Official Report: Minutes of Evidence

The Chairperson (Mr Irwin): I welcome Graeme Wilkinson, Colette McMaster, Pauline Rooney, Norman Fulton and Roger Downey. Are we one short?

Mr Graeme Wilkinson (Department of Agriculture and Rural Development): Yes. Chairman, I intend to go through the business plan first. Roger will then join us, and I will go through the various financial reports, if that is OK.

The Chairperson (Mr Irwin): That is 100% OK.

Mr Wilkinson: I will begin with the Department's business plan out-turn report for 2014-15. Hopefully, members will have had an opportunity to review the business plan report provided. It follows a similar format to that in previous years, with an assessment of whether or not the various targets were achieved. No doubt, members will want to explore the various targets in more detail, and I have asked Pauline, Colette and Norman to come along to address the various questions that you might have. As you know, Pauline looks after the administration of the area-based scheme, Colette looks after the rural development programme, amongst other things, and Norman is the senior sponsor for the Agri-Food and Biosciences Institute (AFBI). Whilst we will attempt to answer any questions that you might have, we are more than happy to come back to members in writing.

There is quite a bit of detail in the report. You will be glad to know that I do not intend to go through it line by line, but a brief summary may be helpful by way of introduction. I will begin with the four Programme for Government (PFG) commitments assigned to DARD: the eradication of brucellosis in cattle; the measure for tackling rural poverty and social isolation (TRPSI); the development of a strategic plan for the agrifood sector, which is being taken forward through the Going for Growth action plan; and the advancement of the relocation of DARD headquarters to a rural area.

As you will see in the highlighted report on brucellosis, the position remains unchanged since we last presented to the Committee. As confirmed then, the annual herd incidence reached zero on 28 February 2013, with the last case confirmed in February 2012. On 5 March, we submitted an application to the EU for official brucellosis-free status.

DARD had a commitment to spend £5 million on TRPSI in 2014-15, which brings the total expenditure on the programme to £13 million. It has been a successful programme, and I will remind members of some of the outcomes achieved through that £13 million: 13,900 households were visited under the maximising access to services, grants and benefits in rural areas programme (MARA); 7,100 health checks were carried out in 344 locations, including 224 farmer marts; 78,000 contacts were made under the connecting elderly rural isolated project; and 575,000 passenger trips were funded through the assisted rural transport scheme.
.
Departments, including DARD, continue to progress the various actions in Going for Growth agreed by the Executive. Of the 118 actions, 42 fall to DARD. We have covered overall monitoring of the Executive action plan under goal 1, target 2. Whilst it is not practicable to include all actions in the business plan, we have incorporated some of their key elements under goal 1, targets 5 and 7.

We are making good progress on HQ relocation, and work is progressing to relocate the fisheries division to the Downshire Civic Centre in Downpatrick later this month and Forest Service to Inishkeen House by September 2015. Rivers Agency is due to relocate to Loughry in 2016. The remainder of the Department's headquarters is due to relocate to Ballykelly, where it is planned to have 400 workstations by the end of 2017 and a further 200 by 2020.

You will see from our summary that 30 of the 43 remaining business plan targets were classified as green, which denotes achieved, and 13 as red, which denotes not achieved. The position of each of the 13 red targets is included in the papers, and, hopefully, you have had a chance to consider them. That concludes my introductory comments, and my colleagues and I are more than happy to take any questions that you might have.

The Chairperson (Mr Irwin): Thank you for your presentation on the business plan. In the Main Estimates document, the statement of comprehensive net expenditure shows that, in 2013-14, your total net administration costs were £54·2 million; in 2014-15, they were £57·98 million; and, in 2015-16, they are estimated to be £60·6 million. Your programme costs are down, so why is the cost of administration going up? What elements make up your administration costs?

Mr Wilkinson: Chair, that is really a matter for the finance presentation. Do you wish me to deal with that now?

The Chairperson (Mr Irwin): No, that is OK.

Goal 3, target 4 is about the creation of a TB eradication strategy. Will you update me on when you expect the draft strategy to be available?

Mr Wilkinson: Certainly, Chair. As you are probably aware, the TB strategic partnership group is having various meetings and deliberations. The interim report is due, I think, in June, and we intend to have a final plan in September or towards the end of this year. Work is progressing on that. We will take stock once we receive the interim report from the partnership group.

The Chairperson (Mr Irwin): Under goal 5, targets 11 and 12 deal with AFBI. Will you explain in further detail why these targets are red?

Mr Wilkinson: I will pass to Norman, who is the senior responsible officer (SRO) for AFBI, to pick up on that.

Mr Norman Fulton (Department of Agriculture and Rural Development): Target 11 is to agree a strategic plan with AFBI. This has involved, as you would imagine, a substantial volume of work over the past year, working with AFBI to develop a plan that will take the institute to 2020. As you are aware, the institute faces significant challenges over the next number of years, not just the expected downturn in government funding through grant and aid but the effects of the loss of the substantial royalty income that the institute receives. Therefore, it is important that we have a plan that will help the institute through the challenging period ahead. We received iterations of the strategic paper in the early months of this year. We received a revised version right at the end of March, and, last week, we received what we hope is a nearly final version, which we now need to consider in detail. The Minister will want to consider it very carefully before taking any final decisions. We did not make the end of March deadline, but this is important work for the institute, and we need to get it right.

