Official Report: Minutes of Evidence

The Chairperson (Mr Gildernew): I welcome the officials to the meeting. I welcome back John Greer, deputy secretary of the corporate services group; and Cherrie Arnold, finance director. The briefing paper is in your pack, members. John, please brief us on the paper, and we will then go to questions from members. Thank you.

Mr John Greer (Department for Communities): Thank you, Chairman and Committee members, for giving Cherrie and me the opportunity to brief you on the out-turn position for 2024-25 and the June monitoring result.

I will quickly go through the out-turn for 2024-25. We had a very small underspend of £5·1 million in our departmental expenditure, which equates to 0·6%, and a small underspend of 1·4%, or £3 million, in capital. In our annually managed expenditure, we had a small underspend of 3·5%, which equates to £351 million. Members will understand that annually managed expenditure is demand-led and volatile, as it largely relates to social security and pensions payments. We have largely delivered a balanced budget within tolerances.

Members were previously briefed on the budget allocated to DFC by the Executive for 2025-26. That budget provided £940·9 million of non-ring-fenced revenue spend to the Department, with £270 million of capital and £48·1 million of financial transactions capital. That resource departmental expenditure included an indicative allocation of £2·8 million for National Insurance contributions, which is due to be provided in the June monitoring round. While those numbers are large, the Department's opening budget allocation still reflected a shortfall of £98·6 million, or 12%, and a £161·3 million, or 38%, shortfall in capital. As was said at the previous briefing, that still represents an extremely constrained position for the Department.

I will move to the June monitoring round. As part of that exercise, all Departments are asked to submit their reduced requirements. We submitted reduced requirements totalling £12·7 million across our revenue, and that was largely down to, essentially, a revaluation due to vesting. The bids that we made in the June monitoring round are reflective of the allocations that we did not receive in the 2025-26 Budget round. We submitted bids totalling £148·2 million. That included £0·6 million for the derating grant and £49·9 million of non-ring-fenced resource bids, £17 million of which was for inescapable pressures relating to pay and arm's-length body (ALB) costs; £6 million for parity employment programmes; a rates support grant of £12·4 million; and £14 million to cover the additional cost related to the changes in National Insurance contributions. We also submitted a bid for a non-cash allocation of £15·7 million that related to depreciation and impairment.

Members will be interested to hear that we submitted a bid of £82 million relating to capital, £62 million of which related to the gap in what is required to hit the target for social home starts this year. Recognising that shortfall, we also submitted a bid of £13·6 million to cover disabled adaptations, £3·8 million for the affordable warmth scheme, £1·5 million for the housing development grant and £1 million for cladding safety.

Following the submission, the Executive agreed the outcome of June monitoring on 1 July. That resulted in us receiving £0·6 million for the derating grant, £9 million of capital for our social development housing programme and £14·5 million to recognise the non-cash costs of depreciation and impairment. As the Committee was previously briefed, that £9 million will cover approximately 135 new homes. In the June monitoring round, it was also noted that DFC will be given first call on up to £2 million for the social development housing programme in the future. Obviously, that still means that the Department faces a significantly constrained budget position that will impact our ability to deliver on key programmes such as our social development housing programme. I am happy to take questions, and Cherrie is here to ably assist me with those questions.

The Chairperson (Mr Gildernew): Take the hard ones.

Mr Greer: Exactly.

A Member: We know.

The Chairperson (Mr Gildernew): I have a couple of quick — I hope — questions. The additional £9·1 million for housing is very welcome. That is 135 new homes. I note an almost identical bid for fraud and error. If that £9·1 million were to be agreed, how much of it would come back into the budget? I am setting the scene for a choice between that bid and 135 extra homes. How is that decision arrived at? What is the rationale?

Ms Cherrie Arnold (Department for Communities): We have not bid for that £9·1 million for fraud and error —

The Chairperson (Mr Gildernew): You are going to.

Ms Arnold: — in the current year. It is reflected in an Executive paper. A lead time would be needed to recruit fraud investigators. Our return on investment in 2024-25 was 1:8, so if you were to secure the £9·1 million, you would be talking about £70 million. That figure is very high-level: it would be subject to a full business case being developed. We had notification this morning that the Chief Secretary to the Treasury has accepted that, if we can produce a business case that demonstrates our fraud and error savings, the Treasury will consider Northern Ireland for a share of that money.

