Official Report: Minutes of Evidence

The Chairperson (Mr O'Toole): We have Nathan Mulholland, a research officer at the Research and Information Service (RaISe); welcome, Nathan. Nathan will give us a briefing on the NI Fiscal Council Bill. How are you, Nathan? You may make an opening statement. Members, the research paper that has been prepared by RaISe is at page 278. This is one of our big priorities for the autumn, so thank you, Nathan, for providing it. Go ahead and give us a brief overview.

Mr Nathan Mulholland (Research and Information Service): This was a joint piece with my colleague Rachel Keyes. Unfortunately, Rachel is not available to attend today, so I will deliver the briefing.

The Chairperson (Mr O'Toole): That is extremely collegial of you. [Laughter.]

Dr Aiken: Wait until we hear what it says.

The Chairperson (Mr O'Toole): It has been noted in Hansard. Thank you, Nathan and Rachel.

Mr Mulholland: I will bring you through the paper briefly, section by section, and I will try to leave plenty of time for questions from the Committee.

Section 1 of our paper provides an overview of the Bill and the nine clauses and two schedules. I will not go into that in too much detail, because the Committee is already aware of what is in the Bill. Section 1 simply reiterates what is already in the Bill.

Section 2 of the paper provides background information on the conception and development of an independent fiscal institution (IFI) in Northern Ireland. In January 2020, 'New Decade, New Approach' committed to the establishment of an independent fiscal council by June 2020. However, that did not happen. Instead, in March 2021, the Northern Ireland Fiscal Council was established on a non-statutory basis by the Department of Finance. The terms of reference required it to prepare annual assessments of the Executive's revenue streams and spending proposals and prepare a further annual report on the sustainability of the Executive's public finances.

The paper considers subsequent developments that have arisen since the Fiscal Council was established. In 2021, the former Finance Committee published a report on the independent Fiscal Council for Northern Ireland in which a number of recommendations were made in relation to putting it on a statutory footing. Some of those recommendations are referenced in section 4 of this paper, where issues that merit additional scrutiny are discussed. We will look at those later. The paper highlights that, in 2021, the Northern Ireland Fiscal Council conducted a consultation on its output and structure and that the findings of the report were published in 2022. Those were summarised under three themes, first of which was independence. Stakeholders wanted to be confident that the Northern Ireland Fiscal Council was independent and noted the importance of legislative guarantees around appointments, funding, rights to information and rights to publish. Another theme was education. Stakeholders believed that educating the public about how NI's public finances work is as important as the publications that were specified in the terms of reference. Finally, process: stakeholders expressed frustration with the Executive's Budget process, and there was frustration with the Programme for Government and other strategies not being costed and linked clearly to specific Budget allocations.

Section 3 of the paper looks comparatively at legislation in other jurisdictions. The explanatory and financial memorandum states that the policy underlining the Bill was informed by other jurisdictions' legislation. That included the establishment of the Scottish Fiscal Commission (SFC), the Office for Budget Responsibility (OBR) and the Irish Fiscal Advisory Council (IFAC). As noted in the paper, RaISe had previously compiled an in-depth report on the roles and remit of independent fiscal institutions in the UK and the Republic of Ireland. The former Finance Committee considered those comparisons when formulating its recommendations in July 2021. The Committee may also wish to consider that paper in relation to the Bill.

Section 4 of the paper considers the policy and scrutiny of the Bill. The first subsection presents an overview of the Committee's call for evidence, which closes on 30 September. Section 4·2 outlines additional issues that merit consideration when scrutinising the Bill. Those relate to function; membership and staffing; access to information; and finance and funding. We note that those have been framed in the context of the 2025 OECD principles for independent fiscal institution recommendations and the previous Finance Committee's 2021 report.

I will look at those issues individually: first, function. The 2025 OECD recommendations state the importance of independent fiscal institutions having a clear mandate, and for that to be set out in legislation. They also state that IFIs:

the mandate that they have been given. They cite typical tasks that are carried out by independent fiscal institutions around the world. They include economic and fiscal projections, analysis of Executives' budget proposals, monitoring compliance, costing of major legislative proposals and analytical studies on selected issues.