Target 12 is on AFBI's estate requirements, and substantial progress has been made. The main building at Stoney Road requires significant investment. It is coming to the end of its working life. The outline business case for that is now, effectively, complete, having passed through our internal scrutiny processes. However, before submitting it to DFP, we want to make sure that it is properly aligned with the overall strategic direction of the institute in order to ensure consistency. The business case is looking at the future of the headquarters at Newforge. That is also at a very advanced stage and very close to being signed off through our internal scrutiny processes. We want to make sure that it, too, is properly aligned with the AFBI strategy before submitting to DFP. A lot of work has gone into the two documents, and they are very well advanced. We are also looking at a master plan for the farm buildings at Hillsborough, for which there will be a slightly longer time frame. We just want to make sure that we align what we are doing there with what is happening at the College of Agriculture, Food and Rural Enterprise (CAFRE) and that we explore in full any possibility to share facilities in order to ensure that we maximise our return from the overall DARD estate. I would like to think that the work will conclude by the end of June.

Mr Byrne: I welcome the presentation. The fact that we are at the stage of being able to get brucellosis-free status is to be welcomed, as is the fact that £13 million was spent on TRPSI last year. On the targets reported as red, goal 1, target 4 is on the rural development programme (RDP). You mention that EU approval for the programme is now expected to be in June or July or, in the worst-case scenario, September 2015. Why is it so delayed? Am I right in saying that it will be June before you can put in your final answers to the queries that came from Mr Hogan?

Mrs Colette McMaster (Department of Agriculture and Rural Development): I will pick up on that one. The business target in last year's plan was to achieve EU approval by the end of March. There are a couple of reasons why we were not able to do so. I will explain those and where we are now. We had Executive approval for the overall RDP budget towards the end of last June. Following that, we finalised our programme for submission in mid-October. We submitted that formally to the Commission on 14 October. Some programmes had been submitted during the summer. At that stage, we expected to have the formal Commission response to our programme within three months, which would have been by mid-January, but the Commission was dealing with quite a lot of programmes at that stage. We did not get our formal observation letter until 31 March. That is why we did not achieve the approval by 31 March. That is the date by which we got the formal comments back from the Commission. We are now in a process of negotiating with the Commission on those formal comments. We are working very closely with Commission officials on that. We have had a lot of contact with them: eight video conferences to date and a face-to-face meeting. We are working very steadily through the comments. We are working towards having our final programme ready to resubmit this month. If we can achieve that in that time frame, we hope to have Commission approval by the end of September 2015. That is the target that we put in this year's business plan. If we can get approval more quickly, that would be good.

Mr Byrne: It was June 2014 before there was agreement on the quantum of the co-funded package of up to £623 million. Are you saying that the delay in getting to that point is the reason why we are so far behind?

Mrs McMaster: No. I am saying that a range of things happened since then, but that explains, to some extent, where we are with the time frame. We are not very far behind at this stage. Of 118 programmes that have gone to the Commission, 51 have been approved and 67 are still to be approved. We are in those 67, so we are not at this stage very far behind.

Mr Byrne: Maybe allied to that is goal 4, target 7:

I take it that there will be no progress on that until the RDP is sorted out.

Mrs McMaster: That is one of the targets for those on the delivery side of the Department. They are proceeding to develop the proposals for the schemes in the RDP so that they can take that as far as is practical before the approval is received.

They are working closely with policy colleagues on that, so they are aware of the negotiations that we are having with the Commission. There is a target in this year's business plan as well, which remains at 31 March 2016.

Mr Byrne: I am concerned about the fact that the rural economy will suffer because of delays in agreeing the RDP. Last Friday, when we were in Cookstown at the launch of the TRPSI report, a number of development groups and personnel raised concerns with me. Some are worried about being in limbo if we do not get the RDP moneys sorted out, because, once you agree the programme, it will take more time to get an implementation plan. When do you think that the implementation plan will be agreed?

Mrs McMaster: Are you thinking specifically of the work of the local action groups (LAGs)?

Mr Byrne: Yes.

Mrs McMaster: There is a lot of preparatory work under way in advance of RDP approval. The proposed LAGs will work over the summer to draw up the new rural development strategies for their areas, which will outline what should be funded and why. That work is under way, and there is no delay in that, as I see it. They are moving things along in parallel with the work that we are doing. So, when the approval from the Commission is in place and we have the business case approval, the LAGs will be ready to launch their work. I do not see any particular delay at this stage, because people are able to take the preparation of that work as far as possible.

Mr Byrne: Does the Department intend to send out a comfort letter to those groups to calm them down in case they have grave concerns?

Mrs McMaster: The groups will not be put in place formally until the RDP approval is obtained, so they are working at a preparatory stage. I am not sure whether that answers —

Mr Byrne: That is the worry — that they are in limbo. Some are very uncertain about whether they have a future. They feel that, if the RDP programme had been sorted out, they would be further ahead and know what the lie of the land was, so to speak. There is concern that, having built up so much capacity in the rural communities for rural development, some of that resource could be lost.

Mrs McMaster: We do not anticipate a loss of resource. The budget for the RDP will be for the whole period of the RDP, which is up to 2020. At this stage, we do not anticipate any loss of budget or any delay in approval. If we are successful in what we are working towards, which is achieving approval by September, we do not see that as a particular delay in the start of the programme.

Mr Byrne: Chairman, we are here on business, so I will address another matter. Goal 5, target 9 is:

Your paper states:

What is wrong? Is it the weather?

Mr Wilkinson: No. We talked about this previously. It is very difficult for us to influence sick absence in the short term, but, hopefully, Joe, you will see from the various actions that we are taking that we are doing everything possible to address the level of sickness in the Department. We are looking at some of the trends, and a lot of this relates to long-term sickness and stress-related illnesses. We are doing everything that we can to address that through interventions in health and well-being and allowing staff to attend sessions with the occupational health service in the NICS. It is difficult to meet the target, and it has been red over the last two financial years at least, but I assure you that we are doing everything that we can to address it.

