Official Report: Minutes of Evidence

The Chairperson (Mrs Erskine): I welcome Susan Anderson, director of finance; Declan McGeown, deputy secretary, water and departmental delivery group; David Porter, director of engineering; and Peter Rice, interim director of public transport operations.

Are members content that the evidence session be recorded by Hansard?

The Chairperson (Mrs Erskine): Before we begin the evidence session, I want to say — as I have done in the Committee a number of times before — that the Department's budget is a key part of our Committee scrutiny. We did not receive the evidence papers in a timely way that would have allowed us to look at these matters in depth in the way that we would have liked to do. I regret that, because these are not just numbers on a page for us. These numbers affect Northern Ireland; they affect our constituencies; and they affect the prioritisation of projects. The Department for Infrastructure has a huge capital budget, and we want to see things driven forward — pardon the pun — in our constituencies and across Northern Ireland.

I want evidence that relates to finance and your budget to come to the Committee in a more timely fashion. We have to give an account of all of this when we go into the Assembly Chamber and vote on it. There were exceptional circumstances last year: we were just back up and running. I had to go into the Assembly Chamber last year and say that we had not had adequate time to look at the budget. Other Committees were saying that too. It should come as no surprise to the Department, however, that we want to scrutinise its budget. This year, I want to be in a position where we are able to go into the Assembly Chamber and say that we have had adequate and appropriate time to look at it.

I understand that the Department is under pressure. We are all under pressure, but the Budget is fundamental to what happens outside of these doors, and the Committee wants to scrutinise the Department's properly. I just wanted to say that from the outset in relation to our evidence session. I will give you a bit longer to go through the presentation in detail, after which we will go to members' questions. We all have individual questions. Rather than the usual five minutes, within reason — I want to give members the opportunity to ask questions — I will give you a bit longer to go through this. Like me, members had only a short time to look at the material in detail, and I would have liked to marry it up with the business plan and other things that have come from the Department in previous evidence sessions. Without further ado, I invite you to present your evidence.

Mr Declan McGeown (Department for Infrastructure): Thank you, Chair. I will begin with an apology if members feel that they did not have enough time to scrutinise the material. We will certainly look at that. I reassure members that, looking to next year, neither we nor the Minister have taken any budgetary decisions yet, so there is time to consider that going forward. There is time built into the system, but we apologise. The presentation is fairly short, and I think that you got it in advance, but we will walk through it and pick up some of the detail if need be.

The Chairperson (Mrs Erskine): OK, thank you.

Ms Susan Anderson (Department for Infrastructure): I will start with the spring Supplementary Estimates (SSEs). The Committee will be aware of the process behind these. We are bringing the position of the allocations that have been received in-year up to date so that they can be voted on. First, in our resource departmental expenditure limit (DEL) position, we are reflecting the allocations that we received in June, October and, more recently, January monitoring, which total £34 million in-year.

We have also received a number of technical transfers from other Departments, which are reflected from the Main Estimates to the spring Supplementary Estimates figures. We have received around £4·5 million in technical transfers from other Departments. The majority of that relates to City of Derry Airport (CODA), where £3 million was received from the Department for the Economy, along with just over £0·5 million in relation to rural transport funding from DAERA. It also reflects additional allocations that were received in-year in relation to the Windsor framework: another £4 million or so is reflected in the figures. What is different here, which the Committee will not have seen before, is that the figures include our ring-fenced resource DEL, which relates to depreciation and impairment of our assets. Those are also factored into the figures that you can see on the slides.

I will drill down into some of the figures. The figures for Translink are slightly different and reflect the budgetary position. We do not show depreciation and impairment in the same way as we normally do, because it is a public corporation. However, for the likes of the Department, transport and road asset management (TRAM), for example, is just under £200 million relating to the resource DEL budget, with another £32 million ring-fenced for depreciation and impairments. When we look at NI Water, the figure reflects just under £150 million for the budget figure along with £113 million for depreciation and impairment. Those are the key things to draw out from the resource position. The figure of £752·4 million includes the ring-fenced depreciation; we did not suddenly have a significant increase in our budget.

