Official Report: Minutes of Evidence

The Chairperson (Mr O'Toole): Are members content that Hansard report the session?

The Chairperson (Mr O'Toole): I welcome Gareth Hetherington, director of the Ulster University Economic Policy Centre (UUEPC), and Ann Watt, director of Pivotal Policy Forum. We will ask you both to make an opening statement. Given the week that is in it, it is interesting to be talking about independent fiscal authorities, so we can ask about that, but I first ask Gareth and then Ann to make an opening statement.

Mr Gareth Hetherington (Ulster University Economic Policy Centre): Thank you, Chair and members, for the invitation to contribute to your scrutiny of the Northern Ireland Fiscal Council Bill. Members have seen my written response to the Bill, which was drafted back in September, so I will keep my comments short. I will then welcome questions from the Committee.

At the outset, I recognise the positive step that the Bill represents. It puts the existing, non-statutory Northern Ireland Fiscal Council on a clear statutory footing, establishes it as a corporate body and sets out a defined duty to examine and report on the public finances in Northern Ireland. That provision aligns Northern Ireland more closely with best practice in other jurisdictions that have independent fiscal institutions and should help to improve fiscal debate here.

There are several features of the Bill that I particularly welcome. First, it provides clear legal status for the council. That clarity matters to how the institution is perceived by the Executive, Departments and local stakeholders more generally. There is no ambiguity about its being an independent public body with a defined remit. Secondly, the Bill puts a duty on the council to provide two core outputs: a Budget assessment report each financial year and at least one fiscal sustainability report each year. That combination of short-term Budget scrutiny and longer-term sustainability analysis is an appropriate and balanced core mandate. Thirdly, the Bill safeguards the council's independence. It makes it clear that, in performing its functions, the council has complete discretion and is not subject to the direction or control of Ministers, Departments or the Assembly. At the same time, it explicitly requires the council to carry out its functions "objectively, transparently and impartially". That should give confidence that the council's analysis is evidence-based. Finally, the creation of an annual data statement and a statutory right of access to government information is a positive step.

Alongside those strengths, the UUEPC's written response highlighted a small number of areas where, in our view, the legislation could be strengthened. Separately, I am aware that the Department of Finance has provided feedback on our response to the Bill. In many instances, the Department's feedback is reasonable; I will recognise that feedback in my comments.

My first point is about membership and independence. The Bill sets out clear membership arrangements that allow for a chair plus two to five members, with appointments and dismissals to be made by the Department of Finance. It leaves quorum arrangements to the council's standing orders. The Department has rightly highlighted the fact that the appointments process will follow the Commissioner for Public Appointments code of practice, with an independent assessor to be on the panel. We suggested that there may be a case for additional safeguards, because we are conscious that the Fiscal Council is responsible for assessing and critiquing the work of the Department of Finance and that, at the same time, the Department of Finance is responsible for making appointments to the Fiscal Council.

Staying on the subject of independence, I note that the Bill requires a review of the performance of the council to be conducted every four years. That is to be welcomed. However, the Bill proposes that the council prepare the terms of reference for the review and appoint the individual to conduct that review. Again, our view is that a greater degree of independence should be built in to the process. The Department has cited the OECD principle that fiscal institutes:

but that does not equate to allowing the council to draft the terms of reference of its own review and to appoint the individual who will conduct that review. The OECD makes a number of suggestions, one of which is peer review by an independent fiscal institution from another country. I am not making that recommendation; that is one OECD suggestion.

We also commented on the publication of the data supporting council reports. The Department has correctly pointed out that, beyond the statutory requirement for an annual data statement, the NI Fiscal Council produces a databank and publishes technical reports. Our underlying point is that, in an era when open data is increasingly the standard, including in legislation a strong expectation of detailed data publication maximises transparency. The legislation should reflect the current actions of the council.

We commented on the non-recommendation rule in clause 6, which is entitled "How the Council is to perform its functions". It is entirely correct that the council should not stray into political choices or advocate specific policy decisions: that is the role of Ministers and the Assembly. The Department has emphasised the fact that the legislation would allow the council to consider:

It may therefore be useful to make it explicit in the Bill or in supporting documents, such as a partnership agreement, that rigorous scenario testing and sensitivity analysis are encouraged. The Committee may wish to discuss that point with the current Fiscal Council chair.

