Official Report: Minutes of Evidence

The Chairperson (Mr Maskey): I formally welcome Ian Snowden and Deborah Brown from the Department. You are very welcome.

Ms Deborah Brown (Department for Social Development): Good morning, Mr Chairman and members of the Committee. Thank you for the opportunity to present the Department's proposals for the November monitoring round. First, I apologise to the Committee for the fact that we were unable to provide this in advance of the submission to DFP on 4 November. This exercise was commissioned at very short notice, on 27 October, with a very short turnaround, which did not give us sufficient time to bring it to the Committee for consideration. However, we are presenting the proposals today and would welcome the Committee's views on them. This is the first part of the exercise, where we are identifying easements and pressures and looking at any bids that we will submit at this stage. There will be a further exercise at the start of January, which will mop up any technical adjustments that are needed at that stage.

I will set out the proposals in our paper. We are presenting a bid for financial transactions capital (FTC) of £75 million for the Northern Ireland Co-ownership Housing Association. As you are aware, we placed a £100 million bid in the June monitoring round and secured £25 million. We are resubmitting the bid for the remaining £75 million.

Moving on to the resource easements that we are surrendering, there is £2·6 million against the child maintenance service. That has arisen from the embargo that was placed on recruitment, some savings that have been made in IT, and some higher-than-expected rental income. On the Social Security Agency (SSA) side, we are surrendering £9·3 million. That has arisen from the confirmation of the number of staff released under the exit scheme, and the associated funding that was set aside for that, and further delays in the implementation of welfare reform. There were also reductions in some supplier costs. In the core department, we are also surrendering an easement of £900,000 in respect of the National Insurance fund. Whilst we acknowledge the scale of the resource easements identified, the Committee will appreciate that there are significant risks from an exercise being commissioned this early in the year, when it is likely that there will be further easements that fall out of the system as we move forward towards the end of the financial year.

Moving to the capital side, there have been a few changes to the figures you were provided with since we submitted the figures to DFP. You will see that, originally, we were surrendering £1·5 million of the social fund crisis loans. We are increasing that to £2·5 million and are not surrendering the £0·7 million from the reduced estate modernisation costs or the £0·4 million on the additional capital receipts. That is because we were going to divert £1 million of the social fund towards some urban projects, which is below the de minimis level and within our gift, but DFP advised us that it was better to use the estate modernisation and the capital receipts to do that. That is why we are changing the way that that is presented in the paper.

That is an outline of the easements. The capital ones include the £2·5 million that I mentioned for the social fund crisis loans. On the SSA, £2·3 million is being surrendered from the financial transactions capital in respect of the north Belfast project. On housing, we have £7 million being surrendered. That is reinvestment and reform initiative (RRI) borrowing and is ring-fenced, so it has to be surrendered at this stage. Also, there is ring-fenced Together: Building a United Community (T:BUC) funding of £1 million being surrendered in respect of the project in the Colin urban village.

That outlines the proposals for the Department at this stage. As I said, there is a further technical exercise at the start of January, and we will come back to the Committee with any issues that arise from that.

The Chairperson (Mr Maskey): OK, Deborah. Thank you. There is nothing untoward in the reasons for the easements, is there? As I understand it, they are technical and logical.

Ms Brown: As you know, a decision was taken in June for us to put a temporary hold on discretionary spend because there was a risk of further in-year cuts. Inevitably, that will create challenges until it is lifted, and we have to try to spend the money. You will see from the paper that the easements being surrendered are not that significant. Each of the easements are being made for specific reasons around embargoes on recruitment and the welfare reform issues that meant that the money could not be spent. So, there are legitimate reasons and the Department is trying to manage its budget as best it can and to use it to best effect.

Mr Allister: Remind us, was there a completed June monitoring round?

Ms Brown: There was a process, and we surrendered some issues at that point, but it was not completely concluded. There were no bids, easements or issues considered at that stage.

Mr Allister: But you gave up some money.

Ms Brown: Yes, we did.

Mr Allister: And, because there was no distribution, got nothing back.

Ms Brown: No.

Mr Allister: Remind us what you gave up.

Ms Brown: I do not have the detail with me. I am sorry.

Mr Allister: On what basis did you give it up, if there was not a due monitoring round?

Ms Brown: That was our normal return to DFP.

Mr Allister: You do it without a monitoring round.

Ms Brown: No, a monitoring round was commissioned, but it was never concluded.