I will move on to capital. The figure reflects our opening budget plus the allocations that were received in-year: £12·5 million in the first monitoring round, just under £40 million in the October monitoring round and, more recently, £17·6 million in the January monitoring round. We also received technical transfers of £8 million. That is the net position after transfers to and from other Departments. There are also reduced requirements, of which the Committee was previously made aware, that relate primarily to the A5 and some EU funding.

I draw your attention to a footnote that refers to capital income and headroom. We have included headroom of just under £50 million. That is not budget cover; it simply gives us cover in our Estimates so that, should there be any late allocations, we will have the cover in our Estimates to spend them. That is a technical adjustment, not budget cover. We do not have the budgetary authority to spend that, but it gives the Minister the flexibility, should the Executive agree any late allocations, to meet other pressures or funding commitments that she wants to make for the remainder of the year. It is simply a contingency, should we get the budget cover. I stress that it is not budget cover at this stage: we cannot spend an extra £49 million, as it stands.

The £49 million headroom that we have factored in represents the balance of the bids that were not met in the January monitoring round. Again, you saw those when we briefed the Committee previously.

That is all that I was going to cover on SSEs in our opening remarks. Would you like to pause there, Chair, so that we can take questions on SSEs before I move on to the draft Budget?

The Chairperson (Mrs Erskine): Yes. I should have said before your opening remarks that this session is on the spring Supplementary Estimates. We will come on to the draft Budget afterwards. This might be a good point at which to come in with questions. Does the Department anticipate that its forecast resource and capital expenditure will be fully utilised in 2024-25?

Ms Anderson: Yes. At this point, we forecast that we will spend our resource and capital budgets in full.

The Chairperson (Mrs Erskine): OK. There will be no underspend.

Ms Anderson: No. We are not planning for any underspend at this stage.

The Chairperson (Mrs Erskine): OK. Are you confident that the allocations received in the in-year monitoring rounds will be utilised as well?

Ms Anderson: Absolutely.

The Chairperson (Mrs Erskine): You are fully confident. There will be no slippage in relation to capital projects, will there?

Ms Anderson: No. We are not aware of any slippage at this stage. As I said, we forecast that we will come in on budget.

The Chairperson (Mrs Erskine): OK. In the in-year allocations, what are the underlying reasons for the increased administrative costs, and what business areas are they in? I am talking about increased spend compared with the forecast amounts in the Main Estimates.

Ms Anderson: Do you mean administration costs?

The Chairperson (Mrs Erskine): Yes.

Ms Anderson: OK. If we compare the figures with the Main Estimates, we see technical adjustments between Main Estimates and SSEs. In-year allocations relating primarily to the Windsor framework are also captured in the figures. The like-for-like comparator is last year's figures; you will see that there is a small decrease in what we forecast for this year compared with last year's out-turn.

The Chairperson (Mrs Erskine): Will there be more spending next year?

Ms Anderson: In 2025-26?

The Chairperson (Mrs Erskine): Yes, in the next financial year.

Ms Anderson: The Minister has not made any budget decisions for next year. That will be wrapped up as part of next year's budget decisions.

The Chairperson (Mrs Erskine): OK. Members, do you have any questions? Keith?

Mr K Buchanan: I have a quick question that may roll into the other presentation as well. On the little pie charts that you produced for resource and capital, I am looking at the TRAM budget. Is active travel broadly capital in TRAM, or is it resource?

Mr David Porter (Department for Infrastructure): There is an element in both. Are you working towards asking about the 10%?

Mr K Buchanan: No. I am working towards asking this: if an active travel project cannot be completed, whether it is resource or capital, can you park it, say, "We will not spend that", and, to put it in simple language, pull it back into TRAM and spend it on roads?