I will move on to the issue of timeliness and, specifically, the speed at which Departments must respond to information requests. Schedule 1 gives the council a right to access government information. The Department of Finance has indicated that the Fiscal Council's memorandum of understanding (MOU) with each Department and with the NIO sets out arrangements for that, including time frames and escalation routes through permanent secretaries, Ministers, the Executive and the Assembly. That is welcome, as is the intention to review the MOUs once the council is on a statutory footing.

In conclusion, I emphasise that our overall assessment of the Bill is strongly positive. It represents a substantial and welcome enhancement of Northern Ireland's fiscal architecture. Our comments are intended in a constructive spirit to help ensure that, once the legislation is enacted, the Northern Ireland Fiscal Council will have the clarity, access and independence that it needs to play a full role in supporting fiscal sustainability and raising awareness in order to inform debate on the difficult choices that we face in respect of revenue and spending. I hope that my remarks are helpful to the Committee in its consideration of the Bill, and I am happy to explore those points during questions.

The Chairperson (Mr O'Toole): OK. Thank you very much. I note that, in your really helpful response to us, you say that Budget assessment reports are due to come "as soon as practicable" after Budget publication, and then you say:

I presume that you do not want us to follow the precedent set in GB of publishing the reports before the Budget; sorry, I am being facetious.

Ann, will you give us an opening statement?

Ms Ann Watt (Pivotal): Thank you, Chair, and I thank the Committee for the invitation to contribute today. Pivotal is a strong supporter of the Fiscal Council's work and of the Bill in putting that work on a statutory footing. What the Fiscal Council has done in the past four years is invaluable and much needed. It has brought transparency to Northern Ireland's public finances that people did not have before, perhaps unless they had a PhD in public finances. It has brought helpful independent and expert analysis to Budgets and public finance issues through its Budget reports, its work on assessing Northern Ireland's level of need and its thematic sustainability reports.

The forward-looking nature of some of the council's work is particularly helpful in encouraging us to look ahead at what is coming and to be better prepared. It has achieved a high standard of technical analysis and made that available in an accessible and relevant way, accomplishing the not-easy task of providing that rigorous analysis and communicating it clearly and understandably. All of that is good, and the council has done it all while clearly working independently from but in a positive and collaborative relationship with the Department of Finance. Sir Robert Chote, as the first chair, has done an excellent job along with the other members of the council and Jonathan McAdams, the chief of staff.

It is worth noting that the Department of Finance was supportive of the establishment of the Fiscal Council and has enabled it to operate independently. Sir Robert has said several times that it has been allowed to do analysis and publish findings without any pressure or interference from the Department: that is good to hear.

Perhaps this is a bit of a fiscal nerd's perspective, but I will say that the Fiscal Council is one of the best things that have happened in the public policy space in recent years in Northern Ireland. From Pivotal's perspective as an independent think tank, we value and rely heavily on its work. We warmly welcome the Bill, which puts the council on a statutory footing and formalises a lot of what it has been doing since 2021.

The Bill seems to be straightforward and sensible, without any major problems. It sets out the role of the Fiscal Council and what is expected of it in terms of reports. It seems to be in line with international best practice. For comments on the Bill, I look to the OECD as the international expert in the area; I know that you heard evidence from it a few weeks ago. I also look at what the Fiscal Council has said. It is much more expert in the issues than I am.

There are positive and important things in the Bill. It sets out the Fiscal Council's remit and functions clearly. It makes it clear what the council is expected to deliver in its reports. It makes it clear how the appointment of the chair, members, chief of staff and staff team will work. The Bill emphasises the council's independence and its freedom and discretion to work on issues that, it thinks, are important. It gives it statutory access to government information, which, obviously, is important. It makes sure that the council is transparent about its work, which it very much has been so far. As was mentioned, the function of a review every four years seems appropriate.

In raising issues that there might be some query on, I will say that I do not see any of them as being hugely problematic. We are looking at what has happened so far and at people who have worked well in the relationships between the leadership of the Fiscal Council and the Department of Finance that, as far as I can tell, have been good. There could be a situation in the future in which those relationships are less amicable and positive, however, and, in light of that, I wondered about the provision for the appointment of the chair and the members, given that, currently, that would be entirely at the discretion of the Department of Finance. Maybe there should be a tighter remit for the people appointed, including the qualifications, expertise and experience that we would expect those people to have. Similarly, the Department of Finance approves staff appointments: is that appropriate without any wider scrutiny? I also wondered about the close connections between the Fiscal Council staff and the Department of Finance, given that a lot of the council's staff will be former Department of Finance officials, simply because they have the expertise.

The Chairperson (Mr O'Toole): By definition, it is kind of inevitable that they will be, because of the professional remit.