Mr Byrne: Lastly, Chairman, I come to goal 2, target 4:

What is the hold-up there?

Mr Wilkinson: This is a very complex area, and you will know from your engagement with Forest Service, and with Kevin Hegarty, in particular, who is taking this forward, that we have been doing a lot of modelling, looking at our various sites and identifying the opportunities. We have progressed well, certainly over the past six months. We are at the stage now of developing our outline business case, and we expect that to go to DFP in the next month or so. The answer to your question, Joe, is complexity: it is a very difficult area. There are many issues, and we want to take the time to make sure that we come up with the right solution for us. That all needs to be developed into a business case and submitted to DFP. So, we are making good progress, and we hope to submit our outline business case to DFP in the next month or so.

Mr Byrne: What are the major two or three difficulties?

Mr Wilkinson: One of the major difficulties is identifying the sites that we want to develop and making sure that we get the best return. Another is understanding what is the best model for government. Do we want to develop the wind farms ourselves, do we want a joint venture, or do we just want to lease them out to the private sector to develop? These are the issues for the Department as we consider the best way for Forest Service to take the matter forward.

Mr Byrne: It would appear that not much thinking has been done on the policy side. It seems to be rather hazy.

Mr Wilkinson: On the policy side?

Mr Byrne: On whether it will be done by the private sector or in-house and on the locations. Does the electricity grid exist to facilitate this?

Mr Wilkinson: That is another key consideration. As you know, there are issues with the east-west connection as well. That is one of the considerations that we are looking at.

Mr Milne: I had another wee question, but you got there before me, Joe. Is there a community benefit built into the business plan that you are proposing?

Mr Wilkinson: Yes, the Minister has been very clear about the social benefits of wind farm development, and another issue that we are exploring is how best to deliver community benefits, particularly when, in the public sector, this is a unique set of circumstances. The private sector has its own way of doing it, but how do we ensure best delivery through the various models? The community benefits will differ depending on, as I just outlined to Joe, whether it is the private sector delivering it, a joint venture or we do it ourselves, but I give you an assurance that we are looking at this as part of the proposal.

Mr McAleer: I want to follow on from what Joe said about goal 2, target 4. When we met the commissioner here on 27 March, he said that there was a possibility of the Commission issuing a letter of comfort to enable the Department to open some of the programmes ahead of sign-off. Has any progress been made on that?

Mrs McMaster: The letter of comfort was something specific that the Commission was issuing before it had put the new legislation in place. It was waiting to put a new multi-annual financial framework regulation in place.

During the period when that was not yet in place, the Commission agreed to issue letters of comfort to those whose programmes were ready to be ratified when it came into place. Because it is now in place, we are back to the normal process, which is that the Commission is working through the formal adoption process for programmes that are still being considered. At this stage, that is what we are working towards with the Commission, and, as I said earlier, we hope to resubmit our programme this month, if possible, and achieve Commission approval for it by September or earlier.

Mr McAleer: So that window has closed, is that right?

Mrs McMaster: The Commission had agreed to the arrangement before it put the new legislation in place at Commission level. The commissioner mentioned that at the time; but there is now no further need for it from the Commission's point of view, and so we are following the normal adoption process.

Mr McAleer: Also relating to the rural development programme, I am aware that Rural Development Council (RDC) held the rural network contract last time, and I know the great work it did on the LAGs and getting all that going. Where is the rural network contract at present?

Mrs McMaster: There was a contract in place under the last programme, as you know. We are reviewing that and, as part of that review, we are taking into account any lessons learned from the last programme and the requirements for the new programme. That work is under way. Under Commission rules, we are required to have a network in place 12 months after the programme is approved. From the point of view of the Commission's requirement, we are still well within that period, and we hope that the programme will be approved by this September. Work is under way to look at the best way to put that network in place for the next programme. It will depend on the option that we go forward with, but the process may be subject to public procurement. That is where things are currently.

Mr McAleer: I am aware that the LAG formation process has been happening over the past months. I am aware of the valuable role played in that.

We got some correspondence today from the Rural Community Development Support Service (RCDSS). Its funding ran out on 31 March, and its letter indicated that it has been promised by DARD officials, on three occasions, that it will get a 12-month extension. The contract holders are facing a lot of pressure. Many of them are running under their resources, which are starting to run out, and they are putting staff on notice. The service is doing good work, not just on what it does but in rolling out the micro-grant scheme. What is the update on the contract for the RCDSS?

Mrs McMaster: I cannot give you information on that today. It is not my direct area.

Mr Wilkinson: I am aware of the issue, and I am working directly with the Department's rural development division on it. We are aware that it needs to be resolved. We have got similar correspondence.

Mr McAleer: Presumably, you will be aware that some the valuable work at grass-roots level is being put under pressure. I am sure that we all agree that there needs to be a focus on it.

The Chairperson (Mr Irwin): You say that you are working on that, but working on it and getting it resolved are different things. Are you near to getting it resolved? We are told it is continuing to deliver for you in good faith and has not got any pay for that.

Mr Wilkinson: I got sight of the letter just yesterday. We are aware of it, and, clearly, we need to resolve it quickly.

Mr McAleer: They have been promised on three occasions. It is important to focus on that now because, going by the tone of the letter, they are under pressure.

The Chairperson (Mr Irwin): That is right.

Mr Byrne: Chairman, that is the issue that I raised. There is concern about the capacity that has been built up; and some of those organisations are now being put into what I call the limbo position. It has caused them uncertainty. It is a big frustration.

The Chairperson (Mr Irwin): Absolutely.

Mr McMullan: I have a question that also came out of the meeting in Cookstown, about the rural White Paper, rural proofing and all that. All those have been touched on. Reference was made to AFBI carrying out research. However, it has, apparently, been delayed due to resource implications. Can officials review research timescales if AFBI is not able to timely carry out research? Can consideration be given to appointing an alternative organisation?