Mr Porter: I see what you are getting at. There is a range of projects. It comes back to the Chair's question about how confident we are that all the capital projects will complete. The Department balances a range of projects. Any one of them can be slowed down because of bad weather, a contractual issue or a land issue, but we have many others that we can then accelerate. Provided that we see the situation early enough, we can do that. If an active travel scheme is not delivered, for example, provided that we get early warning of it in-year, we will have a maintenance scheme, another active travel scheme or some other road improvement scheme that we can bring forward.

Mr K Buchanan: So, David, active travel money that was going to be spent in that year could go to tarring a road.

Mr Porter: It could, yes. If it was very early in the financial year, we would do our best to try to spend money within its allocated budget line, but, if it came to the point where we were running the risk of losing that money and it is not ring-fenced, we would, with Department of Finance approval, redistribute it within the Department

Mr K Buchanan: My final question is about active travel money. How much of that do you not spend in any year? Give me a guesstimate. How much active travel money that are you not fit to spend on active travel are you putting into roads?

Mr Porter: This year, the active travel team is achieving the programme that was set out at the start of the year. The schemes might well be slightly different from those that we said that we would do on day 1 of the financial year, and, in particular, the actual proportion of spend might change on individual projects, but, overall, that budget line has spent out.

The Chairperson (Mrs Erskine): Thank you. What engagement does the Department have with the Department of Finance Supply team? How regularly does that occur? Obviously, it is to ensure that the Executive have regular and timely information on the financial landscape in the Department.

Ms Anderson: At my level — official level — we engage daily. We are back and forward providing information at very short notice to the Supply team as requests come in. At official level, my team and I engage regularly and constantly.

The Chairperson (Mrs Erskine): That is daily, so you are flagging pressures that might come up and things like that: for example, a division has an emergency — road subsidence or that type of thing — and is finding things tight financially. I know that that is at a very micro level, but is that the type of thing that you flag?

Ms Anderson: In that situation, we would look internally. That is the first port of call: we look internally to see whether we can meet that pressure ourselves. Then, obviously, as part of the formal monitoring round processes, we would flag and highlight those pressures to DOF officials at that stage.

The Chairperson (Mrs Erskine): Members, have you any more questions at this point?

Mr Durkan: Thanks to the team for coming in. I was wondering whether there was a breakdown of the capital earmarked allocations. The Finance Minister's statement on the Budget said that it would be £235 million, but this pie chart has a figure of £154 million. I presume that that is with the Irish Government's contribution to the A5 taken out. Is it?

Ms Anderson: Yes.

Mr Durkan: That explains the disparity. Is there a breakdown of the £154 million? The Finance Minister's statement says that it is for:

but the document that we have says:

with no mention of the A6.

Ms Anderson: Yes, we can provide a breakdown of that. Primarily, it relates to the £65 million for the A5. The A6 is a further £6 million, and the transport hub is about £80 million. It also includes city deals projects and a small element for PEACE PLUS. We can certainly provide a breakdown in writing.

Mr Durkan: I thought that city deals would be elsewhere. Is the money for the A6 still paying for land that was vested? Is there any intention to carry out new work on the A6?

Mr Porter: That is the funding to tidy up the existing contract. We are still moving towards a final financial settlement on that contract. That is provision for that.

Mr Durkan: Is there no sign of new work to get it finished?

Mr Porter: No. This is not new work. This is the existing Dungiven to Drumahoe project.

Mr Durkan: Thanks, David.

The Chairperson (Mrs Erskine): Keith, do you want to come back in?

Mr K Buchanan: No. I will wait for the next session. That is fine.

The Chairperson (Mrs Erskine): May I just check something? The spring Supplementary Estimates memorandum talks about addressing regional imbalance. What does that look like in financial terms? In the previous mandate, we had, for example, a pot for rural roads and things like that. Will that be part of the considerations going forward? If that is the case, will it be ring-fenced as well?

Mr Porter: It started out as the rural roads recovery fund but is now just the roads recovery fund, and we have had that over the past few years. We have said that there is not yet any budgetary commitment, but that budget line has turned out to be very popular with section offices, elected representatives and the public, because it pretty much gives money to the section offices without there being too many constraints, so they can target areas where they know that there will be a significant benefit and areas that are causing a particular nuisance or headache for the public. In planning for next year's budget, we anticipate that we would like to have that budget line, but I caveat that by saying that that would need to be approved by the Minister.

