Official Report: Minutes of Evidence

The Chairperson (Dr Aiken): Welcome to the first meeting of the Finance Committee of the year. Conor, it is good to see you. Can you hear us?

Mr Murphy (The Minister of Finance): Yes, I can hear you loud and clear.

The Chairperson (Dr Aiken): Happy new year to you, again. On behalf of the Committee, I wish you and the Department a very good new year. We look forward to working closely with you in these most interesting of times. Thank you for meeting me and the Deputy Chair on Monday. That was very useful. The Deputy Chair and I understand the circumstances around the Budget, but it is appropriate, as we said on Monday, that you get a chance to talk to the Committee so that the Committee is aware of the circumstances of where we are.

A few things have come up today, particularly in relation to the voucher scheme and how that is being managed and looked at. It is appropriate for the Finance Committee to get your view on that so that we understand what is happening in those situations.

I hand over to you, Conor, for your briefing.

Mr Murphy: Thank you very much, Chair, and thank you for the welcome. Happy new year to the Committee and staff. Joanne McBurney is on the line with me, and, as always, she will pick up on any of the detail of the questions.

I am delighted to get a chance to talk to you. I would have preferred that we were talking through the detail of a draft Budget paper that you would have had sight of at this stage, but that is not the case. I first tabled the draft Budget paper on 9 or 10 December and, after a number of attempts to get it on the Executive's agenda, it made it on for discussion only yesterday. I was happy to have some progress in that regard. I wanted to have that opportunity to engage with other Ministers, having gone back and forth with them. They all saw the first iteration of the draft Budget paper in December and quite a few of them had been in communication with me by letter or through my departmental officials. Yesterday was the first opportunity that we had to discuss the Budget. The intention — I sincerely hope that it will be the case — is that it will go back to tomorrow's Executive meeting for approval so that we can launch the consultation.

The Chair and the Deputy Chair met me on Monday and will know that we have a limited time frame for consultation due to the fact that we got an announcement of the end of the comprehensive spending review (CSR) only on 25 November and had to wait a further 14 days before the Secretary of State confirmed our funding envelope. I will come back to some aspects of that in my later remarks. It was only in early December that we were able to put together a paper and bring it to the Executive. That leaves a limited time frame for consultation with the Committee and for other Committees to look at that and talk to their Departments and for stakeholders, who obviously have a keen interest in the Budget in the time ahead. The fact that we will, hopefully, get it cleared only tomorrow — I intend to release a written statement tomorrow and come to the Assembly for an oral statement on Monday if it is approved — leaves a shorter time frame for consultation than I would have liked and that people will have genuinely expected. I am disappointed that we have had that hiatus and delay in getting the Budget paper into the Executive, but I hope that we can conclude the process tomorrow.

The comprehensive spending review was initially due to take place over the summer but was pushed back into the autumn due to COVID. Throughout the process, we were told to operate on the basis that we would get a multi-annual Budget process at the end of it. That is clearly what we want and, from talking to the Committee, I know that that is what it wants. We received a fairly abrupt announcement at the end of the process that we would have an annual Budget process again. It also falls short of what we would have anticipated with the level of finance that is available to us. We can get into some of the detail of that because it is publicly known, but, essentially, there was a marginal additional amount. However, bear in mind that we got £350 million New Decade, New Approach (NDNA) money in this year's Budget at the start of the financial year. That was taken out again and left the increase in the Budget as very marginal indeed. In essence, it has created a standstill Budget for all Departments.

Given the time frames to which we were operating and the fact that the comprehensive spending review ran on, it did not allow us to begin any significant re-prioritisation exercise across Departments. Of course, there will be winners and losers from that when you are operating from a standstill basis, but, from communication and conversations with Ministers, there did not seem to be much appetite for a reprioritisation exercise and we would have been very constrained timewise with what we could have done. Essentially, that means that all Departments will be living within last year's baselines. That is in the draft Budget proposition, which might change or alter if there is significant feedback during the consultation, but my proposal to the Executive will be, effectively, to operate within those baselines.

There are a couple of big strategic issues that I want to put on the Committee's agenda for the Budget. I obviously cannot go into detail on the figures until the Executive approve it, and, as I said, I hope to be able to issue a written statement tomorrow evening, if we get approval, and come to the Assembly on Monday. I am sure that officials will be back in front of the Committee in due course to answer questions, and I, of course, am happy to come back to the Committee if it so requires. Rates are one of the bigger strategic issues to consider. There is a balance between generating income for public services, particularly when we have, effectively, received a flat budget. As the Committee will know, in emerging from the pandemic, there is a very difficult and challenging economic situation, which has affected households. Therefore, that is one of the issues that has been considered, and I made a proposition to Executive colleagues about that. I am happy to share the proposition with the Committee when the paper is approved.

The other issue is the flat budget when we are trying to stimulate some form of economic growth and recovery as we begin to emerge from the pandemic. During the year, a number of Committee members asked questions about the Budget in the Chamber. The question about access to reinvestment and reform initiative (RRI) borrowing has arisen; we need to stimulate capital investment and the economic activity that will regenerate sectors such as construction. As members will know, we have access to about £200 million of RRI borrowing a year. I have put a proposition to the Executive about RRI borrowing, which I hope will be supported. We had a discussion about that yesterday at the Executive meeting. It is a big strategic issue that needs to be considered, and the Committee will want to look at that when the paper is provided.

I hope that we will get some certainty and clarity tomorrow. I was happy at least to get the paper up for discussion yesterday. I wish that the paper had been discussed, agreed and out the door in December. At this stage, even with the Christmas break, we would at least have had a number of weeks to allow people to begin to engage with the Budget. However, we are where we are. Hopefully, next week, I will be in the Assembly to take questions and elaborate further.