The Committee will note that the former Finance Committee's 2021 report recommendations on the functions of the Northern Ireland Fiscal Council, once it had been set out in legislation, align closely to those typical tasks as presented in the most recent OECD work.

Clauses 2, 3 and 4 set out the duties of the council to examine and report on the public finances of Northern Ireland. Those include a Budget assessment report for each financial year, and a yearly fiscal sustainability report, which can be an overall report or a thematic report, although an overall report must be produced every five years. The council can also publish other such reports as it considers appropriate.

The Bill leaves scope for expanding the Northern Ireland Fiscal Council's remit. For example, the paper notes that the Bill does not propose that the Fiscal Council should prepare, for example, its own forecasts. However, clause 5 leaves scope for expanding that remit through secondary legislation at some point in the future. Doing that through secondary legislation diverges from the current OECD recommendations that say that the mandates of IFIs should be clearly defined in higher-level legislation.

The next issue is membership and staffing.

The Chairperson (Mr O'Toole): I have a couple of questions. There is no specific mandate. You mentioned, for example, that the OBR does economic as well as fiscal forecasts. That is not part of the remit of the Fiscal Council as yet, and the Bill does not provide for it. Theoretically, that could be one of the things that it chooses to do, but the Bill does not require it to compile economic forecasts.

Mr Mulholland: Based on the OECD's recommendations, those should be in what becomes the Act, rather than being done through any kind of secondary legislation. That seems —.

The Chairperson (Mr O'Toole): Does the OECD —? Sorry, you go through your briefing, and I will ask the question afterwards.

Mr Mulholland: No problem.

On membership and staffing, the chair and the members of the council will be appointed by DOF, and that will be done in line with the code of practice for the Commissioner for Public Appointments for Northern Ireland (CPANI). However, the OECD and the previous Committee's report recommend that appropriate competence in fiscal and economic scrutiny and experience relating to the understanding of Northern Ireland's public expenditure be made explicit in those appointments. Further to that, the secretariat working for the council has considered the terms of its level of expertise and independence, notably avoidance of institutional capture — that is staff having a formal or informal connection to the Executive or the Northern Ireland Civil Service (NICS).

Access to information is the next issue. The Bill provides detail on the Northern Ireland Fiscal Council's right to access Northern Ireland Government information. The Fiscal Council will publish an annual statement on the quality of the information and any gaps in the data or information that it receives. The OECD notes the importance of having access to information for all IFIs to carry out their role. The Northern Ireland Fiscal Council has previously stated that the issue of access to information is the most frequent complaint from fiscal councils around the world.

I will set out the issues that are identified in section 4. On finance and funding, the Bill provides for the Northern Ireland Fiscal Council's running costs to be included in the Department of Finance's overall Estimate to the Assembly. However, it was noted by stakeholders that more resources will be required over time, especially if the remit of the Fiscal Council expands. Further to that, the OECD recommends that multi-annual funding commitments may further enhance an IFI's independence and provide additional protection from political pressure. The paper notes that a number of independent bodies in Northern Ireland currently avail themselves of multi-year funding, such as the Northern Ireland Audit Office (NIAO) and the Northern Ireland Public Services Ombudsman (NIPSO).

Finally, I will look in more detail at the funding. Section 5 presents a review of the Bill's costs. The paper notes that paragraph 16 of the explanatory and financial memorandum details a cost of approximately £511,000 to run the Fiscal Council in 2024-25. RaISe then asked the Department for a more detailed breakdown of that figure, and that is presented in table 3. In seeking further information on future costs, DOF informed RaISe that a budget allocation of £616,000 had been provided for 2025-26. The £61,000 increase on the previous year is primarily because of changes to National Insurance and agreed pay increases. Other future costs based on the council being put on a statutory footing have also been examined. It is expected that, in the initial period, staffing will be broadly similar to current structures of the Northern Ireland Fiscal Council. Some additional administrative support is being considered, with an additional annual cost of £45,000.

