Official Report: Minutes of Evidence

The Chairperson (Mr Swann): Members, we have just received from the Minister and the Department a paper with the headline budget figures. Minister, we thank you for coming at such short notice. Of course, we would have liked more detail, but your timeline and ours met today, and this is where we are. On behalf of the Committee, I welcome Dr Stephen Farry, Minister for Employment and Learning; Mr Derek Baker, permanent secretary; Ms Heather Cousins, deputy secretary; and Mr Stephen McMurray, director of finance.

Minister, thank you for taking the time to be with us today. I heard your comments on the radio this morning, and I hope that no member of the Committee sends out mixed signals to you today on the budget. We have deliberated on this very seriously and have serious concerns. I ask you to open with brief comments.

Dr Farry (The Minister for Employment and Learning): Thank you very much for the invitation to address the Committee. This is our advanced thinking on the final budget for the Department. You will appreciate that the Budget was agreed by the Executive as recently as 15 January, and we are still working through the precise detail. It is our plan to finalise the budget for the Department within the next few days, but, in many respects, that gives the Committee the opportunity to give its view today in advance of the Department reaching its final conclusions on the way forward. Chair, we have provided you with, as you said, a brief summary. We opted to keep the paper simple, given that we were tabling it today.

The paper shows what is, potentially, the final departmental budget position, and the figures here provide us with a balanced budget position for the coming financial year. There are aspects beneath that on which we can perhaps clarify our thinking today. Other aspects, however, need to be worked through more deeply, particularly in higher and further education, where the absolute outworkings lie outside the control of the Department; they lie very much with the sectors themselves. We will, however, have some say in the direction of travel.

The position in the final Budget is better than in the draft Budget. We welcome the allocation of an additional £20 million, although that could also be considered as a reallocation or, rather, a reduced cut to the Department. It is also worth noting that we received £13·2 million from successful bids to the change fund and that this Department received 44% of the overall fund. That reflects the creativity and ingenuity of our officials in making bids to that fund and recognises the fact that the Department is very keen to collaborate with other Departments. That was reflected in how our bids to the change fund were received.

It is important to say at the outset that the increased allocations do not address all of the budget challenges facing the Department. As I will indicate, we still face some very difficult decisions with some significant implications for our front-line services and, indeed, investment in skills.

I will talk you through the tabled paper. You will note that our closing budget position for 2014-15, including jobs and the economy, Pathways to Success and the youth employment scheme funds, was £791 million. With the loss of those moneys, our opening budget baseline for 2015-6 was just over £756 million, and the final budget position is £707 million, or, to be precise, under £708 million.

The Chairperson (Mr Swann): Sorry to interrupt you. Will members and visitors in the Public Gallery please check that their mobile phones are switched off? Feedback is interfering with the recording.

Dr Farry: The cut to the Department against the opening baseline is £48·3 million. You then have to take into account the change fund allocation of £13·2 million, which is, of course, earmarked for specific new programmes and commitments, meaning that the effective cut to the Department is £61·5 million. The £20 million reallocation has reduced the overall pressure from £82 million to £61 million. These figures do not take into account any pay and price inflation.

You will recall from the draft departmental savings plans that we had already identified reductions in a number of areas. That left a balance of £49 million in the initial draft budget, and we highlighted that this was to be addressed through cuts to the higher and further education budgets, with obvious implications for jobs and places in the universities and colleges, and that we would explore further any mitigating actions. We now propose to confirm the £33·2 million of reductions that were identified initially.

I draw to your attention some other pressures that we need to take into account. These include match funding for the European social fund and the community and family support programme, which Members have found very effective. The removal of the additional £20 million allocation leaves a pressure of £30·1 million, which we propose to address as follows: £14 million of reductions to higher education, £12 million to further education and £4·1 million in further departmental efficiencies and reductions. That is how we balance out the remaining pressure of £30·1 million, if we accept the £33·2 million in previously identified reductions.

It might be useful to elaborate on what all that means. First, we are talking about a cut to both the core teaching grant and the research grant for each of the higher education institutions. We are not in a position today to specify the cuts to each of the institutions; a number of different aspects still need to be bottomed out. I will give you one example. The formula for the allocation of quality-related (QR) funding to universities will be changed to reflect the research excellence framework (REF) results in December. We will wait and see what standard the Higher Education Funding Council for England (HEFCE), with which we are in discussions, literally as we speak, in London, decide on for any reallocations between universities based on the REF outcomes. It will then be for the universities to work through the implications of the cuts and what they mean for places and jobs. It may well be a number of weeks before we understand the full implications.

I want it to be very clear that an impact on the front line is inevitable, given the scale of what we are reluctantly having to pass on to the sector. We have, however, sought to mitigate that impact through a number of measures. First, we have asked the universities to maximise their internal efficiencies. Secondly, we have agreed to relax the requirement to spend a minimum of 20% of additional student fee income on widening participation measures to 10%. In essence, an input-based process will be replaced by a new outcome-based process to maintain, at the very least, current standards.

That will be a condition in relation to what is, in effect, a deregulation of widening participation. The change could free up around £8 million in spending power for the institutions that could be used to protect the front line to some extent. So we propose to move from an input process, whereby spend is required up front, to asking the universities to have an outcome-based process that is based on the same standards but gives them the freedom to work out how to achieve those. Finally, we have reached an understanding with the universities to protect narrow STEM places and encouraged them to protect PhD and research investments as far as possible.

The £12 million reduction in further education will be partially mitigated by the proposed use of £6 million in end-of-year flexibility, which, of course, will be subject to the agreement of the Executive. In effect, that is the use of reserves in the sector. That leaves a balance of £6 million, and it will be for the respective boards of governors to agree how the various cuts to the colleges will be managed.

From our engagement with the sector over the past few weeks, we anticipate that the savings may be found through a number of measures. Belfast Met, for example, will standardise its approach to English for speakers of other languages (ESOL) courses in line with other colleges, which should save £0·2 million. Falling demand for essential skills courses will allow us to save about £0·5 million. We propose that all leisure and hobby courses will be charged at full cost recovery and that subsidies will end. That should save in the region of £3 million. We propose to end the learner access and engagement programme. That has had low enrolment levels, and we believe that there are alternative programmes out there that cover the same groups. We propose a standardisation of college tuition fees. At present, Belfast Met and the South Eastern Regional College (SERC) charge £2,500 for courses, and the other four colleges charge in the region of £1,500. It is our intention that those fees will be harmonised across the board. Of course, the fees for further and higher education in the colleges are still significantly lower than in the universities. That should leave a residual figure of £0·3 million for the colleges to find. They will also benefit to an extent from the relaxation around widening participation.

It is worth noting that the colleges will be best placed to access the £7·5 million allocation in the change fund for the pilots for the apprenticeship strategy. They should be the provider of choice for business for level 3 through to level 5 apprenticeships, and we expect that most of the initial growth will occur in that area. That is an opportunity for the colleges, and I hope that they will be able to avail themselves of that. With those measures, there will be some impact on places and jobs. However, as is the case with higher education, it may be a number of weeks before all that is worked through.

On the other efficiencies, there are a number of programmes — for example, our education maintenance allowance (EMA) commitments and Apprenticeships NI — in which different levels of demand may allow us to make savings of about £1·5 million. We also propose savings in the Office of the Industrial Tribunals and the Fair Employment Tribunal (OITFET) of £0·3 million, and further internal savings in the Department of £2·3 million. That will create the residual £4·1 million required for the budget to balance.

