Official Report: Minutes of Evidence

The Chairperson (Dr Aiken): We can now hear Stewart and Janis. We are really sorry for the communications difficulties and technical bits and pieces. If you are content, please make your opening statement.

Mr Stewart Barnes (Department of Finance): OK. Thank you. The Department has provided a written brief. I will not go through it verbatim but will pick out the highlights. The Department has been allocated a draft budget for 2021-22 that is along the same lines as last year's budget. We were allocated a resource budget of £166·8 million and received an additional £1·8 million, associated with the EU, and £1·3 million for collaborative procurement. That brings our resource total to £170 million. The table in the brief shows the spending areas to which the allocations will go. As you may be aware, most of the Department's budget is for staffing costs and contracts. We have a lot of rates, office estates and large IT contracts underpinning the shared services that we have. We also have a number of large IT contracts in Land and Property Services (LPS) operations.

The Department is looking to take forward not only its normal business but some new priorities in 2021-22. That includes the fiscal council and fiscal commission. We are also looking to improve and transform procurement and include an updated non-domestic revaluation, bringing that in for three years as opposed to five years.

A number of pressures have arisen. They include the census, which is due to take place next month; the rate rebate scheme, which is under pressure; the replacement of our ageing IT systems in HR and finance, which provide services right across Departments; and, as I mentioned, the LPS IT systems. We need to take those forward.

That said, we are looking at around £16 million of pressures in our current budget. In addition to that, if there were any pay increases, we would have to absorb those. Therefore, the bottom line on the resource budget is that we have internal pressures. We are trying to look at those pressures to see whether we can move them down and whether there are any other lower-priority areas or areas where we can make savings in order to live within our budget. We are in a process of working with directors to see how we can deliver savings to ensure that we live within our budget. We will bring a paper to the Minister and agree with him what he wants to take forward as far as those proposals are concerned.

You will also be aware that, this year, the Department has done a lot of work on COVID-19 grants. We do not know how it is going at the moment, but we expect that there will be some activity, obviously, next year and going into the following financial year. The Minister has already announced a freeze on domestic and non-domestic rates of £150 million. Although that does not actually score within the Department's budget — that is without the budget — there may be other grants. We do not have those in our budget at the moment. That would depend on further COVID money coming through.

We have a net capital budget of £45 million. Initially, when we sent the brief, we had forecasted around £48 million. Already, we are looking at re-profiling various capital projects, and we are pretty confident that we could live within that £45 million net budget. That would be achieved by delaying certain projects and some projects costing less than was initially forecast.

That is a quick run-through of where we see the budget sitting. We are doing a lot of work on the budget at the moment and need to liaise with the Minister to see what he is content with in producing savings.

I am happy to take any questions.

The Chairperson (Dr Aiken): Thanks, Stewart. In case the link breaks down again, we have a series of written questions that we will send to you, but I have a few questions and issues that I want to have a quick look at.

Mr Barnes: Certainly.

The Chairperson (Dr Aiken): You said that the resource budget is £170·4 million, but your paper refers to a resource budget for staff costs of £172·4 million. Are we looking at £170·4 million or £172·4 million?

Mr Barnes: It may be misleading, but the difference is that one is a net budget. The overall budget, as shown in the budget document, is a net position, so it includes income etc, whereas the figure for staffing costs is a gross figure. We get a lot of income for the delivery of services to other Departments for shared services, so that is what makes up the net budget of £170 million. It will be made up of a gross total, with income on top of that. That is why those two figures may look different. The figure for staffing is a gross figure — the actual cost of staff.

The Chairperson (Dr Aiken): OK. This is a slightly bigger question. The Minister has indicated that a £300 million allocation will be carried over into 2021-22, but no statement has been provided on that as yet and no information has come through. Can you advise whether that enhanced carry-over will be used in part to cover the lost rates income in 2021-22, or are you not that far yet?

Mr Barnes: We are not yet that far. The lost rates income will come more centrally from the public spending directorate (PSD), so I am not sure whether that has been worked through as far as how our

works. I cannot answer that question at the moment.

