Official Report: Minutes of Evidence
Committee for Agriculture and Rural Development, meeting on Tuesday, 25 November 2014
Members present for all or part of the proceedings:Mr William Irwin (Chairperson)
Mr J Byrne (Deputy Chairperson)
Mr Thomas Buchanan
Mrs J Dobson
Mr T Elliott
Mr Declan McAleer
Mr O McMullan
Mr I Milne
Mr Edwin Poots
Witnesses:Mr Noel Lavery, Department of Agriculture, Environment and Rural Affairs
Mr Gerry Lavery, Department of Agriculture, Environment and Rural Affairs
Mr Graeme Wilkinson, Department of Agriculture, Environment and Rural Affairs
Budget 2015-16: DARD Briefing
The Chairperson (Mr Irwin): I welcome Noel Lavery, the permanent secretary; Gerry Lavery, the deputy secretary; and Graeme Wilkinson, assistant secretary. I ask that you take up to 15 minutes to make your presentation.
Mr Noel Lavery (Department of Agriculture and Rural Development): Thanks for that, Chair. It is a very important issue, so I do appreciate the time that you have given me.
Members, thank you for the opportunity to brief the Committee on the Department's 2015-16 draft Budget proposals. I hope that you have had an opportunity to consider the document, and I know that you will want to explore it in some more detail with us. I will begin with an overview of the financial position and then go on to provide members with an outline of how we have approached the Budget process, the contents of the document and the steps in the consultation process.
I start with the financial challenges for us going forward. You are aware that the block grant from Westminster was reduced by 1·6%, or £160 million, in the financial year. Alongside that, all Departments have had to absorb the impact of pay and price inflation over a number of Budget periods, and DARD has not been exempt from that. As a consequence, there are material pressures across all Departments, particularly given the high proportion of costs that relate to wages and salaries. Indeed, the Finance Minister highlighted in his draft Budget that the Budget has been constructed in the most challenging financial circumstances to face any Administration in the history of Northern Ireland. That gives some context to what we are discussing today.
It is also important to note that the Budget reduction faced by the block grant is not a one-off reduction. There are challenging times ahead, and it is imperative that we plan and design our business to reflect that ever-reducing public-sector funding. Consider the projections by the Office for Budget Responsibility, which the Finance Minister referenced in his statement to the Assembly. He said that we are facing a real terms reduction of 13%, or £1·3 billion, over the three years to 2019. Given that context, we are mindful of the extreme challenges in delivering savings and ever-more efficient services with reducing resources.
How have we approached the Budget process? The Executive agreed the draft Budget on 31 October. They launched their consultation on 3 November and responses are due on 29 December. We are working to that same timetable. Clearly, the Executive face very difficult decisions, and, as the Minister has already stated, the Executive are making a considerable commitment to rural development and agriculture. These proposals will afford us a basis for offering significant support to the sector, continuing to sustain rural communities, high standards of animal health, meeting ambitions for a better environment and delivering business efficiently.
In an overview, I will emphasise a number of important points that have influenced the draft proposals. There has been a long-standing weakness in DARD's budget, and I know that the Committee will be very aware that the Department is dependent on topping up funding via in-year monitoring rounds. Therefore, we start with in-year pressures. The Executive have allocated almost £20 million funding up front for TB compensation and costs necessary to ensure that our European grants and subsidies comply with the Commission's requirements. Then there is a £30 million reduction to our baseline. All of these figures are on resource. Clearly, decisions have had to be taken. The Minister has stated that she is determined to take a balanced and fair approach to finding these savings, and the consultation document sets out that approach.
The Minister has also indicated publicly that she will be making a strong case for additional funding in line with the commitments already made by the Executive to deliver the rural development programme (RDP), the implementing of the Executive's response to Going for Growth and the relocation programme. So, she has indicated that she will be making a strong case for additional funding and that she is looking to the longer term on how we develop a more modern, leaner and more digital Department.
In developing our approach, we have focused on protecting Programme for Government requirements assigned to DARD as well as delivering the Executive's agreement on the HQ relocation and CAP reform, including the rural development programme and Going for Growth. These are reflected in the section titled "Key Issues/Challenges for 2015/16".
To summarise, there are three elements to the consultation document: the distribution of the £19·6 million that we have been allocated; the allocation of the £34·4 million of capital funding, which is a good allocation of capital funding; and the savings proposals of £29·9 million. I will begin with the savings plans for £29·9 million. These are summarised on page 28 of the document. It is a total of £29·9 million, and I will put that into context for members. That is 86% of the Agri-Food and Biosciences Institute's (AFBI's) grant aid from the Department. It equates to 800 staff. It is more than the entire match funding for the RDP, and it is nearly twice the College of Agriculture, Food and Rural Enterprise's (CAFRE's) annual resource budget. That is to put into context what that £30 million cut would mean if you were to look at those areas individually on their own.
As you will see from page 28 of the document, the savings were broken into four categories. First, we looked at the Department's operating costs. This included all elements of running a Department, including staff levels, estate and general running costs. You will see from the document that we identified £3·7 million of savings from cost reductions and £5·6 million from staff reductions. The majority of these would be delivered from staff savings, and, no doubt, members will have questions about the voluntary exit scheme. The £5·6 million that we have identified equates to a reduction of 300 staff halfway during the year. I emphasise that we are taking management actions to reduce our staffing numbers and, when the voluntary exit scheme comes on board, that will be offered to staff. Overall, we are saying that, on average, we will reduce our staff by 300 next year from where we are today. I am sure that members will have questions on this. The scheme is still being developed, and I believe that a paper will go to the Executive but will try to address any queries that members have.
