Official Report: Minutes of Evidence

The Chairperson (Mr Nesbitt): I welcome David Sterling, the permanent secretary at the Department of Finance (DOF); Derek Baker, deputy secretary of the strategic policy group at the Department for the Economy (DFE); and Paul Brush, the head of EU future relations in the Executive Office (TEO). David, I hope that you do not mind if I say something to Paul before you begin. Paul, this is a new department under this mandate.

Mr Paul Brush (The Executive Office): Yes; it is a new division.

The Chairperson (Mr Nesbitt): David, no papers were provided for the Committee.

Mr David Sterling (Department of Finance): No. Sorry, were papers asked for, Chair?

The Chairperson (Mr Nesbitt): We tend to expect them.

Mr Sterling: I was not aware of that.

The Chairperson (Mr Nesbitt): Over to you.

Mr Sterling: Thanks very much for the invitation to outline the work being done by the Northern Ireland Departments to prepare for the UK negotiations on leaving the EU. As you noted, Sir Malcolm McKibbin cannot be here today; he is at a trilateral meeting on EU exit issues in London with officials from Dublin, London and Belfast. I am here in my capacity as one of the co-chairs of an interdepartmental coordinating group set up at the behest of the Executive to coordinate a response to the EU exit. The request went to Malcolm after an Executive meeting in July. Andrew McCormick, the permanent secretary at the Department for the Economy, is my co-chair. He cannot be here today, but Derek is here in his place.

Together we have been working with all Departments to pull together analysis of the potential impact of the exit from the EU and to provide advice to Ministers on how they might respond to the challenges. Each Department has put in place a Brexit team to coordinate the work in the nine Departments. That is the main structure, and we have been doing quite a lot of work through that arrangement. Significant engagement has also taken place between Executive and Whitehall officials as well as with our counterparts in Dublin, Edinburgh and Cardiff. I can give you more detail about those discussions and the arrangements for them. There is still quite a bit of uncertainty over what Brexit will mean, but we seek to assess the opportunities that will arise and the risks that need to be addressed.

The First Minister and deputy First Ministers have made it clear that they intend to have a full and active voice in shaping the terms of the UK's negotiations and the arrangements for exit. At a ministerial level, it seems likely that the discussions between the UK Government and the devolved Administrations will be through the Joint Ministerial Committee (JMC) machinery. At the apex of that, you have the Joint Ministerial Committee (Plenary) (JMCP), and it is due to meet on 24 October. Our expectation is that the First Minister and deputy First Minister will represent the Executive at those negotiations. There is to be a lower-level group, the Joint Ministerial Committee (European Negotiations) (JMCEN), which will probably meet to get through some of the more detailed discussions at a later stage.

At official level, as I say, we are engaged on a bilateral basis at departmental level. The Department of Agriculture, Environment and Rural Affairs (DAERA), for example, is talking to the Department for Environment, Food and Rural Affairs (DEFRA), Derek's Department is talking to the Department for Business, Energy and Industrial Strategy (DBEIS), and, obviously, we are talking to the Treasury. A Whitehall permanent secretaries group has been set up, at which permanent secretaries from the three devolved Administrations have an opportunity to discuss issues with Olly Robbins, who is the permanent secretary in the Department for Exiting the European Union (DExEU). We have also been feeding the Northern Ireland perspective into a range of detailed sectoral reports that are being prepared by DExEU and are taking part in regular discussions with the Cabinet Office, which is also looking at various thematic issues. They have set up a couple of specific groups to look at market access and justice and security issues, and a border issues working group has been established at official level. It is important to point out that we are not relying on one means of engagement; we are using all channels available to us to find out what is going on and to maximise our influence. It is clear — there is no surprise about this — that the issues facing Northern Ireland are, perhaps, unique and more significant than for any other UK region. That gives a special focus to the work that we are doing.

The particular concerns for the Executive were set out in the First Minister and deputy First Minister's letter of 10 August to the Prime Minister, which, I am sure, you are aware of. It identified five categories of issues: the border; economic competitiveness; energy supply and security of supply; future provision of EU funding; and sector-specific issues, particularly the agrifood sector, which comprises a much larger proportion of our economy than in other regions.

That is a broad overview of where we are at the moment. We will continue further discussions with Whitehall Departments. At the weekend, the Prime Minister signalled an intention to trigger article 50 before the end of March 2017, so our expectation is that activity will increase over the next few months at ministerial and official level. As officials, our role is to provide Ministers with the best possible advice on the implications and on potential negotiating positions for the Executive.

The Chairperson (Mr Nesbitt): Thank you, David. That is comprehensive. May I begin with contingency planning? In the face of such a massive event as an in/out referendum, it would be reasonable to expect that there was some contingency planning, even if you felt that the seismic result was unlikely. It appears that Sir Malcolm McKibbin commissioned some contingency planning in terms of this famous paper, which, we are told, was not finished. Why was the paper not finished?

Mr Sterling: The First Minister gave a clear answer to your question about that paper in the Assembly yesterday, I think. I do not think that I have anything that I can usefully add to that.

The Chairperson (Mr Nesbitt): She said that Sir Malcolm had commissioned it and that neither she nor her predecessor had seen it. It appears that her partner in government, the deputy First Minister, had seen it. She also said that it had not been finished, and there was no opportunity to ask why not.

