Official Report: Minutes of Evidence

The Chairperson (Mr Maskey): I welcome from the Department Henry McArdle, Ian Snowden and Antony McDaid. I apologise to you, as I have to other officials, for the inordinate delay that we have had today. I know that you were waiting for a long time. On behalf of the Committee, I very much appreciate your patience. Unfortunately, we had a fairly lengthy session on the inquiry.

The Department has provided a briefing, and that is in members' packs. Without further ado, I will leave it to you to brief the Committee. The Bill is expected to have its Second Stage in the Assembly on 20 January, so you might speak to that and to what the time frame means.

Mr Henry McArdle (Department for Social Development): Thanks very much, Mr Chairman, and thanks to the Committee for giving us the opportunity to brief it on the Department's contribution to the reform of local government and the Regeneration Bill. To give some background, the DOE's Local Government Bill received Royal Assent on 12 May last year, becoming the Local Government Act (Northern Ireland) 2014. The Act sets out the context and environment for reformed and strengthened local government, in which DSD will be conferring powers to tackle deprivation and to undertake regeneration and community development on local government, as well as transferring responsibility for Laganside to the new Belfast City Council.

The Committee will have noted that there have been some changes to the then draft Regeneration and Housing Bill since we last briefed it in June last year. The housing elements — namely, the regulation of houses in multiple occupation (HMOs)and responsibility for unfitness — have now been removed from the Bill following discussions between the Minister and some of his Executive colleagues. As well as removing the transfer of those specific housing functions, an additional provision has been inserted in the Bill, requiring departmental approval for any proposed financial assistance for housing from a council.

The Bill has been renamed the Regeneration Bill, and the Executive have decided that responsibilities will be conferred on councils a year later than planned — from April 2016. The Bill now contains 23 clauses, with three schedules to it, and it will enable councils to make decisions for their local areas to address social need and promote well-being through the powers that have been conferred on them.

Specifically, the Bill will confer the following powers on councils. There are four Parts to the Bill. Part 1 covers powers relating to social need, and those include the power to provide financial assistance to third parties, which will benefit areas of social need; the power to carry out works for the improvement of the environment, such as public realm schemes; and the power to support community development. Part 2 of the Bill provides development powers and other powers for planning purposes, including the power to acquire land, either by agreement or through vesting; the power to develop and dispose of land; and the power to prepare formal development schemes.

Part 3 provides for the transfer of responsibility for Laganside to the new Belfast City Council. The Bill provides for the repeal of the Laganside Development (Northern Ireland) Order and sets out the powers that Belfast City Council will be able to exercise for part of the River Lagan. Those powers will enable the council to safeguard the legacy of the work of the Laganside Corporation and include, for example, the power to execute works to facilitate access to the river or promote recreational use; the power to construct bridges and weirs, subject to the necessary permissions; and the power to make by-laws regulating, for example, fishing or the use of the river by vessels.

The last Part of the Bill is miscellaneous. The Bill provides councils with a range of powers to allow them to conduct or fund studies, investigations or research relating to the exercise of their functions, relating to social need in their districts or the development or redevelopment of their areas.

As a result of the Bill, DSD will continue to exercise policy responsibility for the powers and functions transferring, and councils will have a statutory duty placed on them by the Bill to have due regard to guidance issued by the Department. The transfer of assets and liabilities connected with those powers from DSD will be covered by the Local Government Act (Northern Ireland) 2014. The Department has worked closely with councils and has built up good working relationships with them over the last 12 months or so, and it will continue with that approach between now and April 2016 to ensure a smooth transition to the new councils.

Ian has been heavily involved in the operational and business continuity elements of the reform programme and can provide more detail, if required, on contacts with councils and plans to transfer the work over. I can address any issues about the policy or the legislation more broadly. The Committee will, of course, have further opportunities to scrutinise the Bill in more detail. My colleagues and I are happy to take any questions at this stage.

The Chairperson (Mr Maskey): Thank you for that, Henry.

Mr F McCann: There are two things. You said that, after discussions with Executive colleagues, the issue of HMOs and unfitness was removed. I thought that, in some of those discussions, there was general support for HMOs and unfitness, but that, given their nature, they had to be removed. Are they being taken under a different Bill?

Mr McArdle: That is possible, but the Minister proposed and the Executive agreed that the Bill would go ahead as a Regeneration Bill at this stage. Some work is going on to modify the approach to regulating houses in multiple occupation, and it is possible that that will feature in a subsequent Bill. It will be the same with unfitness.

Mr F McCann: Thanks, Henry.

In clause 1, "Financial assistance to address social need", what does "the provision of housing" in clause 1(2)(c) mean?

Mr McArdle: At the minute, the Department can, under the Social Need (Northern Ireland) Order, provide financial assistance for a range of things, one of which could be housing. An urban development grant, for example, could include a development that has a mix of commercial and residential and could include some element of housing. That is why that provision is retained in the Bill.

Mr F McCann: My understanding is that housing in its entirety was to be removed from the Bill, and this keeps it in and opens up the possibility of councils —

Mr McArdle: It does not, because, if you remove it, you remove a council's flexibility to provide assistance. However, we are not talking about social housing here. We are talking about a private developer planning a development in an area where there is market failure, and he could apply for an urban development grant. That urban development grant could cover that development, which could include some elements of housing.

