Official Report: Minutes of Evidence

The Chairperson (Mr Ross): I welcome Glyn Capper, Billy Irvine and Patrick Barr to the Committee. When you are ready, please brief us, and we will then open up to questions.

Mr Glyn Capper (Department of Justice): Good afternoon, Chair, and thank you for the opportunity to give you an update on the Department's finances. I plan to cover three separate areas in this briefing: first, an update on our savings delivery plans for the Budget 2011-15 period; then, our provisional out-turn for the 2014-15 financial year; and, finally, a summary of our in-year position following the June monitoring round.

This is the Department's final update on the savings delivery plans that were in place for the financial years 2011-12 to 2014-15. Following today's briefing, we will publish our savings information on the Department's website. As the Committee will be aware, savings targets for each spending area were factored into budget allocations: that is, budgets for each of the core directorates and our various agencies and arm's-length bodies were reduced by the savings amounts in each of the four years. The information provided has been prepared by each arm's-length body, and, therefore, it is their not the Department's interpretation of their progress against the savings plans. As at 31 March, the Department had achieved its overall target and delivered savings of £109·9 million against a target of £108·6 million. Where individual targets were not met, these have been compensated by higher savings in other areas.

As you will see from the updates, some areas have indicated that there has been an impact on front-line services: for example, the Policing Board, the Police Ombudsman's office, the Probation Board and the PSNI. However, over the four-year period, the Department sought to minimise the front-line impact as far as possible across the spending areas by providing additional funding where possible and minimising budget cuts to front-line areas. The Committee recently reviewed the Department's final 2015-16 savings delivery plan, and we will continue to work with all of the various bodies across the Department to look at ways to protect front-line services as much as possible.

Our provisional out-turn for 2014-15 can be broken down into three areas of spend. Our non-ring-fenced resource departmental expenditure limit (DEL) budget, which is, effectively, our cash resource budget, was £1·1 billion, and we underspent by a total of £18·3 million, a variance of 1·7%. Excluding the PSNI, the underspend for the rest of the Department was 0·9% of budget. Annex B provides a breakdown by spending area and the reasons for the main variances. The paper notes the main reasons for the PSNI underspend, including the fact that last year was a volatile year for financial planning, with significant uncertainty over in-year budget cuts and the 2015-16 Budget. In response, the PSNI implemented cost reduction plans with a focus on planning for the longer term. In addition, although sensible contingency measures were in place, the operating environment was reasonably stable, reducing financial pressures from, for example, responding to public disorder. Finally, a number of significant legal challenges were ongoing during the year that proved inherently difficult to predict. One case alone resulted in 22% of the police underspend. These underspends form part of the Executive's Budget exchange scheme and are carried forward into 2015-16 to be allocated by the Executive.

When setting budgets for the 2011-15 period, the Department informed the Committee that we had surplus ring-fenced resource DEL. That is our non-cash technical budget for costs such as depreciation and cannot be used to fund other areas of spend. Last year, we did not use £10 million of this budget. Finally, the provisional out-turn shows a capital underspend of £4·9 million. The largest element of this relates to slippage in the Prison Service capital programme.

I turn to our in-year funding position. The Committee, through its involvement in the 2015-16 Budget process, will be aware that this year is extremely challenging. The very difficult funding and prioritisation decisions that have been and will be required will have a major impact on the wider justice system and the services that we provide. I will recap. In setting 2015-16 budgets, the starting point for all DOJ spending areas was a reduction of 15·1% from last year's opening baselines. An allocation of £70 million was provided by the Executive as part of the draft Budget, and, in some areas, this funding has been used to offset specific demand-led pressures. In other areas, it has been used to offset the impact of baseline cuts, so some areas have cuts lower than 15·1%. Conversely, some areas have higher cuts so that funding can be reallocated to front-line priorities. A further allocation of £20 million was provided by the Executive as part of the final Budget, and that was solely for PSNI purposes.

Now that we have completed the June monitoring round internally, the pressures that the Department intends to bid for are outlined in our paper. The most significant pressure relates to legal aid. After applying the 15·1% cut to the Legal Services Agency baseline, the available funding would have been £64 million, approximately £40 million short of the forecast legal aid requirement. Therefore, the Department had to increase the baseline by using some of the Executive allocation and deepening the scale of cuts elsewhere. However, even with an increased baseline in 2015-16 and the work undertaken to make savings in this area, there remains a legal aid pressure. On the basis of the Legal Services Agency's most recent forecast, the Department will bid for £23·8 million for legal aid as part of June monitoring. Our paper provides details of some smaller bids and other adjustments that will form part of the Department's June monitoring position. In addition, we continue to work with relevant stakeholders to quantify our bid for the historical investigation unit, which formed part of the Stormont House Agreement funding package.