In addition to reducing our costs, we have looked at opportunities to raise additional revenue. On page 31, you will have seen that we set a target of £6 million. The majority of this relates to EU funding that we can apply for in respect of our TB eradication programme, and this will go a long way towards securing the target. The Minister has also set an initial target of £2 million in additional income for AFBI to generate. We are aware of AFBI's earning potential and, specifically, the opportunities in Horizon 2020. This will not be easy. There will be obstacles in the way, but it is important that we seek to access alternative forms of funding, particularly given the projected reduction in expenditure that face. This approach is consistent with the Barroso task force recommendations and the approach set by the Executive in relation to EU priorities. The PAC hearing on AFBI highlighted the area of fees and charges, and AFBI is examining this and seeking to benchmark its current rates applied to other organisations on these islands. It may be that the charges that are currently applied need to be uplifted to reflect the costs of delivering the service.
The table on proposed savings deals with half of that, and then we come to programme moneys. Having looked at cost reduction and income and having exhausted those two areas, we then have no choice but to look at the programme area. Appendix 3 documents the savings across four main areas: the rural development programme; the AFBI work programme; the tackling rural poverty and social isolation (TRPSI) programme; and the animal disease programme. With the RDP, we will be constrained in relation to the new schemes that we can open and when we can open them. We will have to phase these. This is a budgetary management issue. However, we will meet the costs of legacy schemes, particularly in agrienvironment, our costs under LEADER and the areas of natural constraint (ANC) scheme. The Minister has allocated an additional £1 million of resource for funding for Going for Growth, specifically around the farm business improvement scheme. I will say more about that when I come to capital.
Our current forecast is that we will not be able to open the new agrienvironment schemes in 2015-16, as we had planned. It is our plan to open those schemes. It is a question of when, and that will have to be phased. As I said, this is a budgetary management issue. We are considering those elements of the AFBI work programme that we are able to reduce. This is currently commissioned from DARD to the value of £42 million per annum, covering a broad spectrum of research and diagnostics services. Given the scale of reductions that we face, our view is that is necessary to reduce this by £3 million. This would equate to approximately 7% of the work that DARD commissions. We will keep the Committee advised of this. This is a challenging scenario for AFBI, and we are very aware of that.
On TRPSI, we considered how best to deliver the programme, given the constraints on our resource funding. The Minister is therefore proposing a rebalanced programme of £4·7 million, which is the same as the value of the current programme, but with £1·7 million moved from resource to capital. There will be options for that on how that programme is finalised. This will ensure that funding remains in place, with spending on a higher proportion of capital schemes. As I said, those are being developed. The Department has also reviewed its animal disease programme, where savings of up to £0·8 million may be achieved and lower priority services reduced or ceased. The imminent move to officially brucellosis-free status should assist on this. There are more details on the savings and potential impacts in appendix 3 of the document. Members will appreciate that we are still at the early stage of consideration of some of these impacts, and more detail will be available as those develop.
I referenced the £19·6 million of allocations. Those are in table 2 on page 16 of the document. As a reference, the Committee will be aware of the structural deficits in the DARD budget. I am sure that you have seen Graeme Wilkinson come forward at monitoring rounds referencing TB compensation, investment in the land parcel identification system (LPIS) and issues around disallowance. Table 2 reflects the need to address these issues. This is vital for how we plan our budget. The uncertainty that we have had is extremely difficult for how we plan. That is not good for DARD, and it is certainly not good for stakeholders.
The Minister is proposing to take £1 million of that as an initial allocation towards a farm business improvement scheme, and she will make that point to the Finance Minister when she meets him. That will take forward training, workshops and business planning to prepare farm businesses for their decision about capital investment.
I referenced the capital allocations earlier. The proposed allocation is £34·4 million to DARD. That is a reasonable allocation for the Department and is significantly above that in the current year. There are a number of factors in how the Minister has allocated that money, such as looking at her policy priorities, deliverability within the constrained timescale and the degree of existing commitments.
As we are all aware, a one-year capital budget is not great for planning, but it is where it is. As you will see from table 3, we have categorised this into programme funding, IT systems and recurring capital. The allocations allow us to progress our Programme for Government commitments on the HQ relocation programme as well as the capital elements of the new RDP, including those relating to Going for Growth. There is a significant allocation of £8·5 million for flood alleviation, and we will provide £2 million for the upgrade of drainage infrastructure assets across the region.
There is about £750,000 to complete the standalone element of the east Belfast flood alleviation scheme and £4 million for flood alleviation works that have been integrated with phase 2 of the greenway project in east Belfast.
The balance relates to smaller capital spends and is there for members to see. The IT allocation of £7 million will allow us to implement the technology that is vital to upgrade our processing systems and ensure that our customers are able to engage with the Department remotely in the future. It is a vital part of our plans for a leaner, more digital DARD. We will have targets to deliver more of our services online to facilitate farmers who cannot access our office services, which are conducted from 9.00 am to 5.00 pm, and we also anticipate resource savings by investing in technology.
The Minister has secured significant additional resource funding and capital allocation from the Executive. She has already said that we will seek further funding for Going for Growth. However, there are very significant cuts being imposed on the Department. Difficult decisions have to be made. In making the proposals, the Minister intends to be true to the commitments she has made and the priorities she has set, such as building for the future; supporting the vision of the agrifood sector; developing a leaner, more digital and efficient Department, and directing resources to high-priority programmes and services. I know that she will value the views of the Committee. That concludes my introductory remarks.