Mr Antony McDaid (Department for Social Development): To cover that element, we added in that extra provision that states that, if they were to use financial assistance for the provision of housing, they would require approval from the Department. That is an additional provision to cover the issue that you raise.

Mr Wilson: Fra, you can envisage a situation, for example, in which there is a row that is particularly run down and maybe commercial shops or something are to be put on the ground floor, but there will be flats above that, which would all be part of the development.

It is really to facilitate those kinds of developments, for which there will be grants available, otherwise the sites would be left derelict. Indeed, some councils may wish to vest land and then open it up for development, which might be a mixed development — that is all you might get on it. On arterial routes into the city, for example, one of the things we suggested to put a bit of invigoration into them was to put flats for single people above shops etc. If you have a development proposal, and the council decides that it is a good idea, then this provision is about providing grant aid to spark that kind of development and bring in private money.

Mr F McCann: You are talking about flats over the shops.

Mr McArdle: As Antony said, because of the concerns that councils, on their own, might build houses, any proposal to provide financial assistance or housing of any description has to come to the Department for approval.

The Chairperson (Mr Maskey): OK. Sammy, you wanted in.

Mr Wilson: Yes. Can I ask two questions? First, this transfer will take place in 2016. Of the staff who will transfer, will any be transferring with these functions from the Department to councils?

Mr Ian Snowden (Department for Social Development): There will be no obligatory transfer. There are about 170 people working in these functions in the Department. In our engagement with the councils, one of the things they identified was that they did not expect to need all 170 people, but that they may need some of them. So, there will be a scheme whereby councils will identify how many people they might need. They will approach the Department to seek that number, and there will then be a selection process and staff will transfer on that basis. Those who do not transfer out in that arrangement will be absorbed into the Civil Service in other roles.

Mr Wilson: Secondly, when we were looking at the Budget proposals here, the regeneration budget was being hit quite hard, and this function will transfer after the reduction in the budget takes place.

Mr Snowden: It will transfer on the basis of the budget agreed for 2016-17, so there is another Budget process to be gone through. The transfer will not necessarily be with the budget we have in the current year or the coming year; there will be another process to be worked through regarding how much money is available.

Mr Wilson: But, it will be significantly less than the budget that would have been transferred had it been transferred this year. Is that right?

Mr Snowden: That assumes that the budget for 2014-15 would have been carried over. Given the scale of the cut applied to the Department and the fact that the transferring budget had to be worked out from within the Department's allocation as opposed to having been ring-fenced beforehand, there probably would have been a reduction in any event. So, as it stands, it is something in the region of £60 million or thereabouts, although that is still to be finalised. There will be a transferring budget from DSD.

Mr Wilson: What was it when the Bill was first drafted?

Mr Snowden: There were a number of different calculations, but it ended up at between £65 million and £66 million by the time we had applied a 4% reduction, anticipating that there would be some cut. The cut ended up being much bigger than that, so the budget is less than that.

Mr Wilson: Are councils aware that this is probably coming to them with significantly less resources than were available to the Department when it carried out these functions?

Mr Snowden: They are aware that our budget has been reduced. They have not been specifically told individually of how that may work out, because we still do not know exactly what our budget will be. They have not yet been advised of the implications for their individual allocations, but they know that there has been a cut.

Mr Wilson: I want to ask about one other issue, namely the powers of vesting. I am sure it is in the Bill, but I have not had a chance to read it. Maybe, you could outline to us the circumstances in which councils will have the ability to vest.

Mr Snowden: There are four specific reasons why you would want to vest land. Three of them are in clause 7, which states that a council may acquire land where:

That relates to the previous two clauses. So, if a development scheme is passed by a council, it can vest land in order to implement that.

The following two are connected to development schemes. If it is expedient to hold the land that you would acquire for the purposes of a development scheme, either because of the nature of the layout of the land or the ownership of it, you can do that.

If you have to move somebody off the land that you want to vest and relocate them, you can vest land to allow you to do that, too.

The fourth area is slightly more general. This is where the council considers that it is expedient to acquire the land for a purpose that is in the best interests of the proper planning of the area — essentially, where it is decided that a particular use on that site is the most appropriate. If the only way to achieve that use would be to acquire the land compulsorily or by agreement, that would be the process by which it would do it. What you have to do, if you are to use that power, is to be able to demonstrate that it is, in fact, in the interests of the proper planning of the area. It cannot be an arbitrary decision; there is a process to be worked through. Clearly, it would have to be something in line with the development plan for the area and not an improper use for that particular location.

Mr Wilson: Does that vesting proposal have to be initiated by the council? I am trying to think of some examples. Let us say that a developer comes in with a specific proposal for the bottom end of Larne, where there is a fair amount of dereliction, and says, "Look, I could develop that in keeping with what the council would like to be done at that end of the town, but here are three landowners whom I cannot convince." Can the developer ask the council to initiate that, or is it a case of the council looking at its overall development plan and saying, "We may do it", and then looking for a developer?

Mr Snowden: Legally, the powers can be used only in the public interest. The council would have to establish that the proposed development on that site would be in the public interest. The council could not respond to a request from a developer to use powers for its benefit. There are a number of safeguards that would have to be applied in that case, which would, essentially, mean that, once the land was acquired, there would have to be some kind of open process by which any interested developer might be able to get access to land and make use of it. As with a lot of these things, it really depends on what the proposal is for and what the proposed use of the land is. There would be quite a process to work through. It would not be a simple case of someone coming and asking for land to be vested. However, it is often the case that somebody having an idea for a portion of land is what initiates or sparks off the interest.