Mr Sterling: As I say, I am not sure that I can add anything to that. The important thing to recognise is that, following the referendum result on 23 June, the Civil Service mobilised very quickly. I would not say that we were any less prepared than Whitehall has been. We have moved quickly to establish the apparatus that I have described across all Departments. Intense analysis has been completed over the summer, and we are now in a position where we are aware of all the potential implications. We are in a position to give advice to Ministers on all the major issues that have been identified. We will be able to give Ministers advice when it comes to the more detailed negotiations that will begin, I would think, within the next few weeks. We have caught up.

It is also worth noting that we have been working with Deloitte, which has assisted us — on a pro bono basis, I should say — in conducting an assessment of capability and capacity requirements in the Civil Service. We now have an assessment of the likely need for resources over the next few years, and we will have to manage within that.

The Chairperson (Mr Nesbitt): Are the departmental Brexit teams populated internally?

Mr Sterling: Yes, they are populated internally. I would not want to generalise too much about what the Departments are doing because Departments are affected in different ways and their responses have been constructed in line with the context that they face. Although this is characterising things a little crudely, three Departments are, perhaps, affected more than others: the Department of Justice (DOJ), the Department for the Economy and the Department of Agriculture, Environment and Rural Affairs, with our Department being affected from a financial and EU funding perspective. I know that at least two of those Departments have set up special arrangements for consulting stakeholders. As I say, different approaches have been taken to conducting analysis and seeking the views of stakeholders across Departments. That is being done in the context of what each Department faces.

The Chairperson (Mr Nesbitt): Would it be fair to say that there is a clear understanding and willingness in the Departments to reach out where capacity needs to be built up by engaging with the right stakeholders and experts?

Mr Sterling: Yes — absolutely. We have been strongly encouraged to use whatever means we can to engage with other parts of the UK Administration and to talk to our counterparts in Dublin and in the devolved Administrations.

The Chairperson (Mr Nesbitt): What about contact with Secretary of State Brokenshire?

Mr Sterling: I am sorry, I should have said that there are very clear and regular discussions with the Secretary of State at ministerial level and with NIO officials at official level. They have helped to facilitate engagement in Whitehall for us as well, so the NIO has been helpful.

The Chairperson (Mr Nesbitt): In terms of ministerial responsibility, is this being driven by FM and DFM?

Mr Sterling: Indeed.

The Chairperson (Mr Nesbitt): We know that, on occasions, when they take differing views, that puts you in a position in which all you can say to us is "It is under ministerial review" or "There is no ministerial agreement" — for example, on the development of the Maze/Long Kesh. When it comes to Brexit, we have Ministers with differing views, so how are you doing for political direction?

Mr Sterling: It is no great secret that the two parties have approached the referendum from different directions. Equally, it is clear that, whatever political differences of opinion there have been, the First Minister and the deputy First Minister have said that they will work together to find an outcome that is in the best interests of our people here. Officials across all Departments are working under that clear instruction. The intention is to find the best possible way forward.

The Chairperson (Mr Nesbitt): Indeed, they came together to write the letter that you mentioned, which contains the five areas of concern. I think that every member would agree that those are valid areas of concern. What about identifying the opportunities?

Mr Sterling: We are all working to identify opportunities. I think that I said in my introduction that there were opportunities and threats. Obviously, we have to deal with the risks, but we also have to exploit the opportunities. There are opportunities in this, and, as I said, they are different in each area. There is a clear intention in all Departments to make the best of this. Good could and will flow from it.

The Chairperson (Mr Nesbitt): Have you made an assessment of the Prime Minister's speech on Sunday?

Mr Sterling: In what sense?

The Chairperson (Mr Nesbitt): Some commentators saw it very much as a hard Brexit-type speech; she said that we would have sovereignty over immigration, which is one of the four freedoms. The Visegrad Four has made it clear that it will veto any attempt to block freedom of movement. That suggests that we are on some sort of collision course over access to the single market and, perhaps, even the customs union that we will exit from.

Mr Sterling: We have provided and will provide analysis to Ministers that will take account of whatever scenario might emerge. Clearly, we are operating at a time when the EU, on the one hand, and the UK, on the other, are in a pre-negotiation phase. Both will be careful not to reveal their negotiating position; you would not expect them to. Both will probably adopt a fairly hard public opening position. It will be only when we get down into negotiations that we will find where the areas of common ground and difficulty are. The Prime Minister said that she would not provide a running commentary on the negotiation tactics etc. That is the context in which we will have to work.

We will work hard to make sure that we have a say at the negotiating table. The First Minister and the deputy First Minister have both said that they need to be there when key decisions are taken, particularly those that will most affect Northern Ireland. At official level, we are working hard to make sure that our voice is heard in the Departments that are playing a part.

The Chairperson (Mr Nesbitt): What I am coming to is this: will you be in a position and is it an objective of yours to provide live commentary internally to FM and DFM and say, "Things have taken a turn for the worse" or "Things have taken a turn for the better, but we've still got a long way to go"? It is almost like monitoring a patient: you have a live eye on what is happening.

Mr Sterling: Our intention is to provide the support that Ministers feel they need when it comes down to the negotiating position.

Mr Boylan: You are very welcome. Thank you very much for your presentation. David, some of us remember what it was like to have customs posts. On Monday morning, I received a voicemail saying that a number of migrant workers had been stopped at the border. They were held for a while because they did not have papers, even though they were travelling back and forward working on farms, North and South. That is not a good sign.