Appendix 5 summarises the consultation questions. We thought it would be helpful to focus on the key issues. Following the session today, we will formally launch the consultation document and seek views from the public and statutory section 75 consultees and meet a range of stakeholders to capture views. As I said earlier, the process ends on 29 December, with views sought in advance of a final budget being presented to the Executive. At this stage, a formal date for that consideration has not been confirmed. However, we expect it to be in early January.
The Chairperson (Mr Irwin): Thank you very much for your presentation. DARD is expecting to raise approximately £6 million in additional revenues relating to AFBI targeting external resources. I am unsure how AFBI will be able to raise that sort of capital.
Mr N Lavery: Of the £6 million, £4 million is on EU vet receipts and £2 million is from AFBI.
Mr N Lavery: You are absolutely right, Chair; this is a challenging target. However, as I referenced, the Executive have said, in their EU priorities from the Barroso task force, that we should be accessing more, specifically from Horizon 2020, and AFBI has made me aware of how challenging that will be. In the direction of travel that we are taking, we need to seek additional income from non-mainstream departmental expenditure limits resources. It came out at the Public Accounts Committee that AFBI has been very successful in growing its external income. It should be congratulated on doing that in the past, but I have no doubt about the challenges we will face.
Mr Gerry Lavery (Department of Agriculture and Rural Development): If you think about it, £2 million is equivalent to, say, 50 jobs. The issue facing AFBI is whether to cut 50 jobs or try to grow your way out of the problem by bringing in additional income. Frankly, we are setting the bar at increasing income, aggressively looking for new work and taking EU receipts in. That is where we think AFBI's future lies. It lies in expanding and trying to compete with other similar institutions across Europe and win the business. It does not lie with downsizing and just cutting your way out of trouble.
The Chairperson (Mr Irwin): OK; I understand that. It is a challenge but it will be interesting to see how it works out. Regarding the reduction of 300 staff, saving £5·6 million, can that money be saved in the 2015-16 year?
Mr N Lavery: I should have said at the outset that all these plans are very challenging. The Department has delivered on its savings plans in the past, but these are challenging.
There are a number of factors. We are seeking to get a balanced budget. That is why we have to reduce our staffing levels. Secondly, we need to re-engineer our business model, given the longer term financial position. We will drive down our staffing numbers by other means, as I indicated.
The amount of staff reduction will depend on the number who actually apply to a scheme, but that is the target we have set ourselves. In seeking to balance the budget, we have basically said that we need to have 300 fewer staff than we have today. That is how we have done it. Running and re-engineering the business will be very challenging, but it is the first step on a road that we will be on for the next five or six years.
Mr N Lavery: We are currently at around 2,650; so, it is about 10%.
Mr N Lavery: Each business area has been set a 10% staff reduction target, so it is across the Department. We do not have detailed plans for all the Department, but we are doing it right across. One thing I have to say is that, with a voluntary exit scheme like this, anyone can apply, so there will be significant churn and movement from within the business. Is there anything else on that, Gerry?
Mr G Lavery: Obviously, you can predict that some areas of work are coming to an end. The Minister is still committed to the eradication of brucellosis. With that eradication, there will be less need for testing. Exactly how much less has to be determined by policy, but there will be posts where the services will not be required any longer.
Mr G Lavery: There are about 50 staff there at the moment, but you are not going to go from doing brucellosis testing to not doing brucellosis testing. That would risk ignoring a potential problem. There are issues there. Some work will cease, but, more generally, we will bear down on business areas and look to people to come up with new ways of working and delivering services.
Mr N Lavery: Yes. As I said in my opening remarks, AFBI is looking at its cost model, but there is no impediment from DARD. The only impediment is its own resources. As I said, we will have to look at cutting our own programme, which would free up resources.
Mr Elliott: Thanks for the presentation. You mentioned savings plans of £29·9 million. Is that the actual amount? It is 15·1%. How did you come to that figure? I did not think DARD had a cut of 15·1%.
Mr N Lavery: I think that the headline figure was 5·2%. We have been allocated £19·6 million. The Finance Minister said what he allocated that for, and we will then have to make a £30 million cut. The net of those is £10·3 million. It goes back to my earlier point: DARD has had a structural problem in its budget for years. As I said, the Committee will have seen in-year bidding for TB compensation. We were not sure that we were going to get it during the year.
Mr Elliott: Sorry to cut across you. Is the TB compensation mainly what you got in the uplifts?
Mr N Lavery: Yes. There are three things: TB compensation, money for disallowance and money for investment in our LPIS. Graeme, do you have the breakdown?
Mr Graeme Wilkinson (Department of Agriculture and Rural Development): Yes. TB compensation was £7·3 million, CAP disallowance was £5 million, our CAP reform programme was £6·3 million, and Going for Growth was £1 million.
Mr Elliott: So, you are agreeing to meet all those in-year now, without any —
Mr N Lavery: Yes. The Finance Minister has recognised that this is a structural deficit in the DARD budget and he is dealing with that deficit. I think he would be surprised if we came forward looking for in-year bids for it. We are saying, "Let's deal with that structural deficit. We've then got £30 million of a cut, so how are we going to deal with that?" That has been our approach.
Mr Elliott: I just want clarity on this: you will not be bidding in the monitoring rounds for TB compensation.
Mr Elliott: You are going to take that out of your mainstream.
Mr Wilkinson: As you know, the disease is very volatile. We will have £12·2 million, when we add this to our allocation. However, should the incidence of TB increase, we may need to review that figure. We are in a much better position than we were previously —
Mr Elliott: So, effectively, you are taking that out. Unless there is a huge increase, you are taking out what I would call almost a block booking for TB compensation in the monitoring rounds. You are going to suffer that loss in-house; you are going to accept those reductions in-house and in other areas.