The Chairperson (Mr Gildernew): Does that mean that that would increase? We would get only a share of it. Do we know what share the Treasury is talking about?

Ms Arnold: The Fresh Start Agreement — this goes back to 2015 — set it at half.

The Chairperson (Mr Gildernew): Is that what the Treasury is considering?

Ms Arnold: That is what our Minister would like.

Mr Greer: It is our duty, as we move into multi-year Budgets — this issue came up in a previous briefing — to recognise the importance of fraud and error. We plead with the Committee to help us to make the case for multi-year investment in matters such as fraud and error, which is an investment that will see funding come back into the Executive. There are other things, such multi-year funding for social housing, which would allow us to deliver on targets in the Programme for Government, and, importantly, allow us to provide an assurance to the sector that it can go on a development cycle that would allow social homes to come forward. I know that members are aware of those priorities.

The Chairperson (Mr Gildernew): I am also interested in the bid of, I think, £13·604 million for disabled adaptations. There is an indication that that need was previously met from another source and that this is a new bid. What changed to require the bid to be made in that fashion, and what would be the knock-on impact of that on other programmes or housebuilding efforts?

Ms Arnold: You are correct. We bid for £13·8 million to adapt Northern Ireland Housing Executive (NIHE) properties for tenants living with disabilities. We have a heavily constrained budget this year, so we are not able to fund that. It was covered in previous years by house and land sales. We are still at an early stage in the year, so there may be scope to put additional funding in, but, in the absence of that this year, we submitted the bid. It was not met in the monitoring round. It is something that we will assess and table for the next monitoring round.

The Chairperson (Mr Gildernew): Those adaptations are vital to keep people in their homes and able to engage in work and all the other things. Is there a sense that that funding is becoming less guaranteed or more difficult to find in the system, and could that have a knock-on effect on getting those adaptations done within an appropriate time frame for those who need them?

Ms Arnold: We are looking at that, too. It is just that our capital budgets this year are so constrained that we cannot put an allocation in at this early stage. We are doing our best to work closely with the NIHE to ensure that that money can be made available to it.

The Chairperson (Mr Gildernew): That is important.

Mr Greer: Disabled adaptations and affordable warmth are among a range of matters that the Minister, with advice from officials, has had to make decisions on. That reflects your assertion that there is less assurance of future funding, which is why next year's multi-year budgeting round becomes so important for those things.

The Chairperson (Mr Gildernew): OK.

Ms K Armstrong: On that point, we know that the house sales scheme funded the disabled facilities grant. This is my concern: if we are not able to use that money, where will the money come from for any disabled facilities grant this year? I know that it is about the private sector, but, if people cannot update their homes, they will be added to the homeless list, and they will look for houses in the social sector; it is a bit of a concerning one. If there is any support that the Committee can provide on that point, it would be useful to know. The disabled facilities grant issue has me very concerned. Can you guys do anything by way of an equality impact assessment to show the negative impact of the decision on people with disabilities whose housing is in the private sector?

Mr Greer: That will be covered in the budget equality impact assessment, which is currently open and is due to be back with the Department in mid-August.

Ms Arnold: Yes, 7 August.

Ms K Armstrong: I turn to the business case to the Treasury on the fraud and error investment. If that money were to come back, it would come back as revenue.

Ms Arnold: We understand that it would come back as departmental expenditure limit (DEL) revenue, hopefully. Obviously, it is still to be agreed.

Ms K Armstrong: Is there any mechanism that would allow us to move that from revenue to capital? I suppose that we need the revenue as well, but I am thinking about the housing issue.

Ms Arnold: We can discuss that with DOF when the time comes. There is no guarantee that it would come to the Department — it would be Executive moneys — but it would be good to secure any funding for the benefit of the wider Executive.

Ms K Armstrong: Absolutely. The final thing that I want to ask you about is the decision on the A5. We know that money has been allocated to the A5. That may well be used later in the year, but, if it is not used and it comes out for reallocation, what is the latest date by which the Department could effectively use that money for housebuilding? Is there a cut-off date after which the money would not be able to be used efficiently?