You said that you had been talking to the Irish Government. Will you expand on those negotiations? I come from a border area, and I hear that the business community out there feels unsure. They are continuing on at the moment, but they are asking us about the impact of all this. Will you expand on the impact on cross-border travel and trade? I appreciate what you said at the start about Brexit: what is it? We do not really know what it is. I want to know what negotiations are ongoing.

Mr Sterling: As officials, we are not negotiating; we are in discussions. The discussions that we are having with Irish Government officials are in the context agreed by the First Minister, the deputy First Minister and the Taoiseach at the North/South Ministerial Council (NSMC) meeting back in, I think, July.

It was agreed that there would be an audit of border-related issues of interest to both Governments and that there would be a presentation of those issues at the next NSMC meeting, which is due to take place in November. Our discussions with officials in Dublin are in and around those issues: the free movement of people, the free movement of goods and the type of things that you mentioned. It is not as if we are negotiating; we are simply trying to identify —

Mr Boylan: The terminology is "discussing", but do you understand where I am coming from? We had a presentation a couple of weeks ago on tariffs and trade; that is where we are. When you live in a border area, you experience it because, depending on currency rates, there will be major issues for us when we travel North or South. I use the example of the people who were stopped the other day. It could be a one-off, but we do not want to go back to that. We want an answer to the question on free movement; that is a key issue for us.

Mr Sterling: Again, the First Minister and the deputy First Minister are both on record as saying that they want the free movement of people and goods to continue. That is reflected in their letter to the Prime Minister of 10 August. The Secretary of State has said several times that there is no intention to return to the borders of the past. The issue will be coming up with an arrangement that satisfies the British and Irish Governments and is also acceptable to the EU. That is where the challenge will come from.

Mr Kennedy: Thank you, Chair. Welcome, and thank you very much for your presentation thus far. I have a couple of questions. Presumably, the main political action for Northern Ireland will be the Joint Ministerial Committee (Plenary) where the great beasts of the political jungle roar. For lesser mortals and lesser beasts, the Civil Service does its work through the JMC (European Negotiations), is that it?

Mr Sterling: There is another JMC group being set-up, called JMCO — with the "O" for "officials". It is a formal mechanism for officials to engage, but there is a lot more unofficial engagement going on between us and the various Whitehall Departments and, indeed, our Scottish and Welsh colleagues.

Mr Kennedy: Each Department has its Brexit team, as necessary, that coordinates with its counterparts in the rest of the UK and with the regional Administrations, as necessary, as well.

Mr Sterling: Yes.

Mr Kennedy: OK. What appears to be emerging is that it is clear, even from the Prime Minister's comments earlier today, that the United Kingdom Government will take charge of the negotiations. For Northern Ireland, as a regional devolved Administration, it is key that we have as much direct input with the Prime Minister and the Cabinet as possible. In terms of that, the relationship with —

Mr Stalford: Things like entertaining the government party and what have you.

Mr Kennedy: Champagne receptions?

Mr Stalford: Things like that, yes. Making friends and influencing people —

Mr Kennedy: I did not know that you are a champagne man.

Mr Stalford: You could have some humble pie. [Laughter.]

Mr Kennedy: More important than champagne is the detail to be worked out and the relationship with the Secretary of State in particular. Explain what mechanisms are in place with the Secretary of State and the Northern Ireland Office in terms of the work of this Administration?

Mr Sterling: Going to a higher pay grade, the First Minister and the deputy First Minister have together met the Prime Minister, and I think there have been other meetings at senior level. There are regular meetings between the First Minister, the deputy First Minister and the Secretary of State, and there is regular engagement between officials and NIO officials. Derek, Malcolm McKibbin, Andrew McCormick and I are in fairly regular discussions with officials from the NIO, the Cabinet Office and the Department for Exiting the European Union. There is not a straitjacketed formal mechanism; there is a combination of formal mechanisms, which I have described. However, the more important engagements are the informal discussions that take place almost day and daily.

Mr Kennedy: So, it is an informal — sorry, Derek.

Mr Derek Baker (Department for the Economy): Sorry to cut across you. I was going to add a point, and maybe it goes back to what you were saying earlier. Further down the food chain — at my level, for example — one of the things that are really important is that we, at official level, are constantly, to use the vernacular, in the faces of our counterpart Departments in Westminster on this. I will give you a for instance. We know that the Department for Exiting the European Union, which is coordinating this in Whitehall, has commissioned a lot of economic analysis, broken down by business sector, to see what sectors look like, what their significance is in terms of employment, output and trade, where the trade is going and who are they the trading with, what the labour market statistics are and where the workers are coming from. Ultimately, they are doing that analysis to feed into the UK's negotiating position. We have to be with them on that and get access to that, and we simultaneously are doing our own analysis in the Department for the Economy, using our economists and statisticians, liaising very closely with Invest NI to get the qualitative stuff in from business sectors so that we can make sure that the analysis done in Great Britain properly reflects any nuances that are relevant to Northern Ireland. We are getting that traction. Our colleagues in Westminster are very willing to engage with us, and they have been very open. However, we need to not be passive on this, because, as you know, sometimes they can forget about us. That is why we need to be in their faces. We are getting no resistance in that regard. That is the kind of thing that we need to do at official level.