The Chairperson (Mrs Erskine): Will that be ring-fenced?

Mr Porter: It is ring-fenced in the sense that it is on a budget line, but it is not ring-fenced in departmental terms. When we get money for the likes of the A6 flagship project or the A5, it is for a specific project and is ring-fenced for the Department. However, within the Department, we just work on budget lines. We would have that allocation on a budget line. It is notionally ring-fenced in that it is on a budget line for that purpose, but it is not ring-fenced when it comes to the way that DOF looks at that money.

The Chairperson (Mrs Erskine): Addressing regional imbalance is not about just roads; it takes in water, transport and all those things. How does the Department plan to do that, from a financial perspective?

Mr McGeown: From a departmental perspective, we will equality screen everything. Could you talk about that process, Susan?

Ms Anderson: Yes, absolutely. We are working through the equality screening process for next year's budget. Exactly that kind of thing will be picked up as part of that process, as well as the rural-proofing.

The Chairperson (Mrs Erskine): OK. In the SSE memorandum, I also noticed the capital provision for land vesting. Is that a result of inflation?

Ms Anderson: Is that in the section on contingent liabilities?

The Chairperson (Mrs Erskine): It is section 1·5, which is key drivers of spending changes. Sorry, I do not have the page number to hand.

Mr K Buchanan: It is page 11.

The Chairperson (Mrs Erskine): It refers specifically to land vesting for the A5.

Ms Anderson: That is provision for the vesting of land. For the Estimates, it is categorised as being "provision" at this stage. We will move it through the process. In accounting terms, we will move it into accruals when we have been able to vest the land. At this stage, we are providing for it.

The Chairperson (Mrs Erskine): OK. Do members have any more questions on that side of things?

Mr K Buchanan: How do you work out the figure for land vesting for, for example, the A5? How do you come to that figure? Is that a DOF or Land and Property Services (LPS) principle? How do you come to a figure for that?

Mr Porter: Is that in terms of the individual —.

Mr K Buchanan: Sorry, the land vesting figure is the figure for the land vesting alone and not for the actual value of the land. Is that right, or does it include both?

Mr Porter: It includes both. It is for the compulsory purchase of that land and will be made up of the valuation that LPS places on the physical land and any accommodation works, disruption and whatever else the individual landowner feels is reasonable to put into their claim.

Mr K Buchanan: LPS indicates a figure: is that how you come up with those figures?

Mr Porter: That is certainly the case when it comes to the valuation of the asset. A land agent will then engage on that — occasionally, a landowner will represent themselves, but it will generally be a land agent — and there will be a heads of agreement. Fairly standard items are taken into consideration: disruption, particularly in the case of a business, and any relocation costs and the like will be taken into account. The Department will also put in some accommodation works, such as, typically, a new fence, a new boundary or a new lane.

Sometimes, there is betterment. That will also be taken into consideration. In that case, a landowner may say, "Yes, what you are offering me is the bog standard, but I would like something better". We will agree to that in some cases, but it is part and parcel of that overall land deal or compensation deal. If you get betterment out of it, you take it. That is a benefit for many landowners. Rather than getting an ordinary lane built as part and parcel of those works, they might want a better lane or a change of arrangement that we can then include in the land deal.

The Chairperson (Mrs Erskine): At this juncture, I will declare an interest: my husband's family lives along the A5.

Mr Durkan: I think that this is the right section to ask this question — the draft Budget bit and the spring Supplementary Estimates bit have kind of merged into one. My question is related to the draft Budget and to Northern Ireland Water. The outgoing Minister has insisted that the funding model for Northern Ireland Water is fine and that the problem is with the level of funding. How does the amount for Northern Ireland Water that has been proposed or asked for match the price control (PC) plan? I see that there is £107 million from the reinvestment and reform initiative (RRI). Has that been done before? How and when will that be repaid?