Mr N Lavery: We are accepting that it is a cost we cannot plan for. We are taking action to reduce TB compensation, but it is a long-term thing. It has been an uncertainty in the budget.
I am trying to plan for staff and their future. I need to know that these structural issues have been dealt with in the budget because they recur every year. They have not been in the Department's baseline, but they are real costs to the Department. It is the right way to deal with it. I absolutely welcome the Finance Minister's proposals.
Mr Elliott: I need clarity on all this. My point is that you are accepting that TB compensation hit from your mainstream budget. Is that right?
Mr N Lavery: We are budgeting for TB compensation in our budget.
Mr Elliott: Yes, and you are not getting additional allocations of resources for it.
Mr N Lavery: Not in-year, unless something happens.
Mr Elliott: OK. I noticed that there was £100 million funding from the Executive for workforce restructuring. I assume that this is for staff reductions.
Mr Elliott: It is a pity that you would not just call it that for the ordinary person like me. That is for staff reductions. How much of it do you expect to come to DARD?
Mr N Lavery: There are two elements to that. I will bring in Graeme in a second. The £100 million is being set aside to fund staff reductions in the Northern Ireland Civil Service and arm's-length bodies, so it has to stretch a fair bit. We would be bidding for whatever number of staff go for it, but let us assume that it was a large element of the 300 and whatever AFBI bid for, because AFBI has already been talking to us about the need for staff reductions. I do not have the cost of what that would be.
Mr Wilkinson: We do not know the terms of the scheme or the terms applicable to individual members of staff. Therefore, until we have certainty around the terms and the numbers, we will not know the actual cost. There have been numbers in the press suggesting over 3,000 Civil Service staff. However, it would be the Civil Service and arm's-length bodies. We would be bidding into it for the equivalent of up to 300 staff plus AFBI.
Mr Elliott: You have £5·6 million in your current reduction.
Mr N Lavery: That is the existing staffing cost to us of 300 staff in DARD for six months.
Mr Elliott: Did you ever think of having a single inspection mechanism between DARD, the DOE and the NIEA?
Mr N Lavery: I think that the Minister made reference to rationalising and looking at our inspection regime, certainly within DARD. A farmer will get a number of visits from people in DARD — vets and inspectors — and we are looking at how we do that internally and restructure it. The Minister raised the issue about DARD and the NIEA, and that is something that we will have to look at.
Mr N Lavery: At this stage. We are progressing it internally first in DARD.
Mr Elliott: It is very slow. It has been a few years since I was on the Committee, and we were talking about it then; we are still talking about it.
Mr N Lavery: We are looking at structural changes that would impact this in DARD.
Mr Byrne: I welcome the presentation. In relation to the Minister's policy objectives, there are now proposed cuts. Obviously, the relocation of the headquarters is a priority. Does that offer you the opportunity to seek 300 redundancies? Is that the intention?
Mr N Lavery: I will bring Gerry in on that, but no, the two are completely separate.
Mr G Lavery: The relocation programme is a commitment by the Minister, and it implements an Executive decision. We always anticipated that we would have a big swap of staff who are currently in posts that are scheduled for relocation with staff who are in our Department and other Departments who are resident in the areas that we are relocating to. We are increasingly confident that we can do that, and do it without a loss of service. We do not see it as part of the planned action to reduce the number of posts in the Department. Obviously in the course of things, people will vacate posts and people will move into posts. Some of those movements may leave a post vacant, and we will consider its future at that point. However, bear in mind the fact that our objective is to transfer jobs to those areas, and we do not want to see a large loss of jobs from the groups that we are moving; therefore, we have an interest in sustaining the number of jobs that we move.
Mr Byrne: Are you hoping to achieve the 300 within a year, with a voluntary scheme? That begs the following question: how many of your staff are over 60?
Mr N Lavery: Bear with me, Chair. You may have offended Mr Lavery, on my right.
Mr Byrne: Like me, he has got to that age in life where he does not worry.
Mr N Lavery: I know that there are about 720 over-55s. I do not know the figures for those over 60. The first element of your question was whether we are trying to do it in one year. The answer is yes, and that will be very challenging.
Mr Byrne: In other words, if we are going to try to achieve it in one year, we will have to get some of the £100 million set aside by the NICS to meet the initial cost of early retirement.
Mr N Lavery: Yes, the cost of the exit scheme. Other Departments have been taking the same approach.
Mr Byrne: So, the £5·6 million refers to the half-year wages that would be saved.
Mr Byrne: I have one other question. In relation to the cut in the rural development programme, have you broken down where the £9·1 million is spread across? How much are you hoping to save by not having the agrienvironment scheme?
Mr N Lavery: If I can, I will explain what we are spending the money on, Joe. Our estimate is that we have about £8 million on the existing legacy agrienvironment schemes. We spend about £2 million on LEADER, about £8 million on ANC and £1 million on Growing for Growth. That is what we see as currently affordable. I am referring only to the national element.
Mr Byrne: Could you give me those figures again? On the ongoing legacy schemes, you spend about £8 million, is that right?
Mr N Lavery: Yes, £8 million on legacy agrienvironment schemes — I am looking to Graeme on my left and hoping that I am giving you the right number — £2 million on LEADER —
Mr N Lavery: No, that is new. There is also £8 million on ANC. Those are the national elements.
As I said earlier, I cannot emphasise enough that, given the scale of the reductions, we are left with no choice but to eat into our programmes. There is a related point that it is eating into match funding for the RDP. That is a concern for us and a point that we will be making at the bilateral meeting.