The Northern Ireland Office has an interest in this in certain areas, but it is facilitating engagement between all Departments at official level, the Cabinet Office and the Department for Exiting the European Union, particularly on what might be deemed cross-border issues. It is about getting a good feel and understanding of that to make sure that all our concerns and issues are fed into the Cabinet Office and the Department for Exiting the European Union so that they have a full picture and a full understanding of all the issues that are important to us.

It is a bit of a blunderbuss approach. There are lots of channels, but that is better than putting everything through one channel. We hope that the message will stick, and we are confident that it will. We are getting —

Mr Kennedy: The relationships that are key to Northern Ireland's interests being best represented are not only those with the regional Administration — FM and dFM, the Executive and, to a lesser extent, the Assembly — but those with the Northern Ireland Office and the Secretary of State for Northern Ireland, who is supposed to represent the best interests of Northern Ireland. That is his title. I am not suggesting that he is doing otherwise, but his job is to represent the interests of Northern Ireland at Cabinet level. We will not be involved in the direct negotiations, so the seat closest to the Prime Minister at Cabinet level has to be the Secretary of State for Northern Ireland. We need to harvest those links and ensure that there is proper work and liaison with the Northern Ireland Office. Is that happening?

Mr Sterling: That is happening at ministerial and at official level.

Mr Kennedy: But there are no formal structures at the moment.

Mr Sterling: I do not think that there need to be formal structures for engagement between us and the Northern Ireland Office; there is regular engagement. The Northern Ireland Office is very much a part of the formal JMC-type structures that I described.

Mr Kennedy: Paul is heading up a new unit to deal with these issues. What are the structures involved with that? What personnel are available to you and what are their jobs and chief responsibilities?

Mr Brush: In essence, my unit has been established to help to coordinate and support the work that is going on in all the Departments. As David outlined, the primary research, analysis and economic assessments are being done by the people who know those individual business areas, but it was recognised that there needed to be a resource to bring that all together in the Executive Office to prepare the unified position to support Ministers in those negotiations and in JMC. The primary role of my team is to support the interdepartmental coordinating group and to bring a central focus. Our resources are quite small because we have been established for only a few weeks. I think that we are sufficient for that coordination and support role.

Mr Kennedy: What does "quite small" mean?

Mr Brush: Three.

Mr Kennedy: That is you and two others.

Mr Brush: That is me and two others, yes.

Mr Kennedy: But you expect that to be supplemented and added to.

Mr Brush: As required.

Mr Kennedy: As you require, or as others require?

Mr Brush: As the work demands, I think.

Mr McGuigan: Earlier, I mistakenly asked the researcher a question that was for you on the potential impact of the vote on the Good Friday Agreement, particularly strands 2 and 3 on the relationships across this island and across the islands. You said that the direction that you have been given is to look at the best possible outcomes for the North. On the back of that, are you looking at arrangements that will have the North remaining in the EU? Is there discussion taking place on that with, for example, Scotland? Lastly, this will have an impact on the citizens who live here, and most people seem to suggest that it will have a negative impact. How much EU funding to the North will be put at risk because of this?

Mr Sterling: Picking up the first point, we were not in the room, so I am not sure what the researcher said on the constitutional position. I do not think that I am qualified to comment on that anyway. Your second question was on what constitutional arrangements we might recommend: I do not see that as our role. Our role is to provide advice to Ministers on the possible impacts and on the measures that might be taken to address or mitigate such impacts. It will be for Ministers to decide what they wish to argue for when the negotiations begin. That is a matter for political discussion. The third point was about EU funding. That has been a concern for all Departments, and my Minister has been campaigning hard to make sure that there will be no loss of spending power and no loss of funding. We are actually in a much better place today following the Chancellor's announcement, in the last couple of days, that the guarantee that he had given before is to be extended from the autumn statement up to the point of exit. Our preliminary assessment — I would not want to be held to this — is that, while last week we thought that our exposure or risk could have been as much as €1 billion, it is now much reduced and may be much less than €100 million. That has been a welcome reassurance in the last couple of days.

Mr McGuigan: Over what period is that a figure?

Mr Sterling: That is the programme funding that was at risk for programmes that were running from 2014 to 2020.

Mr McGuigan: With your indulgence, Chair, there will obviously be a bigger impact on specific EU-funded programmes. We could talk about agriculture, finance, investment or trade, but at what point will officials be able to provide a figure on that impact?

Mr Sterling: The figures that I was quoting were in relation to the funds in those specific programmes. In my Department, we have a particular concern for INTERREG and the Peace programme. The assurance covers all that we were expecting to draw down between 2014 and 2020. If you are talking about the potential wider economic impact, that would be a matter for economists to forecast. We are not producing any forecasts about the impact, but we are working closely with the Ulster University, and Professor Neil Gibson's Economic Policy Centre is looking at this. It has not reached any firm conclusions as yet, but, generally, Neil's view is that, over time, things will even themselves out.

The Chairperson (Mr Nesbitt): David, just to be clear, you were saying that, because the initial statement from the Chancellor said that you had to have it signed off by the autumn statement, that put €1 billion of projects in Northern Ireland at risk because there was a risk that they would not be signed off in time.

Mr Sterling: That is correct.

The Chairperson (Mr Nesbitt): And, because of his statement at the Conservative Party conference in the last number of days, €900 million of projects could now be secure.