Mr Allister: So the monitoring round is commissioned, you hand over some money, then the process becomes moribund and nothing happens, so you get nothing back. Is that a fair synopsis?

Ms Brown: Well, yes.

Mr Allister: And you cannot remember how much you gave up.

Ms Brown: Sorry; I did not bring the details with me.

Mr Allister: The £9·3 million easement in the resource includes something contributed to by further delays in the implementation of welfare reform. How are there savings from the delay in the implementation of welfare reform?

Mr Ian Snowden (Department for Social Development): The welfare reform changes will involve the new systems being introduced and a certain amount of what is described as dual running. The legacy systems have to be maintained for a time while the new systems are implemented. When the budget was first developed for 2015-16, the assumption was that welfare reform would go ahead according to the expected timetable, the Bill would be passed and the measures would start to be implemented during this financial year. Given the position we are in at the minute with the legislation on welfare reform, practically speaking, it will not be possible to start the dual running of those systems during the current financial year; therefore, the money is being surrendered now.

Mr Allister: How much is that?

Mr Snowden: Out of that figure? It is a substantial part of that.

Ms Brown: It is most of it. Most of the £9·3 million is welfare reform.

Mr Allister: Most of it. Can you not be any more precise on that?

Mr Snowden: We could get you the precise figure.

Ms Brown: I will get you a breakdown.

Mr Allister: Will a similar scenario be carried forward come April if you still do not have welfare reform?

Mr Snowden: We have to plan budgets and make budget projections on the basis of what we assume will happen and what is likely or possible to happen and then manage the budget in the light of the actual circumstances as they arrive. Our planning for 2016-17 assumes that welfare reform legislation will be passed and a programme will be implemented from April.

Mr Allister: Which is the same assumption you had for this year.

Mr Snowden: Well, it was not starting from April, given the stage we were in with the legislation, but it was assumed that it would start during this financial year.

Mr Allister: Explain one other thing to me. You say in your covering letter that, ordinarily, the returns would not have been due until January, but there is normally an October monitoring round, is there not?

Mr Snowden: What happened this year was that — as in your first question to Deborah — a June monitoring round was commissioned and we made a return to it. I do not think the Assembly met since that happened, so the June monitoring was not concluded. DFP took a decision in September that, given that there had been no conclusion to June monitoring by that point, there was no sense in proceeding with an October monitoring round, so an exceptional decision was taken not to have it in October. I am not sure what the background to it is, but then a decision was taken that there would be a November monitoring exercise.

Mr Allister: Is that in place of October or in place of January?

Ms Brown: We believe that it is in place of both October and January.

Mr Allister: So we only expect one monitoring round this financial year.

Ms Brown: Yes.

Mr Allister: Does that mean that the January monitoring round in other years has been surplus to requirements and you do not really need it?

Mr Snowden: I would not say that, no.

Ms Brown: No.

Mr Allister: Are we going to lose something by not having it?

Mr Snowden: All we can do as a Department is respond to the requests for information that we receive. We do not set the timetable for the monitoring rounds; we make the returns.

Mr Allister: But you have been told, obviously, that you need not expect a January one.

Mr Snowden: That is the assumption that we are working to at the minute.

Mr Allister: It is not an assumption; it is something that you have been told, I take it.

Mr Snowden: It is not as definite as saying that there will definitely not be one in January; it is not expected that there will be one, but that means that there is a possibility for a change in that situation. I do not know. Essentially, Mr Allister, unfortunately, I cannot tell you how that will play out. All we can do is respond to the requests that we get for information.

Mr Allister: What does the fluidity of that situation do to running the Department?

Mr Snowden: It makes it more complicated.

Mr Allister: So, we had a surrender in June; we did not have a monitoring round. We have no October monitoring round. You think that there will not be a January round, but we are having a November one.

Mr Snowden: Yes.

Mr Allister: But you cannot really explain why any of that is. OK.

Mr McQuillan: I want to ask about the FTC funding for the housing association. What is it called?

Mr Snowden: The Co-ownership Housing Association.

Mr McQuillan: Yes. I could not get the word. The Department has applied for another £75 million to bring the balance up to £100 million. What happens if you do not get that £75 million? What do you have in place to ensure that the coownership scheme does not falter?

Mr Snowden: The £100 million was supposed to be funding for a four-year period. If we do not get it in this financial year, we will bid again in the following.

Mr McQuillan: So £25 million is all that you actually need in this financial year, is that what you are saying?