Mr Fulton: We were in discussion with AFBI yesterday around some of the research we would like to commission this year and its capacity to do that research. That is under active discussion at the minute. Hopefully, we will be able to make progress over the next few weeks to get research commissioned around rural proofing.

Mr McMullan: Will that all be done in the next few weeks?

Mr Fulton: I hope to have that resolved, yes.

Mr McMullan: With the rural programme not getting started until maybe September, October or whenever, some LAGs and groups are starting to put people on protective notice. What happens there? Is there any way that those people can be kept on and not laid off? It is one of the big problems. I know you are doing your best to get plans approved, get them back and get them started. It goes back to what Declan talked about: the letter of comfort. Even that would keep the staff on.

Mrs McMaster: I am not sure that I can give you detail on the LAGs. As the Committee knows, we are working as closely as we can with the Commission to get the approval. We are working on the business case that is needed as well so that we can start to open programmes as soon as we have the approvals. All that preparation work is ongoing with the groups that will become the new LAGs. I think your question is about the existing LAGs. That is something that I would need to take further advice on before I can provide further information and an update.

Mr McMullan: That is fine.

The Chairperson (Mr Irwin): It has been mentioned that, in relation to the rural development programme, we do not, as yet, have approval from Europe. I am aware that, after approval from Europe, it has to get DFP business case approval. Do you have any idea how long it will take to get that approval? What is the normal time frame for that?

Mrs McMaster: Work is under way. A lot of work is happening in the Department in parallel to working on the draft programme with the Commission. Work is under way on a range of business cases that will cover the main parts of the programme. A programme of work is under way on the proposed farm business improvement scheme. That is a package of schemes in the RDP, as we have outlined previously to you. For that one, the business case involves a strategic outline case. We are going to carry out four outline business cases below that strategic outline case. We already have approval for the strategic outline case, and work is under way on the four outline business cases.

In terms of the farm business improvement scheme, we hope, in the early stages, to be able to launch that scheme with the resource, advice and training-type measures in the first instance. We are working particularly on the business cases related to the measures that involve training, advice and guidance for farmers. We are working towards having those approvals in place as soon as possible. There is some funding in the 2015-16 budget for resourced-based measures. We hope to get that approval as early as we can so that we can launch it and use some of the funding that is there.

A LEADER business case is also under way and officials are working to try and have that in place so that we have approval from DFP around the time we get the Commission's approval. That is really the aim. There is other work under way on agrienvironment business cases. There is quite a programme of work under way.

The Chairperson (Mr Irwin): I understand that. It looks like it will be some time yet before applications will be open for the farm business improvement scheme. It looks very much like it will be next year. Is that right?

Mrs McMaster: As I said, we have money. There is money in the budget this year —

The Chairperson (Mr Irwin): Will that help farmers with their business plans and things like that?

Mrs McMaster: Yes. We hope to be in that position. That is where we would like to be and we are working towards that.

Mr Wilkinson: The important part is making sure that farmers make decisions based on sound business plans. There is no point in investing in large capital projects if they will not make a return at the end.

The Chairperson (Mr Irwin): As I understand it, with the returns that farmers are receiving at the minute, business plans are not so easily worked out. I can assure you of that. The currency situation is a big problem.

Mr McMullan: I have a very quick question on the rural development programme, Chair. The councils have not done their community plans yet. Could they come back midstream with something in their community plans that would, for example, change something? Is that possible, or will it be a case of the way that you start it is the way you finish it?

Mrs McMaster: I think that the community plans will be subject to review and can be updated; so it will certainly be possible. The LAGs' role will be to draw up local development strategies that will have to be coherent with the community plan.

Mr McMullan: Some councils have not even gone through the community plans yet. If, for example, the LAGs are up and running before the end of the year and before the community plans are done, councils could come back to the LAGs with something different, for example on village renewal. Is there scope to move some of the rules for the funding to suit any particular community plan?

Mrs McMaster: As I understand it, the councils are engaged in some of the work that is under way. They are certainly engaged with the DARD officials who are working on it. The local development strategies that will be needed and that possibly will be in place, as you say, before the wider community plans, will form part of those community plans. They are being drawn up, and discussions are taking place with councils. Councils are aware that that is what that element of the community plan will be. It will be part of the delivery under the RDP. Those structures are being discussed, and there is a lot of engagement on them. Strategies are being drafted in liaison with the new councils that closely follow the direction of the council community plans. However, if they are in place first, the council community plans will take account of them, and I think there will be opportunities for review.

Mr McMullan: Will there be opportunities for review within the programme?

Mrs McMaster: Yes.

Mr McMullan: That is good. Thank you.

Mr Byrne: When the commissioner was here, he very much highlighted the possibility of using European Investment Bank (EIB) moneys to fund farm business development loan schemes. One such scheme was announced in the Republic about three months ago, and about €500 million is available for that EIB-backed farm development loan scheme. Is DARD doing anything about bringing in a similar scheme? If so, how far along the way are you with that.

Mrs McMaster: Yes. The commissioner talked about the new financial instrument that the Commission launched in March 2015. He encouraged member states to consider the potential of such an instrument in their rural development programmes. It would be linked to rural development programmes and would become part of a programme. The commissioner encouraged us and others to allow for the potential use of such an instrument if we modify our programme in future. We are seeking to gain more understanding and information on it so that we can assess whether it would be a useful thing to do for our programme. At this stage, there is an opportunity for us to make provision in our programme, which has already been submitted and which we are about to resubmit, for the use of such a loan instrument in future.