Mr Sterling: I would not want to be quoted on that completely because we are still —

The Chairperson (Mr Nesbitt): Have you met Mr Hansard? [Laughter.]

Mr Sterling: No. I would not want to be held to it. We are still assessing the impact of that, but our initial assessment is that the guarantee will cover projects that will be agreed beyond 23 November, the date of the autumn statement. Therefore, it provides reassurance that covers, more or less, all the programme spend up to 2020. Obviously, the challenge for us is to make sure that we get the projects that we expected to be successful and draw down funds before exit occurred — that is now likely to be early in 2019 — processed and letters of offer issued within that time frame. We have more time to do it now.

The Chairperson (Mr Nesbitt): Yes. So if that €100 million-ish or whatever it turns out to be —

Mr Sterling: It could be less than that.

The Chairperson (Mr Nesbitt): Are they projects that need more work, rather than just a process?

Mr Sterling: No. What may remain at risk is not so much what is in those programmes; it is other programmes where it is not clear whether the guarantee extends to them. We have quite a list of programmes.

The Chairperson (Mr Nesbitt): I will come back to you and ask for written confirmation of that later.

Mr Lynch: This may overlap somewhat, David, but —

The Chairperson (Mr Nesbitt): Sorry, Sean. Cathal wanted to come in.

Mr Boylan: I appreciate that, Chair. I have just one quick point. My colleague asked a question on the Good Friday Agreement. As part of that set-up, there were entitlements and obligations in relation to, at that time, being in Europe. I know that you speak in an official capacity, but surely there has to be some work brought forward on that. The negotiations and talks that we were committed to at the time have to be brought forward as part of this work because there definitely were obligations and entitlements in relation to the matter. That is the key element of the question asked by my colleague.

Mr Sterling: I will take that point on board. The remit of the work that we are doing is extending, by and large, to economic and social impacts; we are not directly addressing constitutional issues at the moment, but I am certainly happy to take that back.

Mr Lynch: David, how much are the British Government cooperating with us, the Scottish and the Welsh to look at issues and scope out options?

Mr Sterling: Relationships are amicable. I think that Derek hinted at the fact that we have some frustration that the exchange of information is a bit too one-way at the moment, in that we are providing them with analysis of the impacts here but are not yet getting a free flow of information showing their analysis of the impacts on the UK as a whole. That is something that we are pushing hard on.

Mr Lynch: That is a gap.

Mr Sterling: There is a gap at the moment.

Mr Baker: To supplement that with an observation, in the last few months it probably has been extraordinary that our Ministers here have been visited by three Secretaries of State intimately involved in issues regarding EU exit. That shows a very high level of engagement at political level. It is very welcome that, at some of those visits by Secretaries of State, particularly the visit by the Secretary of State for International Trade and by the Secretary of State for Exiting the European Union, there was engagement with local business interests. There was an opportunity for local business interests to relay their concerns directly to the top, where people will be engaged in negotiations.

Mr Lynch: You said that you were feeding in the NI perspective: can you elaborate on what that perspective is, David?

Mr Sterling: Market access is a particular issue. Do you want to talk about that?

Mr Baker: At the start, the Chair asked whether we were reaching out to get views, and one of the things that is happening in the Department for the Economy firmament is that a couple of fora have been set up under the good offices of Invest Northern Ireland, jointly chaired by Alastair Hamilton, the chief executive of Invest NI, and Andrew McCormick, the permanent secretary, to gather views from business. One of the fora involves leaders from quite a large number of local businesses, cut and diced by sector, size and geographical area. There is a similar group for business representative bodies, such as the CBI, the Chamber of Commerce and the Federation of Small Businesses. The purpose of those fora is to make sure that we hear the concerns of businesses directly as they get to grips with the issues and, indeed, to feed back what we know and describe to them the arrangements that are in place. That provides some comfort to business.

To go back to the point, it was through that kind of communication that labour mobility was raised, and Mr Boylan made that point earlier. That is the number one issue for many of our businesses. You might think that market access would be number one, but it is access to skills and labour. It is a big issue for many of our businesses, particularly those located in Newry and in the north-west. There are a couple of high-profile examples of where people commute, and it was for that reason that that was fed into the Executive and then manifested itself in the letter that the First Minister and the deputy First Minister wrote to the Prime Minister. That is how that conduit of information works.

Mr Lynch: I may have picked this up wrong, David, but did you say that there was a border working group?

Mr Sterling: There is. The NIO has set up a border issues working group that the Department of Justice is heavily engaged in.

Mr Baker: All Departments are engaged in it. Whilst there may be vertical issues, if I can use that term, such as trade, labour mobility or sectoral analysis, the border issues group is horizontal because the border affects all those issues. Therefore, all Departments are represented on it. It is to identify issues that, if you like, are peculiar to Northern Ireland so that we can feed them back to the Cabinet Office and the Department for Exiting the European Union.

The Cabinet Office and the Department for Exiting the European Union fully recognise that we are unique in this regard and they have to play those issues into the UK negotiating strategy.

Mr Lynch: Finally, David, you said that there were examples of opportunities. Professor Phinnemore was here a couple of weeks ago, and, when he was asked, he said that he could not think of any. Could you give an example?

Mr Sterling: Clearly, one of the immediate impacts has been the fall in the value of sterling, which has provided a boost to exporters. There are also opportunities to have a lighter-touch approach to regulation. There will be potential opportunities to forge new trade arrangements with other parts of the world. If we have a slightly lighter-touch approach to state aid rules in the regulatory environment, and if Invest NI has more flexibility in how it provides support to promote and develop existing businesses and/or attract new foreign direct investment, it is in that sort of area that there will be opportunities.