You will be familiar with the bids that we have made to the change fund. Those include the £3 million for the pilot phase of the United Youth programme. We have now advanced the roll-out of those pilots, which I know was a concern for a lot of people. We also made bids of £7·5 million for apprenticeships and youth training and, alongside our colleagues in Invest NI, £2 million for a collaborative skills investment, with £7 million coming from the Department of Enterprise, Trade and Investment (DETI). There is also money for an essential skills programme that we intend to take forward in conjunction with the Department of Education (DE).

It is worth noting that our capital resources have fallen from £55 million to £33 million. That will obviously have implications for what can be done in higher and further education.

In conclusion, I want to make a few general comments and reiterate the approach that we have taken. We have sought to protect the areas most relevant to the economy. We have sought to protect services for the most vulnerable. We have looked at previous spending patterns and assessed evolving trends and expectations of demand. We have sought to reduce departmental administration and, indeed, to explore how some services can be delivered differently. We have encouraged efficiencies in the higher and further education sectors, and we have sought to address duplication and dead weight and to explore alternative funding arrangements.

Some of the practical outworkings of that include a commitment to seek to protect narrow STEM subjects, which are so vital to the economy. We have also sought to protect the Assured Skills programme, which is vital for our inward investment initiatives. We have sought also to protect our new system of apprenticeships and youth training; and the employment service and how we deal with those who are unemployed. We have not altered any of the thresholds or eligibility criteria for the student support programmes, so those are proceeding as they did before.

Hopefully, that gives you an idea of our advanced thinking. We hope to close this out over the coming days and forward formal confirmation to the Committee and other stakeholders. We are happy to take any comments or questions from members.

The Chairperson (Mr Swann): Thanks, Minister. Members, as I said before we opened the session, it will be one question per member followed by a supplementary. There will be a number of rounds of questions so that everybody gets a chance.

Minister, some £26 million is being removed from higher and further education. I know that you said that it will take two to three weeks before you work out the numbers. In your paper on the draft Budget, you were able to say that it would cost 1,100 jobs, 16,000 FE places and 11,000 HE places. Do you have a gut feeling now about the impact?

Dr Farry: Those figures were provided by the sectors, not the Department, and were their indications to us of what a 10·8% cut across the board would mean. In higher education, we are still looking at a headline figure of £14 million. To some extent, what is new is the different approach that we are taking to widening participation, which, although it does not transfer money back to the sector, should increase its spending power, potentially to the tune of around £8 million. That is our estimate. In practice, it may come in at somewhat less than that. However, that is what we believe the additional spending power will be, and that could be used to mitigate the level of cuts.

That still leaves a pressure of around £6 million. Hopefully, some of that can be absorbed through universities doing things differently, but the potential for a loss of places remains. It may be in the low hundreds at this stage. Depending on how effective the sector can be in finding other efficiencies, that figure may come down over the coming weeks, and we are committed to working with it to see what more we can do. Ultimately, throughout all of this, we are very mindful of keeping the loss of front-line places to the barest minimum. That is the front-facing aspect of what the Department does and what is most important for providing skills for the economy.

In the FE sector, some £6 million of the £12 million that we have allocated for reductions may be addressed through end-of-year flexibility. We have a commitment that that money can be drawn down. It is not factored into the Budget struck by the Executive, so we would have to seek it through various monitoring rounds over the next 12 months. That is not guaranteed, and it depends on recommendations from the Department of Finance and Personnel (DFP) and an agreement by the Executive on timing, so that the principle of this being FE's money is accepted. In effect, we are using the reserves of the sector.

That will leave a pressure for the FE sector of about £6 million. Given that we are working with NDBPs rather than autonomous bodies, as is the case with the universities, we have a better understanding of how that can be managed. Ultimately, it will be for college boards of governors to agree how they will address whatever cuts are passed on to them. However, I believe that there is an emerging view in the sector that the measures that I outlined a few minutes ago are the way to go. Some will involve the loss of places; some will involve the loss of jobs. The staff who provide some of the programmes impacted and the places on those programmes are in equal jeopardy. However, we are probably talking about a low four-digit figure, if even that.

We have done well to mitigate the situation as best we can, but it would be wrong to give the impression that, on the skills issue, it is a case of box ticked and problem solved. We are not there at all.

It is important that we are clear that, even if we got to a situation over the coming days where there was a zero loss of higher education places and a zero loss for further education, a standstill in our skills investment is not good enough. It is not good enough in the current situation, where skills are a driver of the economy; in the context of lower corporation tax, it is simply not tenable. We have to expand our investment in skills.

The Chairperson (Mr Swann): The £6 million coming from FE's reserves comes once. In the 2016-17 Budget, will you have to raid the FE banks again?

Dr Farry: This is a dilemma that is probably faced in a whole host of areas, and people often say, "Sure, institutions have reserves, and they can use those". This is the constant problem that we face. Reserves can often only be used once. We have to have sustainable funding. In this case, it is justified for a number of reasons. First, due to other factors, those reserves tend to edge up every financial year, so we can be strategic about how we are using some of it and justify dipping into some of it. Secondly, I think that there is a need for the FE sector to readjust itself to what may well be some more difficult times coming along. If we create more breathing space up front, that gives the sector a bit more time and freedom to plan for the future, rather than lumping in even more challenging cuts up front in one year and then having very little option on how to manage that and, in effect, creating chaos in the system.

Mr Derek Baker (Department for Employment and Learning): Chair, as you are aware, the Minister has embarked on a major strategy review for the further education sector, and that will give the opportunity to look to see where the sector should be positioning itself in the future, taking account of what may be coming down the track at us in future years.

Dr Farry: In that regard, the new apprenticeship strategy and the forthcoming youth training system create fresh opportunities for the further education sector, and, obviously, we are very keen to receive bids from FE colleges in relation to some higher level pilots and apprenticeships.

The Chairperson (Mr Swann): Derek, you mentioned strategies. What is the possibility of those two coming in at the same time? Has that strategy been consulted on and agreed on and started to be rolled out in regard to the cuts that are also forthcoming?

Mr Baker: As the Minister has explained, the decisions on the 2015-16 Budget will have to be taken very soon, so they will predate the process of developing a new strategy for the further education sector. The point that I was trying to make was that that strategy development process and implementation process will be looking ahead beyond the 2015-16 year into 2016-17 and what might be coming down the track. It will provide a context within which any strategic readjustment within the sector needs to take place to take account of the new circumstances.

Mr Buchanan: I want to focus in on the same thing on FE and HE. While you have moved to mitigate what was already there, there are still concerns that the front line will be cut. What plans does the Department have to work with the colleges and the universities to look at more innovative ways forward that could drive out inefficiencies, maybe, or maybe provide training or teaching in a different type of way that would be more efficient and help in the situation that we find ourselves in?

Dr Farry: On further education, it is worth highlighting shared services. We are very keen to see what potential is there for the six colleges to work collaboratively around the number of different areas. We had some bids to the change fund. Unfortunately, these ones were not met — we cannot win them all. Nevertheless, we are committed to pursuing that. On current cost patterns, that is about how things can be done somewhat differently. There is also the opportunity for the colleges to rebalance their own offer, and we are keen that they become the key drivers in relation to the apprenticeship and youth training systems as they emerge. Additional funding packages are there for them to tap into, so that is an opportunity in that regard.