Mr Wilson: The reason why I ask this is because I can think of examples. One is of a developer who owns most of the land already and is not likely to hand it over to go out to public tender. He owns 75% of the land, but 25% is being held. He has made his best efforts to purchase that land but cannot. You are saying that, in a case like that, it would not be proper for the council to be approached by a developer who says, "Look, I have a plan for that area in which you, as a council, have an interest in getting redevelopment, but I cannot get hold of the remaining 25%, 10% or whatever. Can you vest it for my scheme?" That cannot be done.

Mr Snowden: Not without running into tremendous legal difficulties that would probably shoot it out of the water. There are schemes for which that has been attempted in the past, including one in the centre of Ballymena and one in Bangor. Several have run into a lot of difficulties with that. The council, as a public authority, has to start from first principles and ask, "Is this the location in the town that we should be focusing our attention on? Is this the process by which we should take it forward?" It should then go through a development brief arrangement. It could well be that the developer who owns that land is the one who comes out —

Mr Wilson: He is in the strongest position.

Mr Snowden: Yes, because he is in a strong position. However, you have to make sure that what you want to get out of it at the end is in the public interest as opposed to the best interests of the landowner or developer who approaches you first.

The Chairperson (Mr Maskey): The fact that it comes from a developer who owns a big portion of the land does not mean that it is precluded.

Mr Snowden: No, it is not precluded, but —

The Chairperson (Mr Maskey): They would have to satisfy the public interest and all the rest of that. In my view, that would end up in a negotiation, or whatever else, about who owns the land or who might own the land. Is that a call to ransom on behalf of the council? I do not know. However, it does not exclude somebody who happens to own the land.

Mr Snowden: No.

The Chairperson (Mr Maskey): As you said earlier, these things tend to be initiated by somebody having a good idea — it might be a good idea, or it might not be — but it would still have to satisfy all the big interest matters.

Mr Snowden: Yes.

Mr F McCann: On the back of what Sammy said, there are many towns, such as Larne, in which there have been, over the past number of years, parcels of land liable to end up in dereliction. However, there are a couple of other scenarios.

One is if, for talk's sake, Larne council were to draw up a master plan to take in the future development of the town, and the developers would not let go of the land, because they believed that the longer they held onto it, the greater the likelihood that they would get back the price that they paid for the land initially. Under those circumstances, because it is probably for the greater good of the town, would that allow you to use vesting orders to ensure that the town might buy it?

Mr Snowden: I think that, in that situation, the developer or owner of the land would probably challenge the council, as it would challenge the Department under the current arrangements, to demonstrate that that was the only way that the development was going to take place. So the developer might say: "I have plans for it, and I just have to wait until they are financially viable. You cannot take my land from me arbitrarily." So the council will have to be able to demonstrate that what it proposes to do is the only course of action which will allow the development to take place. That is quite a steep obstacle to overcome in any kind of court proceedings, if the vesting order is contested.

Mr Wilson: The reason I ask is that many councils with this power coming to them, or many councillors, are under the illusion that, where they have areas which are scabs on their towns, they will now be able to intervene and do so fairly rapidly. From what you say, these vesting powers do not open the door all that wide.

Mr McDaid: Councils have to come to the Department to make the vesting order. They cannot make it themselves.

Mr Wilson: Yes, I understand.

Mr Snowden: Part of that assumption is that the Department has been inactive, whereas, if things have not been done, it is not because they are easily done and nobody has bothered; it is because they are actually quite difficult to work your way through. With compulsory purchase orders, we are actually talking about a fairly draconian power, in the sense that the public authority can just come in and take your property from you, with appropriate compensation of course. That tends to get people quite agitated. Quite often, vesting orders are opposed and contested, so there is a public inquiry process to be gone through and there are many opportunities for legal challenge. Any local authority that wants to do anything in any of its towns can take any course of action that it sees as appropriate to it, within the bounds that the powers allow, but it would have to be clear that it would be able to sustain that in the face of legal challenge, and that is where the correct procedure comes into play. That is why it is very important to be clear about what you are trying to achieve and the process that you work through.

Mr Wilson: Ian, that is the point that I was trying to get at. The Department has tried on occasions, within towns, to do this and has found itself running foul of the law. The question is has the opportunity not been taken in this Bill to strengthen those powers where it is quite clear, as Fra said, that it might well be in the interests of somebody who has stacks of money and holds key pieces of land to say that he is not too worried about the social impact of dereliction in that part of the town and wants — understandably — to get the maximum return, and, if he has to wait 10 years for it, he will wait? In the meantime, the greater regeneration plan which the council might have for the area is held up. That is an obstacle at present, and I am just wondering whether any steps have been taken in this legislation to try to ease the way through what are known to be obstacles, albeit in a small number of cases.

Mr Snowden: It is difficult to see what legislative steps you could take to do that, because most of the obstacles relate to the processes by which any public authority may be challenged legally on any decision that it takes. Very seldom does anybody fall foul, in relation to a challenge to a vesting order, on the grounds of lawfulness; it is almost always on the grounds of reasonableness. And I suppose the question then becomes whether the course of action that you have taken is reasonable in the circumstances that are there. And this is where questions come in as to whether you can stand over and demonstrate that the rationale that you are relying on to take the course of action of vesting property is going to be sustainable against a legal challenge. That is where the difficulty comes in. It is hard to see how, in a legislative proposal, you could overcome that, except by going so far as to exempt any compulsory purchase from judicial review challenges and so forth, and I do not think that that is really a course of action.