Mr Lynch: Are you saying that they will reduce standards?

Mr Sterling: If you are looking at any regulatory regime, whether it is to do with employment law or health and safety, it will be for politicians to decide what is the right balance between creating opportunities for economic development and, for example, protecting the environment, protecting workers' rights and having a sensible approach to health and safety. Those are the political decisions that will need to be taken.

Mr Stalford: David, that was tremendous. Roughly five minutes of positives, and you are not even an academic. That was well done, and I was delighted to hear it. [Interruption.]

Calm down now, calm down.

Mr Sterling: I will take the compliment; I do not get many.

Mr Stalford: Yes, take it when you get it.

I think that it is fair to say that everybody, or almost everybody, including those of us who were on the "Leave" side in the campaign, did not see the outcome that we got coming, in terms of the actual result. You mentioned earlier about getting up to speed with the implications of that. Are you satisfied that we are up to speed and punching at the same level as other devolved regions and London?

Mr Sterling: That is a hard judgement to call, because clearly there has been huge upheaval in Whitehall. They have created two new Departments from scratch. The Scots have put in place a range of arrangements. We are as well prepared as we can be in the circumstances. The test will come when we get to a position where Ministers start to, first, prepare their negotiating position and, secondly, actually engage in negotiations with the EU.

Deloitte has done a piece of work in which it has made an assessment of capacity and capability. That report is more or less finalised. It has identified that we probably need to do more. We need to find more expertise in economic analysis, and we will probably need more lawyers as well. We will have to find those people.

Mr Stalford: Are you satisfied that the Department is well enough equipped that it will be able to access and find those people?

Mr Sterling: We will have to obtain additional expertise. Whether that means recruiting more people or buying in expertise as it is needed on specific circumstances, we have not yet decided. For example, we have moved quickly to process a range of INTERREG and Peace programme projects and have engaged a small number of additional economists on a short-term basis to help process those business cases etc. That is one example of where we have moved quickly to bring projects to the point where they can be approved as quickly as possible.

Mr Stalford: In terms of the general direction from the top of the Department, has there ever been an instance when FM and DFM have issued contradictory advice or requests to civil servants on this issue? Are they pointing in exactly the same direction?

Mr Sterling: I am very clearly under instruction that we are to work together to provide advice on what the best outcomes for Northern Ireland would be.

Mr Stalford: Mr Kennedy made a good point about the Secretary of State. I appreciate that it cannot be a formalised structure — how could it be? — but I want to ask about the engagement between the Secretary of State and FM and DFM and how that will feed into preparing the United Kingdom's negotiating position. In one sense, we will be negotiating with our Government — when I say "our Government", I mean Whitehall — on our position as part of the formal Whitehall position, which they will then negotiate on with other EU states. Is that an accurate summation of where it is at, or will we actually be participants in negotiations?

Mr Sterling: How this will work is not entirely clear yet. The Prime Minister has said that she wants the UK's negotiating position to be an agreed negotiating position. Most people will recognise that that will be quite a challenge given the difference of views between the devolved Administrations and the UK Government on some issues. Nonetheless, we are taking at face value that that is the intention at the moment. But how negotiations are conducted has not been agreed, or I am certainly not aware of it as yet.

Mr Stalford: Will there be a scoping exercise on that? Are you expecting to hear anything about that?

Mr Sterling: I am not sure exactly what the process for getting to that point is, but that type of issue is discussed in the group that Malcolm is involved in with the other permanent secretaries and at the JMC. It is likely that these issues will be discussed at the JMC plenary meeting on 24 October.

Mr Dickson: I am sure that it was not a Freudian slip when Christopher said "our Government". I am sure that, having sipped champagne with them during the week, he considers himself to be part of their Government.

Mr Stalford: Are you still a member of the Liberal Democrats, Stewart? You were in government with them, too.

The Chairperson (Mr Nesbitt): Let us focus here. It is not the debating Chamber; it is the Committee.

Mr Dickson: Gentlemen, the Prime Minister said today that the authority of the EU in this country has ended for ever and promised that the reintroduction of a border control was now a thick, immovable red line. Where do you see that thick, immovable red line, and what are the consequences for Northern Ireland? Will it be on the border between here and the Republic, or will it be somewhere in the middle of the Irish Sea?

Mr Sterling: Clearly, I am not the person who will determine the future arrangements. All I am doing, with my colleagues across all Departments, is providing advice to Ministers on whatever possible outcomes emerge and how we might respond to those. I have not seen the Prime Minister's statement today.

Mr Dickson: Given that we do not have responsibility locally for customs or for international borders, what influence will our Ministers and advisers have on issues like this, particularly given the Prime Minister's statement that she sees it as a thick red line? Even you could, wearing your neutral hat, accept that that is a very strong statement on the type of border that we will have.

Mr Sterling: She has also said — indeed, the Secretary of State has also said — that they do not want to introduce hard borders here. They do not want a return to the borders of the past.

Mr Dickson: It has never been described as a thick red line before.

Mr Sterling: As I say, I have not seen that statement. The First Minister and deputy First Minister have been given pretty firm assurances that they want to come up with solutions that will recognise the particular difficulties that occur in Ireland.