Mr Snowden: The intention was that, if we could provide the funding in full, it would allow the Co-ownership Housing Association to be more flexible about the way it managed it. Instead of working to a budget, it would be able to respond better to the demand.

Mr F McCann: I was going to ask a question about the easements in relation to the welfare reform stuff. However, I will wait until there is a breakdown on the finance between both and that information comes to the Committee.

Let me touch on what Adrian has asked. I have raised some concerns before to do with the Co-ownership Housing Association. It is a housing association that operates with its own budget. What happens is that the Department gives it additional money. What I can never understand is that we have waiting lists of 40,000, with 20,000 people declaring themselves homeless each year, and yet we continue to give money to a housing association that has a waiting list of only 600 people at most each year. People are struggling, certainly in my constituency and others, living in hostels for a number of years. I cannot understand the logic for not pointing money in the direction of social housing. We have heard in the past that sometimes it is difficult to get housing associations to step up to the mark and build. However, that was a number of years ago. You would think that the direction would have changed, and we would have started to deal with the waiting list for social housing. The £25 million is dealt with on a North-wide basis. It removes money from dealing with social need.

Mr Snowden: The budget for the social housing development programme is £98 million this year. It is almost 10% —

Mr F McCann: There is a huge difference between 40,000 and 600. It is not a big lot of money in the broad scheme of things.

Mr Snowden: It is one tenth of the total capital Budget of the Executive.

Mr F McCann: In terms of trying to deal with it, it is not —

Mr Snowden: It is what we have available to do with it. This year, we aim to deliver 1,800 social and affordable homes as part of the social housing development programme, so it is a very extensive programme. Proportionately speaking, across Britain and Ireland, it is the most extensive housing development programme that exists. So, we are making as much effort as we can to deal with that. That is not to say that there are not ways in which we could improve the operation of that programme and make it more effective, in terms of the speed at which some of the schemes are being delivered. That is certainly something that we want to look at. The FTC funding probably would not be appropriate to the social housing development programme. Essentially, that money has to be repaid in a relatively short space of time and so, therefore, it is not the same as a capital grant.

Mr F McCann: My understanding is that other housing associations, the likes of Clanmil, Choice and others, can borrow additional money. I cannot understand what the difference is between them and the Co-ownership Housing Association. The housing associations said that they would be open to additional money to allow them to identify sites and build houses. I understand what you say about FTC money having to be paid back in a short period. We are talking about waiting lists. If you talk to people who have lived for three or four years in a hostel, families sitting there, and you try to tell them that, when you take it in the round, there is a substantial amount of money going into the pot, it does not wash in my constituency and it certainly does not wash in a number of others.

Mr Snowden: I understand that. Some people are in very difficult situations.

Mr F McCann: I have raised this before. It is terrible. We are sitting here again with increasing housing waiting lists and £75 million is going to one housing association that gets money to find a way of working around housing need.

The Chairperson (Mr Maskey): The point has been made. Roy —

Mr F McCann: Just one other point, Chair, on the Social Security Agency and the easement from social fund crisis loans. The paper says that there has been a reduction in the claims volumes. Could we get a breakdown of that reduction? All of us will know from our dealings that we are coming into a fairly difficult period in the run-up to Christmas. Will handing back that money have a direct impact on people's ability to tap into crisis loans coming into the Christmas period?

Mr Snowden: The easement will have been based on a forecast of what it expects to require, given that we are moving into the winter period. It reflects a reduction in what we have experienced in the year to date, rather than any assumptions about much lower levels of requirements coming into the winter.

Mr F McCann: I am just trying to work this out in my mind. Do you make those assumptions based on the number of people who claimed last year, or do you —

Mr Snowden: There are trends and patterns from previous years.

Mr F McCann: You would know that, over the Christmas period, a large number of people are usually forced to go to the benefits office to apply for crisis loans. Is that taken into consideration when you are handing back the money?

Mr Snowden: As I said, the decision will have been based on the reduction compared with the forecast for the year to date, and there will be an assumption made about the situation over the winter period and Christmas.

Mr Beggs: One of the easements that you have highlighted is from the child maintenance service. You have said that higher-than-expected rental income has caused an easement. It sounds as if it is a landlord. Where is this rental income coming from?

Mr Snowden: The child maintenance service is based in the Great Northern Tower, Millennium House on Great Victoria Street. It has leased some floors of Millennium House. It does not require them all, at this point, but hopes to eventually run other operations from the Great Northern Tower. So, as the child maintenance service does not need all the floors, it has sublet them.

