Official Report: Minutes of Evidence

The Chairperson (Mr Butler): I welcome the following DAERA officials to brief the Committee on the budget and answer any questions after the briefing: Mr Roger Downey, director of finance; Mr Declan McCarney, deputy finance director; and Ms Nuala Hennessy, head of in-year financial planning branch. Thank you so much. We are ready to rock and roll.

Mr Roger Downey (Department of Agriculture, Environment and Rural Affairs): Thanks, Chair. Good morning, everyone. Thank you for the opportunity to brief the Committee on DAERA's draft budget 2025-26 proposals, as well as the imminent Budget Bill and spring Supplementary Estimates (SSEs) for the current financial year.

I will start with an overview of the block position for the Executive. Departments bid for £4·4 billion resource departmental expenditure limit (DEL) against £1·3 billion that was available for allocation. On capital DEL, there were bids totalling £2·9 billion against the £1·8 billion that was available for allocation. There were also inescapable capital DEL requirements across Departments totalling £1·9 billion. That means that there was not enough capital DEL available to cover all Departments' inescapable capital requirements.

You will be aware that the Executive agreed budget allocations on 19 December and that there are huge challenges for all Departments. DAERA bid for £50·9 million resource DEL against the opening 2024-25 position and £179·2 million capital DEL from a zero base. It is proposed that we will receive an additional £15·7 million resource DEL and £119·5 million capital DEL. It is also proposed that we will get £332·5 million Executive-earmarked resource DEL for agriculture, agrienvironment, fisheries and rural development from next year. You will recall that that had been Treasury-earmarked resource DEL since EU exit. That changed in the Chancellor's autumn Budget, when it was allocated to the Executive's baseline from 2025-26. The Minister subsequently made the case to the Minister of Finance that that should be Executive-earmarked for those purposes. The Executive have now agreed that for 2025-26 and future years. There is also £4·2 million Executive-earmarked resource DEL for PEACE PLUS across DAERA's five investment areas. When added to the £16·5 million European regional development fund (ERDF), that totals £20·7 million.

The next slide summarises the breakdown of DAERA's key budgets between Executive-earmarked and non-earmarked funds. Over half of Executive-earmarked funding is for resource DEL, and around 10% of it is for capital DEL. The total is almost £716 million.

The next slide breaks down DAERA's resource DEL. At the top, there is the opening baseline of £243·8 million and the Executive's additional allocation, which I have mentioned, of £15·7 million. We then have the two Executive-earmarked pots. The total is just over £596 million. You should note that that does not include any Treasury-earmarked Windsor framework funding. That will be allocated as part of a separate exercise with DOF and Treasury. That may not conclude until around the time of June monitoring.

There are issues with the draft budget, particularly on resource. Although we have £15·7 million resource DEL, that is significantly less than our bids of £50·9 million. As a result, the proposed outcome for DAERA is extremely difficult. With £15·7 million, the Minister can fund some elements of TB compensation and the associated programme; the environmental improvement plan (EIP), including Lough Neagh; climate change; and animal welfare. However, there are significant shortfalls for projected statutory obligations on the TB programme and contractual pressures on pay and running costs. There is also insufficient funding to take forward all of the Lough Neagh action plan.

What funding is available? We always aim to be as efficient as possible, and we have asked each grade 3 officer to deliver a 5% saving in running costs. That has generated £2 million for reallocation. As the rollover position does not take into account the increase in the Northern Ireland Environment Agency's (NIEA) regulatory income in 2024-25, to help ensure full cost recovery in line with 'Managing Public Money NI' (MPMNI), there is also £1 million available to help cover increased NIEA costs. When those are added to the £15·7 million additional allocation from the Executive, there is £18.7 million available for allocation.

How does the Minister propose to allocate the funding? That is set out in the table in the next slide, which shows the original bids that went to DOF broken down into seven areas totalling £50·9 million. The proposed allocations include specific amounts for inescapable statutory obligations, with £3·6 million for TB compensation and £6·6 million for inescapable contractual pressures on pay and operational costs across the top four bids. There is also £2 million to take forward additional measures to help manage the incidence of TB. On bid 2, there is an additional £3·5 million for the environmental improvement plan, which includes £1·6 million for the Lough Neagh action plan. I should note that there is £1 million in the proposed allocation for bid 2 in the table that should be in bid 3. The figures in the table are £6·8 million and £1 million, but they should be £5·8 million and £2 million.