The Chairperson (Dr Aiken): Conor, thank you very much for that. To kick things off, I will go over the timeline. If you get Executive approval to sign off tomorrow and to issue a statement, we will be able to start the consultation process. It will be extremely tight to get proper scrutiny from the relevant Committees. One concern is that this Committee may not be minded to grant accelerated passage because the Budget needs to be carefully scrutinised. Can you give me a quick outline of how you will look at the timings if the Budget goes through tomorrow?

Mr Murphy: In an earlier iteration, we had a seven-week timeline, which has now reduced somewhat. It could be in and around six weeks. The Budget needs to be in the Assembly by the end of February or, at the latest, by early March. How Committees view a request for accelerated passage is their prerogative. Obviously, the Budget needs to be done and legislated for by the end of the financial year. The deadline is 31 March, and we just managed to meet that last year because we came back into office only around this time last year. There is a tight time frame. It is tighter than I would have wanted it to be. The time available was already constrained by the comprehensive spending review and the timetable shifting into the autumn, which is not ideal. However, that is the time frame to which we are working.

The Chairperson (Dr Aiken): We noticed in the media today that the Department for the Economy's voucher scheme and the £98 million is being moved into next year. As far as we were aware, there was no flexibility for shifting funds into the following year. Has the Treasury agreed to shifting the £98 million? If the Treasury has agreed to that, have you had discussions about any other flexibilities?

Mr Murphy: We have been pressing for flexibility. The additional £200 million that was announced just before Christmas has taken us up to £3 billion of additional COVID-related money that we have had to spend. There is a challenge in doing that, particularly because of the impact of the virus and people being able to work together. Getting schemes cleared quickly and out onto the ground for people to join has been challenging. There are still gaps that Executive colleagues need to address in the time ahead. There have been challenges. We have been pressing Treasury for flexibility on that money. Ordinarily, we have limited flexibility with some aspects of the finances that are available to the Executive, but it is very limited.

Joanne and other officials have been talking to Treasury, and there is a recognition that money, such as that £200 million, has come really late in the year. If there is anything else to come — that is a possibility between now and the end of the financial year — I think that Treasury would probably be sympathetic to our carrying some of that over, but we have no certainty. We just have, if you like, the vibes that we are getting.

I am in the process of agreeing a letter with the Scottish and Welsh Finance Ministers to press jointly for as much flexibility as we can get, because not only is there a difficulty with spending out — I have been encouraging all Departments to spend out the money that they have been getting, surrender it quickly and try to find ways in which to use that money to its best possible effect in the short time frame that is left at the end of this financial year — but there is a very challenging Budget situation next year. The more that we can carry over into next year, the more we can manage to ease pressures that Departments will undoubtedly face.

Not only are we pressing our own interests here but we are doing an exercise jointly with Scotland and Wales to press for as much flexibility as possible. I heard the announcement today about the voucher scheme. I know that there have been difficulties in trying to get that put together, and the longer the restrictions roll on, the tighter the time frame for spending that out. We have no guarantees about carry-over, but we know that we have coping money for next year. We hope — I have reason to be optimistic — that we can carry over some COVID money this year. If it is the Executive's will, we will try to meet schemes that people want to be in place for next year. However, that is a matter for further discussion.

The Chairperson (Dr Aiken): Just to be clear: the Treasury has not approved the carry-over of the £98 million. What we are doing is re-profiling that £98 million into additional moneys that we might expect to come for COVID.

Mr Murphy: Treasury has not approved that specific project. What we have been pressing it on is, in general terms, late money that we have received in relation to COVID, including that £200 million that we got prior to Christmas. We have indicated to it a COVID allocation next year of around £500 million, which is significant, but is, obviously, much less when you measure it against the £3 billion that we received this year. We know that we have some COVID money next year to deal with COVID issues, and we hope to carry over some of that from this year as well. However, quite a lot of that COVID money for next year will be earmarked for Health and Education. I think that there will be some of it left. Whether we can accommodate the voucher scheme in that will be a matter for the Executive, but there is no specific approval for carry-over at all. We have not been pressing the issue specifically on the voucher scheme because we really got a sense only today that it would not, at least partially, be spent out within this year.

The Chairperson (Dr Aiken): Basically, with the flat cash Budget that you are proposing, particularly for Health and Education, where there are substantial resource implications based around pay rises, which will definitely be expected. The other issue in Health is Agenda for Change, which is an NDNA commitment. How will we achieve that on a flat cash basis with the totals that we have?

Mr Murphy: It will undoubtedly be very challenging. It is not the Budget that we wanted. We have made it very clear to Treasury that it is not the Budget that we wanted. We wanted a multi-annual Budget and to be able to chart our spend over the time ahead and allow for more strategic planning. It is certainly not what we wanted.

We will continue to follow up NDNA commitments, which are separate. They are now done through the Northern Ireland Office. We have not had clarity on that from the Secretary of State, so we have not been able to include that in the draft Budget paper. It is our clear intention and hope that we will be able to get clarity on those commitments and include them in the final Budget paper, alongside protocol costs from the Treasury, which, I think, need to be included in the final Budget paper. A few elements are missing, including the NDNA commitments, and we need confirmation from the Secretary of State about them. However, the overall position for big-spending Departments like Health and Education will be very challenging.

The Chairperson (Dr Aiken): OK; thanks.

Matthew, are you going to ask a question about RRI? OK, that is fine. I will not ask now.

Mr Wells: I have a couple of points. First, I place on record my thanks to DOF staff for handling the coronavirus grants in recent weeks. I understand that over £100 million has been given out. While there were a few delays, things are beginning to move. Those grants have kept many businesses afloat at a terribly difficult time, so well done to the staff responsible.

Secondly, going back to the Chair's comments on chronology, if you get the agreement of the Executive tomorrow, will there be a statement to the House on Monday? How will you address the issue? Will it be done by means of a Matter of the Day? How exactly will we hear on Monday what is happening?