Mr Byrne: I am very aware of its virtues, having read the prose with which he announced it. I am a wee bit concerned that we seem to be hesitant about putting in a formal application and coat-hanging onto the RDP that could be finalised. It is RDP-type moneys that can be used, if you like, as collateral. There is an opportunity there but there would need to be some urgency in making a formal application so that we can finalise and agree such a loan scheme.

Mrs McMaster: There is no cut-off time for doing this, so there is no urgency. This financial instrument is quite new. A number of member states — not too many, but some — used a financial instrument in the previous programme. We are aware of all the lessons learned from that and we are taking those into account as well. It is quite new, and the Commission is developing it in partnership with the EIB. A conference on it will take place later this month in Dublin, which will be the first in a series of conferences that the Commission will hold around the EU on the issue. It is an opportunity to learn more about it and see what is involved in it. There will also be an opportunity to make provision for its use in our programme at some point in the future. We are very aware of it and we are interested in gathering information on it, after which we will make our assessment.

It is new, but it is not too late to do anything. We need to make sure we understand the pros and cons of doing it before we commit to it. As you say, it uses money from our RDP and it would require us to guarantee moneys from that budget. We have to be careful about what we are doing before we make those decisions. At this stage, we are aiming to gather all the information we need to help us make a good decision on that.

Mr Byrne: I agree that we need to be careful, but we do not want to be so careful that we do not go for it.

Mr McAleer: I just want to make a brief comment. This is the first time that I have seen the letter from the County Down Rural Community Network. I note that it is dated 29 May and that the RCDSS is saying that if there is any further delay beyond the end of May it could result in networks becoming insolvent or staff being made redundant. I want to flag up the urgency that has been expressed in the letter about moving that on.

Mr Wilkinson: I am aware of that, Declan. I have seen the letter as well and it is urgent and needs to be dealt with.

The Chairperson (Mr Irwin): Do you have another presentation for us now?

Mr Wilkinson: Yes, I have a finance presentation for you. I will let the guys go.

The Chairperson (Mr Irwin): Thank you very much

Mr Wilkinson: I now have a number of items to talk about concerning the Department's finances. While the focus of my presentation is on June monitoring, I felt that it was an opportune time to bring the Committee up to date with the 2014-15 financial performance.

I will start with the provisional out-turn for 2014-15, and I can report to the Committee that we achieved our business plan target, which was between 98·5% and 100% in resource and capital. The actual out-turn for both was 99·9%. In monetary terms, that equates to a resource underspend of £245,000 against a budget of £207·5 million and a capital underspend of £63,000 against an overall capital budget of £49·1 million. I have also included an update on the Budget 2010 savings delivery plans in your packs. Again, I do not intend to go through all the various measures. However, I wish to confirm that the Department achieved its target of £40·2 million over that Budget period.

If we turn to the 2015-16 financial year, there are two exercises ongoing with DFP. The first is the Main Estimates exercise, which I have included in your briefing pack for information, and the second and more substantive is in relation to June monitoring. That was commissioned by DFP on 21 April and requires us to provide details of reduced requirements bids and technical issues. As you might expect, we do not have any reduced requirements. We do, however, have a number of bids and technical adjustments to submit, and we would be grateful for the Committee's support.

Starting with the bids; you will be aware from information you have received that we propose to submit three substantive bids. One is a resource bid for TB compensation, and two are capital bids: one for CAP reform ICT and the other for CAFRE building improvements.

Starting with resource; we are submitting a £4·5 million bid for TB compensation. Members will no doubt be aware of the importance of the TB compensation scheme for securing valuable export, livestock and livestock products but also the Department's statutory requirement to adhere to the tuberculosis control order. Veterinary service projections identify a pressure of £4·5 million. As members will be aware, we allocated £7·3 million to TB compensation as part of the budget process, which brought the total funding up to £12·5 million, which is broadly equivalent to expenditure in previous financial years. However, we have experienced a spike in the incidence of the disease, with 476 more reactors this year, from 1 February to 31 May, compared to last year. So, broadly, it is an increase of 16%. That is the only resource bid we have.

Turning to capital; we have two capital bids. One is for CAP reform ICT development, which is supporting developments for some of our new schemes in the rural development programme such as the environmental farming scheme and areas of natural constraint (ANC). That is the Department's top capital bid. CAFRE has also identified a range of capital projects, which will help to improve the delivery of its education and training programmes. The largest projects will improve energy efficiency, as well as a new sheep house at the Glenwherry hill farm.

You will also see in the paper reference to the voluntary exit scheme. Funding for the scheme is being administered centrally by DFP. That will include the moneys required to administer the scheme in the core Department as well as AFBI. In addition, the Department has also had to bid for £3·1 million for the increase in employer pension contributions, which have increased from 19·5% to 22·3%. The Executive had retained £122 million out of Budget 2015-16 to fund that.

On technical issues, we have transfers; £0·9 million resource and £1·4 million which goes to other Departments; half a million pounds goes to DHSSPS and for the tackling rural poverty and social isolation (TRPSI) programme. The capital transfer is for DFP for our HQ relocation programme.

In respect of the overall process, returns are due back with DFP on Thursday. It will consolidate that information from other Departments and submit that to the Executive for their consideration. That concludes my introductory comments. I am more than happy to take any questions that the Committee might have.

The Chairperson (Mr Irwin): Thank you very much for your presentation. In relation to the £4·5 million for TB compensation; I assume that is on top of what you have already bid for. I think that the original bids were lower this year. Am I right in saying that?

Mr Wilkinson: Previously, we did not have enough money for TB, so, historically, it was very low. It was in and around £5 million, and we had to top that up every year through the monitoring rounds. During the Budget process, we recognised that there was a structural deficit in our budget. We needed to address that, so we put an additional £7·3 million into our baseline for TB. That brings us up to around £12·5 million.