In bid 3, £1 million is for NIEA to take forward new or additional work relating to the green growth strategy, the climate action plans and the environment strategy. Bid 3 also includes £0·8 million for the climate change science innovation group to take forward climate action communications and behavioural change across Departments.

The proposed £0·2 million allocation in bid 5 is split between NIEA and the rural affairs division to take forward work on PEACE PLUS, city and growth deals and the complementary fund. In bid 6, the proposed £0·4 million allocation is to take forward work on animal welfare legislation. Lastly, there is a £0·3 million proposed allocation to support the implementation of the Executive's Northern Ireland food strategy framework, which was approved in July last year.

The "Proposed Allocation" column sets out what is being funded. What is not being funded? The largest element is the bovine tuberculosis (bTB) programme. The Veterinary Service Animal Health Group projects an increase in compensation of £14·2 million above the £32·3 million baseline, of which the Minister proposes to allocate £3·6 million. However, that still leaves a significant shortfall of £10·6 million in what is a statutory obligation.

The Chief Veterinary Officer would also like to take forward more proactive actions to reduce the incidence of TB, and, while the Minister has allocated £2 million to that, they could spend around £5 million more. There is also no funding for avian influenza or bluetongue outbreaks.

In addition, there is a shortfall in funding of £2 million to take forward the Lough Neagh action plan after allocating £3·5 million to the EIP. There are further gaps on pay and operational costs, totalling £7 million. Those are significant shortfalls across the bids that will have to be managed in year if there is no further funding at final Budget stage. That also assumes that the employer National Insurance contribution increases will be fully funded by Treasury. You can see that that is an extremely difficult proposed position for the Department.

The next slides set out the breakdown of DAERA's resource DEL budget, based on these proposals, starting with income. You can see that we propose to bring in over £35 million of income at this stage, the largest element being NIEA's regulatory income side for consents to discharge. The next largest is the work that we do for the Food Standards Agency, particularly around the meat plants. Salaries, as you might expect, are the largest element of non-Executive-earmarked funding, totalling over £150 million. There is also a small subsidy to Forest Service.

The next slide breaks down the funding that we provide to our non-departmental public bodies (NDPBs), with the largest, as you might expect, for the Agri-Food and Biosciences Institute (AFBI) to cover its staff costs and other running costs. That is the non-research and development work in those budgets. The largest programme is bTB compensation, which now includes the additional £3·6 million that the Minister has allocated, bringing it up to £35·9 million. As I said, it is still £10·6 million short of what the vets project. Given that, in 2019-2020, TB compensation was £19·5 million, there has been a significant increase in the intervening period.

Turning to capital, DAERA has received a proposed allocation of £119·5 million from the Executive. Although that is a £24 million increase on the opening position for 2024-25, it is £7 million less than our inescapable pressures. I suppose that that reflects the wider capital position facing the Executive. There is also nothing for high-priority bids totalling £52·7 million. In light of that, the Minister proposes to overcommit £15 million on capital on the basis that there will be some slippage and the opportunity to secure additional capital during 2025-26 so that can be managed down by the year end.

The next three slides set out the breakdown of the Minister's proposals under eight headings. The first one is a new heading and represents the first time that it is proposed that DAERA receives an Executive-earmarked allocation for the just transition fund for agriculture. There are four items there. The Minister proposes to allocate £5 million to bovine genetic improvements; £3·7 million to on-farm capital support; £2·8 million for peatland restoration; and £0·8 million for the livestock dietary emissions challenge fund. You will also see that there is other non-Executive-earmarked funding for on-farm capital support and bovine genetic improvements further down the table under the heading "Programmes".