Mr Murphy: First, Jim, thank you for your comment about the staff. As you know — members know because I have had communication from them — there were teething problems, and some outstanding issues remain in relation to the localised restrictions support scheme (LRSS). However, Land and Property Services (LPS) staff have worked incredibly hard not only to get that money out the door but to deal with the understandable enquiries and concerns raised as people waited to find out whether or not they were in the scheme. The allocation of over £100 million to over 10,000 businesses is a very significant achievement. Bear in mind that LPS is a rate collection agency. It has had to re-profile and get additional powers to turn itself into a grant-making body, which was never in its make-up or nature. I think that it has done a remarkable job, albeit I accept that the people out there who are still waiting to get payment will be anxious. We will try to address those issues as quickly as possible. I welcome your acknowledgement of the work of the staff.

As I said to the Chair, if we get agreement tomorrow, my intention is to do a written statement so that Members can be informed right away and to ask permission from the Speaker on Monday to make an oral statement to the Assembly. Members will have an hour, I think, to ask questions on the back of that.

Mr Wells: That is fine. Obviously, the decision to defer and give a rate amnesty to businesses this year has made a huge difference to struggling companies. Is your Budget for 2021-22 predicated on a return to normal rating activity? Is there any leeway to change that? The way that things are going, I do not think that many businesses will be back to anything like normal at the start of the next financial year. Where do we stand as far as that crucial element is concerned?

Mr Murphy: It is a fair point and one that we have been discussing with businesses for some time. As you know, at the start of the financial year, all businesses got a four-month rate holiday, which was very welcome. We then had a more targeted rate relief for others, to which we recently added back in manufacturing at the request of the Minister for the Economy. I have had many discussions with business and business organisations, and that was very welcome. You are right that there is a concern among businesses that it will be some time before they are back to as normal trading arrangements as they can have. We have earmarked £150 million for a six-month continuation of rate relief for those businesses that have got it over the year. We hope that the COVID carry-over money will cover that. Obviously, we will need to have a conversation about the voucher scheme and the additional £500 million COVID money that we will get in the new financial year. It is our intention to try our best to provide an additional six months' rate relief to the businesses that got the full year, in recognition that it could well be into late summer and autumn before they are back to operating as normally as they can.

Mr Wells: That is good news. Hopefully, at the end of that six months, things will have returned to something half normal, so businesses will very much welcome that.

We are in an era of historically low interest rates. Governments and local assemblies can borrow money at incredibly low interest rates for a considerable period. You said that you have a facility for £200 million.

Given the fact that you can get money so cheaply, would it not be worth considering using further facilities or asking the Treasury to enable us to borrow money for next to nothing to enable some infrastructure projects to go ahead —

The Chairperson (Dr Aiken): Yes. Why are we not using the £200 million?

Mr Wells: — rather than trying to get it out of departmental day-to-day running budgets?

Mr Murphy: That is why I drew the Committee's attention to RRI. You are correct: there are very low interest rates. Joanne can correct me if I am wrong, but the interest rate for the Executive to borrow the full £200 million would mean a yearly repayment of about £1·1 million. However, RRI borrowing has to be against projects that have a lifetime of 25 years, so you are talking about things like infrastructure. That may be some of the necessary sewerage and water infrastructure that will not only be necessary for Northern Ireland Water but will stimulate and facilitate private sector investment in construction. There are also assets that will last a long time, like housing, the school estate and the health estate.

You are correct, and that is why I put a proposition to the Executive on RRI borrowing, and we hope that that will be agreed. If there are proposals from other Departments to access the full amount, and those stack up and have that 25-year lifespan, we should consider those, particularly in the context of a very flat budget, and also in the context that we need to try to stimulate economic recovery. Construction represents about 25% of our economic output. Therefore, anything that we could do to help to stimulate construction would be very helpful in the time ahead.

Mr Wells: That £1·1 million is 0·55% of £200 million. This is a chance of a lifetime for you as Finance Minister to access capital at unbelievably low interest rates. When you were last Chair of the Finance Committee, you could only have dreamt of the Minister being able to borrow money at that incredibly low rate. So, can we have a commitment that you will at least hit £200 million in this incoming year?

Mr Murphy: I can tell you that I have put a proposition to the Executive. Hitting £200 million means that various Departments have to come in with schemes or proposals that can use up the money. I cannot go into Departments, extract schemes and say, "We are going to do this". There have to be propositions. I flagged this up to the Executive as a very serious issue of strategic interest and asked people to go off and think about it. Between now and the final Budget paper, it is my hope — it is, of course, a matter for the Executive — that, as an Executive, we will get as much access to and make as much use of that as we possibly can.

Ms Dolan: Thanks, Conor and Joanne. I echo Jim Well's words about the staff. I have some outstanding queries but I am sure that they will be worked out.

On the Budget process, excuse my ignorance, but I am trying to make sense of how the delay with the paper was allowed to happen. I thought that there was a three-meeting rule on bringing papers to the Executive. I just want your thoughts on that.

Mr Murphy: The three-meeting rule is written down in protocol. I had this experience last year when trying to get on to the agenda a paper on financial support for the airports. We had to try to get it on the agenda for a number of meetings. At that stage, I tried to invoke the three-meeting rule, and I had a conversation with the then head of the Civil Service, who informed me that the three-meeting rule was in protocol but did not have a legal binding. Therefore, effectively, it was not worth the paper that it was written on. The Executive need to look at how their business is conducted. If Executive Ministers consider and reject important papers, that is their prerogative, but when you cannot get a discussion on them, it is a very frustrating place to be.

Ms Dolan: I can imagine how frustrating that would be. Did you say that it happened with the airports as well? Has this happened before?