As the Committee will be aware, June monitoring is taking place in the context of ongoing financial issues facing the Executive. I am not able to provide any further details about any potential impact on the DOJ, but the Department's accounting officer has taken the responsible step of asking all spending areas to suspend now any discretionary spend and to continue to fund only inescapable or contractual commitments. Where there is a significant impact on the justice system or public safety, the Department and the Justice Minister will consider this before agreeing the next steps. We will continue to keep the Committee informed as the in-year position develops. I hope that that provides you with an overview of our financial position, and I am happy to take any questions that you have.

The Chairperson (Mr Ross): A number of members have indicated that they have questions, so I will be fairly brief. On the legal aid issue, the Law Society and the Bar Council have said that they will take legal action against the Department. If they were successful and the Minister was not able to make the reductions that he has planned, what areas of spend would be reduced further?

What areas that you fund currently would you be unable to fund?

Mr Capper: I think it fair to say that, from the scrutiny that the Committee gave to our 2015-16 budgetary process, members have a good understanding of the actions that we have already had to take to live within that budget. Those are also outlined in our savings delivery plan and include an impact on the courts system, the Probation Board, the Prison Service, the police and so on. I am unable to give specific details until we go through the process required of us, but, assuming that our June monitoring round bid was unsuccessful and we did not get that extra money into our baseline, it would mean a greater impact on those front-line areas.

The Chairperson (Mr Ross): I asked you previously about the police budget and whether they share enough information, or do sufficient work in conjunction, with the Department on their financial management. Rightly, the public will look at the fact that the Chief Constable complained about not having enough finances and being under pressure but will have seen him returning £14·9 million. They will ask how the two line up. You said that it was the result of unforeseen circumstances. Under the Budget exchange scheme, that money is guaranteed to go back to the PSNI in the following year. Is that right?

Mr Capper: I have a couple of points on that, Chair. In my opening remarks, I provided some of the context to the police underspend, and there were some important points there. That underspend will go into the block's Budget exchange scheme pot — it used to be called end-year flexibility (EYF). That funding will go into a central pot, together with the underspends from other Departments, and its allocation will be decided by the Executive. The underspends do not follow the specific areas into the next year. They go into a central pot to be reallocated according to Executive priorities.

The Chairperson (Mr Ross): Finally, in the grand scheme of things, this is a relatively small amount, but the PSNI has put in a bid for cybercrime. I suppose that the PSNI sees that as a Barnett consequential of money that has been given in GB and so goes into the block grant, and that is why it is looking for it. What exactly do the police want to use that for? I would have thought that cybercrime would be dealt with mainly at National Crime Agency (NCA) or national level. I can understand how there would be a requirement for educational stuff at a local level. What exactly does the PSNI want to do with that £1·5 million?

Mr Capper: I will have to come back to you on that, Chair. We will have received specific detail on that from the police. You are right in saying that there will be a local element to that, and that is what the police are bidding for. If you are content, I will come back to you with some details on that.

Mr McGlone: The last day we were here, I asked for a couple of things. First, what is the present position of the allocation of funding to the Desertcreat project?

Secondly, we sought clarification on the £30 million that had been promised by Westminster. At that stage, I think that the point had been raised two or three times. The position that we always got, which did not seem to move, was that it was subject to talks between DOJ and the Department of Finance and Personnel (DFP). What is the contemporary position on that £30 million? Has it been lost, has it been reallocated or is it still there?

Mr Capper: I go back to the 2015-16 Budget-setting process. At that stage, it was intended to carry forward just over £53 million under EYF for the college. Given the current status of the college, the discussions were between DFP and Treasury, and the Department's understanding is that Treasury's stance is that the EYF will not be available.

Mr McGlone: Sorry, did you say that it will be available?

Mr Capper: It will not be available. On that basis, and depending on the outcome of the current work on the project, there is the potential that the funding would have to come solely from within the block's allocation.

Mr McGlone: Has that £53 million now gone?