Ms Arnold: We have taken funding late in the year previously, but it is far from ideal. We will put in bids throughout the year. There is a commitment in the recent Executive paper on the monitoring round that said that DFC would be given first call on the next £2 million. We hope that there will be significantly more than that, because we currently have a £35 million gap when it comes to delivering the target of 2,000 new social-home starts this year.

We will put our bids into the monitoring round. In the run-up to every monitoring round, we work very closely with NIHE to assess and understand what can be delivered, and we put in the maximum bid so that we can deliver the units. As I said, we will assess it as we come up to each monitoring round. Beyond the monitoring rounds, if we can work with DOF to do something, we absolutely will.

Mr Greer: I know that Committee members have received submissions from housing associations and so on. It is important to say that the sector's ability to respond and deliver starts later in the financial year will become ever more reduced if we continue to drip-feed the social development housing programme. Housing associations have to start a development programme of land acquisition, planning and so on, and they will incur professional fees and expenditure, so they are unlikely to continue to produce that development pipeline if they do not have the assurance that the Government will have some ability to fund social homes.

Ms K Armstrong: That is what I was going to ask about. It is all ifs and buts at this stage, but say, for instance, that an additional £20 million or £30 million were to become available through monitoring rounds for housebuilding. Some of the housebuilding associations have said that it takes up to two years before they can break ground, because of planning and different stuff, as you said. Is there any mechanism by which the money can leave the Department for a future purpose so that it can go into housebuilding?

Ms Arnold: We do not have any flexibility on the carry-over of budget.

Ms K Armstrong: What if it leaves the Department but goes elsewhere?

Ms Arnold: It can go to a scheme if land has been purchased. If we think back to last year, we see that we started off with a very heavily constrained budget position, and we were able to deliver only 400 homes. That figure was up to 1,504 by the end of the financial year. That was supported, though not in the correct way, by end-of-year and in-year allocations. That was not ideal. The fact that DOF has now brought out a multi-year budget exercise is really positive.

Ms K Armstrong: Sorry, but my final question ties in with that point. The Minister mentioned the ongoing work on the availability of public land to be used for housing. As far as the financial terms are concerned, does money change hands, albeit on paper, between Departments, or is the asset transferred? If the Department of Education had extra land that could be used for housing, would the land transfer be internal, or would it hit your capital budget?

Mr Greer: To be honest, I will need to bring something back to you on that. I do not have the answer today.

Ms K Armstrong: It would be good to know, because, if assets can be transferred between Departments, it would mean a saving.

Thank you very much, folks.

Miss Brogan: Thank you, folks, for attending. I have a quick question on employers' National Insurance contributions. Will you provide some clarity on that, please? In your briefing, you noted that the British Government had awarded some support to local councils in England. Has the Department sought any support from the British Government for the voluntary and community sector here?

Ms Arnold: Yes. The Department received an allocation in the June monitoring round of £2·8 million for National Insurance contributions, which was significantly less than what was required. We have funded the pressures in the voluntary and community sector. When the budget was set this year, the Minister gave an additional £2·8 million — it is a coincidence that it was the same amount of money — to the voluntary and community sector.

We submitted a bid in the June monitoring round for £17·1 million for pay pressures in the Department, which included pressures in our arm's-length bodies. Alongside that, we submitted a £14·4 million bid for third-party National Insurance contributions: £12·2 million for pressures in local government and £2·2 million for the Supporting People programme. At this stage, the pressure in the voluntary and community sector has been funded from the Department's allocations.

Miss Brogan: The other groups, such as local government, are still feeling the pressure.

Ms Arnold: Yes. At the end of the day, we are working with the money that was allocated to the Department from the money that the Executive received. The Executive received the Barnett consequentials of decisions made at UK level, which included the money that went to English local authorities. The Department has not received that money.

Miss Brogan: Finally, were you able to cover the cost of increased National Insurance contributions for the Department?

Ms Arnold: No. The allocation that we got falls significantly short. As a result, and to meet pay pressures, we submitted a £17·1 million bid. That included a small amount for running costs, but it was predominantly for pay and National Insurance contributions. No allocations have been made for that.