Mr Murphy: It has happened on occasions. I am not sure about the experience of other Departments, but, on a number of occasions, I have not been able to get a paper tabled in the Executive, and I imagine that it can take more than three meetings. Bear in mind that, at one stage, the Executive were meeting three times per week; we now meet twice per week. In a previous iteration, when this protocol was drawn up, the Executive might have met once a week, or, if I remember my previous Executive experience correctly, once a fortnight. There is a greater frequency of meetings now. Nonetheless, we should have an arrangement whereby, at the very least, a paper is tabled for discussion to allow the Executive to take a collective view on whether it should progress.

The Chairperson (Dr Aiken): Can you confirm, Conor, just for clarity, that you had to table a Budget eight times before it got on to the agenda?

Mr Murphy: To be honest, it might have been on the agenda for discussion five or six times. By the time it is eventually taken, if it is decided on tomorrow, it might be six or seven times.

The Chairperson (Dr Aiken): We might consider sending a letter to the First Minister and deputy First Minister about that.

Ms Dolan: I think so, yes.

Mr O'Toole: Happy new year, Minister. Were you give a reason why it was blocked? Did the First Minister, deputy First Minister or TEO explain why it did not get on to the agenda?

Mr Murphy: I think that the problem was on the First Minister's side. A number of reasons have been offered from December through to yesterday. One was the replacement of European funding for the Department for the Economy, which I could not guarantee because that would have meant taking money from another Department. What I can do, and what I have been doing, is engage hard with the Treasury on the British Government fulfilling their commitment to replace all lost EU funding. Of course, the Executive — the position in Scotland and Wales is the same — should have control over the use of that money. That continues to raise concern for us, as does the Bill that is going through Westminster in relation to that. Other issues advanced included RRI borrowing, and there were variations of what that might be used for. We were back and forward a number of times but seemed unable to reach a resolution.

Then, yesterday morning, there was an agreement to have further discussions with the First Minister and deputy First Minister and agreement to table a paper for discussion at the Executive, which I welcome because I want to give Executive colleagues an opportunity to have their input. They have had that through correspondence and engagement with the Department, but not collectively. As I say, I am hopeful that we will be able to make a decision on it tomorrow.

Mr O'Toole: On the point about RRI borrowing, and this does not happen often, I could not agree more with Jim Wells about accessing that. As I have said to you in the Chamber, Minister, we should be accessing RRI, given that the debt would be very low. Sovereign debt could get very much more expensive in the years to come, depending on the global economy and the markets, so we should strike while the cost is low.

Specifically on the query that was raised about RRI, it sounds as though the First Minister had an issue. Was her issue with a specific project that was suggested or a specific Department accessing RRI? What was her concern?

Mr Murphy: I can give you only an impression. Conversations between Ministers are a matter of trying to ensure confidence in Executive business. However, there was a general issue in relation to RRI and, I think, a specific issue of an allocation to a Department and what it might be used for. It is, obviously, up to Departments to make a case that stacks up in relation to what they will use it for and whether they can, in fact, make full use of it. Bear in mind, however, that, if a Department is not going to make use of RRI borrowing as it had indicated, it can revisit the issue over the course of the year. I am sure that Joanne can keep us right on that. RRI is, effectively, a monthly borrowing exercise. Maybe you can explain how that operates, Joanne.

Ms Joanne McBurney (Department of Finance): Yes, you are right, Minister. We factor Departments' borrowing plans into the Budget but do not access the borrowing at that time. We do it monthly, in advance of incurring any expenditure, and we get monthly profiles from Departments of their requirements. If we were to build it into the Budget plans now but things changed, we would not have accessed that borrowing, or we could substitute one project for another. In that way, we ensure that we do not borrow what we do not need, and we minimise costs.

Mr Murphy: Yes. Thanks, Joanne. That is why I put RRI to the Executive as a serious proposition to consider. Not only are the costs low but we can access it as we need it and do not have to overextend ourselves.

Mr O'Toole: OK. Are you fairly confident that, when you give a statement to the Assembly at the beginning of next week, if there is not a proposal on RRI in the Budget for 2021-22, it will be because it was not agreed at the Executive, others having pushed back on it?

Mr Murphy: From the conversation yesterday, I would be surprised if there is not a proposition relating to RRI. The question was more of Ministers' interest in accessing some of the propositions that I made. As you said, up to £200 million is available, depending on many Departments want to avail themselves of it and bring in projects that can access it. I would be surprised if the Budget paper was agreed without some level of RRI borrowing. I hope that, if other Departments have an interest, it could even increase between now and the final Budget paper.

Mr O'Toole: OK. I want to ask briefly about where we are with underspends. Do you have a global number for underspends in this financial year?

Mr Murphy: There are two elements to that. One is the, if you like, normal underspends that will appear in the January monitoring round. Joanne can keep me right, but I think that we intend to bring a January monitoring round paper to the Executive next week. There is also the COVID money.

January monitoring will deal with the smaller end of things in the natural spend of Departments: what has not been used and what comes back into the centre at the tail end of the year for reallocation. We are working through that and will have discussions tomorrow with Joanne and her team about it. We are working through that paper to get it to the Executive next week. There is a bigger issue with COVID and a potential underspend there. As you know, the last £200 million came in, we have had £3 billion to spend, and there may be further allocations. That is why we have been exercised not only in spending that but in finding out from Departments whether the money that they have already bid for will not be used. We had some sense of that today from the Department for the Economy in relation the voucher scheme.

Those are significant portions of money to try to allocate and spend between now and the end of the financial year. For some time, I have been encouraging Departments to state their position. I have written to them and raised the matter at the Executive. I have said that Departments need to identify very early whether they will not spend the money that they have already received and, if so, they need to determine whether there are other areas to which they can try to export those COVID allocations so that we can get that money on the ground very quickly. It will be a real challenge. That is why we have also been exercised in trying to get the carry-over into the new year — so that we have as much potential to carry over as possible. There is an urgency to spend this money. Many sectors feel that they have not received any support or enough support. If we get to the end of the financial year with a significant amount that we have been unable to spend, particularly COVID-19 money, and cannot carry that over, there will probably be due criticism of Departments for not getting that money out as quickly as they could to the people who need it.