On higher education, again with reference to apprenticeships, I am keen to see us experiment with almost a hybrid apprenticeship-degree system, where there is a lot more focus on in-work experience and, potentially, people being employed while they do a degree.

That may be a slightly different concept from the pre-existing part-time degree approach. On this occasion, there would be a much more formalised arrangement between the employer and the higher education provider. There are some initial discussions ongoing with companies around pilots in that area, and I know that both universities are mindful of that type of opportunity. That provides us with perhaps a more cost-effective way of preserving places, and, in doing so, we are also having a much keener focus around employability skills, which employers are very keen to stress that they need, as well as people with the right technical and academic skills.

Mr Baker: On one final point, there is some really good thinking and work going on in some of the colleges regarding the use of new technology in teaching and learning. It is very innovative work, and we need to explore opportunities for rolling that out right across the sector and not doing it six different ways but doing it the best way. I think that there are opportunities not only for efficiency but for greater effectiveness there.

I have had meetings with all of the college principals recently. The colleges all have non-departmental public body status, which straitjackets them in certain ways. On the matter of their ability to generate income as a consequence of their closer relationship with business and commerce, seeing whether there is any way that we can release those shackles involves engagement with DFP. I am up for exploring opportunities there to allow the colleges to generate income if they can. That is one for the future.

Mr Buchanan: Yes, I think that that is one of the ways forward. Has any thought been given to the situation where companies and employers that are keen to get students trained up to the level of expertise that they want them at will be willing, perhaps, to contribute something to the colleges and universities towards that and to put an income in, knowing that, at the end of it, they will get what they are needing and looking for to drive their business forward?

Dr Farry: Absolutely. If we join the apprenticeship and youth training systems with current provision, we are bringing a lot more to the table with an employer contribution, so the cost to the state for training should diminish by a not inconsiderable amount. In effect, you would have a situation where, if someone were doing an apprenticeship, they would be employed by the company. They would be earning a wage and a salary from them, while the state meets either the full or partial off-the-job training costs, whether that is through a private sector provider, an FE college or a university.

Mr Baker: We really want to see that kind of thinking coming through strongly in the development of the new further education strategy. One of the six themes that is identified in our early thinking on the strategy, which will be going out to consultation in due course, is economic development. That is in its widest sense. It is that engagement with business and the partnership and pooling resources to deliver outcomes. So, it is in line with our own thinking.

Mr Anderson: Minister, you touched on harmonising fees. Can you elaborate on that? What is the difference in fees, and who would be the losers and gainers if you were trying to harmonise these fees? I think that you talked about £0·3 million.

Dr Farry: Hopefully, we will all be winners in this regard. At present, the fee for universities is a minimum of just under £3,800. Colleges have the ability to charge up to that if they so wish, however the maximum fee level that is currently charged by a college is £2,500. That is the situation at Belfast Met and SERC. The other four colleges are charging fees in the region of £1,500. Of course, these can be met through tuition fee loans and such, so they are not upfront costs as such. We believe that, given that that is already the practice in two of the six colleges, there is no reason why the other four do not follow suit. That is a fairly logical move to make ahead of more challenging situations that involve the direct cut of services. That is probably one of the first things that I would advocate that the colleges to do. It makes a lot of sense and does not threaten in any way, shape or form people's access to higher education in the FE setting, where it is still significantly less expensive than is the situation in higher education. It is probably about two thirds of the cost, if my rudimentary maths work is correct.

Mr Anderson: Can you see that harmonisation taking place? If not, would it impact on the colleges, and would they have to find the money?

Dr Farry: If that did not proceed, that would leave a gap that would have to be found from elsewhere within the FE system, so there is real interest in that happening. Having spoken to the colleges, I think that they understand that that is a fairly logical step to take.

Ms Lo: Minister, you referred to FE having the possibility of using its £6 million end-of-year surplus. That £6 million is for the sector. What about the individual colleges? Will it be spread out evenly between all six colleges?

Dr Farry: We are not in a position today, Anna, to give the detailed breakdown of how the cuts will work out across the different colleges. That was a separate piece of work. At this stage, we are approaching this from the point of view of balancing the Department's budget for the forthcoming year, and it is our judgement that we have to take £12 million from the FE budget. We are suggesting that we use £6 million end-year flexibility. The principals of the colleges are aware of that approach, and they are content that we use, or seek to use, that amount of EYF during the forthcoming financial year. As I said to the Chair, it is a delicate judgement call to find the appropriate level for dipping into the reserve position versus keeping that for future mitigation of what might happen during the rest of the decade. Across six colleges, you are looking at an impact either side of £1 million, depending on which college you are talking about.

Ms Lo: Minister, you are trying your best to resolve the situation, given the extent and scale of the cuts. You mentioned Belfast Metropolitan College, and it has a massive ESOL programme. What is the cut that you are talking about there?

Dr Farry: It is a saving of £0·2 million. It essentially involves a standardisation of approach between Belfast Met and the other five colleges. We are just ironing out a discrepancy in the system. We are mindful that we are funding ESOL more generously than other types of course or are taking a different approach to cost recovery for ESOL than other courses. It is an adjustment on the margins, but there is an ongoing commitment from the Department and the colleges to that. It is a very important issue in the South West College, for example, given the demographics in that area.

Ms Lo: Those are all measures you suggest —

The Chairperson (Mr Swann): Anna, we will come back to that.

Ms Lo: OK.

Mr Ramsey: You are very welcome, Minister. You can only play the cards that you have been dealt. It is a tough budget, even though we have been critical of some areas of it.

The Committee has been working on the NEETs strategy and the NEETs inquiry. Are you concerned about the impact that this could have on the delivery of the strategy affecting those most marginalised? When I look, for example, at my constituency, I see that the YES programme will close. There will be nothing in my constituency and probably other constituencies for training 18- to 24-year-olds that involves the colleges, which make a huge impact on getting people back to work. Are you concerned that you will no longer be able to deliver the NEETs strategy?

Dr Farry: Well, Pat, it is a source of concern, because we are moving from a situation where we had a considerable budget that we were able to invest in the Pathways to Success strategy and the youth employment scheme. Those were time-limited investments from the Executive that expire on 31 March this year. To be fair to the Executive, that was the understanding, and we knew that. Of course, if circumstances had been different, we would have been hopeful that those investments would be renewed. That is not a viable option, given the pressures that the Executive face.

We are not discontinuing YES, as such; we are trying to re-profile what we do around the youth employment scheme and mainstream that within our existing employment service offer. We are in discussions with our officials on how best we can take forward elements of the youth employment scheme beyond 31 March. So, we are not walking away from that. We recognise the importance of a tailored approach to addressing youth unemployment.

The same applies in relation to the NEETs strategy. I am not sure if you missed my opening comments. We said that we had accepted a pressure in relation to the community family support programme. So, we are trying to ensure that we can maintain an integrated continuity with that because we believe that it has been a very effective way of addressing the prevention of people becoming NEETs. We are looking at how we can deliver what we have been doing previously in relation to NEETs through the use of the European social fund. You will understand that we have a bigger pool of money for the European social fund than was the case previously. For example, we are losing the collaboration and innovation fund under the pathways strategy, because the funding has dried up. We are hopeful that a number of the organisations that were delivering as part of that fund will have bid in relation to the European social fund. I cannot predict who will be successful, or otherwise, at this stage, but we may well see some projects continuing or being revamped in that regard.