On green growth and climate change, the largest element is for Lough Neagh, which is significantly up on the funding for 2024-25 on capital, which was £3·2 million. Farming with Nature is the largest of the programmes, and it is due to launch later this year. Its allocation is £4·8 million. There is also £4 million for the tackling rural poverty and social isolation (TRPSI) framework and £3·3 million for household waste.

The next slide is about our IT systems. The largest proposed allocation is for the digital transformation programme, which enables so much of the work that goes on across the Department, followed by the Information Systems for Laboratories in AFBI, NIEA and DAERA (ISLAND). Under the heading "Estate Transformation", the largest element is the AFBI research vessel, which is under construction, followed by the animal health sciences building, the construction of which will begin later this year at Stoney Road, and the ruminant emissions research facility at Hillsborough. Under "Research and Development", the largest allocation — £21·8 million — is to AFBI to cover staff and other running costs that meet the strict Treasury criteria for research and development.

The last slide on capital details some smaller amounts of recurring capital for the likes of plant, vehicles, machinery and equipment across DAERA, as well as a small amount for the Whitespots Country Park. As you can see, that totals £134·5 million, which is on the basis that the Minister proposes to overcommit £15 million, as I mentioned.

I move briefly to the current financial year. The spring Supplementary Estimates, Vote on Account and Statement of Excesses debate and the five stages of the Budget Bill are due to take place between 17 and 25 February. As part of the Supply process, the Estimates will set out in detail the amounts of cash and net resources that are required for public services for one financial year for each Department. The SSEs represent the final outcome at January monitoring and the changes that have taken place since the Main Estimates last July. There is also an Estimates memorandum that provides readers with a greater understanding of the information in the Estimates template. That is a new development for this year.

I am conscious that there are lots of tables, figures and charts in relation to the spring Supplementary Estimates, and we are happy to take any questions that you have on them. We are also happy to take any questions you have on the draft budget proposals for next year. I understand that the Committee is due to submit a report to the Finance Committee later in February on the draft budget, and we would welcome the Committee's support for additional resource and capital funding to help address the proposed significant shortfalls that we will face next year.

The Chairperson (Mr Butler): Thank you so much. That was really good. Thank you for the slides and documentation. Members have already contacted me on some of the issues, which, I am sure, will be picked out in the questions.

I will ask you a couple of questions at the start, particularly about the opening part of the presentation on the proposed resource DEL allocations against the bids. You can see in bid 1 that the Minister had bid for almost 50% of the total bid — £24 million out of £50·9 million — for the bovine tuberculosis programme, which, arguably, in cattle farming terms, is the number-one priority. You made the point that, in 2019, the total outlay was about £10 million and we are now touching £60 million. You can see the Minister's intent. However, the proposed allocation is only one quarter of what was bid for. Is there any rationale for that?

Mr Downey: You can see that there is only £18·7 million available for allocation. If we had got £50·9 million —.

The Chairperson (Mr Butler): Sorry, I should probably have expressed myself better. Of the Minister's total bid, 50% was for the TB eradication programme. If you follow that, you could argue that 50% of the proposed allocation should go to the TB eradication programme; instead, it is a quarter. Does that make sense? Sorry, it is a third. Of his total bid of £50 million, £25 million — 50% of his total bid — was for TB eradication, but actually he will allocate about a third of what he receives to that. I know that that is a ministerial decision, but was there any rationale for it?

Mr Downey: TB compensation is one of the few pressures where we pick up additional funding in year. I have been in the Department for 11 years: if we get anything in year, it is usually for TB compensation. Therefore, whilst the Minister was keen to increase the baseline, because there is additional funding, he is hopeful that we will get additional allocations at monitoring rounds.

This year, we got £4 million in June monitoring and £1·6 million in October monitoring. If we were to get an additional £5·6 million, that would push it over the 50% that you referred to. Because it is a statutory obligation, when the Executive consider pressures across Departments, it is at a higher level than some of the other pressures.

The Chairperson (Mr Butler): Was that initial bid made for the compensation only? I know that everyone's ambition is that the eradication of TB should probably be the primary aspect. Was all of the 2024 bid for compensation, or was an element of it for the eradication scheme?