Mr Dickson: Can I turn to the issue of your relationship with your colleagues around the United Kingdom and the devolved Administrations? I turn in particular to Scotland, which clearly speaks with one, strong political voice in how its public servants will represent the Scottish Government. Given that you have, perhaps, two directions to be drawn in through OFMDFM, how will you deal with that, and how will, ultimately, the Government and the officials whom you represent square the circle of the differing demands that are placed on civil servants around the United Kingdom? Those coming from Scotland might take a different view from here or Westminster.

Mr Sterling: I do not feel that I am being pulled in two directions. As I said, it is clear that the two parties came at the referendum from different perspectives. However, I have been clear that, since then, my priority is to provide advice on what is in the best interests of our people here. Nothing has happened that conflicts with that. As to how Ministers ultimately decide how they will negotiate with the UK Government, that will be for them to determine at a political level.

Mr Dickson: Nevertheless, the political input to Scottish civil servants will be different from that given to you and, perhaps, to Westminster civil servants.

Mr Sterling: The Scottish context is very different from ours, yes. We play the ball as we find it.

Mr Dickson: You said that the Deloitte report was coming to a conclusion: will you be in a position to share that with us?

Mr Sterling: I will check on that.

The Chairperson (Mr Nesbitt): Will you take that away, please?

Mr Sterling: I will take that away.

Mr Dickson: Yes, that would be helpful, because you do not seem able to share much else with us.

In relation to the expertise that you have inevitably suggested you will need to draw on in Northern Ireland — I think that you said legal and consultant-wise — where will Northern Ireland fit in the pecking order of this? It is well documented that the United Kingdom is poorly placed when it comes to those types of advisers, whether in relation to negotiating future agreements or, indeed, understanding the total implications of this. Surely those experts will wish to gravitate towards London and sell their wares to the Westminster Government rather than to people like us.

Mr Sterling: We will obtain the advice that we need given our context. We are not clear yet how negotiations on future trade arrangements will be conducted and to what extent they will be needed. We will respond as is appropriate at the time. I do not think that I could be any more precise than that at the moment simply because the terms of engagement have not been agreed as yet.

Mr Dickson: Will we end up basically getting second-hand or recycled advice?

Mr Sterling: Certainly, it would not be the intention to end up with second-hand advice.

The Chairperson (Mr Nesbitt): Christopher, is this a follow-up?

Mr Stalford: It is, briefly. Just to be clear, the deputy First Minister attended the British-Irish Council on 22 July. He has said:

Has that been the approach of the deputy First Minister? Is that how you would characterise it?

Mr Sterling: As I said, I have very clear instructions from both the First Minister and the deputy First Minister.

Mr Stalford: No pulling in either direction.

The Chairperson (Mr Nesbitt): I think the point has been made on a number of occasions.

Mr McPhillips: Thank you, gentlemen, for your presentation. As an MLA representing a rural and border constituency, I have great concerns over the future of the North in a post-Brexit environment, from border controls to the single farm payment. How confident are you that the North of Ireland will get a fair deal? Would you agree with me that we are so far down the pecking order that it is difficult to see what benefits there are to us from Brexit?

Mr Sterling: Again, I cannot predict the outcome. All I can do is repeat what I have said before, which is that we will provide the best possible advice to Ministers going into discussions. The First and deputy First Ministers have received assurances from the Prime Minister and, indeed, from the other Ministers involved — the Secretary of State for International Trade and the Secretary of State for Exiting the EU — that Northern Ireland's unique position is understood and will be represented in the negotiations with Europe. It is probably fair to say that, whilst the EU is perhaps a little hostile to the UK at the minute because of what has happened, nonetheless we have many friends in Europe and there is recognition of the unique circumstances that Northern Ireland faces. Whilst I cannot predict the outcome, I would not want to think that we will go into these negotiations in anything other than a positive way.

Mr McPhillips: Since I came into the Assembly as a new Member, my party and I have asked on several occasions about preparation work and the implications of Brexit. Generally, we have had no opportunity to get any answers, but then last week we found out about this European policy unit report. It might have been covered before, but, just for clarification, who commissioned the report?

Mr Sterling: Again, the point I made earlier was that the First Minister gave a very full answer on that in the Assembly on Monday. There is not much that I can add. These issues occurred in the Executive Office, and I am not privy to all the detail.

The point I made earlier is that, since 23 June, there has been a focused, concerted, coordinated effort to assess the potential impact of leaving the EU and to provide the best possible advice to Ministers going into the negotiations, which will presumably start pretty soon.

Mr McPhillips: Should a report highlighting 20 negative repercussions of Brexit for the North have been shared with the public?

Mr Sterling: Again, that is not for me to comment on. Certainly, there is no shortage of analysis of the potential impact of Brexit available. Indeed, Professor Phinnemore, whom you referred to, has produced a paper on it. There is a wealth of analysis of the issues.

Mr McPhillips: What Ministers were given the report?

Mr Sterling: Again, I do not know.

The Chairperson (Mr Nesbitt): We have focused so far on what is happening in Belfast and how that is inputted to London, before London negotiates with Brussels. There is, of course, another route: going round the back or, to use a golfing analogy, slipping on at the tenth. We have the Office of the Northern Ireland Executive in Brussels. We have a Barroso task force in Brussels, and we have three MEPs whom we have not even mentioned in the course of the discussion. How do they fit into your thinking?