Mr Beggs: It has leased floors that it does not need.

Mr Snowden: It has made certain assumptions about the number of people it will have. As in the Social Security Agency, there has been a reform programme in child maintenance, involving a period of the dual running of two systems. As we move everybody on to the 2012 child maintenance system and migrate their cases off the older 2003 and 1993 systems, the number of staff required will reduce. There was a peak requirement for staff and a peak requirement for accommodation, and that is reducing.

Mr Beggs: Is the rental income covering the cost of renting those floors?

Mr Snowden: It is.

Mr Beggs: Under core, you have mentioned an easement of £1·9 million relating to the National Insurance fund costing exercise. Can you explain what that is?

Ms Brown: We have to calculate what gets repaid. There is a [Inaudible.]

aspect of this when we recoup the funds. There is also an element for DFP to do, and it is to do with the benefits that are contributory and those that are non-contributory. The calculation at this stage is that we have some easements coming out of that.

Mr Beggs: Going back to the issue of monitoring rounds, which Jim mentioned. It is the first I have heard that there will be no January monitoring round. What will happen if you have further easements between now and the end of the year, if there is no monitoring round?

Ms Brown: We are required to declare any easements as soon as they arise. If we were to incur significant easements, we would declare them at that point. Of course, the Department will always look at where it can redeploy its resources in order to maximise its budget, and that obviously has to be done within the de minimis rules.

Mr Beggs: Essentially, if there is not going to be a monitoring round, there is no expectation that there will be money to be redistributed. I assume that we are already overspent. Is that the reason? What explanation has been given?

Ms Brown: That was not stated in the commissioning letter.

Mr Beggs: Good governance would have us discuss the Budget for 2016-17 now, to be finalised, so that all the agencies that get money from that have good, timely information on what their budget will be, starting on 1 April.

When will that exercise occur? When you take decisions very late, there is a cost involved, and it is not a good way of running things. When will we hear about the Budget for 2016-17?

Mr Snowden: The Chancellor's autumn statement is scheduled for 25 November, and that is the point at which the Northern Ireland block figure is settled. We have been doing some planning work on the basis of a number of assumptions that the Northern Ireland block will remain flat in cash terms and that Health and Education will be protected. None of that has been commissioned officially, but that is what we have been doing in the Department. Therefore, we will have to look at a reduction in our cash figure of between 5% and 10% and what that will mean in terms of scenarios. We expect that the 2016-17 Budget will be commissioned after the Chancellor's statement is issued, and, at that point, the Executive will know the block for allocation for 2016-17. It will be a very challenging budget period for the Department, and there will be some very difficult decisions to be taken.

Mr Beggs: Would it not be more normal to have a draft Budget, so that you know roughly what figures are coming, and then have the final Budget reflect any final adjustments that the Chancellor might make in a few weeks' time? Is that not the normal process? Why are we running everything so late? Does that not make life more difficult for you in your Department and for all the other bodies that you fund?

Mr Snowden: Yes, it would have been preferable to have had this commissioned much earlier and to have a process started and have had discussions ongoing with the Committee, but all we can do is respond to the situation that we are presented with and the process that has been decided on.

Mrs D Kelly: Thanks for your presentation. There are a couple of points that I want to pick up on. One is the underspend in some Departments because of the moratorium on recruitment. What impact has that had on service delivery? The second point is on the money that has not been spent on housing. I support Fra; it is incredible that money is being returned that was for housing in any regard. I want to know why there are no plans in place to ensure that all moneys for housing are expended. Thirdly, I want to know what impact, if any, the failure to spend money on T:BUC has had on the Executive's programme for delivery aspirations.

Mr Snowden: With the moratorium on staff, there has been a small impact on service standards in a number of places. In some cases, average processing times have been pushed out marginally, and there has been a bit of an impact on accuracy rates in the child maintenance service. Measures are being put in place to address the accuracy rates problem, but there is no question that, if we have a smaller number of staff doing the same amount of work, something will have to give along the way. The Social Security Agency is doing what it can to make sure that the processing times are maintained at a high level. However, there is no question about it: if we have to reduce our staff numbers further to live within our budget, there will be implications for service quality.