Mr Capper: The current position —

Mr McGlone: Sorry, I should say have asked that in a different way: is the £53 million that was available no longer available in its entirety from that source?

Mr Capper: That is the position.

Mr McGlone: It is pretty disappointing that that has slipped now, too. That is all that I needed to ask, Chair.

Mr Douglas: Thank you for your presentation. Glyn, your paper talks about a bid for £0·8 million of resource and £0·1 million of capital under Together: Building a United Community. Will you give us a breakdown of that? That is in relation to peace walls.

Mr Capper: It is. We have classed that as a bid, but it is more a transfer of funding between Departments. The Office of the First Minister and deputy First Minister (OFMDFM) holds a central pot for Together: Building a United Community, and each Department bids for its share of that. As part of that process, the Department will, hopefully, receive a transfer from OFMDFM for that amount. As you said, the bid is for £0·8 million of resource and £0·1 million of capital. I will come back to the Committee with the details of how that will be spent. Presumably, you are after which area it will be put into and so on.

Mr Douglas: It was just the nature of it. I have been involved with DOJ at the interface, and officials have been very helpful and supportive. Things like replacing roofs and providing reinforced glass in people's houses cost big money. The £0·1 million of capital would not get you very much if you wanted to replace 10 roofs, for example.

Mr Capper: If you are content, I will come back with a detailed breakdown.

Mr McCartney: I want to ask about some of the underspends. The PSNI has an underspend of £14·9 million. What happens to that? Where does that money go?

Mr Capper: The same principle as I outlined to the Chair applies. That will form part of the Department's overall underspend. It will be added to the underspends of the other Departments and go into the Budget exchange scheme. That will then be rolled forward, up to a ceiling, and be allocated by the Executive this year.

Mr McCartney: How was the calculation made for the underspend in the compensation services at the beginning of the year?

Mr Capper: On the budget —

Mr McCartney: There is a £4·4 million underspend. Is there no flexibility to move that within the Department?

Mr Capper: There would have been last year at the various monitoring rounds. Once last year closes, that underspend is added to the others and forms a total amount that is carried forward.

Mr McCartney: Is there any contingency for next year to try to do that earlier rather than having to hand it back?

Mr Capper: Last year, the Department's budget fluctuated significantly due to cuts and extra funding coming in. That was one of the main drivers in making it difficult to do accurate financial planning, or as accurate as we would have liked it to be. We have ongoing processes for looking at and monitoring budgets, and the June monitoring round is one of those processes. Ideally, we will reallocate funding within the DFP processes as quickly as we can.

Mr McCartney: OK. The Prison Service had an underspend of £1·6 million for approved projects. Will those go ahead in the next round or will they need to be resubmitted?

Mr Capper: The Prison Service's capital budget for this year is about £10 million. Within that, yes, there will be some —

Mr McCartney: It will be able to go ahead with the projects.

Your document refers to an underspend by the PSNI that I just do not understand. It states that it is £1·3 million and:

How does that work?

Mr Capper: What we are saying is that, in overall capital terms, if you set aside the community safety college, the police underspent by half a million pounds. Of course, we would say, rightly, that that was a good outcome. What contributed to that half a million pounds was the fact that police got receipts from sales. That increased their capital budget and helped to produce some of the underspend.

Mr Frew: We all have a certain sympathy with your having had an unregulated year with ups and downs and uncertainty at times. Of course, we face a financial cliff if parties maintain their irresponsible stance. I do not think that anyone, not us or you, can get us out of that. That is more for the parties that are being irresponsible.

When it comes to the January monitoring round, I always feel that we have nearly finished the year — we have two months to go.

Surely the money that is underspent can be used, and you can use the January monitoring round, to focus it better and hoover up as much as possible in other ways. Over the past year, I was involved in a campaign for the drug addiction service in Railway Street, which is still under considerable financial pressure. The mountain rescue groups are also crying out for money, and although funding has been produced, they could always do with more. Many mountain rescue organisations, Lough Neagh rescue, Mourne mountains rescue, and those in the north-west also help the PSNI and not only the core Department. Is there not a more inventive way come January — when people should know exactly how much money they will need and how much they are going to return; and I look back to Raymond McCartney's question — to shift or move that money around? The mountain rescue people need their vans or trucks serviced, and, even if those could be pushed onto the same conveyor belt whereby police vehicles are serviced at the same time, practical things like that still take money. Surely there are other ways to channel that money and help those groups that are vulnerable by their nature because of their voluntary status. They do so much to keep costs down, both operationally for the PSNI and for the DOJ through their work in preventative spend. Is there no other way of being imaginative when it comes to moving money about?