Mr McArdle: There is a balance to be struck between allowing a Department, as the case is at the moment, and councils, in the future, to do something like that. It is pretty draconian to take somebody's property from them, and there have to be checks and balances.

The balance is probably right. It has worked. It might not have worked wonderfully in that there may have been frustration in getting regeneration schemes through, but better that than having something that is pretty cast iron in favour of the Department or a council and gives the person who owns the property fewer rights. I think that the balance is probably right.

Mr Snowden: Essentially, part of the problem in the circumstances that you described and the ones that Fra described is that a council, or the Department, if we are still doing it, will have to take the side of one individual or interest over another. If somebody owns a 95% portion of land and somebody else is holding out with their 5%, we essentially have to take the side of one party in that dispute or go against a party that owns land and is not developing when we think it should be brought forward more quickly.

One of the difficulties of the situation that Fra described is that you crystallise a loss for an individual. They may have paid, for the sake of argument, £10 million at the height of the market for a property that is now worth only £4 million. Once you force them to sell the land to you, they have to realise a loss of £6 million. That is one of the issues that cropped up in relation to regeneration schemes like the one in the Village, with housing-related issues about negative equity and so forth.

There is a complicated set of issues to tackle here. It can be done, of course, because Victoria Square was a case of contested vesting and it was achieved, although it did take several years to work through all the processes. It is doable.

Mr F McCann: A number of sites are lying in Belfast that contractors got planning permission for at the height of the property boom. Then, when the crash came, they delayed building on those pieces of land. That has been running for years now, but it is having a direct impact on communities that live beside them. It also impacts on plans for the city centre. Surely there must be something that allows you to deal with that situation and vest land under those circumstances.

Mr Snowden: You could attempt to. There is nothing in this legislation to prevent that. It is actually allowed under clause 7(d), but if a person decides to oppose that course of action, you would need to have done plenty of advance groundwork to make sure that you could sustain that because, again, they will suffer a financial loss.

There are also things that the new councils will have control over under the planning legislation. There was a case a couple of years ago in Portstewart on the Strand where a half-built property had sat in some degree of dereliction for several years. Eventually, the DOE Minister decided to take action against the individual concerned and forced them to demolish the eyesore. So, there are other courses of action to deal with some issues of blight, but land ownership is a fairly fundamental right; you cannot have your property taken without due cause and there have to be proper reasons for doing it.

The Chairperson (Mr Maskey): Following on from the previous line of questioning, two issues have jumped out at me over the years when dealing with some cases. You mentioned the test of reasonableness, which is really a judicial determination, but the question that Sammy asked, and I think Fra alluded to, is around a borough council vesting land. At what point can you look at the question of reasonableness and what are the criteria?

I think that, at this stage of the game, the issue of reasonableness really prevents councils in this case, or the Department previously, from being able to vest more easily. That would, of course, have to be balanced against the need for proper compensation if land were vested.

You mentioned the Village, where I have dealt with issues over a number of years. Quite a number of families there were left very badly hurt by having their property vested. They were in negative equity and lost thousands of pounds. Will this Bill do anything to help in such a situation? In other words, is this Bill just transferring power from the Department to councils, as opposed to taking the opportunity to do anything to fix what I and some other members think are flaws in the system in the test for reasonableness for councils to be able to vest, and the need for proper compensation, which prevents a situation where families buy a home in good faith and end up having it vested?

I think that more of this applies to a small person like that as opposed to a big business. Big businesspeople can sit on the land for ever; a homeowner really has no voice. Are you saying that the Bill is not taking the opportunity to address the questions of reasonableness and compensation?

Mr Snowden: I will take the issue of reasonableness first. Very simply, the test for reasonableness is that you have taken into account all the things that you should have taken into account and that you have not taken into account things that are not relevant to the decision that you have to take. That is an easy thing to say, but you end up having to consider a very long list. In the case of a commercial development scheme of the kind that we are talking about using these powers for, it boils down to whether the scheme is viable, whether it is in the proper interests of the planning of the area, and whether you have considered all reasonable alternatives and have looked at all the issues that are relevant to the proposal and not taken into account things like who owns it, which are not directly relevant to it. Of course, once you get into a legal dispute, the distinctions can become much finer and much more difficult to navigate, but that is essentially a list of things that you need to look at, as well as considerations such as human rights law and so forth.

On the question of the compensation that is payable, I understand that separate work is going on in DFP on compensation for landowners in the event of compulsory purchase, and that is to introduce changes to the legislation in Great Britain to bring it into line with what we have here, which includes issues such as supplements and how to deal with negative equity. I do not know exactly what the detail is; I only know that is being dealt with by DFP at the minute. With the land tribunal, questions of compensation are dealt with separately from this legislation and are not dealt with by DSD at the minute under [Inaudible.]

They are referred to the Lands Tribunal. So, any question about the amount of compensation that should be payable is dealt with under the Lands Tribunal legislation.

The Chairperson (Mr Maskey): Does that cater for homeowners as well? You are talking about land. What about people who own a house in The Village, for example, or the New Lodge Road, which is another case in point?