Mr Downey: There was £14·2 million for TB compensation and £7·1 million to take forward actions to help to mitigate the incidence of TB. The Minister has allocated £2 million towards those actions. There is £5·6 million in total going to the TB programme.

The Chairperson (Mr Butler): Given the rise that you pointed out, the compensation piece has increased by almost 600% over six or seven years. Is that correct?

Mr Downey: Back in '19-20, it was £19·5 million.

The Chairperson (Mr Butler): Not 1920; 2019, hopefully? [Laughter.]

Mr Downey: Sorry, 2019-2020. It was £19·5 million. The projected TB compensation for this year is £41·7 million. For next year, it is £46·5 million.

The Chairperson (Mr Butler): Those are significant burdens on the Department.

Mr Downey: They are.

The Chairperson (Mr Butler): As you said, they are statutory obligations, so there is that premise.

I want to ask a wee question that I asked the Minister. You are definitely the team to answer it. What is the difference between "earmarked" and "ring-fenced"?

Mr Downey: In layman's terms, they are exactly the same. In technical terms, Treasury has three DEL budgets that we manage. There is capital DEL, which is capital; there is non-ring-fenced resource DEL, which everyone refers to as "resource DEL", which is salaries, wages, running costs and programmes; and ring-fenced resource DEL, which is your non-cash depreciation. To avoid any confusion about what Treasury calls "ring-fenced resource DEL", which is non-cash depreciation, the Department of Finance refers to anything that is ring-fenced as being "earmarked" so that there is no confusion.

The Chairperson (Mr Butler): I thought that it might have been an agricultural term — "ear marks" to go with the ear tags.

I have a final question about the bid for delivering the environmental improvement plan, including Lough Neagh delivery. Tackling the issues in Lough Neagh is a significant priority for all of us. Have any issues or things been identified that will not be able to be rolled out or implemented, given that the allocation is 50% less than the Minister had bid for?

Mr Downey: There is £1·9 million that is going towards specific actions in the environmental improvement plan, excluding Lough Neagh. Across NIEA; environment, marine and fisheries group; climate change and science innovation group; and food, farming and rural affairs group, there is £1·6 million for Lough Neagh to take forward 16 actions in the Lough Neagh action plan. We will not be able to take forward three actions: action 37, action 17 and action 21. Those actions total around £2 million.

The Chairperson (Mr Butler): Will you briefly tell us what those actions are, if you do not mind? I do not have them in front of me.

Mr Downey: Yes. Action 17 is:

Action 21 is a:

Action 37 is the ability to respond to blue-green algae reports and analysis to inform operators, as outlined in the inter-agency protocol.

Those three bids total £2 million. There is just not enough resource to do everything, but there were 16 actions where we could do a small amount, and that £1·6 million can cover those 16 actions. At June monitoring last year, we got £1·5 million specifically for Lough Neagh. If there is nothing extra at final budget, we will bid for the £2 million, because we got an allocation last year, and, as you know, the blue-green algae starts to bloom again at that time of year. We may get additional funding around that time, but we will have to wait and see.

The Chairperson (Mr Butler): The problem with getting additional in-year funding for action 21, for instance, which is the grant programme to support water quality, is that the people who would be best placed to do that might not be in place. A number of months ago, the Minister announced that there were five successful applicants to a scheme for trialling solutions. Is that what we are talking about here? Is that still going?

Mr Downey: I think that that is for sustainable utilisation of livestock slurry.

The Chairperson (Mr Butler): I think that it is that, yes. Is that not what we are talking about here?

Mr Downey: No. That is a capital scheme; this is a resource grant scheme.

The Chairperson (Mr Butler): Thank you for that. I really appreciate the detail in your answers.

Ms Murphy: Thanks for that comprehensive briefing, Roger. I want to zero in on the rural affairs capital DEL, where there has been an uplift of £2·9 million. I appreciate that you may not know what specific programmes that additional money will be put into off the top of your head. I assume that it may be an uplift to TRPSI.

Mr Downey: Sorry, where is that?

Ms Murphy: It is in some of the tables. I was comparing it with the previous —.

Mr Downey: Is it in the 2024-25 spring Supplementary Estimates or the budget?