Mr O'Toole: When you say "Departments", are you referring to specific Departments that you are concerned about?

Mr Murphy: I have been asking all Departments. Most if not all Departments have received COVID-19 money. People have bid for that during the year and had projects attached to that, things that they needed to do and supports that they needed to get out. We have met all those bids.

We want early feedback. Some of the schemes were based on uptake that has not materialised at the level anticipated. We need early sight of that, and we need early sight of the moneys that Departments have not been able to spend or do not believe that they will be able to spend. We have had that information from one or two Departments. It is a question of getting that money reallocated to schemes that can deliver between now and the end of the financial year. That will be a significant challenge. There is no way to avoid that. That is why we are equally focused on carry-over.

There is a challenge for people to spend money out. We have been encouraging all Departments to step up and spend the money that they have been allocated. We have also asked them to look at areas that have not received support over the course of the year in response to the pandemic and find ways to get support to them.

Mr Frew: As other members have done, Minister, I echo your comments about LPS having to change from a money-collecting agency to a grant support agency. The chief executive, Ian Snowden, and his staff acquit themselves very well when they attend the Committee. I wish you and Joanne a happy new year. I did that earlier in the week when we met but I want to do it officially.

Did I hear correctly that you might not be able to achieve an eight-week consultation on the Budget?

Mr Murphy: Yes. We are down to a time frame in which that is probably unlikely. Joanne might be able to give me the date. We were down to seven weeks, and that might reduce further, given the delay this week.

Ms McBurney: In order to allow time for us to consider fully the responses from the consultation and develop a final Budget paper for the Executive, we are talking about the consultation closing around 23 to 25 February. We have to have a final Budget agreed before 31 March, so that puts a lot of pressure on getting the paper through the Executive and getting a final Budget to the Assembly before 31 March.

Mr Frew: OK, thank you. Minister, you talked about your six attempts to get your Budget paper on to the Executive's agenda. In all six attempts, I take it that there were changes and tweaks to the Budget paper. In which version of the paper was RRI first established?

Mr Murphy: I will put that specific point to Joanne. When we put the paper out to Executive colleagues initially, a number of them come back with written responses. It may be that, for some reason, we decide to hold the paper back because we want to address some of those issues and reissue it when we have tried to do so, which is between Ministers receiving it and the Executive scheduling it. It is a fairly common and regular occurrence that papers will be tweaked to reflect some of the responses and feedback from various Ministers.

RRI came about as a consequence of feedback from Departments whose budgets for the year ahead were not good asking about other ways to access capital money. I am not sure which version we are on. It is, perhaps, version 5 or 6 of the paper. Was RRI mentioned in version 3, Joanne?

Ms McBurney: I do not have the various versions in front of me. We are at version 5 at the moment. I think that you are right in saying that it was around version 3. The changes between versions have, sometimes, been quite minimal, but, as you say, they are reactions to the responses that we get from Departments.

Mr Frew: Thank you. You have answered some questions about the delay, and a press statement was issued on that matter. Were none of the versions of the paper agreed by the First Minister or the deputy First Minister?

Mr Murphy: If they agree a paper, it does not necessarily mean that they agree its entire content. The First Minister and the deputy First Minister have to agree to allow it on to the agenda. I have submitted the paper to every Executive meeting since 10 December but it has not made it on to the agenda. That means that there has not been an agreement. I understand, from talking to the deputy First Minister, that she has been content to allow it on to the agenda from the first meeting. I have submitted it, but it made the agenda only yesterday. It is up to the First Minister and the deputy First Minister to agree the agenda for the Executive meetings, including which papers are submitted. If one does not agree that a paper should go forward, unfortunately, it cannot be included on the agenda.

Mr Frew: You said that you had distributed a paper to all Ministers to give them good time and space to assess the proposals in it. Was there never a discussion on maximising the RRI spending envelope, considering that Health and Education should have rolling capital programmes? I get your point that you need the Departments to bid for RRI, but surely it should be a case of any Minister lifting a project from that rolling capital programme, which, I am sure, is years advanced, and adopting it for RRI spending.

Mr Murphy: As you said, it is up to Ministers to say that that is what they wish to do. The RRI matter was in response to a number of Departments saying that they would like access to capital. Bear in mind that the time frame for all of that was already constrained because the comprehensive spending review did not end until 25 November, so the additional two-week period for the Secretary of State to confirm the Budget envelope took us into December. We were already in a constrained time frame in which to get it out to consultation. Of course, the paper could change during the consultation. I expect some Ministers, perhaps over the period that Joanne outlined, to say that they would like to access RRI borrowing, be it for school buildings, health buildings or whatever other schemes that they may be interested in. Of course, the Department will be very happy to work with them to identify those. It is a matter for Ministers to come forward, as some did, and say that they would like to access RRI. That is how the issue became part of the discussion.

Mr Frew: You talk about a standstill Budget. That means pain, basically, for most Departments, and some more than others. In this day and age, given the health emergency and the condition of our health service, I would be amazed if the Minister of Health was not really troubled and worried about a standstill Budget.

The Chairperson (Dr Aiken): Oh, he is.

Mr Frew: I am on the Justice Committee, and I know about the pressure on policing, given that we have the regulations to enforce. The victims' pension issue still has to be resolved, so I would be amazed if the Justice Minister was not up in arms about a standstill Budget. Surely, those two Departments are nervous and extremely worried about a standstill Budget.