Ms Watt: Exactly.

The Chairperson (Mr O'Toole): Other than you and a relatively small number of people who work in the area, there are not that many such people in this region who do not work in the Department of Finance.

Ms Watt: I just wonder whether, given that they might have previous connections or be thinking about future career roles, staff will be as outspoken or as ready to challenge as they would have been otherwise. Similarly, the Department of Finance sets the finances for the Fiscal Council. In a different scenario or with a different relationship from the one that we have had so far, could those finances be restricted to constrain its activities?

The final thing is that the Bill does not say much on what we expect from the Fiscal Council beyond its reports. Does it have to respond to the Committee? Does it have to respond to the Assembly? Does it have to respond to the media and the public or, indeed, think tanks? Maybe there needs to be a little more on that.

The final thing — the actual final thing — is this: how would any dispute between the Fiscal Council and the Department be resolved?

The Chairperson (Mr O'Toole): Is that in legislation in other jurisdictions, as far as you are aware? You might not be able to answer that now.

Ms Watt: I do not know.

The Chairperson (Mr O'Toole): Dr Aiken will come in in a second, but other members should indicate if they wish to come in.

If that covers your remarks, Ann, thank you. Thank you both for your opening remarks. I will throw out questions for you to grab. I will get answers from both of you, but, if one person feels that the other has covered the question and they have nothing to add, that is grand.

I will start with you, Ann. Your response has probably broadly mirrored a lot of the responses that the Committee has had: this is good; we are pleased. Like Dr Aiken, I have been on the Committee since the Fiscal Council was set up, and I definitely see it as a good thing. It has definitively improved the debate, even if the Department does not totally agree with every piece of analysis. It is authoritative, and it has been useful. The fact that it is being enshrined in statute, albeit somewhat belatedly, is also a good thing.

At first glance, the Bill is relatively straightforward, but, as with all these things, there are a couple of potential devils in the detail, most notably when it comes to independence, both real and perceived. You mentioned the slight question about the Department making the appointments and, effectively, being paymaster for the Fiscal Council. In the current situation, there is a broadly good relationship between the Department and the Fiscal Council. It has probably said things that a Finance Minister might not say, but it has not said scathing or politically hugely difficult things. However, there may come a point at which it has to say things that are difficult for a Finance Minister and senior officials to hear. What could the Bill do to enshrine the council's independence? Will you give a worked example of how those difficulties might arise in practice?

Ms Watt: The Bill is clear on the independence of the role. It is more a question of, "What are the crunch points?", which are the appointment of the people and the setting of the finances that enable the council to function. Those are the two areas where there could be some difficulties. You hope that it would not happen, because it would be contrary to the aim of the establishment of the organisation, but, if you were to get into the scenario that you talked about, Chair — the Fiscal Council being challenging to the Department in its decision-making — maybe the council would find that it does not get resources for the next year or does not get as much as it wants or that a request that it has made to enhance its abilities is not looked on favourably.

The Chairperson (Mr O'Toole): I might come to you on this, Gareth: jump in. At the minute, we almost have two worked examples. There is a prominent one in London, which lots of us are reading about. We do not need to go into the whole "Did they? Didn't they?" aspect of when information was briefed out or whatever. That is about a particular type of fiscal relationship, because the forecaster is an economic one as well as a fiscal one, and it does much more than our Fiscal Council does. Even in Dublin, however, there has, to an extent, been a moment of tension, if not confrontation, between the Irish Fiscal Advisory Council and the Government. That, clearly, is because the Fiscal Advisory Council is saying, effectively, that it does not particularly approve of some of the things that the Irish Government are doing in budgetary terms. Do you anticipate, Gareth, that the Fiscal Council will have to say things that the Finance Minister and the Executive will not like? Can it do its job if it does not say things that they do not like?

Mr Hetherington: It is inevitable that, from time to time, it will say things that the Finance Minister and the Executive do not like. If it can go through a period of time without doing that, I would raise questions about whether it is doing its job effectively. Its role is to challenge.

I will take in turn each of the points that were raised on funding, appointments and independence. There are some potential solutions. On the financing side, we have to recognise that it is normal for fiscal institutions to have a sponsor Department, so the question is which Department should be the sponsor. If it is not —

The Chairperson (Mr O'Toole): Sometimes, they are sponsored by the legislature. That is something that the Committee has discussed. It is a different model with its own issues.