Future operating costs have also been considered, as a number of those functions, such as accommodation services, IT support, HR services, office support and finance management, are currently carried out by the Department of Finance. The Department has noted that it is anticipated that the Northern Ireland Fiscal Council will align with similar-sized non-departmental public bodies (NDPBs). The example provided is the Criminal Justice Inspection Northern Ireland (CJINI) in which corporate functions are supplied by the Northern Ireland Civil Service shared services. Based on the size of the Northern Ireland Fiscal Council, the Department concluded that stand-alone corporate systems would have a significant cost and that:

Currently, an approximate increase of £110,000 for the corporate functions would be required.

I will finish there and take questions.

The Chairperson (Mr O'Toole): That has been helpful. I do not know — I should do — where its office space is.

The Committee Clerk: It states that it is in PricewaterhouseCoopers' (PwC's) building now.

The Chairperson (Mr O'Toole): Thank you, Nathan. You have looked at the OECD recommendations around the independent IFIs. You alluded to some of this: will you summarise any specific ways in which the Bill diverges from what it describes as best practice?

Mr Mulholland: That is presented in section 4 and the four points that are identified. The highlighted divergence relates to the legislation. The OECD recommends that you try to avoid the use of secondary legislation when mandating for what an independent fiscal institution will do and what its roles and responsibilities will be. It recommends that everything is set out clearly in the primary legislation.

The Chairperson (Mr O'Toole): That is because there is a risk that it would never happen if there had to be secondary legislation. A fiscal institution anywhere is, inherently, not necessarily an irritant, but a watchdog of sorts, and the Minister responsible — it could be any Minister of any party — is not necessarily going to want to bring forward secondary legislation to increase its powers once it is operational and scrutinising the Minister.

Mr Mulholland: As I stated in other parts of the paper, the OECD recommendations are about the independence of the role, being able to hold Departments to account and giving the council that power initially, rather than trying to get it later. That is an aspect of giving the office the power to carry out its functions effectively. In most cases, it should have the power to choose what it investigates and looks into, rather than be restricted by its powers. There are only a few clear definitions of what is going to be required of the Fiscal Council, at present, and the other work that it may carry out during the year will be subject to the council itself. Giving it that power from the start gives it the ability to carry out its scrutiny role more effectively. That is what the OECD was pushing for.

The Chairperson (Mr O'Toole): Clause 4(4)(b) gives more expansiveness to the council. Clause 4(4)(b) states that a fiscal sustainability report may relate to:

That still has to be a fiscal sustainability report. It cannot be a report about economic performance, for example, which may, but not specifically, have some relation to fiscal performance.

Mr Mulholland: With the non-specific nature, perhaps it could be, but, without having that detailed in the legislation, there could be some uncertainty around what it could carry out in certain cases.

The Chairperson (Mr O'Toole): You can tell me if this is unfair and that you are not willing to endorse this statement: the Bill constrains the Fiscal Council to fiscal sustainability matters, specifically. You might say that it is called the Fiscal Council, in the same way in which Criminal Justice Inspection is not allowed to inspect hospitals or schools. However, the OECD recommends a bit more flexibility to do things that the Fiscal Council deems to be germane.

Mr Mulholland: I do not know if I fully commit to that. It is saying that looking at what, perhaps, it wants to do or what is felt that it should be doing should be contained in the primary legislation. That should be clearly defined, so that there is no ambiguity as to where there may be issues of going outside its remit, if that is something that were expected of it, or what people would like to see it do. That should be set out clearly in the primary legislation.

The Chairperson (Mr O'Toole): In fairness, it is, in some ways, fairly well laid out in the legislation, in that case.

Ms Forsythe: Thanks, Nathan. You have referenced a lot of the consultation, as well as the paper in which you compare it with other jurisdictions. It was done in 2020 and 2021, which was when we went into the pandemic. Five years is a long time since then, and given that there is quite a different global economy now, I wonder whether you think that there is scope to do a brief update of some of those things, especially in the other jurisdictions, such as what went well during that responsive period over the five years. We are starting afresh in 2025, and it would be good to go in with all the information.

Mr Mulholland: It is about the response to the pandemic. I do not think that there has been much change to the foundation of the legal structures; it may be more about what it did during that time, or the actions that it took to analyse the economies or finances of those particular Administrations at the time, and how it helped or supported. I am not aware of much legislative change that is very different from what was in the original paper. It is from a position of how it supported the Administrations during that time. There may be something that could be worked on in that respect, but, from a legislative point of view, minimal changes have occurred since that paper.