Mr Byrne: Obviously, the primary focus of the Department is to service the needs of the farming industry and the agrifood sector going forward. The question is this: will the cuts that you have outlined cut into the productive capacity of the industry?
Mr Wilkinson: We are still committed to the overall rural development programme and to delivering the £623 million. It is really about phasing, but we do intend to deliver on those commitments. It should not impact on any plans that the industry has going forward.
Mrs Dobson: Administration costs in the Department have risen from £40 million in 2011-12 to £42 million in 2014-15, despite your targets to cut administration and red tape. All of us on the Committee know that every farmer feels that they are in a stranglehold because of red tape and bureaucracy. Will you clarify why that is? Surely, you realise that, at a time of tighter budgets, greater administration, rather than slimmed down administration processes, makes it so much harder on our rural communities. Will you explain what those increased administration costs are?
Mr N Lavery: I will bring my colleagues in on that in a second to give details of the admin costs. The point I will make is that delivering on savings delivery plans and reducing staffing budgets by 300 is a significant strain on a Department. So, administration costs in this Department will be significantly lower in 12 months' time necessarily.
Mr N Lavery: I understand.
Mr G Lavery: I am not familiar with the figures, but what I would suggest is that —
Mrs Dobson: They are contained in your briefing document.
Mr G Lavery: — in a sense, you make the point very well about bearing down on the staffing level. Over half of our resource costs are on staff. At present, staff costs are increasing because there is pay inflation and changes to pension arrangements at national level that impact on us as an employer. We see staff costs as increasing all the time. We have a difficulty in reducing staff until we get the voluntary exit scheme in place. That would be one of the major components of getting an inflation element to the administration costs. What we want to do is reduce our staffing level, reduce our administrations costs and bring on a target operating model that is more efficient and has more online, automated services. That will be cheaper for us but also cheaper and more effective for farmers and other users.
Mrs Dobson: Surely the fact that you have had more staff and are now having to cut staff is because it is overly bureaucratic and there is so much red tape. That is something that I have heard since I have been on this Committee. You hear constantly that farmers are bogged down and tied down with red tape and bureaucracy. Those additional staff were needed, in your opinion, to administer the overly bureaucratic systems that were set in place.
Mr G Lavery: Without conceding the overly bureaucratic point, we would suggest that there has been some increase in our staffing level when we are implementing, or even planning for, CAP reform and a new rural development programme —
Mrs Dobson: Noel said a few weeks ago that the new CAP reform will be even more bureaucratic going forward.
Mr G Lavery: For some of the schemes that are being introduced, such as the replacement of the single farm payment, inevitably, if you are going to have a greening payment and a young farmers payment, all of those will add to the weight of administration. Our response to that is to try to become more efficient and more effective. That is what we are going to have to do to reduce our staffing levels. So, we are responding, but it is not a big surprise that, in implementing CAP reform, we have had to grow our staffing level for a short period. We will now have to push it back down.
Mrs Dobson: So, you are finally waking up to what every farmer in the country has known for years, which is that you need to work on your bureaucracy, red tape and administration. I noted, Noel, that you said that the Minister is looking for a modern, leaner, more digital Department.
Mr N Lavery: She said that in public.
Mrs Dobson: I know that. Obviously, there has been a lot of work done, and it has been known for years how overly bureaucratic it is.
In relation to the budget cuts, can you explain if there will be a reduction in the allocation for the headquarters relocation project, or is that to remain untouchable? At paragraph 66, you talk about:
"scaling back programmes, raising additional revenue and taking forward cost reductions measures."
Is the headquarters relocation project in that other than staffing, or will that remain untouchable?
Mr N Lavery: The headquarters relocation project remains as it was.
Mr N Lavery: It is a capital programme. The allocations are outlined in the document. The Minister emphasised the point in the media yesterday. It is a Programme for Government commitment, and it is set out as the capital allocation there.
Mrs Dobson: So, it is untouchable then. Finally, you talk, again at paragraph 66, about keeping in mind the needs of rural dwellers and farming communities. Whose needs will be put first, those of the farmers or those of the Department? I am quite concerned by your phrase "kept in mind". Whose needs will be put first, the farmers' or the Department's?
Mr N Lavery: As I sought to say as I went through how we have addressed the cuts and dealt with the £29·9 million target, first, we have looked to the staff and the administration. We have looked at internal cost reduction. We have looked at maximising revenue. That is before we have looked at programme, that being programmes for rural dwellers and the farming community. That would be my response to your point.
Mrs Dobson: So, you are putting farmers first, Noel. Is that what you are saying?
Mr N Lavery: I am saying that it is after we have got to those areas that we have gone into the programmes.
Mrs Dobson: So, is it after you look after the Department that you will look after the farmers?
Mr N Lavery: No, it is after we have made the cuts. I am saying that we have sought to make the cuts in administration where we could before we have touched the programme. I think that that is quite right. If we had taken the other approach and gone to the programme first, you could rightly have challenged us on looking after ourselves.
Mrs Dobson: I am just trying to tease this out. Chair, I should have declared at the start that my husband is a beef and cereal farmer, as you well know. You said that you are:
"keeping in mind the needs of rural dwellers".
What exactly do you mean by that?
Mr N Lavery: As I said, it is taking cuts on the Department and then trying to protect programmes. It is about trying to protect programmes. We sought to protect the rural development programme. The Minister will be putting aside for Going for Growth and the farm business improvement scheme some of the money that Minister Hamilton allocated. The Minister has prioritised ANC and LEADER as part of her allocation. Those are the programmes that she has prioritised.
Mrs Dobson: So, are the farmers a priority for the Department?