Mr Hetherington: You could go down the Department of Finance route; there is a tension there. The other centrally coordinated Department here is TEO, but you would effectively have the same tension with the First Minister and deputy First Minister as you would have with the Finance Minister. The other independent organisation in Northern Ireland is the Northern Ireland Audit Office, but it will be responsible for auditing the Fiscal Council and cannot independently audit an organisation that it sponsors. When I was prepping for the meeting, what I finally landed on was this: when the Fiscal Council chair makes a resource request and the Department then makes its funding award, the Committee or the Assembly generally should have sight of both of the documents. If, over a period of time, it becomes clear that the Fiscal Council's funding is being constrained, you, as our political representatives — the political accountability on this side — will understand why that is happening. It is about having clarity on any difference between the funding request and the funding award. That is the first point.

On the appointments —.

The Chairperson (Mr O'Toole): I will just come back in on that.

Mr Hetherington: Go ahead.

The Chairperson (Mr O'Toole): That is a good point, and it is one of the considerations that have come up. Playing devil's advocate, I would say that it is fairly clear that lots of other organisations from NI Water to the Arts Council to the PSNI could say that they have been squeezed over the past decade and a half and that other bits of the Executive — they may say Health or refer to other political choices — have had priority over them. There is clarity on that; everyone knows about it. Those are all totally different organisations that do totally different things, but nobody could deny that NI Water, the PSNI and the Arts Council have had their budgets squeezed. We all know that, but that just means that we know that it is happening.

Mr Hetherington: That is correct. If the Fiscal Council were to put in a funding request for £600,000 and be awarded £550,000, the Committee could try to understand that difference and make a determination as to whether that is reasonable. If, however, it were to put in a funding request for £600,000 and be awarded £300,000, that is a different conversation. Yes, every public body is under funding constraint — we understand the reasons for that — but I guess that what I am saying is this: provided that there is external scrutiny, outside the Department of Finance and the Finance Minister, of the funding awarded to the Fiscal Council, that should help to alleviate some of the challenge to its independence.

The Chairperson (Mr O'Toole): OK. I will bring in members in one second. I have just one additional question. It is about the fiscal sustainability reports, which, in many ways, are the most interesting bit. I have one other question after that, which I will [Inaudible.]

One of the questions is about the regularity of fiscal sustainability reports. Clause 4 says, basically, that the Fiscal Council has to do, I think, one fiscal sustainability report a year. That does not stop it doing more than one a year, but it has to do at least one a year. Is that appropriate? I suppose that you could double or triple its staffing and have it do one every week.

Mr Hetherington: There is a Budget assessment report and a fiscal sustainability report. There has to be one a year of each of those, which seems reasonable to me. I have raised issues with the regularity of the overall fiscal sustainability report relative to that of the thematic fiscal sustainability report. The legislation requires that an overall fiscal sustainability report be prepared "at least" once every five years. The point that I made in my paper is that five years feels too long, given the frequency of economic shocks. The Department has come back to say that there has to be one at least once every five years. The chair can prepare one more regularly, if he or she chooses to.

Dr Aiken: One every year.

Mr Hetherington: I am talking about the overall report as opposed to the thematic report; I accept that. In the paper, I suggested that it should be every three years. My thinking was that the spending review periods tend to be every three to four years, so it seemed correct to me that an overall fiscal sustainability report, as opposed to a thematic sustainability report, should follow that cycle with one at least every four years, rather than one every five years. It is a not a huge issue, but that is the point on the regularity and number of reports that I took from the legislation.

The Chairperson (Mr O'Toole): I want to get the views of both of you on one final thing that I have been asked a lot of questions about. Something that is absent from the Bill but could be included is economic forecasting or a requirement to include at least some form of composite economic analysis. I am aware that the very fine UUEPC does its own analysis; I am not trying to undercut or duplicate work that is being done.

In a sense, it goes back to what Ann said at the start about this adding to the policy debate in Northern Ireland. One observation that is frequently made about the policy debate in Northern Ireland is that questions of policy are often linked to fiscal outcomes and constraints but rarely linked to economic discussions about whether something has a growth consequence or the opposite of that or about how it links to long-term productivity challenges or any of the other economic considerations. I happen to think that that is a huge absence from our policy debate and that we focus narrowly on fiscal consequences. The fiscal discussion is therefore, due in part to the fiscal model that we have and to the block grant, at a remove from economic consequences.

We know that, when the Executive produce a Budget, they habitually have a page or two of economic context, but that often feels somewhat detached — to be honest, it seems a little like a bow that has been put on to a garment that does not require one; sorry, that is a strange analogy — and how it relates to what happens afterwards is not clear. It is a disembodied bit of analysis about the economic context without any explanation of how it relates to decisions that have been made elsewhere in the document.