Miss Brogan: Thank you for that clarity.

Ms K Armstrong: May I ask a question for clarification? I did not pick it up; sorry. Did you say that the Supporting People programme did not get funding for its employers' National Insurance contributions?

Ms Arnold: No, but, in our opening allocations, the Minister provided £3·7 million of additional moneys to Supporting People and to tackle homelessness.

Ms K Armstrong: Thank you.

Mr Kingston: When an allocation is made for depreciation and impairment, is that an actual allocation, or does it just recognise a reduction in the value of assets? If it is an actual allocation, what does it go towards?

Mr Greer: It is a non-cash sum. It just recognises the revaluation of the asset.

Mr Kingston: We see that in charity accounts and so on.

Ms Arnold: You still need to bid for it. In effect, it gives you budget cover.

Mr Kingston: Right. It is not money that is set aside for future building costs. It just recognises the reduction in the value of assets.

Ms Arnold: Yes.

Mr Kingston: Right. OK. My other question is generic. The Department has a large number of vacancies. What is the financial consequence of that for the budget? We are carrying, typically, around 2,000 vacancies; has funding been allocated for those jobs? Are we carrying the vacancies partly because we do not have the funding for them, or is it just about the recruitment exercise? What happens to the funding that is not spent on wages?

Mr Greer: The Department has approximately 2,500 declared vacancies. With our current budget allocation, approximately 400 of those are affordable. The constraint is that we cannot recruit. The difference of 2,100 in the vacancy allocation is because we do not have the budget to do so.

Mr Kingston: Right. At some stage, a decision has to be made about the number of vacancies with a view to making potential efficiency savings. Are those jobs needed?

Mr Greer: Over the past number of years, the Minister has made a number of difficult decisions on the management of vacancies. We are kicking off a piece of work that is going to review our vacancies. The Northern Ireland Civil Service people strategy has a key initiative that is about looking at developing a strategic workforce model. We are part of that and, obviously, it involves reviewing our headcount requirement, which will have an implication on the level of vacancies in the Department. That was reflected in the Minister's statement to the Assembly on his 2025-26 budget.

Ms Mulholland: I have a question about process. We are moving into a multi-year Budget process. What will that look like? Within the three years, will we have flexibility if there is June monitoring or if extra money comes in? Will that be when you add anything extra? As Kellie pointed out, there is a concern that some of the strategies might miss out. Will they be funded only through underspend or monitoring rounds?

Mr Greer: We are going into a three-year Budget cycle as opposed to a one-year cycle, but the conditions do not change. Some things will happen at pace, and some things will not happen, for a bunch of reasons — think about the A5 ruling and the implications of that for expenditure. Those conditions will not change. There will still be opportunities for things to move throughout Departments, and there will still be opportunities within the three-year window for Departments to vire moneys to different priorities.

Kellie asked a question in the previous session about Budget allocations for strategies. We will always seek to make an allocation for what we 100% know we will need, or where we have a sound understanding of what we think we will need, for the strategies, and we will make that allocation. That is not to say that, during any financial year or any period of three years, we will not be required to do new things because of outside events or new data and knowledge. There will still be opportunity to work with DFC colleagues and colleagues across the Executive's nine Departments to seek additional funding for those priorities. Again, it is important to say that a lot of the work that the Department does is on Executive strategies, so other Departments will similarly work to fund relevant interventions that will contribute to delivering those strategies.

Ms Mulholland: Will the likes of arm's-length bodies that are funded by the Department for Communities be told at the start of the process what their allocation will be for three years? Will they know exactly how much they will get in each of year 1, year 2 and year 3?

Mr Greer: My expectation is that they will get that assurance, as we will get that assurance from the Executive; we will want to provide them with that certainty. There will be ongoing in-year monitoring of how they are spending their money, and so on, as there would be in any good organisation, to see whether there are opportunities for money to be reallocated or whether they require additional money.

Ms Mulholland: OK. Thank you.

The Chairperson (Mr Gildernew): Thank you, Cherrie and John, for your attendance and for your briefing. We will be seeing you again as this process moves on. Thank you for your help with the issues today.