On the European social fund, it is probably worth saying that, at this stage, we need to be mindful that there is a huge problem in the system around the securing of match funding. We can proceed to award grants or recognise who has been successful in bids under the European social fund; people do not need to have their match funding in place from day one. However, there has been a requirement for people to get money from other statutory organisations outside the context of DEL. Other Departments and councils are facing up to quite serious difficulties in accessing resources. That type of support, beyond their own core services, is often the first thing they look to when making efficiencies. So, there is going to be an ongoing dilemma in how we can maximise European social fund match funding. That is why, as a Department, we are trying to do what we can, internally, to provide some backup, but, again, our capacity in that regard is limited.

Mr Ramsey: I will adhere to the Chair's request for one question.

Dr Farry: In many parts, with subclauses, no doubt.

Mr Ramsey: Clearly, there is worry, concern and distress amongst the community sector in relation to the European social fund. I appeal to your Department to try to accelerate that process. However, in every darkest hour, there are always opportunities as well. On the change fund, Minister, are there opportunities in respect of economic inactivity and the pilot programmes, for example, which we talked about, that might help in constituencies where there is historical, long-term unemployment or economic inactivity?

Dr Farry: You will note that a successful bid in the change fund came through from our colleagues in Social Development. That may well be of relevance in taking forward some initial work in relation to economic inactivity. Our Department made its own bid of about £0·6 million for initial resources in relation to economic inactivity. That, again, was unsuccessful. While we were very successful in our bids, some were not met. I have said to our officials that we are going to proceed with the finalisation of the strategy. Hopefully, we will get that to the Executive before the end of February. So, it should be agreed and in place by the beginning of the next financial year. We will look to make a bid in monitoring rounds for a relatively small amount of money to get the ball rolling in 2015-16, in relation to the strategy, and then look to see what we can do in the 2016-2020 Budget around long-term funding for the strategy. So, at this stage, while the funding for economic inactivity is not in place, the amount of money we need is relatively small for 2015-16. That is outside the context of that DSD bid. We are hopeful that we can proceed with the strategy. With particular reference to what, I am sure, you are about to ask me about — Derry as a pilot area — we are mindful of running some control pilots. The most logical thing that government does is to pilot things in the areas in which the problems are most acute. Read between the lines on that one.

The Chairperson (Mr Swann): There you go, Pat; you did not need the question, but you got the answer.

Ms McGahan: Minister, did you make any bids during the negotiations at Christmas? Did you highlight the additional pressures faced by your Department in, for example, funding the special premium for St Mary's University College and Stranmillis University College? Did you highlight during the negotiations those additional pressures that your Department faces?

Dr Farry: At a general level, we were extremely clear throughout December, and beforehand, about the impact of the draft Budget on our budget. I do not think that anyone could have missed what was said directly by me, nor indeed by universities and colleges or the business community, in relation to the Budget. So, things were very clear.

The process between draft Budget and final Budget does not relate to bids being made as such. There is a consultation process, and DFP then makes a final recommendation to the Executive, which, in practice, is hammered out between the DUP and Sinn Féin in practical terms. I voted against the Budget, which is a matter of public record, for a host of reasons, and not just because I did not think that the skills issue had been sufficiently addressed.

You seem to be suggesting that I should have been making a specific bid for the money for the premia, which we did highlight as a potential saving in our draft budget, which we published at the beginning of December. To my mind, I do not see the logic as to why we would be bidding for that. My ultimate objective is to do what we can to protect the economy and services for those who are most vulnerable, so I want to maximise the deployment of resources in those areas as opposed to investing in subsidies that are based around institutions rather than investing in people. Our case was based on getting as best a settlement as we could for the Department as a whole to allow us to protect the front-line services that are being provided by the Department. So, in any situation, I should by logic be prioritising the front line ahead of what are, in effect, subsidies. In the approach that I was taking, where I see unnecessary subsidies or deadweight in the system, those are areas that I want to address to ensure that we are maximising our resources. One of the messages that was given clearly to me in the debate in the Assembly yesterday was to use my money wisely, which is what I am seeking to do. What you are suggesting is the opposite of using it wisely.

Ms McGahan: I disagree with you, Minister. I am sure that you are well aware of the difficulties faced by the Department of Education as well. Those were made clear publicly, just as yours were, but they made the bids and secured substantial funding. I just said "for example" to highlight the additional pressures on your Department through funding that special premium; it does not mean to say that it is related to that, but it is just everything in general.

Dr Farry: I heard it said by someone in the teacher training debate that somehow I had said nothing about the Budget over the preceding six to eight weeks and that Sinn Féin was doing all the heavy lifting in relation to the DEL budget. I really struggle to find any evidence, publicly or privately, of that type of endeavour having taken place at all.

While you make reference to the Department of Education, it is worth referencing that it is part of what I would term a racket that is going on in relation to teacher training, where the fundamental objective of some seems to be based around protecting institutions rather than doing what is best for the teaching profession and investing in students. We have an ongoing situation, which predates this mandate but has carried on into this mandate, where we have a professionally statistically based teacher-demand model that indicates the demand level for teachers in our economy and what we should invest in. That model has been traditionally topped up for political reasons by Sinn Féin Ministers with a quite explicit view to maintaining the viability of the teacher training colleges.

Whether we are talking about premia or artificial numbers of teachers being trained when we know that there are not the jobs for them, we seem to have an agenda of propping up a system that is fragmented and costly, reinforces division in society and does not address the best academic standards compared with what is happening internationally — all to protect institutions rather than do the best for student teachers and future pupils. That comes at an opportunity cost and a price that prevents us investing in front-line services. Therefore, when people come to me and ask, "What are you doing to protect the vulnerable? What are you doing to protect the economy?", I will say, "Actually, I am not doing all that I can because other people's agendas are saying, 'Spend money in an inefficient manner', resisting change that is happening elsewhere in the world".

Ms McGahan: Is that an objective point of view, Minister?

Dr Farry: We have had a report from Grant Thornton on the financing of our teacher education system and one from international experts. I stress that they were independent. I did not tell them what to write and, if there were any suggestion that they wrote something that was not independent, they would take great issue with it. That report says that our current system is not sustainable and that we are not reaching our full potential in line with international standards. That is a view that is held beyond me and my political party. They have had similar reforms in Glasgow and Dublin, which are very close to home. They were nothing to do with me; I did not force those reforms to happen. However, those societies had the good sense to address the need for change for the better and to protect and ensure that they are addressing the needs of the diverse, pluralist school systems that exist in their societies.

The Chairperson (Mr Swann): I will come back to you, Bronwyn.

Mr Hilditch: Thank you, Minister, for your attendance today. I acknowledge the heavy lifting that you have had to do in recent days. I do not envy it at all. The idea that places may be lost at university and higher education level will then have a knock-on effect and, potentially, put the further education colleges under pressure. As you mentioned, that might then affect the more vulnerable in our community. How do you see that panning out, and how can it be mitigated in any way?

Dr Farry: The difficult answer to that question is that there probably is no real mitigation in that regard. Previously, I was asked: "What plan B do you have in terms of the cutbacks?" The Plan B is to do what we can to fund plan A but, when we do not have the resources for plan A, we will have difficulties.

You are right to suggest that there will be a knock-on effect, and that people may look elsewhere for provision which, in turn, displaces others. We could see a situation where more people end up studying outside Northern Ireland, with the risk that they will never return. That is a wasted resource. There are also people who may never get the opportunity to study at all and who stay outside the education and training system, not living up to their full economic potential. That may become a pressure on social security budgets, or those people may be in jobs for which they are overqualified or over-skilled, in the sense that they could be performing at a higher level. So, again, we are not tapping into people's full potential in that regard.