The Chairperson (Dr Aiken): OK. Please send us a response to that question.

The investment activity report for January 2021 refers to significant capital costs of £6 million to £8 million for the Orchard House refurbishment and of £10 million to £12 million for the James House asset management project. What are those projects about, and why are they costing so much?

Mr Barnes: They are part of the management of the Northern Ireland Civil Service (NICS) estate. As you may know, DOF is responsible for providing accommodation for the whole NICS and, in fact, for other public-sector bodies. We recently purchased James House, so it is about refurbishing it and putting it into a state where we can get as many people into the building as possible so that it provides value for money. Orchard House is similar. We are reconfiguring the building to make the most effective use of the internal layouts. They are older buildings that need to be refurbished, and, as I say, James House was recently purchased. That is what those moneys are for. In the long term, they should provide savings for the Department.

The Chairperson (Dr Aiken): The Minister talked about a move towards new methods of working and new distributive hubs, particularly looking at Ballykelly and some of the offices in Londonderry, Enniskillen, Omagh and the rest of it. Is that being factored into your budgetary process to develop those hubs? If we are developing those hubs, why are we spending all this money on those major buildings?

Mr Barnes: It is a much wider strategy than those buildings. We will be looking to have a mixture of those buildings, plus we have a lot of leased buildings across the Department and the Civil Service in general, and that will allow us to get out of a number of leases, through which money can be saved. There is a longer-term strategy to look at all the buildings that we have, including the hubs and the buildings that we purchase, own and lease. In the long term, the idea will be to get out of some of the leases and use the savings to have our place in the hubs and in the buildings that we own. In the longer term, there will be a saving across the estate.

The Chairperson (Dr Aiken): The draft Programme for Government consultation has a number of references to the Department of Finance and its role in supporting transformation in education, health and administration in the PSNI and its involvement in measures to tackle homelessness and to promote economic growth and the digital economy. Can you advise us in general terms how the Department will support those activities and whether there is required financial cover in the draft budget for 2021-22 for that work? Why is the Department of Finance doing work that other Departments should be doing?

Mr Barnes: I suggest that most of that is HR and financial IT systems support, and also things like the nidirect contact centre, which will enable greater collaboration and contact with the public. It is about those types of shared systems. I do not have the specifics for each one of those, but, in general, the Department of Finance provides a lot of infrastructure for the whole Civil Service, including finance, HR and the nidirect contact centre.

The Chairperson (Dr Aiken): The Department of Finance did not have much say in the previous Programme for Government, but, this time, it talks very much about its role in supporting transformation. It would be very useful if you could drop us a note with some more detail on how that has been broken down — for example, if it is for IT support, digital government, HR services or whatever it happens to be.

Mr Barnes: OK.

Mr Wells: I am just teasing out what you have built into the budget for rates. The decision to provide a rates amnesty for many businesses in 2020-21 was a lifesaver to many. What are your assumptions in 2021-22 for that continuation? What are you assuming?

Mr Barnes: The Minister has made an announcement of £150 million. I am not sure that the assumptions are long term, and I am not sure that we can make any longer term. That is an initial announcement, and we are keeping it under review as we see how the situation develops as to whether people can get back to work and whether businesses can get up and running. That will be a continuous assessment as far as rates are concerned.

Mr Wells: I will ask the question another way. If the present level of concessions to hard-pressed businesses continues, how long will that £150 million last?

Mr Barnes: I am sorry but I cannot answer that. It will depend on the number of schemes that are laid out and whether any businesses come back. The current support is in and around £300 million, and we have already said that we will give another £150 million. You can make assumptions that it could be for six months to start with, but that is more a central line as far as PSD is concerned, involving the other Departments as well. I cannot answer that with any accuracy, but you could make that assumption.

Mr Wells: That is very welcome, but, if the situation does not improve as much as we expect, what flexibility will there be to extend that beyond six months? Would you expect funding to come from outside the Department for that?

Mr Barnes: I anticipate that we would look for additional funding for that, because I am not sure that the sheer scale of the amount of money required could be absorbed within the Northern Ireland block.

