funds as such. Obviously, when they are ring-fenced, a view is taken on what that money is to be used for and that it should be used only for those purposes. However, I do not disagree that a useful thing to do on an ongoing basis is to review any decisions to ensure that we get best value for money and utilise resources in the best way.

Mr Cree: There are examples of them being kicked along year on year, and in fact that does not happen. I would welcome that as a positive move forward.

Ms McBurney: That is certainly something that we can consider.

The Chairperson (Mr McKay): We will move on to the next session, so thank you, Stephen. You are free to go.