Ms Murphy: It is the budget. It would have been in and around £2·9 million.

Mr Downey: I see £4 million for TRPSI. I do not know what page that is on, and I do not want to give you the wrong answer.

Ms Murphy: If you want, Roger, you can get back to me on that, as it is a specific enough request.

Under annually managed expenditure (AME), £108 million additional resources have been allocated to Mobuoy due to a potential technical accounting adjustment. Can you expand on why that adjustment has had to be made?

Mr Downey: Yes. AME budget cover is for a provision. As it says in the paper, it is a technical accounting issue involving the assessment of whether international accounting standard 37 should apply to the latest position on Mobuoy. That has been an issue for the past couple of years. The Audit Office has looked at the work that has been going on there and said that the Department should include a provision. We have looked at the analysis, including the contextual factors, the legal obligations and what the Minister said in the Assembly. We have not made a provision in the past couple of years, but, when we take a view from doing the accounts at the end of the year, it may be that there is a need to make a provision. We cannot wait until we are doing the accounts to get the budget cover, so we have applied for that.

There are various windows during the year to apply for AME cover. As part of prudent financial planning, we bid for £108 million at that stage. If it comes to pass that things have not moved on by the time that the Department is preparing the accounts in April, we will not need that, but we have the headroom, should we need it at that stage. We have to work through the accounting standard in light of the latest information.

Ms Murphy: You mentioned international accounting standards: how do they factor in? I ask more as a point of curiosity than anything else, Chair.

Mr Downey: That is international accounting standard 37. There are dozens of accounting standards that, as accountants, we have to follow when we prepare our accounts at year end, along with the guidance from the Department of Finance. That is done so that preparers of accounts prepare their accounts on a consistent basis so that readers can compare Department with Department and see that it has been done consistently. That standard relates to the determination of provisions at year end. We will just have to work through that process.

Mobuoy is just one provision that will be considered along with others. Depending on the evidence and how it aligns with the criteria and the standard, we will make a call on whether we make a provision or whether it is a contingent liability.

Ms Nuala Hennessy (Department of Agriculture, Environment and Rural Affairs): TRPSI capital in this financial year is £5·7 million. I think that you are comparing the opening capital last year —

Ms Murphy: Possibly.

Ms Hennessy: — with the opening capital this year. TRPSI this year is closing out at £5·7 million capital.

Mr McGlone: I want to come to two or three items. First of all, I represent a good part of the western shore of Lough Neagh. I saw nice wee photos of three Ministers announcing that Lough Neagh was a key priority for the Executive, but we now see that there is insufficient funding to take forward all of the Lough Neagh action plan. What was the shortfall there again?

Mr Downey: The shortfall is £2 million —

Mr McGlone: It is £2 million.

Mr Downey: — across three actions on resource.

Mr McGlone: Sorry, what was that second bit? Was it £2 million plus —?

Mr Downey: It is £2 million across three actions —

Mr McGlone: Yes, the three actions that you outlined.

Mr Downey: — but that is on resource. On capital, however, there is a significant increase in the funding to take forward Lough Neagh. In the current financial year, there was £3·2 million capital. Next year —.

Mr McGlone: Sorry, an increase from what base?

Mr Downey: For 2024-25 — the current year — there was £3·2 million. That is the first year.

Mr McGlone: It is a significant increase compared with nothing: is that what you are saying?

Mr Downey: No, for 2025-26, it is £12·8 million. There is an increase of £9·6 million from the current financial year to next financial year. Although there is a shortfall of £2 million in resource to take forward the Lough Neagh action plan in three specific actions, there is an additional £9·5 million in capital that we did not have in the current financial year.

Mr McGlone: That is a fair point.

There are two or three things there. The Chair mentioned the £10·6 million shortfall regarding bovine TB. Does that include the figures that we received before? I think that you projected it to be about £60 million when you were here previously. Does that include veterinary costs?

Mr Downey: No, that is purely the compensation element.

Mr McGlone: That is purely compensation. Is there a shortfall regarding veterinary expenditure?

Mr Downey: The rest of the TB programme is largely balanced out, but the shortfall in the programme is in the compensation element, because it is —.