So, yes, there will be real consequences in that regard. We are, potentially, moving backwards in higher education at a time when we should be moving forwards. We have heard calls for the expansion of Magee to take place, and that is something that I want to see happening, but the reality is that, rather than growing our higher education sector in line with what people are rightly aspiring to see happening, we are potentially seeing a contraction.

The situation in FE is quite fundamental. It is important that we are very clear in that regard. Further education has always prided itself as being open to all. I am still, hopefully, relatively young, but those who are slightly older and wiser than me in many respects tell me that, throughout their lifetime, FE has always been open and accessible. This is now potentially the first time in their memory that we are going to be rationing access to further education. That is an enormous statement that we are potentially making at this stage.

Mr Hilditch: I have a question for Derek. You mentioned that you had spoken to the heads of each of the colleges in recent days. There are a lot of hard decisions to be taken down the line. How can that be managed? I know some of the people who sit on those boards, and they are not looking forward to the time ahead. Maybe some of them do not have the experience for it. Is there any support or backup for the boards as we move forward?

Mr Baker: Yes. The Minister alluded to this point: there is a great degree of collegiality amongst the further education colleges. They are six organisations, and we are fortunate as a sector in that we can all get together in the same room with the principals and the chairs of the governing bodies, and there is fantastic cooperation between them. The Minister has already listed the mitigating actions which the colleges generally have identified, and that is them coming up with their ideas in conjunction with us. We work really closely with them, and we will continue to do so.

Non-departmental public body status is a double-edged sword for the colleges. I appreciate that. It does things to them that they would probably rather not have done to them, but, at the same time, it brings them into the fold and we work really well together. This is not a one-off process. We will be working with them throughout the year. The Minister mentioned that, unfortunately, we had a change fund bid for exploring shared services turned down, but that is not the end of that work. We will be working with them to see where we can go with that, and, as I said earlier, I think that the development of a new strategy gives us a great opportunity to introduce new thinking. It is a really difficult time for the colleges but also an exciting time, too.

Mr Flanagan: Minister, thanks for coming. I am sure that you are devastated that I could not participate in yesterday's debate.

Dr Farry: And shocked.

Mr Flanagan: I know. I need to declare an interest at this stage as a student of the Ulster University.

Dr Farry: Double-jobbing?

Mr Flanagan: If I could get any more jobs, I would take them, too. I am also a class rep, I will have you know.

What input do you have into how universities spend money? The decision by Queen's to cut the budget for the student union has concerned me, given that it seems to have made no efforts to tackle the excessive salaries of those at the top of the institution. I certainly think that cuts of that nature should be directed towards people who are earning £250,000 a year as opposed to cutting jobs for seven people who provide a very valuable service for students.

Dr Farry: I will say at the outset, Phil, that if we follow through with what your party is advocating me to do, there will be even less money for the universities and so there will be even more difficulty in terms of the situations facing students in terms of services. I met the student union representatives as part of my engagement with stakeholders, and I am sympathetic to their point in relation to having the proper resources. The student unions are not just about the social aspect; they provide a very strong welfare aspect, which is incredibly important, particularly in these very difficult, austere times that we are living through. It is ultimately for the universities to manage their budgets. I can advise and use my influence in that regard and can certainly pass on the direction of travel that you are advocating.

I want to make it clear that salaries are not approved by the Department, and our advice is not sought in that regard. Furthermore, I am not here to justify the salaries that are sometimes paid in the higher education sector. However, it is important to bear in mind that we are not just looking at those salaries in the context of the Northern Ireland economy. We are looking at them in the context of a market in higher education across these islands, across Europe and across the world. If we want to have world-class universities in Northern Ireland, we need to be part of that process of attracting internationally mobile, high-calibre academic talent. That is just part and parcel of what we are trying to achieve. If we want to go out to the rest of the world and use our universities and colleges as a means of attracting inward investment, we have to have some substance behind that. We cannot go out to the world and say, "Come and invest in Northern Ireland. We have two of the best universities in the world. We have the best quality in terms of students coming through and are doing the best research". We would be very quickly found out if that is not the case, so we have to make sure that we are making all the proper investments in higher education and also ensuring that they have the freedom to make the best decisions in light of that international market in higher education.

Mr Flanagan: I note that you said that you would not defend it, but then you kind of did in a qualified manner.

Dr Farry: I am not defending it; I am rationalising it.

Mr Flanagan: I hear what you are saying and I can understand why the university would defend it, but that does mean that we have to agree with it here.

Dr Farry: Nor am I. I am rationalising.

Mr Flanagan: What about the potential revenue that universities can attract? Has any work been done or assessment been made of the positive impact, in revenue terms, that increased student flows from across the border could have on our universities if more students from the South were able to come to universities in the North or could be attracted into them as a result of the fact that they are not included in the cap on student numbers?

Dr Farry: The first thing to say about revenue-raising for the universities is that, if you ask them what they would like to explore, be conscious that their first answer will be an increase in tuition fees.

Mr Flanagan: That is a matter for us, not them.

Dr Farry: Indeed, but they are entitled to come back and make that point to you. What you are suggesting in terms of revenue-raising are measures on the margins of what they view as the main instrument available to them to increase their revenue. It is just to put that in context.

Mr Flanagan: Well, we will just tell them now than an increase in tuition fees is not available for them.

Dr Farry: That is perfectly fine and is not a position that I disagree with, but I am just putting it in context. If you want to ask them about revenue-raising, that is what they are going to say, so anything else is of marginal benefit in terms of revenue-raising. They are all of worth, but that is just to put it in its fullest context.

There are probably two ways that are worthy of discussion. One is attracting more international students from outside the European Union and students from within the European Union. Students from elsewhere on the island are treated the same as students domestically, so the gain from that is probably fairly limited. It is probably more lucrative to get students from elsewhere within the UK because, while we are not able to discriminate against nationals from other EU countries, we can have different regimes for students from different parts of the UK. We are keen to develop that. It is still a work in progress, and some of the events over the past number of years have maybe not allowed us to expand the level of recruitment from elsewhere in these islands to the extent that we would have preferred.

It is also worth noting that our universities are performing well in advance of their size relative to the UK as a whole in engagement with the community and business sectors, which is also a way of generating additional revenue. It is important that we put that on record. That is a real success story coming through the higher education sector. That type of endeavour can grow ever further but the additional revenue generated from that will, in the best case scenario, be single-figure millions. That, of itself, is not going to address what is a major structural problem within higher education.

Even before you hit the current budget cuts that we are having to pass on to universities, we are in a situation where the funding per place is lower than the average in GB by between £1,000 and £2,500, depending on the funding band. There is real pressure in quality there that we are going to struggle to preserve over the coming years, so the status quo in higher education funding is probably no longer tenable. We are going to have to have some discussions as to how we address that.

It is clear that England has gone one way on higher fees. You have clearly said that that is not something you are prepared to contemplate, which is fine, but also bear in mind that then Scotland has gone a different route, investing much more in direct revenue into the university sector. We have tended to fall between those two stools in Northern Ireland. We have to make a decision to follow one or other path. By implication, you are suggesting we go for the latter, but we need to have a bigger discussion with the Executive and other Members of the Assembly over how we approach next year's Budget in that regard.

The Chairperson (Mr Swann): Minister, to go back to your paper: £4·1 million in further departmental efficiencies and reductions. Talk us through those again.