Mr Wells: The only certainty, therefore, that we can give for businesses is that there is £150 million, which may provide a rates holiday or amnesty for about six months. We do not have it tied down to an exact time. Can businesses assume that they will not pay any rates until September?

Mr Barnes: No, I do not think that they can make that assumption, and I do not think that I am in a position to make that suggestion either.

Mr Wells: We will not tell anybody. We will keep it between ourselves as a secret.

Mr Barnes: I appreciate that, but I do not want to say things that are wrong. I can only state the fact that £150 million is set aside for next year. [Inaudible.]

Mr Wells: Would it be useful for the Department to tell businesses specifically now, before the start of the new financial year, where they stand so that there is clarity? While that is all very welcome, new initiatives seem to appear suddenly from nowhere, and it is very difficult for businesses to plan long term. Can we be specific and say that, if you are a certain category of business, you will pay no rates until a certain date, or is that asking for too much?

Mr Barnes: I am certain that the Minister will be looking at that. He has been in contact with businesses and representatives, so I am sure that there will be some sort of announcement to allow businesses to account for that.

Mr Allister: I want to go back to the question about the Connect2 hubs. How much are you planning expenditure-wise for the Connect2 hubs in next year's budget?

Mr Barnes: There is not very much in the budget for those next year. It is very early stages. We are talking to councils in various areas about how much it might cost, so we do not have much in those areas. It may be about looking at the buildings that we have and sharing them or whatever, but, at the moment, it is very early stages for the hubs.

Mr Allister: We have a written statement, which the Minister released just this afternoon, that says that the first Connect2 hubs are expected to open in Ballykelly and Downpatrick this year, and planning has started on facilities in Ballymena, Craigavon, Omagh and the Antrim/Newtownabbey area, with their opening planned for 2022. Are you telling us that there is no financial allocation for those?

Mr Barnes: What I am saying is that there was no specific allocation for those, but there is an allocation for the reform of property management. We will look at how we can best allocate those resources to make sure that hubs are covered.

Mr Allister: Do you have any idea how much the hubs will cost?

Mr Barnes: I do not. I can have a look and provide you with some information on that.

Mr Allister: Is it a resource and a capital expenditure?

Mr Barnes: There may be a combination of both.

Mr Allister: Would we not expect to see that reflected in the figures that you are bringing forward to us for next year's budget?

Mr Barnes: As I said, this is still very early stages, and it is a draft budget. A lot of the issues, particularly around hubs, are ongoing work, so we need to look at the outworkings of those and factor them into our budget.

Mr Allister: Thank you.

Mr Frew: Thank you very much for your presentation. Technology can fail us at any stage, so I have sympathies for you in this meeting, and, believe it or not, it is not great for communicating on this type of scrutiny work.

A term was used last week, which I will use — it is not my terminology, but it must be economic jargon — but how much of your budget is "silted up" by old borrowing and interest payments?

Mr Barnes: I am not sure that any of it is. We get an allocation from the centre, but there is no borrowing and things within that.

Mr Frew: Your Department has not had to bid at any stage for something and receive borrowing, the onus of which would be purely on your Department to pay it back.

Mr Barnes: No, not at the moment. We do not have borrowing in that respect or in any respect.

Mr Frew: OK. I am looking at the draft Programme for Government — I have not invested a lot of time going through it yet — but explain to us again the work that you are doing on it. Why does it fall to your Department, as opposed to, let us say, the Executive Office?

Mr Barnes: Sorry. Did you ask why the Programme for Government work falls to the Department?

Mr Frew: Yes. Why do you have budget lines?

Mr Barnes: Sorry, I did not hear that. My screen froze for a second. Was the question about why we have budget links?

Mr Frew: Yes. Why do you have budget lines for the Programme for Government?

Mr Barnes: It shows the support that the Department provides to other Departments. In previous Programme for Government processes, it was felt that DOF did not get enough acknowledgement. We provide a lot of help and support to enable other Departments to provide their services, such as through IT, the digital side etc, and that has to be acknowledged. We help other Departments and provide platforms and systems to help and enable them to deliver their services. I suppose that that is a recognition that we play a very important part.