Mr Poots: You gentlemen are really just implementing Tory cuts on the poor farming community. That is being compounded by Sinn Féin's spending on welfare, which means that the rural community will suffer even more. However, you are looking at delivering efficiencies and at delivering savings. There is a difference between the two. Where are the efficiencies?
Mr N Lavery: The efficiencies are in staff reduction and cost reduction and our seeking to increase revenue.
Mr N Lavery: They are right across the Department, Mr Poots.
Mr Poots: What are you looking at doing to make inspections more efficient?
Mr N Lavery: This point was raised earlier. The Minister set us a challenge here, and we are looking internally at how we do it. We have veterinary inspections and cross-compliance etc. We are looking at restructuring to see how we can reduce those and make them more efficient. As you will be aware, we have an obligation for inspections under EU regulations, and we will continue to do them.
Mr Poots: Is it your intention to bring all cross-compliance inspections in-house? Can you legally bring them in-house? NIEA currently conducts inspections.
Mr N Lavery: We look at how we work with NIEA. Is that your point?
Mr Poots: Can you do that? Can you bring it into the Department of Agriculture so that it is not Agriculture that has to make those redundancies but Environment?
Mr N Lavery: I actually do not know the answer to that one, Mr Poots.
Mr Poots: I am very surprised that you have not checked that out in the context of protecting your own staff. Does it require two people to come out and carry out one inspection?
Mr N Lavery: Are you citing an example?
Mr Poots: No, that is not an example. That is what is done. You send two people out to carry out a farm inspection. Does it require two people to carry out a farm inspection?
Mr N Lavery: As I said, we will be looking at all areas of efficiency in the Department.
Mr Poots: Where services are concerned, we have a policy of Going for Growth. That goes beyond the Department of Agriculture, as DETI is heavily involved in Going for Growth. There are many opportunities to create employment and to shift the balance of job opportunity from the public sector to the private sector. Is everything that you do going to seek to ensure that you do not diminish in any way what the Department is doing in its support for Going for Growth and ensuring that it is implemented? That would be cuts as opposed to efficiencies.
Mr N Lavery: I understand the point that you are making. I suppose that there are a couple of points in that, and I will bring in others if they want. A cut of 15% is a big cut, whichever way you look at it, and it will impact on all areas of the Department.
The Department has not had a specific allocation for Growing for Growth in the past. Of the £19·6 million, the Minister will allocate £1 million, and we put some money into the capital schemes. It will form a core part of our policies going forward, which the Minister has said, but we have not been allocated any funding for it. The Executive said that they would give priority consideration for up to £250 million under the farm business improvement scheme. Is it a priority for the Minister? Absolutely, yes.
Mr Poots: I think that you have set aside funding for the new computer systems. Does that include the Animal and Public Health Information System (APHIS) and recurrent funding, rather than capital funding? You will have to task people to work with the organisations to develop that, so the money will come out of recurrent funding.
Mr N Lavery: Yes. Some of it will be capital, and some will be resource.
Mr Poots: Will you remind me how much the new computer system will cost?
Mr N Lavery: I will pass that to my finance man on my left.
Mr Wilkinson: The total amount of capital investment for the new system is £25·8 million. That includes capital for the existing APHIS and the new Northern Ireland Food Animal Information System (NIAFIS) that they are procuring.
Mr Poots: There is also a considerable fund on top of that for recurrent spending. Is that right?
Mr Wilkinson: It is about £28·3 million.
Mr Wilkinson: I think that is out to 2025-26, so it is quite a number of years.
Mr Poots: How much did the original system cost?
Mr Wilkinson: I do not have those figures. APHIS was implemented a significant time ago.
Mr Poots: We looked at that in a previous meeting, and we found that it was a fraction of that cost. We are being told that some procurement rules mean that we have to go out and tender for a new system.
Mr Poots: You are suggesting to me that we should be spending, what was it — £25 million?
Mr Wilkinson: We should be spending £25 million on capital.
Mr Poots: Are you suggesting that, at a time when we are cutting everything, we should be spending over £50 million to adhere to some procurement rule because we could not extend the contract for a system that is still fit for purpose and that will be fit for purpose for a considerable period?
Mr G Lavery: There are a couple of points that I would like to make. First, there is a substantial and increasing risk of legal challenge on the procurement issue — that is absolutely correct — and we would therefore be at risk of losing a substantial sum of money.
Mr G Lavery: It could be of that order since we have said that that is what our replacement contract is worth.
Secondly, if that was the only issue involved, we probably would not be winning that amount of money in competition with other Departments. However, we have looked at the opportunity that a new system presents. The existing APHIS system may be fit for purpose, in the sense that it works as a stand-alone system, but it is no longer capable of being integrated with the Department's other systems. We need the new system to integrate with the other systems and to give farmers a joined-up service.
Thirdly, and importantly, the new system offers us the opportunity to make substantial savings in our back office and to deliver some of the job reductions that we are talking about. The extent of the savings that we are looking for from the programme are of the order of £18 million. So, a new system will mean very substantial savings to the Department and farmers.
Mr Poots: OK, so that is £53 million take away £18 million.
Mr G Lavery: The £53 million also includes an element of optimism.
Mr Wilkinson: Yes, it includes an optimism bias of 61%.
Mr Poots: Can you give us an assurance that it will not exceed £53 million?
Mr G Lavery: With an optimism bias of 61%, it would be reasonable to expect it not to exceed £53 million.
Mr Poots: Those words will be recorded in Hansard. You may be well long retired, Mr Lavery, at that point in time, but —
Mr G Lavery: I have no intention of retiring before you call me to account.