Dr Farry: There are probably three categories, and I will let my colleagues come in with more of the detail. Some of those will be around demand. I will give you a couple of examples. Demand for EMA is falling just through demographics, so savings can be found in that regard. We anticipate that there will be a fall in demand for the Apprenticeship NI scheme, in part because we are seeing some migration towards our new pilot interventions, so again we can possibly make savings there. We are going to ask the tribunals to save £0·3 million. The balance will be for the Department to find in other savings.

We are, perhaps, being fairly conservative in what we expect to generate in savings from staff reductions. This subject is very much in the press at the moment and there is still a lot of uncertainty as to how that can be bottomed out. Given the nature of this, and from experiences elsewhere, it is unlikely that we are going to find the level of savings that some Departments and others seem to be factoring in. Therefore, we have taken a more cautious approach and have settled on trying to find a balance of savings of probably an additional £2·3 million across the Department. If we cannot push the envelope in staff savings, other savings may well be from other departmental efficiencies.

Mr Baker: I will expand on that point. I think we mentioned last time that we will participate fully in the Civil Service voluntary exit scheme. We have set ourselves what I think is a pretty ambitious target of reducing our pay bill by 10%. We will not achieve that in one year because the Civil Service scheme, if it goes according to the timetable which has been indicatively mapped out by the Department of Finance and Personnel, will probably open for interest at the start of March but, by the time we actually get staff out, we will be well through the financial year. So we will only, maybe, get half a year's benefit, rather than a full year's savings. Nevertheless, we are going to go for that. None of us knows what the level of interest will be in the proposed terms of the voluntary exit scheme. There could be a stampede or a trickle; we are really taking it on trust. We are taking a punt there.

However, the Minister has outlined some elements of the £4·1 million. Other elements of it are as follows. We have a fairly significant overtime bill in the Department. It is not unnecessary overtime. It is about £0·5 million per year, or just over it. We are just going to say no to that; we are going to stop it and deal with the consequences. We are having to be brutal here. We are doing what might be regarded by the Committee as silly things. We are shutting buildings a bit earlier than they normally close because, if they stay open that wee bit longer, we have to pay security guards overtime to go around, do a check of the building and shut it down. That saves a little bit on heat and other services. It is all kinds of little measures like that: cutting and paring back wherever we can. Some of it we are taking on trust. As the year goes on, we will be cutting back on travel, subsistence, going to London for meetings or whatever to identify savings whenever and wherever we can.

Mr Stephen McMurray (Department for Employment and Learning): Let me just say as well that the devil is in the detail of all this. We are going through each individual cost centre with HR and finance, looking at every single job and seeing whether it is absolutely essential or whether there is a different way of doing that. We are down to the granular detail of that, going through each individual cost centre. As Derek says, 10% is well above the 6·4% net reduction that we have to find and it equates, broadly, to 200 members of staff out of 2,000.

The Chairperson (Mr Swann): Let me pick up on that, Stephen. You are looking through every cost centre and every individual job. My understanding is that this is to be a voluntary redundancy scheme. If you are going through every job to see, in your words, to see if it is necessary. is that not moving away from the voluntary nature of the scheme? You are actually looking at positions that can be removed.

Mr Baker: There is a difference between posts and people. You can suppress a post, but the personnel has to be redeployed. The person is not made redundant; the post is closed down and you find an alternative post for the individual.

The Chairperson (Mr Swann): Do you think, Derek, that, across the Department, there is enough variation across all the grades to make this so attractive that you will reach your numbers?

Mr Baker: I honestly do not know. Are you talking about making the voluntary exit scheme attractive?

The Chairperson (Mr Swann): Yes.

Mr Baker: I honestly do not know. I have a personal view on that. Members of the Committee may be aware that, two years ago, there was an exceptionally generous severance scheme in the Civil Service, and that was changed a couple of years ago. It is not as attractive any more. I think that an individual would need to be in fairly particular circumstances, financially and personally, for this to be deemed attractive to them. Now, there may be enough people in the Civil Service who will find this attractive. I do not know. I talk to my colleagues in what is called "corporate HR" in the Department of Finance and Personnel, which does HR policy and strategy for the whole Civil Service. They have some concerns that maybe the scheme will not be sufficiently attractive to attract all the numbers that Departments are anticipating in year one. Bear in mind that the Stormont House Agreement created a public sector transformation fund to fund voluntary severances over a four-year period, so it may be that this will be repeated year on year until we get to the point that we need to get to. We are shooting in the dark on this; I fully accept that.

That is that; we are shooting in the dark, Chair.

Full stop. It is crystal ball time; it really is. We were talking about a voluntary redundancy scheme —. I am sorry, it is not a redundancy scheme, it is an exit scheme. There is a difference.

Ms Lo: We heard that, too, Chair, in the Committee for the Environment. The same thing.

The Chairperson (Mr Swann): So, you have done no internal work with regard to the numbers you may be looking at?

Mr Baker: You cannot do that in advance. We cannot go around and say, "Would you be interested?", because the terms of the scheme have not been formally decided by the Executive.

Dr Farry: Hopefully, this week.

Mr McMurray: You are right, Chair, about the challenge that we face. People will want to go on to the voluntary exit scheme, and there will be the posts that Derek has mentioned that will go, so marrying the two will be a challenge for us and it will involve moving people around to fill posts, because the two will not marry up.

Mr Baker: As I have said before, this, in my view as a manager, is a massive risk to business continuity to the whole Civil Service over the course of the next year to 18 months. There will be a churn in the system caused by a massive voluntary exit scheme, not just regarding those who leave but those who remain and have to be moved around jobs. Allied to that will be departmental reorganisation, which will affect DEL, and allied to that will be very significant budget cuts that will place pressure on the ability to deliver programmes, and you kind of have a perfect storm of internal issues that make business continuity difficult. Those are management issues, and that is for me as opposed to the Minister, but it will be a really difficult time, not just for DEL but for every Department.

The Chairperson (Mr Swann): Just a quick question to finish. The two do not marry up, Derek. If the two do not marry up, and you have done your assessment on posts being redundant, are we then looking at redundancies in the Department rather than voluntary exit?

Mr Baker: No. Ministers have made it very, very clear that there is no prospect of anything other than voluntary exits, and that means that we would have to carry the cost of staff, and we would have to revisit our budget yet again.

The Chairperson (Mr Swann): So you would carry staff doing nothing, then, if you made the posts redundant.

Mr Baker: They will not be doing nothing, but we will not be able to deliver the quantum of pay bill reductions. All of our staff are doing something; they are doing a lot. These pay bill reductions will be hugely painful. To decimate an organisation — to literally take one in 10 out — is going to seriously impair our capability and our capacity. However, if we cannot get rid of sufficient numbers of staff through voluntary exit, then they stay, and we will not generate savings through that mechanism. In year, we are going to have to recalibrate and look again, and I think that that is a point that I would make: all of this will require the most minute management and monitoring week by week and month by month, because things will change. Assumptions that we make about savings may not materialise. Maybe we have underestimated, maybe we have overestimated, but it is only a plan.

Mr Buchanan: What impact will the £1·8 million pressure relating to the match funding for the European Social Fund (ESF) have on attracting moneys from the ESF in the future?

Ms Heather Cousins (Department for Employment and Learning): The problem is that, if we cannot attract the match funding, we cannot draw down the full programme, so the risk is that we are unable to maximise the programme and we also fail to meet targets. It is a difficult situation to be in. For match funding, we will be bidding in in-year monitoring rounds to ensure that we can maximise the use of the funds and not lose moneys to the Northern Ireland block.