Mr Snowden: It is any property owner. I stand to be corrected on this because I am not directly involved in looking at it, but I think that, essentially, you are proposing some kind of supplement to the value of the property to accommodate things like disruption and so forth, which might be up to an additional 10% or more of the value of the property.

The Chairperson (Mr Maskey): You said that DFP is doing work on that, but is there any possibility of getting an update on that as part of our consideration?

Mr McArdle: We are only one of a number of Departments with powers to acquire land compulsorily. Our Regeneration Bill does not actually talk about what you do when you go to vest; the procedure for that is set out in existing planning legislation. Compensation is not covered in this because it is covered for all Departments in a central piece of legislation. This work might throw some light on that.

Mr McDaid: The process for vesting is set out in schedule 6 to the 1972 Local Government Act.

The Chairperson (Mr Maskey): A number of us have dealt with cases of families who have been left disadvantaged and seriously damaged.

Mr Brady: Thanks for the presentation. Henry, you mentioned finance being available to third parties. Will that include independent advice?

Mr McArdle: Sorry?

Mr Brady: You were saying that there will finance available for — it says here —

Mr McArdle: It says financial assistance for the Social Need Order, yes.

Mr Brady: At the moment, some advice centres get matched funding from DSD through councils. It is a sort of cocktail of funding. Is it possible that, within the concept of advice centres, councils will take on responsibility for funding citizens advice bureaux or independent advice centres?

Mr McArdle: My understanding is that councils will take on responsibility for funding at a local level. If there are regional advice centres, DSD will retain that responsibility.

Mr Brady: Our council, Newry and Mourne, will be put in with Down; we will have a huge area from Cullaville to Strangford. So, it might make sense for some independent advice centres — CAB is regional — to come to an agreement on coming together. There was talk years ago of hubs, which, I suppose, at the time, made sense, but, like everything else, unless mainstream funding is available, it becomes more difficult.

The other question is about schemes like neighbourhood renewal, which are currently administered by [Inaudible.]

councils, presumably. Is there any redefinition? Areas of deprivation were designated under the Noble indices. Are there any plans to possibly redesignate areas? We have neighbourhood renewal areas in my constituency. I am talking about the Camlough Road and the Egyptian Arch. Derrybeg is on one side and Carnagat on the other could be a neighbourhood renewal area. Then there is Cloughreagh, which is not far up the road. They are not neighbourhood renewal areas.

Mr McArdle: Ian will come in with more detail. In terms of the neighbourhood renewal scheme, we are conferring powers on councils to tackle deprivation, do regeneration work and support community development. Ultimately, it will be for councils to decide how they go about that and where.

Mr Brady: Yes, I understand that. Sammy talked about the transfer of staff, and there are DSD staff who deal specifically with neighbourhood renewal schemes and who, on the whole, do a good job. Will there be a transfer from DSD to the councils?

Mr Wilson: I think I know what Mickey is getting at. The Department has criteria for neighbourhood renewal, which they apply. Will councils be able to decide, within the limits of their own resources and budgets, on criteria for neighbourhood renewal schemes, which might be different from those used at present, and which, therefore, might have the effect of including additional areas, or excluding areas that are currently included? Or, will the criteria also be transferred, so that councils cannot deviate from the current criteria for a neighbourhood renewal area? I imagine that is not the case; otherwise, what is the point in giving the councils the power?

Mr Snowden: Just indulge me, and I will explain what is going on with some history. The powers in the legislation are the same that DSD has had since about 1985, when it was the old DOE. They have been used as the legislative basis for a number of funding schemes over the past 25 years or so, starting with Making Belfast Work and the Belfast Action Teams, the Londonderry Regeneration Initiative, the community regeneration and improvement special programme (CRISP) and the community economic regeneration scheme (CERS). In the early 2000s, neighbourhood renewal was the latest iteration. They also use it to fund areas at risk. Essentially, the Department could change the basis of neighbourhood renewal without having to go through any legislative process. The current strategy for neighbourhood renewal and the approach that is adopted are more or less administrative policy decisions, as opposed to having a legislative basis.

Mr Brady: I think Sammy is making the point that, at the moment, there is uniformity to the neighbourhood renewal criteria. You may get 11 different interpretations of an area of deprivation. That is the fear that people have, certainly in my own constituency, in the voluntary sector and on the neighbourhood renewal teams. They fear that there could be a whole redefinition of deprivation. There were changes with the Noble indices in our area, where a residential area was put in with an estate that was not as well off. They worked it out by the average number of cars. One house might have had three cars, and another none, but because they were in the same area, they worked out an average. So, there is fear about the redefinition of the criteria.

Mr Snowden: Yes, they will be able to do just that. To put it simply: that is the point of devolving these responsibilities to local government.

Mr Brady: It may well be the point, but it may not be the result you are looking for.

Mr Snowden: Some councils have indicated that they will probably continue with neighbourhood renewal as it exists for a couple of years at least. Others have decided already that they will do something entirely different. I know that Antrim and Newtownabbey have already fairly well-advanced plans for an alternative kind of spatial disadvantage scheme, which will have a different set of criteria. It is up to each local authority to work out the main social needs for their area. They may decide that they are to do with health, crime or education.