Mr Poots: It will be a while before the system is in place, but we can —
Mr N Lavery: Can I make a couple of other points? I am not sure which Mr Lavery was retiring there.
Mr Poots: I might be retired before it is called to account, never mind you.
Mr N Lavery: You made a point about procurement. There is a legal issue here, and it is important. I assure you that we considered that very carefully before deciding to go with open procurement. Also, this is an aged system. Gerry has recalled to me on a couple of occasions how the APHIS was down for three hours after the flood in Dundonald House. Export trade depends on that working.
Mr Poots: No system will withstand a flood. DARD does not get Rivers Agency to clear its rivers out —
Mr N Lavery: Fair comment, but my point is that it is an important system for trade as well, so there are significant risks in not investing in it. We are making our case. We will require DFP to sign off on the final business case.
Mr Poots: I think that I suggested to people that more work should be done in the Department on developing the system. We have witnessed the PSNI and, indeed, Planning Service bringing companies in to deliver these systems and the finance running completely out of control. That was also the case in the National Health Service, which spent £12 million on a system that did not work. In the first instance, £53 million is far too much to be spending. If that was the end of it, that might be acceptable to some people, if not to me. However, I fear that the cost will be more. That will be in the Hansard report as well.
Mr McAleer: I noted in your report that there is going to be a change to the balance of funding for the TRPSI programme for 2015-16. At the stakeholder meeting we attended last week, I noted that things like the assisted rural travel scheme, the MARA and other schemes were more resource oriented. What impact will increasing the capital budget, as opposed to the resource budget, have on the implementation of the TRPSI programme?
Mr N Lavery: There are a couple of things in that. The TRPSI programme is a Programme for Government commitment, and the Minister wants to keep it. There is potential for the capital element to provide more sustainable investment, given the pressure on recurrent costs. So, you have investment in capital assets and investment in infrastructure. The Minister has asked for some advice on how she can rebalance the programme, and that will be finalised shortly. It may be that Pauline Keegan or some of our other colleagues will present to the Committee once the Minister has finalised it. I think that there is potential for more sustainable investment.
Mr McAleer: I note that the cut-off date for the consultation is 29 December. Bearing in mind that that is just over one month away and we have the Christmas holidays, does that give sufficient time for serious engagement with the main stakeholders?
Mr N Lavery: It is a shorter timescale than we would have liked. I was going to say it is shorter than we had in previous Budgets, but the timescale in the 2010-11 Budget was short. We would have liked longer, but it is what it is: it was based on the Executive agreement. I think that we are one of the earlier Departments out to consultation. The Minister is keen to engage with stakeholders and has tasked us with doing that.
Mr Wilkinson: We are keen to hear from stakeholders, so, whilst we are working toward the Executive's timetable of 29 December, we have extended the consultation until 18 February. That will allow us to take views from stakeholders to help us to inform our policies on our funding decisions going forward. So, that will not inform the Executive paper, but we are still interested in hearing from stakeholders.
Mr McAleer: Will you just repeat what you said about 18 February?
Mr Wilkinson: We are keeping the consultation open until 18 February. So, whilst there is a deadline of 29 December to inform the Executive's paper, we still want to hear from stakeholders, and we have given them additional time to respond.
Mr Buchanan: Apologies for being out at Question Time.
Over the past three years, DARD's admin costs have increased by some £2·7 million. Can you give us some reason for that?
Mr G Lavery: I said that the main component will be inflation in pay and the extent to which our admin costs are composed primarily of staffing. Staffing costs go up because public servants have an entitlement to pay progression. They get an increment as they go through the different stages of their career, which means that there is a built-in inflation in cost every year.
The issue for us as a Department is to reduce our staff costs significantly. The opportunity is there with the voluntary exit scheme that the Executive are bringing forward. We are going to participate in that to the fullest extent that we can while still delivering services. That should reduce our administrative costs considerably.
Mr Buchanan: OK. Another issue that I had was whether DARD will now allow AFBI greater flexibility to bid for work. We know that its current model makes it uncompetitive. Will DARD give it greater freedom to bid for further work?
Mr N Lavery: I have a couple of points to make on that. We are certainly not seeking to limit AFBI bidding for work. In fact, the Minister has set it a target for doing that. However, the Public Accounts Committee was very clear about the need to ensure that AFBI was fully accounting for its costs and overheads when setting its rates. It quite rightly held us to account for that. So, AFBI has been developing a model to ensure that its full costs are recovered in its charging for work. That will impact on its charges. Graeme, is there anything you would like to add?
Mr Wilkinson: Obviously, there are opportunities out there for AFBI. It is an exceptional organisation with very talented individuals, so I would have thought that its research would be very marketable. We encourage it to take the opportunity.
Mr Buchanan: Given the current climate, is this the right time to move forward with relocating the headquarters? Should that not be put on hold while we protect front-line services?
Mr N Lavery: As I said, this is a Programme for Government commitment. The Executive have approved it. The money is mainly capital, and we set it aside in our plans. The Minister is absolutely clear that it is a top priority.
Mr G Lavery: The Executive took a decision on 26 June to go ahead with relocation. At that point the Minister was very clear that she expected the Executive to fund relocation and that that would be additional to the DARD budget. That remains her position. She is looking for additional funding for relocation over and above anything that the Department would gain normally, if I can put it like that. It is an Executive commitment, not a departmental commitment.