Mr Sterling: That is my omission; I should have mentioned them. Our office in Brussels is important and valuable in two respects. First, it provides us with intelligence about what is happening there and what the mood in Brussels is; secondly, it provides an opportunity to influence the key influencers in Brussels. We will use that. There is an opportunity to use the Barroso task force — it is called the special task force now — and that will be taken where appropriate.

The Brussels dimension has not been neglected at all and is very much a part of what we are doing.

The Chairperson (Mr Nesbitt): What about the MEPs?

Mr Sterling: And the MEPs. One of the immediate impacts was that Commission officials were instructed not to engage in discussions that might be related to future negotiating positions etc. We have not had the access that we had before. However, MEPs are still in a position to get access to commissioners and others, and they are being used where appropriate.

The Chairperson (Mr Nesbitt): On the mood in Brussels, David, you are saying that you recognise that there is a degree of hostility to the UK.

Mr Sterling: Yes, I think that that is fair comment.

The Chairperson (Mr Nesbitt): But there is also a fairly practical, hard-headed attitude. It seems to me that there was shock and a bit of mourning and then everybody went off for their summer holidays and came back saying to a certain extent, "Well, we are going to have to do this, so let us scope it out and get on with it".

Mr Sterling: Yes. Many people, including some members around the table, have said that what happened in June was surprising; again, that is fair comment. The surprise in Brussels was just the same, and the reaction has perhaps been a little predictable. I think that you are right that, as time goes by, those who are involved in negotiating on both sides will realise that there is a huge range of interests here. It is in the interests of Europe and the UK to reach a sensible deal at the end of this. It is probably fair comment again to say that Europe needs a strong UK and the UK needs a strong Europe.

The Chairperson (Mr Nesbitt): The Prime Minister has now given us a timeline. Do you have a timeline internally for when you will have scoped out the policy options and priorities and an assessment of whether those priorities clash with or complement the UK Government's priorities?

Mr Sterling: There are three key dates in the timeline at the moment. The end of March is the latest date by which the Prime Minister has said that article 50 will be triggered. Before that, we have the JMC plenary meeting on 24 October and an NSMC plenary meeting in November. There will be other things put into that timeline, but, at the moment, our focus is very much on those key dates.

The Chairperson (Mr Nesbitt): At the very beginning, you mentioned three Departments — the Economy; Agriculture, Environment and Rural Affairs; and Justice — as the ones likely to be most impacted. What are the specific concerns with Justice?

Mr Sterling: With Justice, there are issues in and around the common travel area, the movement of people and borders. I do not want to speculate about possible outcomes, but you will understand that there are clearly issues in and around the movement of people.

The Chairperson (Mr Nesbitt): Is the European arrest warrant a specific issue?

Mr Sterling: The European arrest warrant is one example of that.

The Chairperson (Mr Nesbitt): In a good outcome scenario, there would be a hiatus while we come out of Europe and before we renegotiate.

Mr Sterling: I do not want to speculate on what might emerge. I am not expert on justice issues, which is why I am hesitant to offer any views on that. What I would say is that Justice officials are very heavily engaged in this. All Departments are represented through the border issues working group.

The Chairperson (Mr Nesbitt): I would like to close with a list of asks, if I may. It would be useful to have an organigram showing the structure of all the JMCs etc so that we can get our heads around how it looks.

Mr Sterling: We can do that.

The Chairperson (Mr Nesbitt): You talked about an audit of issues with Dublin: on behalf of the Committee, I request that you ask if we can have sight of that when it is compiled.

Mr Sterling: That is a matter for discussion at the NSMC plenary in November, and, as with any NSMC plenary, there will be a statement to the Assembly afterwards.

The Chairperson (Mr Nesbitt): We have already asked for the Deloitte report when it is complete, so you will take that point away.

In terms of that billion pounds, would it be possible to have a list of funding applications?

Mr Sterling: I provided a breakdown before of the funding position, and we will rework that post the Chancellor's latest announcement. I will talk to the Minister about how we might best promulgate it.

The Chairperson (Mr Nesbitt): For my money, it would be nice to have a RAG indicator that shows us what is really in danger and what you think is relatively safe. Anything else, members?

Mr Boylan: Just two points. I would not mind a wee update on the office in Brussels and communication back and forwards. What is its interaction on these matters? You mentioned MEPs. What is going on there? You can come back to us on that.

I was listening to Derek with interest when he was talking about Whitehall officials and the discussions that he is having there. I mean no harm to anybody in the room, but in the key discussions on how this land border works with the Twenty-six Counties, negotiations with the Irish Government are key. We, on this island, know as much as anybody else. Everybody talks about the member states and that being dealt with by Westminster, but I feel that those negotiations are key. The Chair has already alluded to being kept in the loop on those discussions. There needs to be more than just the North/South ministerial statements back and forwards. I would like to hear more about those discussions as they go forward and to be kept informed.

Mr Sterling: We can take that back. As far as the views in Brussels are concerned, I think that Andrew Elliott, who heads up the Brussels office and has appeared before the Committee before, would be happy to come back and give an up-to-date assessment.

The Chairperson (Mr Nesbitt): He would be happy to host us out in Brussels.

Mr Sterling: Indeed.

The Chairperson (Mr Nesbitt): OK. Paul, Derek and David, thank you very much indeed.