Mr McGlone: Right. Is the amount of veterinary input not conditional on the effects of what is being done on the ground? Are you telling me that there will still be significant veterinary costs that could be changed or could go up and the compensation will not be there? Is the Department of Finance basically telling DAERA, "Look, your bovine TB action plan, you're on a bit of a recycler at the moment. You need to be focusing on on-the-ground actions and getting your action plan out there to reduce the incidence of bovine TB"? If the Department has a £10·6 million shortfall at the minute, what situation will you be left in when the compensation claims stack up?

Mr Downey: As I said, in 2019-2020, the compensation was only £19·5 million. It is projected to be between £40 million and £50 million next year. That is a huge jump.

Mr McGlone: That will be topped up with veterinary costs.

Mr Downey: Yes, it is on top of that. The chief vet presented his strategy to the Committee back in November. A delivery plan is being firmed up at the minute.

Mr McGlone: Has that moved to being a strategy now? It was presented that day as the Chief Veterinary Officer's own thoughts and own paper.

Mr Downey: Sorry, maybe I used the wrong terminology. The Chief Veterinary Officer was here at the end of November presenting his findings.

Mr McGlone: Yes.

Mr Downey: My understanding is that the next stage is an action plan on the back of that that will help to reduce the number of incidents.

Mr McGlone: It is not specific to your area, but do you know when that action plan will manifest itself?

Mr Downey: I do not have that detail.

Mr McGlone: It is a wee bit like Groundhog Day with this one, to be honest, but I know that it is outwith your control.

One final question. The concept of just transition has been about for a while. Specifically, what moneys are available for the just transition and in which lines of expenditure?

Mr Downey: On the capital, the Executive have, for the first time, allocated to DAERA Executive-earmarked funding for a just transition fund for agriculture totalling £12·3 million. The Minister has decided to allocate that across four areas.

Mr McGlone: I heard you refer to that. Specifically what is that for?

Mr Downey: There are four areas: bovine genetic improvements; on-farm capital support; peatland restoration; and the livestock dietary emissions challenge fund.

Mr McGlone: How will those be administered, in particular the capital fund? What is the sum total of that?

Mr Downey: For bovine genetic improvements it is £5 million; on-farm capital support is £3·7 million; peatland restoration is £2·8 million; and the livestock dietary emissions challenge fund is £0·8 million.

Mr McGlone: What is the capital fund directed towards?

Mr Downey: The livestock dietary emissions challenge fund?

Mr McGlone: You mentioned the capital funding.

Mr Downey: The on-farm capital support?

Mr McGlone: Yes.

Mr Downey: It is the farm business improvement scheme tier 2, tranche 2. It is designed to support farm transformation and provides grants for projects costing over £30,000, so it is the larger investments. There is £3·7 million for that in the Executive-earmarked just transition fund for agriculture, but there is a further £3·1 million for on-farm capital support that is non-Executive-earmarked, so £6·8 million is going to that project in total.

Mr McGlone: OK. It might be helpful, Chair, if we had some idea of the sorts of projects that that will be directed towards. I do not mean today. If you do not have that detail, maybe you can follow up with a letter. That would be great.

Mr Downey: I do not have that detail. There is a long list of projects.

Mr McGlone: I get that. Also what types of farms it is being directed towards. There are big farms, medium-sized farms and small farms, and we want to make sure that those most likely to be disadvantaged get a fair crack of the whip.

The Chairperson (Mr Butler): Are there any other questions for the team?

Miss McIlveen: My question has probably been asked, because it was on the capital DEL. On-farm capital support and bovine genetic improvements were detailed twice, so it was really just to get an explanation of where that money was coming from. Obviously, it is a much bigger programme than just through the just transition fund.

Mr Downey: Yes. We have two pots of money now: Executive-earmarked and non-Executive-earmarked. I thought it better to split that so that you know what is Executive-earmarked and what is not. In total, though, you are right: you just add the two together to get a bigger amount for those projects.

The Chairperson (Mr Butler): Thank you for your presentation and your time. We will see you at the next one.