Mr McGeown: I will pick up on that in general. People will have seen that the midterm evaluation was done by the Utility Regulator on PC21. It indicates that, going into the next financial year, as in from April, Northern Ireland Water will need in the region of £537 million. I assume that you are talking about capital, Mark. We have not allocated a figure at this point. Of course, members will know, as they have heard me say it before, that we gave Northern Ireland Water an indicative figure of £321 million to work with over the three years, but that was just an indicative figure to allow it to plan with some degree of certainty. We were not saying that that was the absolute figure, nor will we until the Minister makes a decision.

We will come on to that point after Susan's next briefing, but it is fair to say that, while we have a better capital position going into next year, we will still be challenged as a Department. You will hear that in Susan's presentation. Therefore, the cake that we have to cut presents us with challenges. There will, no doubt, be a gap between what Northern Ireland Water needs going into next year and what we can allocate, but we will continue to work with it and to bid in-year. As you know, we are looking at the previous Minister's three-pronged approach, through which we will continue to work with the Executive to try to bring in more money, and we will look at developer contributions and other ways that we can work, such as through sustainable drainage systems (SuDS) and things like that, to try to minimise the cost of the system.

It will be a challenge, but, as you have heard me say before, Mark, I do not think that it is about a governance model. It is about funding. I echo what the Minister said about that. Had we more money for the Department and, by extension, for Northern Ireland Water, we would not be in this position. To me, the governance model is a bit of a red herring, but others will have their own views on it.

Mr Durkan: It is about ensuring that the right level of funding goes into it.

The Chairperson (Mrs Erskine): We are jumping ahead of ourselves by talking about the draft Budget. We have yet to have the presentation on that. Peter, you were looking to come in. Is your question about the spring Supplementary Estimates or the draft Budget?

Mr McReynolds: It touches on Mark's points.

The Chairperson (Mrs Erskine): Yes.

Mr McReynolds: I was not going to come in on this, but Declan mentioned the Minister's three-pronged approach. Will the gap that Mark highlighted be filled through SuDS and developer contributions? Has anyone looked at whether filling that quite sizeable gap will be achieved by that approach?

Mr McGeown: We do not know what the gap is at the moment, Peter, insofar as we have not allocated a figure to Northern Ireland Water. If such a figure is based on comparing £321 million with £537 million, I think that everybody would accept that closing that gap would be a challenge. It is more about the Minister saying, "Look, this is my contribution to trying to help to close the gap", and asking Northern Ireland Water to work with us as well. As you have heard me say before, it is about prioritising the schemes that have the greatest impact and for which the need is greatest at the moment and making sure that they happen. No, there is no way that it will close a gap of, potentially, £200 million, but it will go some way towards helping to alleviate some of the problems. That is what we are trying to do, and we hope that, on the other side, Northern Ireland Water will work with us on that.

Mr McReynolds: You said a figure, which, I think, was £321 million.

Mr McGeown: Yes.

Mr McReynolds: Could you put as a percentage what the three-pronged approach will realistically achieve? Will it go halfway? Will it go 25% or 10% of the way?

Mr McGeown: I would be guessing, because we still have to take through the consultation etc on developers' contributions, which, no doubt, we will come on to later. We have to see how that will play out at the far side, and we still have to work with developers more widely to look at alternative ways of diverting water out of the system. That will take time to bed in.

Is the three-pronged approach likely to have a major impact as we go into next year? No, it will not markedly close that gap, but it will start the process of doing it. The previous Minister was very keen on doing that to show that we can work to find ways of doing things instead of always saying that we do not have enough money.

The issue goes back 15 or 20 years. As you will know, Peter, we funded Northern Ireland Water to the tune of well in excess of £1 billion in the first few years of the price control. We are trying to get as much money to it as we can, but the costs are rising so much. That is to do with the cost of inflation, which you will also hear about on the roads side, for example. We are running to keep up.

The Chairperson (Mrs Erskine): OK. Thank you.