Ms Forsythe: Sometimes, times of crisis expose small legislative weaknesses that do not allow you to do something, so it would be interesting if we could dip into that.

Mr Mulholland: Absolutely. I can check whether reviews have been done and check reports about those institutions.

Ms Forsythe: That would be grand.

Do you think that there is strong enough independence? You referenced the Northern Ireland Audit Office and the Public Services Ombudsman. I sit on the Audit Committee. Those budgets go straight to the Audit Committee; they do not bid into the Department of Finance, which they primarily scrutinise. Do you think that there are enough degrees of separation there?

Mr Mulholland: I am not making a judgement call on that; rather, I will state where those issues occur in other institutions and in the recommendations. It is very much the interpretation of others to decide what level of independence is right or appropriate, or how that can be achieved. The OECD, which is an international institution, provided those as a key issue to consider. For it, independence is a key aspect of having those institutions: if you are going to have them, their independence is a key aspect of allowing them to hold Governments to account. I am not making a judgement on that, but, clearly, the OECD, as a global institution, finds that a key issue that should be considered during the creation and setting up of such an institution. I know that we already have, but it is important even to put it on a statutory basis.

Ms Forsythe: Thanks very much. The Committee will definitely be taking that forward.

The Chairperson (Mr O'Toole): No other members want to ask a question about the report.

Nathan, maybe this is something that you did not directly look at. Diane mentioned the issue of the budget's coming from the Department directly, rather than via the Audit Committee, which, obviously, is the case for the Audit Office and NIPSO, as Diane said. Are there other precedents in these islands? I think that the budget of the Office for Budget Responsibility is set by the Treasury. Do you know of any other examples of how they are set?

Mr Mulholland: I would need to go back to that paper and check the set-up there. As I say, my colleague prepared the comparative piece. I have looked at it again, but I cannot recall that point off the top of my head. However, I can definitely go back to that paper and check the position. If it is not there, I could follow up, but the first port of call would be that previous paper on the comparative piece to look at the fiscal commissions or councils in other jurisdictions.

The Chairperson (Mr O'Toole): OK. That is helpful. The right of access is obviously a huge part of the Department's ability. You might be able to give us a sense of what this Bill confers on the Fiscal Council when it comes to the legal power to require information.

Mr Mulholland: The requirement for access to information is a key part of any of these institutions. At the minute, the Fiscal Council has memorandums of understanding with individual Departments — or with the Civil Service. I am not entirely sure about that. I need to consider further exactly how this will be different to what it already has, other than giving it that statutory basis where it may feel that, at present, there is a lack of information coming or those memorandums of understanding are not as robust as they could be. It, perhaps, feels that providing that legal and statutory footing would make those more robust.

A key aspect of that access to information is the robustness of that information and the quality and timeliness of it. Perhaps the legislation may give more backing to that and make requirements for that to be more timely so that they can get better agreement with the individual —. As I say, it involves Northern Ireland Departments, and I suspect that, as institutions, they will probably want to have agreements with other relevant institutions, but that might fall outside the Bill at present. It may not be possible to get —.

The Chairperson (Mr O'Toole): When you talk about other institutions, what do you mean? Whitehall Departments?

Mr Mulholland: Whitehall Departments.

The Chairperson (Mr O'Toole): Is there an explicit —? I might have missed it. I am looking for how explicitly it gives the Fiscal Council the power to compel or get information. Clause 6(1) gives the council:

Clause 6(2) says:

Then clause 6(3) says:

We may want to unpack more what subsection (3) means and to what extent that negates the previous requirements.

Mr Mulholland: You could look at the previous Finance Committee report from 2021 and what was being suggested there about access to information. There was more detail that could be considered when it comes to how to frame access to information and the roles and responsibilities there. I think that we have that in the paper at some point, but, off the top of my head, I do not know exactly where.

The Chairperson (Mr O'Toole): OK. It would be helpful to get that.

No other members have questions for Nathan at this stage. Nathan, that was helpful. Thank you both very much for the report. I suspect that we will call on you either to give oral evidence or for follow-up questions. Thanks also to Rachel.