Mr Brady: I understand, but the lack of uniformity may well give rise to a perception that people in areas of deprivation in other council areas are much better off because the council has taken a different view on what constitutes an area of deprivation or social need. It is a very broad church.

Mr McDaid: The Department will be issuing guidance, will it not?

Mr Snowden: Yes. We will issue guidance, which the councils will have to have regard to, but, within that, they will have fairly broad latitude to decide what they want to do. All the powers are discretionary, so it could be that a new council could decide to do nothing at all, having had regard to and thought about it, because that is all that "have regard to" means. They could think about what they need to do in their area and decide that they do not need to do anything. They could take that decision. Alternatively, they could decide to keep things pretty much as DSD has done them or to go down an entirely different route. I expect that some changes will happen, but those will be fairly evolutionary, as opposed to revolutionary. Over time, you will see all the areas diverge in the approaches that they take, because their circumstances are different.

Mr Wilson: Anyway, the constraint would be dependent on what budget the councils have.

Following on from Mickey's point, when the money is devolved, will it be done on the basis of where you currently have neighbourhood renewal areas? If, for example, one council has three neighbourhood renewal areas at present and another council has none — I know that that is an extreme example — that council will get devolved the amount of money for three neighbourhood renewal areas while the other one will get devolved no money? If the latter then wants to introduce neighbourhood renewal areas, it will have to raise additional funds from its own resources. Could the other area decide, because it has money for three neighbourhood renewal areas, not to use it for that and use it for something else?

Mr Snowden: No, we are not doing that. A budget allocation formula has been worked out that has attempted to deal with that issue from first principles, by looking at what the whole purpose of the reform of local government is and saying that we want to start from a position of wanting to equip the new councils with enough resources for them to be able to deliver against the regeneration and community development policy framework. That means not looking back at what has been done in the past, either to try to replicate it, continuing going forward, or to correct previous perceived imbalances, whatever they might be. Each council area will get an allocation that has been calculated on the basis of the urban population of its area and the level of deprivation there. An allocation has been worked out accordingly for each one. That has resulted in some money moving out of Belfast into other districts and in the north-west seeing more or less the same current expenditure levels. That, broadly speaking, is what the impact of that has been.

The Chairperson (Mr Maskey): OK. In a way, this is a follow-on from the previous question. When it comes to funding allocated to councils, the Committee has already decided that, in the context of the current draft Budget, it wants to see, for example, the like of neighbourhood renewal funding ring-fenced. Will you be putting any of that to local government in the Bill, or is that necessary?

Mr Snowden: The budget allocation formula has three component parts. It is about tackling deprivation, the physical regeneration of town centres and community development. There are specialised amounts for Laganside. Some of the councils are choosing to use their allocation on those three packets and pretty much direct it in those ways, while others are just lumping the whole lot together and making decisions in the round about how they would like to use the budget. We would not propose to direct any council to spend any portion of its money in any particular way; otherwise, to manage that kind of relationship, we would have to get into quite a heavy-handed oversight arrangement.

The Chairperson (Mr Maskey): In the context of where organisations in, for example, Belfast are saying that — you have already alluded to this — there are defined areas of need and that there is a defined need that has been quantified, probably over a long number of years, whatever about the particular iteration, if there is now a new funding formula that, in effect, is going to transfer money out of Belfast to compensate other, rural areas, is that simply because of the level of budgets currently available to DSD? I ask that because, if there is a determination that there is already a need in, say, Belfast that has not been met — I am reversing the logic of this — and you have to transfer money from a budget from Belfast to somewhere else, that tells me that the other area had not been getting what it should have been getting. Why would the budget not be increased to meet that need, as opposed to somewhere else's money being taken off it? That defeats the purpose of tackling disadvantage.

Mr Snowden: The budget allocation formula has worked out a percentage of available budget for each council area. What you end up with, specifically with the amount of money, will depend on how much you have available to allocate. As long as DSD has to make the transferring budget available out of its allocation as part of the budget process, it and the Minister will have to take decisions based on the different priorities. If we try to protect any one part of the budget — for example, the transferring part to go to local authorities — that would mean that some other part of the Department's budget would have to take a disproportionately larger hit and a decreasing budget position. We might have to make quite a substantial reduction in the coming financial year, so it is very difficult to go past any part of the urban budget.

The Chairperson (Mr Maskey): I am not querying that element of it, but it seems to me that there is an additional problem now. We are being told, in effect, that rural areas, or areas outside of Belfast, have not been receiving what they need. I am asking why you do not increase that portion of the budget rather than taking it off somebody else. You are taking it off someone, where there is a clearly defined, quantifiable need, to give it somebody else. Why not increase it to meet the needs of the other people, who obviously have not been given their share and what they should have been getting? Do you know what I mean? It is not about cutting the current reduced cake, which is what you are doing, but meeting greater needs.

Mr Snowden: Again, I go back to the point about where the money comes from in the first place. We have only a particular size of cake. We have to work out the most equitable way, because this transfer will effectively be in perpetuity. It will be an allocation that will not be revisited regularly. Whatever amount of money is transferred to Belfast City Council or any other council as part of this process will become part of its transferred budget forever afterwards. To base it on an existing funding allocation because of a former programme — at the minute, that is neighbourhood renewal — and what the Department currently does will inevitably skew the resources in one way or another. In the budget allocation formula, we have tried to come out with something that is rational and equitable across the piece. The cumulative result of all that is that, proportionately, a bit less is going to Belfast than has been going to other areas in the past. That is what the formula produces. If we are going to manage the transitional problem that that will create for Belfast — I suppose that you are suggesting that it may put a budget pressure on that council — we would have to find additional money from some location. In our circumstances at the minute, and with the Department's decreasing budget, we do not have much to do that with.