Mr Byrne: I raised before the quantum of capital and revenue that are recurring costs to this computing system. I am still concerned that a lot of money is being thrown at it, and I am not so sure that we are getting value for money. What size of a team of computer systems engineers do you have in-house? They must have some knowledge of the capability of the existing system and of what the new system requires. Do I take it from what you said, Noel and Gerry, that we might have to go to outside tendering again, even though we have targeted a lot of money at this, and that therefore the tendering process is likely to be for a minimum of £53 million? How much real rigorous analysis has been done on the requirement for this and on the cost that would be incurred?
Mr N Lavery: You asked a couple of questions, Joe, and I will bring Gerry in. There are a number of calls on the Department's IT resource. NIFAIS is one, and there are quite a few calls on it about the requirements for single farm payments and for implementing the new IT systems under CAP reform. So, from a management perspective, our IT resource and how we balance those resources is a concern for me.
On the cost of this, we put a business case to DFP, we are going to procurement and we will negotiate it at procurement. That is designed to get the best value for money. I can give you those assurances. I will bring Gerry in, and, again, I am quite happy to bring the internal experts up to brief the Committee.
Mr G Lavery: We have set up a team to take forward the procurement. It is being guided by central procurement division in DFP, and it has set out what it wants the system to do. It has a very detailed specification of user requirements, and criteria are being developed for how it will judge the tenders. It has received expressions of interest from the various parties and groups that you would expect to bid for that work. So, it is a rigorous approach and one that should deliver value for money. We could not do that work in-house at the same time as we are redesigning our systems on single farm payments and designing new systems for the different rural development programme measures. There is not the capacity to redesign the APHIS product in-house.
Mr Poots: On that, Chair, it strikes me as quite remarkable that we can create a system that contains the data of 1·8 million human beings with all the information regarding their health — sometimes the files are a foot deep — and that costs £9 million, and you want to spend £53 million on data on cattle movements, which may be one, two or three movements in their lifetime. It just does not stack up. I do not know how you got the business case approved, but if you think that this one is going to go away and people are going to lie down and say, "Oh yes, they have got the business case through, and everything is acceptable", you are wrong. It is not acceptable to spend public money in these straitened times in that way, and I have not seen it demonstrated in a very clear and unequivocal way that there is a significant advantage and benefit to be derived from that. We need to legally deal with the issues on procurement to extend the current system's lifetime, as opposed to charging headlong into spending £53 million of hard-earned public money in such a glib fashion.
Mr N Lavery: I cannot accept the point that it is glib. I am not in the position of incurring public expenditure in a glib fashion. That is my view. As I said to you, I have taken legal and professional advice on it and have signed off a single tender action for £7 million on the extension of the current system. That is pretty unprecedented, in my view. I am not sure what briefings the Committee has had on that before, but, again, I am happy for the Committee to get a detailed briefing to provide you with some assurance. I hear your very clear reservations, Mr Poots.
Mr Poots: It is £53 million for one system versus £9 million on another that contains considerably more information.
Mr G Lavery: Without seeing the detail, I would not like to judge the issue of the £9 million. We made it clear that the £53 million has two components: ongoing staff costs for administering the system; plus the capital cost. The capital cost includes an element of optimism bias, so the tender should come in well below that. However, that remains to be seen. I am satisfied that we have a rigorous approach to procurement and that the procurement is not only necessary but will yield substantial savings. That is where we are sitting at the moment.
Mr Poots: You make a substantial saving with the £53 million, but you still spend £35 million if all goes to plan.
Mr G Lavery: The £53 million would not be my plan, but yes, that could happen. We have tried to make sure that the system will move forward in a number of parts so that we will be able to judge each part and whether to move on to the next. It will not be one simple procurement at the outset with everything done and dusted; it will rely on each part working and on us moving on to the next. So, there will be a number of opportunities for the Committee to see whether money is being invested wisely.
Mr Buchanan: Should greater priority not be given to Going for Growth over rural development, given the state of the industry and the need to reach the Going for Growth targets?
Mr N Lavery: As I said, we did not have an allocation for Going for Growth, and the only allocation that we have been given is the £19·6 million, which was to deal with our structural deficit. The Minister will be allocating £1 million for that and £2 million for the farm business improvement scheme. As we said, that will form a core part of our policies.
The Minister said publicly that she will be pushing the Finance Minister for more allocations for Going for Growth. She is absolutely making it a priority. We just have not been given an allocation, and that is our issue. The Minister has, however, prioritised commitments under ANC and rural development, but we simply do not have sufficient allocation.
The Chairperson (Mr Irwin): I am aware that the APHIS system is from the mid-90s. It would be good if the Committee could get more detailed information. I think that Gerry mentioned possible savings of £18 million. Could we have a more comprehensive assessment? That might allay some of the Committee's concerns about the overall cost. I think that it would be good if we could have a presentation giving the details of that to set the record straight on those issues.
Are you able to give an assurance that, with 300 fewer staff, you will be able to deliver the new basic single farm payment on time next year?
Mr N Lavery: Delivering the single farm payment will be an absolute priority for the Minister. She made that clear to me. If you were to drive the Department's budget down by 50%, it would be a core requirement for the Department to do so.
Mr N Lavery: Maybe I should have answered Mr Buchanan's comments in that way too.
Mr N Lavery: Chair, may I just make one last point on the consultation? I should have made this point. This is an important consultation, and we definitely need to hear the Committee's views. This is setting the basis for the budget for future years. The one-year budget is a strange animal, if you pardon the pun. When the Committee is looking at it, it is just looking at one year — 2015-16. However, it sets the basis for future years. It is important to make the Committee aware of that.
Mr N Lavery: As the Minister indicated, there is no impact on the colleges. Obviously, our staffing reductions will impact on CAFRE in the same way as it will impact across the Department.