Mr Capper: I accept your point about January monitoring. Just to touch briefly on the timing of January monitoring. It is called January monitoring because the Department's return goes into DFP at the very start of January; but the Department has to work back to that deadline. We effectively start January monitoring in October or November to allow the process to go through the departmental board, the Committee and then to DFP. At best, you are making decisions for the January monitoring round based on the Department's out-turn in November, which is just over six months into the financial year.

Having set the scene, I do accept your point. I will give a couple of examples of how we have been as creative as possible. I will pick up the example of Railway Street. The Department, for example, in February or March last year, was able to find £82,000 for Railway Street from the assets recovery scheme. That is an example of how within that context we are able to do that. It is also worth noting in relation to the search and rescue funding that the Department has, I think it is correct to say, doubled the funding from £46,000 last year to over £90,000. Yes, there are some things we can do, and we will continually seek to do them.

Mr Frew: I take your point about the complexity of the system. I did not realise that you had to start so soon to get to January. The money for Railway Street came from assets recovery. That was another stream, if you like; it was not core finance. Also, most of the search and rescue money came from DCAL in the previous financial year, did it not?

Mr Capper: I think the baseline did, but the Department was able to increase the funding.

Mr Frew: So, my question is whether there is any way the Department can distribute the money more effectively? The Department will not have that big a budget, I would imagine. The PSNI and legal aid will be the big players. Still, £4·4 million seems to be a lot of money for a smaller financial pot.

Mr Capper: I think the simple answer is yes, and we will continue to try and find ways to do so. Again, context is important. An awful lot of that core departmental underspend related to the timing of payments within Compensation Services, the former Compensation Agency. So, you could have some very big high-value cases worth hundreds of thousands of pounds either settling for less than was forecast or, depending on the timing of court sittings, slipping from one financial year into the next. That is not an excuse. We will continue to seek ways to use that funding in the best possible way.

Mr Frew: This is my last theme, Chair. We talk about pressure on legal aid, but is that not a delayed rolling payment? If that is a delayed rolling payment, it can be paid in instalments or even in smaller chunks. Is that not the case?

Mr Capper: I would have to defer to colleagues from the particular business area. I know that there is the concept of hardship payments, for example, but the focus is effectively on assessing the bill. There was the concept of very high cost cases in the past that were effectively taxed, and the Department is trying to move to standard fees and has done that in criminal cases. That makes the process simpler and hopefully provides more value for money.

Mr Frew: If a solicitor or barrister takes eight years before putting in a bill, surely the Department can wait a period of time before it honours that bill. If we can pay it in smaller chunks, surely it is better to spend that money on a pressure that is greater than that in legal aid.

Mr Capper: There are a significant number of different categories of payments in legal aid, and each has its own subtleties and nuances in terms of life cycles and the overall legal aid forecast. Therefore, pressure is a function of all those things. I am not entirely sure of the position in relation to what you outlined other than to say that, yes, there are significant lead times in some categories of cases. Others are much quicker. In calculating the forecast and the pressure, it is about trying to combine all those things. It is worth noting that, although the forecast pressure is £23-odd million in June monitoring this year, that is a smaller pressure than there was last year for a couple of reasons. First, the overall forecast is down, and, secondly, the starting point is higher because, as I said in my opening comments, the Department has sought to increase the legal aid baseline as far as possible from within the funding allocated to it.

Mr Hazzard: My question is on the back of what Paul and Raymond said about the use of underspend. I will, perhaps, touch on the ombudsman. I met a number of families this morning who have been told, in recent months, that with investigations into loved ones' murders, for example, there will not be the same amount of evidence collected because the funds are simply not there. The timeliness and quality of the investigations have been severely affected by the fact that the ombudsman's office has been asked to make savings of less than £400,000 this year, which it has met, yet we have — and families are quite aware of this now — an underspend in the PSNI of £14 million. I am sure you can understand the severe frustration that they are feeling. Is there no way that the money can come over? I do not mean now but in advance. Paul talked earlier about it happening around January. Is there no way that that can be done? Are there legal frameworks that prevent it? How can that be done going forward so that we are not in the same situation next year?