Mr Frew: That is a very good answer about the support that you give, and we appreciate and acknowledge that. What we really yearn for is a joined-up Executive that function together to produce a Programme for Government. How will the money and funding complement that wish going forward?

Mr Barnes: I am sorry. I do not quite understand. What do you mean by "complement"? The money in the budget delivers it. I am not sure that it necessarily complements other money.

Mr Frew: To explain: we have a Programme for Government, but we still have a silo mentality in Departments. I suppose what I am asking is: how best can you spend the money? While there is an acknowledgement that you guys are very critical in a practical sense, how can you utilise that money better to police the other Departments and ensure that there is joined-up working with regard to the Programme for Government and, in a real, tangible sense, to the public that our Departments are working together on a Programme for Government? In many cases, the indicators will be shared between a number of Departments. What I am asking you — it is not just for you but for all our Departments — is: how best can the money that you have received be utilised to ensure the joined-up working that we have not had previously?

Mr Barnes: We certainly work very closely with the other Departments on how the money is spent. From my point of view, the Executive direct the priorities for the money and how it is spent. They work together to decide how the money should be prioritised. If there are priorities in Education and Health and support needs to go to them, the other Departments need to ensure that they all help to deliver those high priorities. We follow that direction and, through our Minister, decide where the money should be sent and where our focus should be. There are certainly very close relationships between officials in trying to deliver the top Programme for Government priorities.

Mr Frew: OK. Thank you. That is me.

Mr O'Toole: Apologies that I was late for the start of the meeting. Stewart, I am not sure whether it came up prior to my arrival, but you have allocated £2·3 million for support for a fiscal council and fiscal commission. What is the bulk of that money for? Is it for salaries? What else will it be spent on?

Mr Barnes: That is not all for a fiscal commission or the fiscal council. That also includes Central Procurement Directorate (CPD) building, Departmental Solicitor's Office (DSO) transformation and PSD baseline funding. It is for finance, procurement, policy, the fiscal council and the fiscal commission. Only a small element of that would be for salaries for those on the fiscal commission and fiscal council. You are probably talking about less than £1 million for salaries, and support for them because they will need some form of secretariat.

Mr O'Toole: If it is for the fiscal council, fiscal commission and CPD, as someone who is very supportive of setting up the fiscal council and the fiscal commission, it would be helpful to understand what the balance is and how that number was arrived at.

Mr Barnes: That is very much under development. I do not have the detail of how the fiscal commission and council will function as regards attendance fees or whether members are to be treated like board members. They will have some sort of expenses, including attendance fees and things like that. They will also have a secretariat behind them. Of that £2·3 million, the vast majority is not for the fiscal council. I do not have the exact figures for how much is for the council. I am not sure that they exist yet. These are just high-level figures that we need to look at to make assessments of what we need to factor into our budget.

Mr O'Toole: This may be a stupid question. On the resource DEL side, £1·8 million is allocated for EU exit costs. What is that, mostly?

Mr Barnes: A lot of that work will be things like the Departmental Solicitor's Office looking at statutes. It is also for special projects division in the strategic policy and reform directorate, looking at how they can facilitate businesses and help to ease the way for EU exit. The other side is for the Northern Ireland Statistics and Research Agency's statistical support for those operations.

Mr O'Toole: Is the £1·3 million for Special EU Programmes Body, effectively, administrative costs?

Mr Barnes: Yes, that is funding to run the North/South body.

The Chairperson (Dr Aiken): Have members any other questions? No. OK, Stewart and Janis, thank you very much indeed. I apologise again for the poor quality of the communications link. Rather than continuing with this torturous link, we would like to send you a few written questions. Good to talk to both of you again. I hope that Janis does not feel too put out by having to be pushed off her working microphone.

Mr Barnes: No, I think that she is perfectly happy [Laughter.]

The Chairperson (Dr Aiken): OK.