Mr Murphy: I assure you that all Departments, as they have expressed to me, are agitated and concerned about a standstill Budget. My Department has to look for savings in areas in which we intended to spend. We have already begun that exercise. We are looking for things that we might not do next year — things that we intended to do — and any savings that we can make. Every single Department is disappointed, agitated and concerned about the level of funding available to us next year. The timescale involved means that, if you tried to match some of the real pressures that all Departments are facing, you would match some but add to others because of reprioritisation. The time frame involved does not allow for such an exercise, and I did not detect any serious appetite for one. Health is our biggest spending Department, so it feels those pressures more than any other, but all Departments are exercised and agitated about the idea of a standstill Budget. It is not what any of us wanted.

Mr Frew: You talked about the possibility of having an underspend this financial year. Why are we dividing ordinary spend and COVID spend? Surely, that COVID money is not ring-fenced. If there is an underspend, regardless of whether it is ordinary spend or COVID spend, it will be a massive failure on the part of the Executive to support the businesses from which they have removed the right to earn money and make a profit. Surely, that is a failure.

Mr Murphy: No. The ordinary spend — Joanne can probably explain this — is kept for accountancy purposes. We will have enough in January monitoring, money that has been returned from the ordinary spend of Departments, to meet the bids that Departments have made for additional spend in normal, run-of-the-mill areas. The money that came across to us in relation to COVID was intended to be used for COVID issues. That, by and large, is what we have used it for.

There is no doubt that it has supplemented Departments' budgets, but it is intended that it be used for that. In my view, there is sufficient money to address a lot of the issues that people have raised with us. As I say, I have been encouraging Departments to identify previous schemes, if they are not utilising them in full, to get that money back into the centre and to come up with additional ways of looking at some of the sectors, sections and areas that perhaps have not received either any or sufficient support to allow the Departments to address them.

There is a concern, because £3 billion on top of the budgets that we already had is a significant amount of money to spend across Departments. It is a challenging situation, because quite a lot of staff are working from home and people are isolating because of COVID. It is a challenge, and we need to make sure that we spend the money out as best we possibly can by the end of the financial year. As I said, we pressed for flexibility to allow us to carry over some of that money, which could meet some of the challenges that we will undoubtedly be presented with next year.

Mr Frew: In my time, I have never heard a Minister or Department say that they have enough money in their budget, but here we have extra money that cannot be spent. In my eyes, that is a failure.

Mr Murphy: I have been about slightly longer than you, and I have never had that experience either. However, this has been an extraordinary year. I am not saying that the money will not be spent; I am saying that we are concerned and exercised about getting it spent, and we are pressing Departments to do that.

A significant amount of COVID money has been given to us. It is a challenge to spend it all. Some of it has come very late in the year. I am of the same view. Departments have always been seeking more money, but the question is what they can spend it on between now and the end of the financial year. It is one thing for Departments to have a lot of budgetary issues that they would like to address, but if they cannot spend the money out between now and the end of the financial year, they will end up giving it back again. What is bid for is something that can be utilised. That is why we have asked Departments to get their thinking caps on and find ways to spend out this money.

Mr Frew: Thank you, Minister.

Mr Allister: It is interesting to observe and hear the Executive wash their dirty linen in public over whose fault the delay is. It is an inescapable conclusion that this saga of delaying and, indeed, the telescoping in consequence, of scrutiny and consultation are a very poor commentary on the efficiency of this Executive and of devolution.

There are a couple of questions that I want to ask the Minister, if I might. My recollection of when RRI was introduced was that there was linkage to the floating of water charges. Has that now been withdrawn by the Treasury, and is there no longer any proviso attaching to RRI in that regard?

Mr Murphy: Go ahead, Joanne.

Ms McBurney: Unfortunately, I have been around long enough to remember that well. When RRI was initially introduced, it was linked to what they call "qualifying revenue", which is an increase of particular household charges here comparative to council tax in England. You are right, there was a sort of link to water charges. That was broken in the St Andrews Agreement, and there is no longer that direct linkage.

Mr Allister: OK; thank you. On RRI, the Minister indicated that there was talk of £70 million for infrastructure for water and sewerage and £70 million for housing. Is that the totality of the bid or ambition for RRI?

Mr Murphy: As you know, Jim, it depends on what Departments request for access to RRI. In relation to your initial point, I do not get any satisfaction from the difficulties in getting an Executive paper, but the Committee is entitled to ask, and it has asked me, questions about where this is at and why it has not been put on the agenda. I am obliged to give the answers. As I say, I do not get any satisfaction from that. I wish that we got the paper on 10 December and were well through our consultation process.

Following the discussion about RRI at the Executive yesterday, other Departments will go off now and look at that, and I have invited them to talk to Department of Finance officials about how that might satisfy them. There would be a marginal increase in interest if we were to access the full £200 million. As others indicated, over the year, I have been asked many questions, including those from you, about not accessing resources that might be available to us. If Departments come up with schemes that match, I am more than happy to look at that for them.

Mr Allister: Would the hydrogen hub scheme be such a candidate?

Mr Murphy: I do not honestly know. It may well depend on the length of time that the asset is available to set against the borrowing, if you like. I am certainly open to considering any of those projects. It would be a matter for the Department for the Economy to come forward and say, "We've a project here that we would be interested in accessing RRI for".

Mr Allister: Perhaps Joanne could remind us about this. Of course, on RRI, you do not just pay back the interest; you pay back the capital. Is that tied into a schedule of payments over a number of years? How exactly does it work?

Ms McBurney: Yes, that is correct: you pay back the principal sum, as well as the interest on it. There is a schedule of payments twice yearly. In the past, twice-yearly payments were made over the lifetime of the loan. The loan is linked to the lifetime of the asset, and that is why the Minister is referring to assets that have a 25-year lifespan, because that is obviously more beneficial. You would not want to borrow for something that had only a short lifetime.

Mr Allister: But you could do so, could you?

Ms McBurney: You could, but you would not want to. While you could do it, there would be a restriction on it. You would not borrow for something that had only, say, a one- or two-year lifespan; you are probably talking about something with a 15- to 25-year lifespan.