The Chairperson (Mr Maskey): In the context of transferring staff to councils, if a council decides — it may never happen — that it does not need to deal with that and will deal with it in some other way, what happens to those staff?

Mr Snowden: They will have to be absorbed into the Civil Service in another role, and there is a process through which we are trying to do that. If they become designated as officially surplus, they are found alternative postings as those become available. They are first and top of the list to be posted to vacant posts. Normally, it would not be a particular problem, because the numbers that we are talking about are fewer than the annual staffing turnover in DSD, but, in the context of trying to decrease our staffing numbers at the same time, it could be challenging enough. We have to retain some of them for a period because there will be some residual work to be done around the accounts for the end of the year and to finish off payments and do post- [Inaudible.]

evaluations, but that work will run out over six to nine months. After that, they would have to be found alternative work.

The Chairperson (Mr Maskey): Obviously, all decisions of that nature would appear to be fundamentally important in changing the nature of defining social need in a particular area and how a council might meet that need. That would all be subject to council governance regulations, corporate plan votes, call-in votes and all the rest. We have to try to look at safeguards being built in to protect the best of what is already there, rather than opening the door to having an area where the council may decide that it is not going to do that because it does not like it. When we looked at the initial RPA deliberations, we did it council by council. Very few councils were even relating to the arts world, for example, which understandably led to some regional bodies being fearful of the transfer of powers to local government. They said that the history had not been very good in some cases in which councils were not interested in doing work to tackle disadvantage, embrace the arts or other things.

You will know all the regional bodies well. All of them were heart scared of some of the powers being transferred to local government, because they said that the history of some of it has not been terribly edifying. That is why we are saying that we need to look at the safeguards that are built in, as well as welcoming the transfer of powers to local government.

Mr Brady: There may have always been a perception that rural areas have been underfunded. I am not suggesting that Newry is a rural area, but there was a perception that it was underfunded. Ultimately, councils will look at areas of deprivation and social need in terms of objective need. If they do that, there might be less of a fear that the funding will not be distributed by councils in the way that it should because, ultimately, objective need is what is important.

Mr McArdle: You would have to expect that councils would deal with that properly —

Mr Brady: Well, you would hope so.

Mr McArdle: — and base their decisions on objective need. The Department will provide ongoing guidance on the type of things that it takes into account in making decisions on where to target resources. So, you would expect councils to do something similar. You have to bear in mind that this will all be in the context of an evolving community planning process that councils will have to —

Mr Brady: Will there be a monitoring process or will the Department have a light-touch monitoring process? Is that a possibility?

Mr McArdle: It has not all been worked out yet, but as I said the last time, the intention is that it will be a light touch. There is no point in us devolving this and then clamping down on councils every five minutes.

Mr Brady: I understand that, but if there are blatant examples of funding not being used in the way envisaged by the legislation, then that is the worst-case scenario.

Mr McArdle: I think that if there were serious concerns, there are powers in the Local Government Act that allow any Department to ask for a report from councils on any individual function that has been transferred and call them to account. Those powers would be some way down the line. You would not want to be using them from the outset. You would give them an opportunity.

Mr Brady: I am probably the only member of the Committee who has not been a councillor, so I am trying to be objective here. It is just to make that point.

The Chairperson (Mr Maskey): That is a lesson that has been wasted on you, but go ahead.

Mr Snowden: To clarify what the Local Government Act allows the Department to do in relation to regeneration and community development roles of the new councils; it could require councils to make reports and provide information regarding the exercise of that role; cause local or other inquiries to be held or investigations to be made concerning any matter relating to the council's exercise of its regeneration and community and voluntary role; and, finally, take action where a council has failed to discharge any of its functions, including making an order declaring the council to be in default.

As Henry said, by the time you get to that point, you would need to go as far as you possibly could. As far as I am aware, the only time that particular power has ever been used in relation to a local authority in Northern Ireland was when Belfast City Council refused to build an air-raid shelter in 1943.

Mr Brady: I almost feel encouraged.

The Chairperson (Mr Maskey): It is almost complete now.

Thankfully, Belfast City Council has moved forward considerably since that.

Mr F McCann: It goes back to the question that Alex asked. There are two elements. First, were councils involved in drawing up the formula? Secondly, in dealing with social or generational deprivation, there are areas across Belfast that will be directly impacted on because of the reduction of the resources going in. That will have a detrimental impact and could set you back 15 or 20 years. Why would you come to a decision like that when you know that it is going to have that effect?

Mr Snowden: I will take the first question. We started a process of engaging with councils in September 2012. The budget allocation model was published for consultation to the local authorities in February 2014, which is just short of 12 months ago. So, we had gone through a significant process of consulting and engaging with local authorities about what they thought about the transfer of DSD's powers to them and took account of all the issues that they had raised.

We came to the point of trying to come up with a system that started from scratch essentially and worked out how to transfer the money because that, broadly speaking, is what covered most of the concerns that were raised by local authorities.