Mr Buchanan: What impact will that have on the community family support programme?

Ms Cousins: Again, we have provided for the amount of match funding required for that within that £1·8 million, so that is secured for that year. It is other match funding areas where we are particularly looking for additional funding.

Mr Baker: In the draft Budget that the Minister outlined, we have made provision for that £1·8 million pressure within the context of balancing our books, so we have that.

Mr McMurray: To be honest, the bigger pressure is probably other Departments not being able to meet match funding. That is a real risk for us.

Mr Buchanan: OK. Minister, I have one further question for you. By restructuring and refining teacher training into a single training college or two, whatever it would be — not only the £2·2 million premium that you are looking at — how much more would you expect to save by doing that? Not only is there a financial implication to it but, at the moment, the wrong perception is given that we are training teachers for jobs that are not there — in excess of some 200 teachers a year. Therefore, we are saying to the young people, even through the Careers Service, "You should go for a teacher", when the reality is that there are no jobs for them at the end of it.

If there were a single college, what would the savings be in real terms?

Dr Farry: There is a range of options for any potential reconfiguration of the system, and, depending on which option finds agreement — that is, if any find agreement — there will be different degrees of saving. In the context of a single provider, it is important to stress that we are not talking about integration but about a shared, inclusive means to deliver for all school sectors in Northern Ireland. We are training teachers side by side, and that type of model would be the most financially efficient. Other models will be less efficient. We are not proposing to continue to pay the premia, which would be a degree of efficiency. Hopefully, our colleagues in the Department of Education would have the freedom to set a more realistic target for teachers to be trained, because there would not be the same requirement to look to the continued viability of certain providers. The current non-ITE provision in the university colleges may be consolidated into another provision, and there will be savings there. Even if we went for an option tomorrow, it would probably take about four years for the full savings to be generated, because you have to honour everything that is already in the system for people who have started their degree courses. We always honour that, and it is a fundamental principle that we have adhered to throughout the years. So even if something were agreed tomorrow for entry in September, it would probably take four years before the full effects are seen. There are three angles from which considerable savings could be found, alongside administrative savings. Can we put a figure on that, Heather? It is potentially about £4 million or £5 million.

Ms Cousins: Potentially.

Ms Lo: NICVA was before the Committee, Minister, with its concerns about funding cuts in the sector. What impact will the new budget have on NICVA?

Dr Farry: We met NICVA to discuss all the issues that it raised with the Committee. We systematically worked through those issues, and I think that we found a way to address or to mitigate every one of them. At this stage, the community and voluntary sector, which depends to an extent on European social fund bids, is waiting to hear the outcome of that process. I think that about 130 or 140 bids were received, and consideration of those is already at a fairly advanced stage. So allocations can be made, but the sector's ability to get match funding will probably be the biggest impediment that it will face in drawing down money from the fund. We will do our best to seek to source that for groups, but if other organisations are losing funding, that will be —

Ms Lo: Include Youth is facing big cuts. Will it see those cuts materialise?

Dr Farry: I cannot comment on Include Youth, Anna. I do not know the full list. I have not asked about that, because it was not appropriate. It has to be an objective process, so it is best that I do not see the list until it comes to me with formal recommendations from officials. Even if Include Youth has bid, I am not sure how its bid has been assessed to date, but we will see in due course.

Mr Ramsey: I was listening keenly, Derek, when the Chair was quizzing you on human resources and possible redundancies, and, in that context, you said that you would not want to decimate an organisation. With the decisions on St Mary's and Stranmillis, did you reflect on that decimation in the same context with a reduction of over 30%? What quality proofing took place of the impact on the social, community and economic value in south and west Belfast?

Mr Baker: I did not say that I would not want to decimate the organisation. I am making the point that we will be decimating the organisation by taking one in 10 staff out of it. That is the effect of what we are planning to do with a 10% pay bill reduction in the Department. As far as the decisions on the premia for the initial teacher education institutions are concerned, I think that the Minister has adequately explained all the thinking behind that, and I do not think that I have anything to add to that at all.

Mr Ramsey: The question was this: "Do you accept that the two organisations — St Mary's and Stranmillis — would be decimated by that impact?".

Dr Farry: We have never accepted that. Furthermore, a potential decision about their premia has to be balanced against the fact that there is a clear course of action that can mitigate the effect of that, which is a range of models or the reconfiguration of teacher education in Northern Ireland, which we know is not sustainable, and we have known that it is not sustainable for the best part of a decade or longer. There are ways in which we can ensure that we are continuing to provide teacher education and are meeting the level of demand that we require in our economy. There is a means by which we can address the impact of the loss of premia by reforming the system.

Mr Ramsey: I listened intently, Minister, to your final comments in the Chamber yesterday, when you were reflecting on the debate and your desire to try to achieve a consensus and your willingness to enter a process. Given the concerns of most of the political parties in the House on Stranmillis and St Mary's, would you be minded to bring in an independent person to get those players into one room to try to get some consensus? If you got consensus on one of the options from the independent panel, would that allow you to lift the exclusion of the premia to the colleges?

Dr Farry: We have made a commitment to all the providers to reflect on the next step and the way forward, including how best to engage with all of them in a round-table format. We have said that, in the event that we can find consensus, we are willing to consider that, subject to meeting a number of basic benchmarks: first, that it is more financially sustainable than the current situation; secondly, that we are meeting international trends in the approach to teacher education; and, thirdly, that we are making moves towards a more shared and inclusive manner in which to train our teachers, in recognition of wider policy in Northern Ireland towards shared education.

Your final point was about the return of the premia. I think that it is appropriate to turn it back to you, Pat. If we are not to find savings from the premia, where else will I get those savings in my budget? You made a very passionate case today about the importance of the continued provision of the youth employment scheme. You expressed concerns about what we do with the Pathways to Success strategy. If we are to restore the premia, that creates further pressures across the rest of the Department, and it would have very real implications for everything else that we do, including those types of services. We have a fixed budget, and choices have to be made. Every penny that we pay in premia has to come off some other budget allocation.

Mr Ramsey: If I had the hundreds of staff that you have to reflect on budgetary concerns, I would be in a much stronger position and would have the capacity to give that answer to you. Given the reflection —

Dr Farry: To be fair, the advice that I am getting from officials is that the premia are not warranted and that there are other areas that we should be investing in to protect front-line services, including for the most vulnerable. The hundreds of civil servants are giving me advice that we need to look at reconfiguration, and we have the evidence base to justify the argument that reconfiguration is desirable and doable in the context of Northern Ireland, but we have very real pressures elsewhere.

Mr Ramsey: You are clearly stating that you will reflect on discussions and the budget. Given that the House made an appeal directly to you to reinstate the money for premia, will you now go to the Executive, as a result of the vote in the House yesterday, to ask them to make up the difference?

Dr Farry: With respect, Pat, yesterday the House also advised me, during speeches and in the debate on the Committee motion, to do what I can to protect higher education and further education. I was told to protect the economy and the most vulnerable in society, who depend on opportunities from training and education to be able to engage. I was told to use my budget wisely, but, at the same time, I was told to restore the premia. In my head, I cannot rationalise those two messages. The Chair talked about what I said on the radio this morning; that is the context in which I made those remarks. You are asking me to do two entirely contradictory things. The amendment was agreed to yesterday; it is fine to call on me to restore the premia, but, to be clear, if I were to follow that advice from the Assembly, it means taking the money from somewhere else. If I take it from the NEETs budget, you will be the first person in the Assembly to stand up and cast aspersions on my motives for doing so. You will say that I am reckless and will ask me why I am doing it.