Mr Capper: Context is important. Police underspend is in the context of a budget of over £700 million, and I have talked about the timing of legal cases and so on being very late and, in fact, into the last couple of weeks of March. The process for underspends is not within the gift of the Department. It is dealt with at Executive level. As I said, those underspends go into a central pot to be reallocated according to the Executive's priorities. It is also worth noting that the Department, as I said in my opening remarks, continues to work with relevant stakeholders on the funding package under the Stormont House Agreement for the historical investigations unit. That is a separate stream of funding that relates to the issues you are talking about. We continue to pursue that option for funding as well.

Mr A Maginness: In relation to asset recovery, given the full implementation of the National Crime Agency here and the perfection, as it were, of the asset recovery mechanism; do you anticipate a higher level of recovery and, therefore, an additional stream in relation to assisting the sorts of programmes that were originally envisaged to be assisted?

Mr Capper: It is very difficult to predict what the funding stream from that source looks like. It has fluctuated over the number of years in which the scheme has operated. It is roughly in a band of £1 million to £3 million. The fact that the annual amount is lumpy makes it difficult to plan for how that funding is used. For example, if funding is received from a particular case very late in the financial year, given that we have just talked about the fact that underspends cannot be carried forward, there is a drive to spend that funding very late in the year. It makes it difficult to plan. We are working with the Department of Finance and Personnel to see whether there is some way we can smooth that over a period of X years so that we know that we will have X million pounds to spend in a year so that, at the start of the year, we can plan to use that in absolutely the most effective way we can. Whether more funding comes in is difficult to predict, and there may be a time lag there, but, regardless of that, we are seeking to smooth the funding as much as possible to make sure that what does come in is used as effectively as possible.

Mr A Maginness: Are you suggesting that it might be possible to save some of the money with some mechanism with the Department of Finance?

Mr Capper: We are exploring options. For example, if we got £2 million in one year and we were forecasting £3 million in the next year, it might be possible to strike a position with DFP where we say, "Let us plan to use £2·5 million in each of the years". If we know that at the start of each year, we can spend it more effectively.

Mr A Maginness: Was there an underspend last year, the preceding financial year?

Mr Capper: In 2014-15, I think that we spent virtually all the funding that came in under that scheme, albeit that some came in very late in the financial year and it was more difficult to spend than we would otherwise have wanted. To the best of my knowledge, we spent up to the capacity on that scheme.

The Chairperson (Mr Ross): I am surprised that you did not take the bait from Paul about not paying barristers for a period of time.

Mr A Maginness: I will leave that to the Bar Council.

Mr Dickson: Perhaps finally, I believe that applications for the early retirement scheme are all in and that there should be an indication of the numbers applying and successful. Will you have met the targets in relation to that?

Mr Capper: Factored in to the Department's 2015-16 plans across the core and agencies were 195 people to leave under the scheme. We will not know the figure for a couple of months. I think that the Committee may be aware that some letters issued to staff at the start of this week. There is now a period where they have time to make a decision on whether they wish to leave. Until we know what that looks like, it will be difficult to know how we plan financially for that. I do not have the exact number, but there were fewer than 195, so we will have an issue to work through after this monitoring round.

Mr Dickson: Are the resources there to pay for it?

Mr Capper: The resources do not reside in the Department. They form part of the Stormont House Agreement. I do not have the exact wording in the letters, but I understand that the offers are conditional on the funding being available.

Mr Dickson: They are currently held up.

Mr Capper: The letters have gone out to appropriate staff asking them to make a decision within an certain time period once figures are received. The letters note that those offers are conditional on funding being made available.

Mr Dickson: Even if the member of staff makes a decision to accept, it is effectively a fantasy package as of today because there is no money.

Mr Capper: I would want to defer to personnel colleagues for the nuances, but the letters have gone out with a conditional offer.

The Chairperson (Mr Ross): Just before we finish, we have not mentioned the fine default issue. The Department has highlighted the potential for,

What does "very significant" mean?

Mr Capper: Given that this is an ongoing legal case, it would probably be inappropriate for me to try to put a figure on it. Also, it would be hugely difficult to do so, because there is a wide range of options and a range of people involved. What I can say is that, at an extreme, the figure would be sufficiently big that the Department could not afford it within its existing resources and we would have to seek funding from the Executive.

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