When the budget model was produced and put through the then Minister, he agreed it, and it was issued for consultation. We then took account of some of the comments that came back from local government in the spring of last year, before the final version was published. That is the process through which the budget allocation model was worked out. Councils have been involved quite a lot. Most councils, but not all, are content with it. Belfast City Council has concerns about the amount that will go to it, not because it is not sufficient to keep funding neighbourhood renewal but because it is not sufficient to do that as well as the scale of capital works that it will want to do on top of that. That is the position. I hope that I am not misrepresenting anyone, but that is, more or less, the position that it has made to us.

The second question was on the nature of deprivation in parts of Belfast. I am well familiar with that having worked in the Belfast regeneration office (BRO) for a number of years. It will be up to the new council to work out the best way of tackling that, but there will be sufficient money in the budget transferring to Belfast City Council to meet all the current obligations that we have under neighbourhood renewal, and there will be more money on top of that. It is the scale of what else it can do in capital investment that concerns the council

Mr F McCann: There must be a difference of opinion: when we speak to city councillors, their interpretation of what is on offer and the impact that it will have is completely different from what you are saying. I remember you working in the BRO and Making Belfast Work (MBW), and I remember dealing with you. I have always said that one of the lifelines in many communities across the city was the formation of BRO and MBW and the fact that they started to deal directly with some of the serious problems that arose. You say that sufficient money will transfer to the council to allow it to do this. However, there must be misinformation somewhere, because that is not the picture that we are getting. It is certainly not the picture that many of the groups out there are getting. They are already being told to tighten their belt because this is coming down the road at them. Somebody needs to clarify the position because many of the decisions being made now could be a matter of life or death in some communities, and that needs to be taken on board.

The Chairperson (Mr Maskey): In a way, that is beyond the conversation today, because you are getting a presentation on the Regeneration Bill.

Mr F McCann: It drifted earlier.

The Chairperson (Mr Maskey): I understand that. It is important to highlight the concerns that you have, which I think that everyone shares. My understanding is exactly the same as yours: there certainly is a different understanding of what way this will work. I have no doubt that some of it will need a bit of negotiation, which is fair enough. Maybe councils are portraying a higher level of difficulty. Some councillors whom I have spoken to told me, as they told Fra, that the indication that they are getting is that there will be cuts as a result of the transfer as opposed to overall cuts in the funds, but I do not know whether there will be.

Mr Snowden: A lot of this is going on in the context of the current discussions about the Budget for 2015-16 and the reductions in that. There is no question about it: savings will have to be made against what we currently spend on neighbourhood renewal across all neighbourhood renewal areas in Northern Ireland, and they will be fairly substantial.

The Chairperson (Mr Maskey): I appreciate that this is not part of the discussion today, but I presume that we would like some differential or some attempt made by the Department. I do not know whether we can ask you to take that back today or will, as a Committee, deal directly with the Department. I do not want to confuse the two issues today, but one impinges on the other because there is a lack of clarity around the fact that we are dealing with the 2015-16 Budget and Budgets beyond that. So, I think that some clarification needs to be given to communities. I am not sure how best that can be done. Maybe we should write to the Minister; I do not know. You may have a view on that.

Mr Snowden: It will be difficult for the Department's officials or the Minister to give a view on that, because we are talking about the implications of the Budget for 2016-17 and subsequent years. That is really what will drive how much money is available to be transferred, and, if the money is made available by the Executive to increase the transferring amount, it will go up. If we have to make further reductions against the Department's budget, some difficult decisions will have to be taken by the Minister at that time.

The Chairperson (Mr Maskey): OK. Ian, my final point is this: because some of this will now transfer to the councils, there will be an expectation in rural and urban areas that work will be done around tackling social deprivation and how that may be defined. What kind of liaison is going on with, for example, DARD? I imagine that some work is being done through that Department as well in terms of rural development.

Mr Snowden: DARD is not actually transferring any of its rural development functions at the minute, except in so far as it would spend its money through local authorities and local action groups. Its money is all Europe-sourced, so it is not really suitable to be devolved. Those powers are specifically limited to urban areas. Because the remit of DSD is defined as being urban regeneration, we are able to spend money only in what are defined as urban areas. The Northern Ireland Statistics and Research Agency (NISRA) has defined that for the Executive. The new councils will be able to spend money wherever they like in relation to those powers as they see fit; there will be no geographical reduction to it. It will be up to the new councils to work through all that. We do not have particularly close links with DARD, although we meet officials occasionally to talk about the urban and rural interface and how things link up and where there may be gaps between the two. Over the coming 12 months, we will have to work quite closely with the new councils to work out how all that will be worked through and delivered.

The Chairperson (Mr Maskey): Would it not be appropriate to have a better relationship with DARD? I am thinking of some of that work.

Mr Snowden: It is always something that we strive for. I was in DARD before I came to DSD. Since 1999, it has been something that the two Departments have been attempting to come to a clear understanding on. The nature of what DARD funds under rural development with the European funding is quite a bit different from what we do with DSD's funding. We made several attempts to try to link the two, including coming up with a common approach to dealing with the settlements that tend to fall into the gaps. It has been a difficult enough process, but we attempt to work together as best we can.

The Chairperson (Mr Maskey): OK, Ian. Thank you for that. No other members have indicated. Thank you, gentlemen. Again, I apologise for your lengthy delay this morning and thank you very much for your patience. No doubt we will discuss these matters again.