Mr Allister: If five or 10 years into the scheme interest rates were not as they are at the moment, what would be the consequence?

Ms McBurney: The interest rate is set when we access the borrowing. As I said, we borrow monthly in advance, and the rate is set on the day that we borrow for a fixed term of years.

Mr Allister: For a fixed 25 years or whatever.

Ms McBurney: Yes.

Mr Allister: Very good.

I have a couple of other questions for the Minister. In the Budget that is now being tentatively put forward, how much is being set aside for the innocent victims' pension?

Mr Murphy: I cannot get into the detail of that. There is, as you will know, an ongoing discussion with the NIO and Treasury about the responsibility for meeting that cost. That has not been concluded. I understand that a proposition has been put to the Secretary of State to meet the First Minister and deputy First Minister, the Minister of Justice and me. That meeting has yet to be secured. We want to bottom out the cost. Depending on the uptake of such a scheme, the costs could be so prohibitive to the Executive as to really damage a huge range of public services, if that were to be commenced. There is an issue with the funding statement. The body that proposes the legislation, drafts the policy and implements it is responsible for its payment. In this case, that is, of course, the British Government and the NIO. We have not yet been able to bottom that out. We have money set aside to get the scheme up to work, but it is coming to the point where payments are due to be made, so that discussion needs to conclude sooner rather than later.

Mr Allister: Are you saying to us that, if that discussion does not conclude on a satisfactory basis, there will be no money in your Budget for the payment of the pension?

Mr Murphy: What I am saying is that — I am not sure what the amount set aside for that for year 1 would be; I do not know the figure off the top of my head — if we end up shouldering the responsibility for paying that, my advice to the Executive will be that, to meet that commitment, we will have to do a serious reprioritisation exercise that will impact significantly on public services.

Mr Allister: Are you or are you not anticipating a budget line to deal with the cost of paying the pension?

Mr Murphy: I am putting out a draft Budget. We want to conclude the discussions with the Secretary of State ahead of the final Budget so that we know what the position is.

Mr Allister: I am probing this point: if you do not get the conclusion that you are looking for with the Secretary of State, will there not be any money provided in the Northern Ireland Executive Budget to pay for the pension?

Mr Murphy: That would be a matter for the Executive to decide. If the Executive decide to pick up the tab for that, which is, of course a question for them, my advice to them will be that that will have serious implications for spending across all Departments and on public services.

Mr Allister: provided for in this Budget.

Mr Murphy: If the Executive choose to do that, the implications will be profound because not only will they be picking up for next year's Budget but they will, in principle, have accepted the costs of paying for that scheme, which will have long-lasting implications for future Budgets as well.

Mr Allister: If they do not make provision, there is no pension.

Mr Murphy: That is not the case. No. The question is about who makes provision for it and whether that is the responsibility of the Executive. Under the British Government's statement of funding policy, it is their responsibility to pay for it. It is unsatisfactory that we have not been able to conclude those discussions, but the Secretary of State has not been available in recent times when we have sought meetings with him. I hope that that can be concluded and that the Government will recognise their own rules on this and will recognise the burden that that will place on the Executive. Given that it is not what we, as parties, agreed to in the Stormont House Agreement, I hope that they will recognise that they have a contribution to make. If they do not and the Executive decide to pick up the tab not only for next year, which the Budget is set for, but, in principle, for evermore, that would have profound implications.

Mr Allister: It has profound implications for innocent victims if the pension is snatched away again, having been promised.

Mr Murphy: Yes, absolutely, and that is not a situation that anybody wants to be in. I do not think that it has been helpful to victims that we have ended up in this dispute, but the Government took a different approach to that agreed by the political parties at Stormont House. They headed off in a new direction with this, legislated for it and then said to us, "By the way, you have to pick up the tab". I do not think that that is a fair situation to —.

Mr Allister: Is Sinn Féin continuing to play games with that at the expense of innocent victims?

Mr Murphy: Not at all. I mean, the Executive can —.

Mr Allister: It looks like it.

Mr Murphy: Jim, you will know that the Executive can take a decision. It is not the Department of Finance's policy area; it is the policy area of TEO. The Executive can take a decision on it. I think that all of us recognise that, first, it is not the scheme that we agreed to and, secondly, that the British Government have a responsibility to that, given that many of the victims' issues were created on their watch, not the Executive's watch. I hope that we get a solution to it sooner than later because I do not think that it is helpful to victims that they have to hang on.

Mr Allister: It sounds to me, Minister, that you are trying to extract —

The Chairperson (Dr Aiken): Thank you very much, Jim.

Mr Allister: — the political price that you want, namely that the pension would also apply to the victim makers as the price of the pension. That is disgraceful.

The Chairperson (Dr Aiken): Jim —.

Mr Murphy: It is disgraceful to formulate a policy and then refuse to provide financial support to back it up. That is disgraceful to victims, and it is quite a cynical game that the NIO has been playing with this.

Mr Allister: When we talk about cynical games, we need to look no further than Sinn Féin's approach to innocent victims.

I have another question, if I can, Chairman.

The Chairperson (Dr Aiken): Thank you very much indeed, Jim, and thank you very much indeed, Minister. Your points are made. Thank you. That has been noted. Pat is next.

Mr Catney: Thanks very much, Chair. I know that some of the other Committee members want to wish a happy new year to you and Joanne. No doubt your house is a busier house with the new grandchild who was delivered just before Christmas. Well done for that.

Minister, I want to ask you about the £45 million that is required to address the shortfall in the Department for the Economy. I am trying to work that through. As stated, that money is not there. How are you going to allow for that if no extra funding comes in?