However, because we have had the spike in TB we now require a further top-up to the cost for TB compensation.

The Chairperson (Mr Irwin): Over £12·5 million?

Mr Wilkinson: Yes.

The Chairperson (Mr Irwin): How much extra?

Mr Wilkinson: Four and a half million. We reckon that it is £17 million overall.

The Chairperson (Mr Irwin): Is that the highest for some time?

Mr Wilkinson: It is. It is much higher than it has been over the last number of years.

The Chairperson (Mr Irwin): That is what I thought. That is concerning. It means that we are not getting on top of it. There is £2 million for IT. Is that new IT?

Mr Wilkinson: It is. It is for the development work that the IT guys need to do to introduce the new schemes that will come in through the RDP. As I mentioned in my introductory comments, you have the environmental farming scheme and areas of natural constraint. There is a range of schemes that need to be implemented and the IT work needs to be done to make sure that they are ready for application.

The Chairperson (Mr Irwin): There is £1·9 million for CAFRE building improvements.

Mr Wilkinson: Yes, as I said, there is a range of schemes that CAFRE wants to do: it wants to put in a new sheep house at the hill farm in Glenwherry, and investment in it this year is around £350,000. There is also a range of energy-efficient measures, such as PV panels, that it wants to introduce, and putting new windows into the various campuses to improve energy efficiency and, ultimately, reduce running costs. The focus for us is on resource, and anything that we can do, by investing in capital, to reduce that will only be a benefit, not just in the short but also in the longer term. Those are the sort of things that we want to implement.

Mr Byrne: I will just follow on from your questions, Chairman. You had been looking for roughly £12·5 million for the TB compensation scheme; now you are looking for another £4·5 million and we are only partly through the year. I am worried that the TB compensation scheme is almost like making a demand on a slush fund, when it comes to monitoring rounds. Have any projections been done on what the total quantum for the year is, or will you be coming back in further rounds to seek more?

Mr Wilkinson: No, Joe, at this stage those are our projections. At the minute, our Veterinary Service has done its own projections based on the total cost. Our total projections are around £17 million, as I said. As you know, it is —

Mr Byrne: Is that because there is a 16% increase in the number of reactors?

Mr Wilkinson: Yes.

Mr Byrne: And that is 16% of an increase in reactors so far this year.

Mr Wilkinson: Yes, and they have factored that into their projections. They do projections and have various ranges: a high, a medium and a low. At this stage the projection as to what they believe the cost is likely to be is based on the median.

Mr Byrne: Has any analysis been done on the increase of 16% to the number of reactors and why it is such.

Mr Wilkinson: One of the elements is that the Veterinary Service is taking what I understand to be a severe interpretation of the various results, looking at how it interprets the reactors, and that is giving rise to an increase in the number of reactors coming through. That is part of the reason why, but as you know from your own research and the Committee's research, it is an incredibly difficult disease to assess and forecast into the future. That is based on the information that the Veterinary Service has produced to date.

Mr Elliott: This is a follow-up to the same three points. You are probably the wrong people to ask, but is there any indication why there is such a spike in TB reactors at the moment?

Mr Wilkinson: This is speculative, but it would be one of the key points that I just mentioned: that it is a severe interpretation of the results on the animals. You are probably right that I am not the best person to ask about how the Veterinary Service interprets the results, but it believes that, by taking that severe interpretation, it will reduce costs. Taking more reactors out at this stage will cost more, but it will save in the longer term. That is one of the key elements that are giving rise to the increase in TB compensation.

Mr Elliott: On the capital spend on ICT, in relation to CAP reform, £2 million sounds like quite a lot over and above what should have been budgeted for. Did you not see that there were going to be additional requirements for CAP reform?

Mr Wilkinson: We have invested in CAP reform as part of the budget process. One of the key issues for us has been understanding what the requirements would be, particularly for the new Rural Development Programme schemes. The basic payment scheme and the greening schemes were further advanced when we were developing the budget, but, as you rightly said, we had not factored in the other elements, such as ANC and the environmental farming scheme. Two million pounds does not buy you a huge ICT investment. Perhaps we could have done more work as part of the budget process; we might have been able to foresee it, but we did not have the detail at that point. We are where we are.

Mr Elliott: How is the ICT work tendered for?

Mr Wilkinson: There is a mixture.

Mr Elliott: Are there many interested in it?

Mr Wilkinson: There is a mixture of approaches. We do some of the work in-house, and for some of it we have a strategic partnership with a company. We use a call-off contract. It is not something for which we would have to do a procurement exercise. At this stage, we have a contractor in place. That is how we deliver it. It is a mixture of in-house and a contractor delivering the ICT requirements.

Mr Elliott: Are you satisfied with the service that you are getting in-house, and especially with the contractor that you have on tap, or however it works?

Mr Wilkinson: I think that the process that we have works well. The initial feedback from farmers on the system that we have developed for the basic payment scheme has been positive. If you compare what we have with other jurisdictions, you see that it works well and that there has been positive feedback. We have had no complaints about how it works or about the service that we receive. The ICT that we have is certainly well received by the agriculture and farming community.

Mr Elliott: Since the additional IT system went in some years ago — obviously, it has been improved and increased — has the workforce that you need increased or decreased?

Mr Wilkinson: I suppose we are in limbo at this stage of the process. We have about 50% uptake for single farm payment or the basic payment scheme, so we still have to maintain a paper-based system. You do not see the benefit of that until you are closer to 100% and you can stop using the paper-based system. At the minute, we have both; we have an IT and a paper-based system. When you have both, you do not see the savings coming through until you have a higher uptake of the IT.