The money handed back in relation to housing is on the ring-fenced funding for T:BUC. The money for the Together: Building a United Community project is from the reinvestment and reform initiative. It is borrowed money that is provided to the Northern Ireland Executive. We are handing this back because we do not need that money this year. That money can be re-profiled later. We are using our own budget to cover the cost of the schemes. There has been good progress on the T:BUC schemes that we have. There are five on site at the minute, and one has been completed and opened on Ravenhill Road. There is another one at Felden/Mill Road, which, unfortunately, has been in the news for some for the wrong reasons. The first phase has been allocated. The scheme is progressing quite well. It is simply the phasing of the time when we need the money for those projects.

Mrs D Kelly: Chair, it would be useful if we could get some feedback from the Social Security Agency on the impact of reduced staff numbers on waiting times for processing people's claims. I would like to know exactly how many applicants are impacted and what the waiting time delay is. Indeed, I think that we need to know about some of the pressures on staff and if there are any additional alarm bells in relation to sickness and absenteeism, which we all know is often caused by stress.

Mr Snowden: I think that the Committee has received or is due to receive a briefing on absence levels in the Department.

Mrs D Kelly: That is OK. I will reflect on that.

Mr Snowden: In short answer to your point, there has been a slight increase in absence levels in the Department this year compared with the past year. After a five-year trend of continually reducing absence levels in the Department, it has gone up slightly this year. An interesting aspect is that long-term absences are decreasing but short-term absences are increasing, which gives some indication of people possibly being under pressure or disaffected.

Mr Allister: I have just a quick point. In six months' time, the Department is meant to disappear. How is that factored into your financial planning?

Mr Snowden: We have to make financial plans in relation to the functions that the Department carries out. All those functions still have to be followed through by the new Department. It is a complicated issue. We have to have a budget in place to deliver the functions that we currently deliver, which will be carried out by the Department for Communities. The other Departments that are changing will be doing the same thing. At some later stage, when the Department is closer to being formed — Deborah is leading on this issue for the new Department — those bits will have to be joined together.

Mr Allister: In joining them together, given that you are budgeting for your existing functions, are there any savings?

Mr Snowden: It is possible that there might be opportunities for more efficiencies to be achieved because the whole purpose of the new Department is to make a more coherent delivery of various functions across government. For example, the plan is that the employment service will join DSD from DEL. If that can be joined up better with the Social Security Agency, we would like to see, maybe not in 2016-17 immediately but certainly within a year, more efficiencies emerging from that.

Mr Allister: Does that mean that, during next year, you expect fairly generous easements?

Mr Snowden: I would not expect that. No.

Mr Allister: I just wonder where the savings are coming from.

Ms Brown: At this point, the budgeting for 2016-17 is in the context of the functions that we currently have. The respective Departments will be doing the same. In the first year, there will be a huge amount of change and flux. A change programme of some description will need to be put in place to identify where efficiencies can be achieved and how those can be worked through. There will be a large piece of work in that, so it would not be reasonable to expect any efficiencies falling out of that amalgamation in the first year. However, you would anticipate that, moving forward, they should be able to find some economies of scale and synergies. That will be worked through in the first year.

Mr Allister: The jargon is good: finding economies of scale from the synergies moving forward.

Mr Douglas: Thank you for your presentation. Deborah, I think — I hope that I am right — that you mentioned reprofiling some allocations to urban projects.

Ms Brown: Yes.

Mr Douglas: Will you give us a flavour of some of those projects?

Ms Brown: One of the projects that we will fund is St John Bosco in Newry. Another is Manor Street/Cliftonville, which is a Men's Shed project. There are a few smaller projects, such as Kids Together funding for IT and play equipment. There is the Newstart education facility upgrade of a computer suite, and a St Peter's IT suite. There are a number of projects that we are able to divert the funding to.

The Chairperson (Mr Maskey): No other members are indicating to speak. I have a couple of wee points. I appreciate the difficulties that you are under, given the difficult circumstances that we are all working under. I have sympathy for the difficult challenges that you, as officials in the Department, have to address, but I am probably more concerned about the impact of all this on the people we represent. In the talks that are on at the minute, all the parties have been addressing issues around budgets and stuff, so we know the problems that we all face around budgets.

You heard the issue of the social housing budget being raised again this morning. I know that it is not a specific policy issue that we can address with you this morning, but it is something that we need to return to. I am pleased to hear that the T:BUC work and activity is still under way.

If there is anything else, Ian and Deborah, that you think you need to add to your presentation, please do so; if not, I am happy that we leave it for now. It is difficult when we do not have the routine monitoring rounds that people can deal with on an ongoing and more organised basis, but that is where we are. Thank you, Ian and Deborah.