Mr Ramsey: I probably would, Minister, but I asked the question to challenge the other Ministers to put their money where their mouth is and go to the Executive and ask for additional money to cover the premia for the two colleges.

Dr Farry: Yes, and the same thing applies, Pat, with going to the Executive, even leaving aside my own budget. Can I sit here in good conscience and listen to what is happening in the health service, where people are lying on trolleys in accident and emergency departments and waiting for excessive times to get treatment? Do we look at what is happening with road safety, where we desperately need investment in street lights and so on? How do I go in good conscience to the Executive and ask them for £2 million, which has to come from somewhere else. Every single penny that is spent in Northern Ireland comes at the opportunity cost of doing something else with the money. At this stage, no one out there is saying, and nowhere in the Budget does it state, that there is plenty of money or that there is waste somewhere in the system that we can easily tap into. Do you want to do things like revenue raising? Your party has ruled out doing those sorts of things that bring more money into the system. If we have a fixed budget, choices have to be made, whether in my Department or across the Executive as a whole. If we get that money from the central pot, the £2 million comes off somebody else. What Department do I take it from?

Mr Hilditch: I probably should have declared my role as part of the management of the Michael Hughes Academy, which works in partnership with the Northern Regional College to help people in the NEETs category.

It sometimes makes me smile when I hear this socio-economic argument and certain decisions — to be fair, not decisions, just arguments — when you come from a constituency such as East Antrim, which is losing a whole university to Belfast, with tens of thousands of students and staff all heading to the city. Sometimes, you just sit back and smile at that.

With next year's Budget — it has been touched on — and where we are and will be in future years, has there been any support for DEL's taking a really bad hit compared with other Departments? Is there any Executive support as we move through the next few months as to where help could come from?

Dr Farry: It is important not to be churlish, so the first thing to say is that I welcome and recognise the changes that took place between the draft Budget and the final Budget. I appreciate the additional resources that were allocated. That said, those resources in themselves are not enough to address the pressures around skills. Even if we manage to stretch things this year in practice, just to cover the existing provisions, standing still is not good enough. We have to invest in skills, even in the current climate, never mind the potential for a lower rate of corporation tax. Of course, if we got a lower rate of corporation tax, the pressure on skills becomes even more acute.

I am certainly looking at this as a bridging year. We will see the outcome of the next comprehensive spending review when we have a new government in London after May. The Executive will then have to consider a four-year Budget. Potentially, we will make a decision about the lower rate of corporation tax, which will have to be resourced by the Executive. From my point of view, it is important that I communicate and put on record two considerations. We have to view a decision on a rate as part of a Budget process and ensure that the rate that we establish will be sustainable. It is important that, when we go out to the world and market Northern Ireland, we have the credibility to stand over what we are advocating on corporation tax rates. If we are unable to maintain that, our credibility will suffer enormously. Whatever we do must be financially sustainable. That means further tough budget decisions in that four-year period. I am concerned that we will inadvertently end up raiding the skills budget or underinvesting in skills to find the money to underpin a lower rate of corporation tax.

A lower rate of corporation tax will not be effective in isolation from further investment in skills. If anything, the advice is that, at best, we have to invest in skills ahead of a lower rate of corporation tax or, at worst, do the two in conjunction with each other. The notion that we will go out and artificially increase demand levels in our economy for skills without the ability to supply that demand would be very dangerous and would create expectations that we cannot meet as an economy and a society. There is a real job of work for the Department over the next 12 months — in effect, it will be our legacy — to make sure that there is a full understanding of the importance of skills to the economy and the need for full investment in that area. Hopefully, we can do that in partnership with the Committee.

Mr Hilditch: That said, as we move forward over the years, would a reduction in the number of Departments and a merger between DEL and a larger Department place skills and higher and further education in a better place financially?

Dr Farry: I am largely comfortable with the direction of the potential review of Departments. Bringing together skills policy and economic policy under one roof alongside the key levers for the delivery of skills — our colleges and universities — has long been advised. That more integrated approach to the economy may position skills better in future budgetary negotiations. So, on balance, it can be only a positive development. Ultimately, however, if the money is not there, it is not there, so you will still face the same basic problem.

I imagine that we are moving towards the conclusion of this evidence session — I am not shutting things down if there are other questions — and I want to be clear on two things. First, we are more than happy to come back to the Committee in writing with the final outworkings of our decisions. Indeed, if members want further evidence sessions to discuss those in more detail, we are happy to provide them.

Secondly, David mentioned the review of the Departments. One issue is still being discussed in the Executive, and the Committee may want to take a view on it over the coming weeks: where the employment service will sit best in any future institutional design. It is the desire of the Executive that the bulk of the current DEL functions will merge with all DETI's functions to create a new Department of the Economy. One issue that has been left somewhat up for debate is whether the employment service sits best within a social welfare context, where it would work more closely and hand in hand with the Social Security Agency and would, in effect, overcome the current administrative gap between the employment service and the SSA, or whether it would sit better within an overall Department of the Economy, which would recognise that it is not just about the mechanics of getting people jobs but is an interface with the skills levers to ensure that people have the ability to find and maintain jobs. There are genuine arguments both ways, and the Committee may want to reflect on that more directly over the coming weeks.

The Chairperson (Mr Swann): Thanks, Minister. In closing, the draft budget that you presented on, I think, 4 December had a table detailing the £32·3 million savings and a number of other headings. The only difference between that draft budget and this budget are the final figures that have been assigned to FE, HE and the further savings. What role did the consultation process play? Did it affect your mindset in any shape or form?

Dr Farry: Three main themes probably came across from the consultation responses, and, of course, DFP also received general responses to the Budget. First, I am sure that you can imagine, and in the interests of full disclosure, we received a lot of correspondence on the teacher training issue. That did not surprise us in any sense. We do not, however, respond to consultations on the basis of the sheer quantity of responses. Our response is based on the quality of responses, and, in the responses, there were no compelling arguments that would lead us to change the approach that we had recommended at that stage. Obviously, we are reflecting on things and will be until we set the final budget, which, hopefully, will be later this week.

Secondly and thirdly, we got a lot of advice about the importance of skills investment and higher and further education. My approach all along has been to do everything that I can to find savings elsewhere in the services of the Department, before coming to higher education and further education. It was always going to happen that, after we had dealt with everything else, we would look to the balance and how that would be passed on to both those sectors. That is pretty much the process that we follow through.

I concur with the vast bulk of the arguments that were made in the consultation on higher education and further education, but I simply do not have the capacity to eliminate the threat to provision in both those areas. Sadly, we are in the context that we are in today, where we have to make some allocations in our budget that mean reductions in those sectors. Hopefully, we have worked proactively to find ways to mitigate the impact. While the headline figures for higher education and further education are stark — it is important that people appreciate that they are stark — beneath the hood, there are some mitigating factors that may give additional spending power, and that should allow some front-line services to be protected. There will be a loss, and people should be very conscious of that.

The Chairperson (Mr Swann): Minister, thank you very much for your time. You will be back in front of us.

Dr Farry: In the very near future.

The Chairperson (Mr Swann): I am sure. Derek, Heather and Stephen, thank you very much for your time as well.