Mr Murphy: The Government, again, committed to replacing in full any lost EU funding, so that £45 million, I think, will be for next year. Had we stayed in the European Union and acceded to the democratic wishes of the people of this place, that funding would be in the Department for the Economy's coffers next year. The Government guaranteed, as part of their Brexit arguments, that they would replace it in full, and, as you know, we discussed many times in the Assembly that they certainly knew the expectations that all the devolved Administrations had that we would have that money in full plus the responsibility for advising programmes and allocating the EU money against the priority programmes. We do not have that certainty yet from Treasury. If we can get it between now and the final Budget paper, that would be helpful. If we cannot, that money is not in the Department for the Economy's budget for next year.

The programmes that the Department ran, operated and funded under the European social fund, ERASMUS or various programme funds that it was able to draw down will not be available next year. That is a big problem for the Department. It is a big problem for society here and all those who were able to avail themselves of the spending in those programmes. It is a challenge and an area alongside a couple of others that we continue to engage Treasury on. I hope for answers and solutions to those sooner rather than later.

Mr Catney: I hope that some of the promises that were made pre-Brexit will come through, but, as is the case for most of the other promises — Minister, I hope you agree — I will not hold my breath on them. What are the timescales for the Committee's role in this Budget Bill? It seems to be condensing and not giving us the time to do the consultation that is required.

Mr Murphy: Pat, that was already constrained by matters beyond our control in that the comprehensive spending review, which was originally to take place in the summertime, was pushed back to the autumn. It did not conclude until the end of November, and we did not get the funding amount confirmed until December. The time was already constrained, but the difficulty in getting this paper through the Executive has shortened it even further. That is something that I regret and am very disappointed with. It places the Committee and all the other Committees in a difficult position in trying to turn around consultation, examination of the Bill and discussions with their Departments. It is not something that I wanted to see, but it is the position that we are in. It is not even that it is not ideal, it is very disappointing. It was a short time frame anyway, and it has been shortened further, which is not what I wanted to see.

Mr Catney: OK. I just want to bring up a point on the RRI borrowing. It was brought up by the Committee months ago. Why was it not acted upon months ago? It looks like it has made its way in only recently.

Mr Murphy: It takes Departments to come to us about that. People were waiting to see what the allocations were for next year, and they got those only really in December. We quickly turned around the draft Budget paper within days of getting that confirmation of the figure. It is not that the Departments had a long run-in and a sense of what was coming to them.

It really takes Departments to come and bid to us and say, "We would like to access RRI. We have capital projects, and we think could avail ourselves of it". We included that in a later version of the Budget paper. As I said, if other Departments are interested, we will, hopefully, have an even larger figure attached to the final Budget paper.

Mr Catney: Do you think that there will be further evidence from the Departments for easements on the Budget as they come through in the January monitoring round? Do you have any idea which Departments will ask for some of that money? Do you have any evidence yet for what will be coming back?

Mr Murphy: No. Joanne could give you the dates when we concluded and asked for that, both in January monitoring and in unspent COVID money. We have asked the Departments, so we have feedback from them already on that. This morning we were talking through the detail of the January monitoring paper and the COVID spend paper, both of which I hope will go to the Executive next week, and then the detail of that will be made available to the Committees and the Assembly.

Mr Catney: If the Chair will allow, as I do not know whether it is appropriate to ask this, is there any guarantee that the £10·9 million that is to be brought back to the Department from supermarkets and large stores will come back?

Mr Murphy: That arrangement was with Treasury because most of those big supermarkets are headquartered in Britain. Joanne will keep me right, but it is our understanding that the arrangement was that they will pay Treasury back the rates that were refunded. They are now saying that they did not need that and will voluntarily give it back. Treasury will work out our proportion of that, and it will then be allocated to us. Joanne might have a clearer idea about whether it will come in-year this year or in the next financial year.

Ms McBurney: Yes, Minister, you are correct. It was originally organised through Treasury. My understanding is that the supermarkets and any other businesses that want to voluntarily return their rates payments can do so either via the Treasury or directly to us. You are right: we have no guarantee on that. It is a voluntary payment. They do not have a rates bill to pay, so it is a voluntary contribution, and we have no control over its timing. It is up to the organisations to decide when they choose to refund that money to us.

The Chairperson (Dr Aiken): Minister, thank you very much for your time. I have two short questions before we conclude. Has the Treasury agreed to re-profile the £400 million or so for unspent Fresh Start capital?

Mr Murphy: There has been discussion on that, particularly on the Strule campus. Perhaps Joanne can give you an update on that, but I know that there is ongoing discussion with Treasury on that.

Ms McBurney: Yes, Minister, you are correct. It has agreed to a revised profile for the Strule campus, and that money can be accessed for that. I am not sure whether that agreement extends to the full level. I have a feeling that it does not, but we are still in discussions with it on that. That is one of the issues that would need to be factored in to the Secretary of State's confirmation of our funding totals before we could conclude on the Budget.

The Chairperson (Dr Aiken): Joanne, let us know when you get a response on that. That would be very much appreciated.

We cannot let you go without asking about any progress on the Procurement Board, which, I understand, has already sat, and the fiscal council, which we still have not seen.

Mr Murphy: The Procurement Board has been reconstituted. It did not meet prior to Christmas, but it is due to have its second meeting in early February. We have a number of papers going to it, and I think that the terms of reference for it are going to the Executive for approval. We have, therefore, had some discussion on that. As you know, we want to give the Executive ownership of procurement matters so that they will enforce procurement policy right down to Departments, public bodies and arm's-length bodies. It is going well. The first meeting was excellent. The people who have been brought in made good contributions, so I think that we can look forward to good work being done by the reconstituted Procurement Board.

Our engagement with people on the fiscal council is well advanced, and I hope to bring a proposition to the Executive and to discuss that with the Committee in the very near future.

The Chairperson (Dr Aiken): Minister and Joanne, thank you very much indeed for your time. Best of luck, and, please, keep us informed. Let us have a fruitful and good working relationship for the rest of this year.

Mr Murphy: Thank you.

Ms McBurney: Thank you.