Mr Elliott: Yes, but all the letters and measures are generated electronically for the single farm payment, for example, apart from the inspections; some of them are handwritten and have to be transferred to electronic equipment. The CAP payment system is all electronic, is it not?

Mr Wilkinson: The paper-based system is still used quite a bit. When the application form goes out, everybody gets a paper form. When that comes back in a paper-based form, it has to be manually inputted.

Mr Elliott: But that is only around your integrated administration and control system (IACS). When it comes to the payment system, it is all electronically generated.

Mr Wilkinson: Yes, but that would have been the case historically. Payments have always been done, in the main, electronically. The labour in the process is with the forms.

Mr Elliott: There were payments of a different type, previously; you had the farm capital grants scheme, and all of that. Has the number of staff reduced significantly since payments transferred to the IT process?

Mr Wilkinson: I was not in the Department when it cut across from purely manual to IT, so I do not have that information.

Mr Elliott: Yes, but there are a number of aspects that have been in transition for some years that have finally got to. I think that you are being a wee bit evasive, Graeme. Are there more staff in the Department now than there were 15 years ago when there was very little —

Mr Wilkinson: There are definitely not more staff in the Department; we have seen a trend downwards. The number of staff has been reducing. We have seen the complexity of the various EU rules, and we have had to put more staff on to particular areas. The experience around CAP disallowance has required us to put more staff into particular areas because of the EU requirements. That has been very labour-intensive. We are definitely doing different things than we were 15 years ago, when areas such as payment processing were very labour-intensive. We are doing different things now, particularly around compliance with rules and regulations. That has required us to invest in our staffing in those areas. There is no doubt about that. I do not mean to be elusive.

Mr Elliott: I appreciate that.

Mr Milne: On the voluntary redundancy scheme, have you any firmed-up figures on how many will be leaving the Department?

Mr Wilkinson: No, I do not, Ian, but I do know that letters issued this morning to staff. The staff who applied have got a letter saying whether or not they have been successful this time. Those staff will have 10 working days to decide whether they want to take up the offer. We are still very much in an iterative process, and we will not know for sure until the 10 days have elapsed and staff have made their decisions on what they intend to do.

Mr Milne: On the TB issue, it seems that every time we get a presentation, we are in a no-win situation. So much money has been put into research, £7 million, I think, over the next five years. Is that correct?

Mr Wilkinson: Yes, the test and vaccinate or remove (TVR) programme is about £1·5 million a year, so you are right that we are putting a significant investment into the research programme. Unfortunately, any research into TB takes significant time, and that is a five-year programme. You are right: I seem to come to the Committee at every monitoring round with bids for TB compensation. I had not foreseen coming to this monitoring round with a bid, and I certainly was surprised by the spike in the costs. As part of the budget process, we recognised that there was a structural deficit in the budget, and we sought to secure £7·3 million. We put that money into TB compensation. We have seen an increase in the disease. We are statutorily compelled to pay it, and it is, therefore, a liability for the Department.

Mr Milne: When you think about it, you are planning in the region of £25 million for TB, whether for compensation or for research.

Mr Wilkinson: We are talking about £17 million for TB compensation for this financial year; the £7·5 million is over a five-year period.

Mr Milne: I understand, but that says to me that we are not getting on top of it. Maybe we need to look outside the box. Someone came in here one time and told us that there was a toolkit, although there may be a spanner missing from it. We can sit here year after year listening to the same story about the research and that we are trying to get on top of it, but £25 million is a big amount of money to be taken out of anybody's budget. Is there still a concentration on the areas that were coming up with the bigger figures to show a spike?

Mr Wilkinson: There are no particular areas where it is concentrated; it is right across. I go back to my earlier point about the severe interpretation that Veterinary Service is taking on the results from the tests. That is the only thing that I can see that we are doing differently that would give rise to an increase in the number of reactors. There is a huge debate on TB and what works. I do not think that anybody has a silver bullet, to be honest.

Mr Poots: What happens when you do not get the money?

Mr Wilkinson: We are certainly looking at a very difficult financial picture, and that is a real prospect. We have been doing some initial contingency planning looking at options that we might have in the Department to address the shortfall. None of them is particularly palatable, and some difficult decisions will have to be made. We are doing contingency planning, and we will need to have a discussion following the June monitoring round, should we not get the money, and make decisions at that point.

Mr Poots: You have a legal obligation on TB payments.

Mr Wilkinson: That is right.

Mr Poots: So it is unavoidable.

Mr Wilkinson: Yes, it is unavoidable.

Mr Poots: I will take you from the surreal world that you have been in for the best part of the meeting back to the real world. The budget was predicated on the Stormont House Agreement. The Stormont House Agreement was welshed on by Sinn Féin, and the consequence is that, by the end of the June monitoring round, close to £30 million that would have been available to all Departments will have been spent on welfare, and that will have to be reserved for the welfare fine that is associated with that.

The consequence is that there is little likelihood of there being any additional money. The more significant consequence is that, by July, the permanent secretary might be told to make do with 95% of the funding. What are the consequences in that scenario? How will that play out, and how will it affect the Department of Agriculture in terms of jobs and commitments that you will be expected to honour? What happens in July if you have to operate on 95% of the budget that you started the year with?

Mr Wilkinson: As you would expect, we have been looking at what that means. My understanding is that it is 95% of the previous year's budget, which would equate to a 5% cut. In net terms, that is where we are today for 2015-16. It will require us to look at the various elements of our budget, looking at all the areas of discretionary expenditure, and that will include things such as working on overtime, on which we currently spend £3·5 million. On the running costs of the Department, looking at our maintenance, we spend £5 million a year. There are discretionary areas in our programmes — things that are not compulsory. We will have to look at all those things in the round. We have not discussed those options with the Minister as yet, as we are awaiting the outcome of June monitoring, but we will need to come back to the Committee if we are unsuccessful in the June monitoring and advise you of our next steps and their consequences.

That is where we are at. You are quite right about the difficult decisions that we will have to make as part of the process should we be unsuccessful in June monitoring.

Mr Poots: They all sound like stopgap measures that will undermine the strategic direction of the Department.

Mr Wilkinson: They are reactive. There are things that we would prefer not to have to do; ultimately, however, we have to balance the books and the budget. Once we know the outcome of the various negotiations that are ongoing, we will take stock.

Mr Byrne: There has been a reducing budget over the last four years, and you are expected to live within service delivery plans. Why have the total net administration costs risen from £54·25 million in 2013-14 to £57·98 million in 2014-15, and why was there a further increase in 2015-16 to £60·16 million?

Mr Roger Downey (Department of Agriculture and Rural Development): To answer that, it would be best to provide a breakdown of the £60·6 million in this year.

Mr Byrne: Keep it simple now, because I am simple-minded. [Laughter.]

I see a £3·5 million a year increase.

Mr Downey: There are three main elements to the admin budget, and I am afraid that this is where it gets a bit technical. There is the non-ring-fenced resource DEL admin budget, which is our main admin budget, and it is £39·8 million; there is the ring-fenced resource admin DEL depreciation budget, which is non-cash, and it is £4 million; and then there is the notional budget, which is not a DEL budget and it is notionally included to show the full costs to the Department, and it is £16·8 million. Those three figures total £60·6 million. I assume that you are taking those figures from page 29 of the Main Estimates.

Mr Byrne: Yes, they are in front of me. I am reading them out.

Mr Downey: There are two main areas where there has been an increase. The first is the notionals, and page 34 of the Main Estimates shows a breakdown of them. Those are the charges that we get from DFP for accommodation in the likes of Dundonald House and for shared services such as HR Connect and Account NI. You can see the main reason for the increase is in the accommodation charge from £7·3 million to £9 million and from £5·9 million to £7 million. The DEL budget is held in DFP, but we are notionally charged for that. It is not part of our DEL budget.

Mr Byrne: Are you telling me that it is not a real increase and is the result of an accounting procedure?

Mr Downey: The Main Estimates show the total costs that affect the Department. That is a mixture of the DEL budget, the annually managed expenditure (AME) budget and the notional budget, which is a proportion of those costs that are notionally charged from other Departments, such as DFP. They are put in for completeness. DFP provides notional charges to all Departments, and you are looking at our share of them.

Mr Byrne: The layman who looks at the figures sees are increase of £3·5 million for each of the last two years.

Mr Anderson: Following on from what Tom said about ICT, you talked about the £2 million capital bid required for CAP reform. Was there much lacking there that we are in the sphere of looking for £2 million? Bearing in mind what Edwin said, how crucial is it that that £2 million is required? Could you limp on if you did not get it?

Mr Wilkinson: No, we could not limp on. That is for sure. We are introducing new schemes, so the IT needs to be redesigned and redeveloped. There are new geospacial requirements that the EU requires us to implement as part of those new schemes. I mentioned a few of them, including the environmental farming scheme and areas of natural constraint. Those are all new area-based schemes, so we need to implement new IT systems. So, I can give you the assurance that the money is required; it is not a case of bells and whistles or gold-plating.

Mr Anderson: Where are we if you do not get this money? Can you find the money in your budgets to upgrade the ICT?

Mr Wilkinson: We would prefer to get the money in this monitoring round; that is why we have put in the bid.

Mr Anderson: But if you do not get it.

Mr Wilkinson: If we do not get it, we will need to reprioritise and stop things that we had planned —

Mr Anderson: So you will reprioritise and ensure that the money goes to ICT to bring these essential measures forward. Is that what you are saying?

Mr Wilkinson: Yes.

Mr Anderson: You will reallocate.

Mr Wilkinson: We would have to reprioritise our existing 2015-16 capital budget if we were not successful in the monitoring round.

Mr Anderson: With everything coming forward, it is something that you cannot sit back on. If the money does not come forward, it will come from somewhere else.

Mr Wilkinson: I agree.

The Chairperson (Mr Irwin): If a Budget is not agreed by the Assembly in the coming days, what does it mean for payments to farmers, such as the single farm payment, the basic farm payment and other schemes? Will it have any impact?

Mr Wilkinson: The point that was being made was about accruing resources. That is an issue for all Departments; it is not unique to DARD. So, where Departments do not have access to their accruing resources, there is a significant impact on their ability to incur that expenditure — they cannot incur it. We get a significant receipt that allows us to make the single farm payment. We are awaiting the outcome of the Budget process, but, as the Minister has clearly articulated, it is an EU scheme and it is backed by EU funding, so farmers' payments are secure.

The Chairperson (Mr Irwin): There are different schools of thought on that. Am I right in saying that?

Mr Wilkinson: Yes.

The Chairperson (Mr Irwin): I notice that you said that the Minister thinks that, so it is not absolutely clear. Is it absolutely clear that payments will not be affected? Are you confident that payments will not be affected if a Budget is not agreed?

Mr Wilkinson: There is an issue with getting the Budget agreed and with accruing resources. There is more work to be done on looking at whether there is a legislative way of putting in the accruing resources and resolving the issue through legislation. If there is not, we would need to look at contingency arrangements to secure those payments. It is a very iterative process, as you know, and we are going through it. Hopefully, the Budget will be approved by the Assembly: that is our assumption at this point in time.

The Chairperson (Mr Irwin): OK. Thank you very much.

Mr Wilkinson: Thank you.