That was a long way of saying that the Fiscal Council could be required to produce its own economic forecast of one kind or another — that is the more fulsome option — or to provide some kind of economic analysis that is produced by an organisation such as the UUEPC or another economic forecaster or is a composite of such organisations' work. I would welcome your thoughts on both those things. You first, Ann, and then Gareth.

Ms Watt: Your point about public finance decisions being taken in isolation from their impact on the economy is important. We spend too much time talking about how to divide up the block grant and not enough time talking about how to grow the economy. That really big point is much bigger than the issue that is on the table today, but it is important that it is said, and Pivotal will keep saying it.

The reason why the Fiscal Council does not produce that is that the main determinant of how much funding we get is the Barnett formula and what happens in England.

Forecasting the Northern Ireland economy, therefore, does not impact very much on the amount of money that is available.

The council's role, as it is defined at the minute, is looking at public finances and doing budget reports, sustainability reports and so on. It does not need to do forecasting, so doing that would be quite an expansion of its remit. You would obviously have to fund and staff the council to do it. Personally, I am not convinced of the need for it, because other organisations — I will hand over to Gareth, because he is much more of an expert in this than I am — are working on forecasts of the Northern Ireland economy, including a new initiative that I know is happening but do not know very much about.

Gareth, do you want to add to that?

The Chairperson (Mr O'Toole): Over to you, Gareth.

Mr Hetherington: We — I am talking about we as a nation — carry out a wide range of impact assessments on legislation, but we sometimes do not carry out economic impact assessments of our legislation. We may want to consider that in the future. I agree with a lot of Ann's comments.

Why do the Office for Budget Responsibility (OBR) and the Scottish Fiscal Commission have economic forecasting capability? It is because they need it to forecast taxation revenue. We are different in that regard. The Fiscal Council has two options. If it was to go down that route or if it wanted to make some sort of economic assessment of budget policy decisions, it could either bring the capability in-house or commission others to do it. In the short term, it would probably go down the route of commissioning others do it, with a view to building up that capacity in the longer term.

Ultimately, as we sit right now — I agree with Ann — I do not see huge demand for that. However, if, in three to five years' time, we were to have a larger range of devolved fiscal levers at our disposal, we could have a different conversation about it.

The Chairperson (Mr O'Toole): Assuming that there is no political agreement on that, would it not be reasonable to bake into the legislation the potential to do some of that work? I accept — others may not — that our policy debate is suboptimal at the minute. We talk a lot — you talked about this, Ann — about how we divide up the pie. I have not heard a good argument for trying to change that conversation a little by, through legislation, insisting or mandating that that respected statutory authority has to talk a little about the economic impact of policies.

I understand the limitations that we have at the minute, how the block grant works and how the Fiscal Council is funded. However — tell me if I am being completely mad — I still do not see a bad argument for giving it the power to even append a bit of economic analysis to say, "By the way, this Budget or this measure is not very good for productivity. Northern Ireland has very low productivity, and that is part of the reason why we have lower levels of income per head and worse outcomes, all the way up to worse public health outcomes". I am just intrigued as to why we would not bake in some of that.

Mr Hetherington: In principle, yes, that sounds like a good idea. I am supportive of that and anything that adds to the debate in order to help grow the economy. In response to your specific point, if that power were to be put into the legislation, would that create an expectation that the council would have to do it from year 1 rather than build up to it over time? Certainly, I have no opposition, in principle, to an economic assessment layer being included in the overall remit; it is about how that feeds into legislation and the impact that it would then have.

The Chairperson (Mr O'Toole): I hear you. I am not trying to create more work for you and your colleagues.

We will move on to other members now.

Ms Forsythe: I thank you both for being here. I really appreciate it.

Gareth said that the Bill gives the Fiscal Council a clear legal status with no ambiguity and a clearly defined role. I am concerned, however, about two points that we have touched on. I want to draw them out a bit.

I am concerned about the perception of independence, particularly around the council's budget. In another evidence session, we heard about how our Department of Finance has a treasury function and a departmental function, but it all goes back to that. In previous evidence sessions, we heard about the situation where the essential work might be done but something happens and, if the Fiscal Council wants, effectively, to do extra work, it has to ask the Department to fund it to do that. Were the Department to say no, there might be a perception that the Department was shutting down the scrutiny of that work. I have a concern about that. I do not know whether we can build anything into the Bill on that. It is about how the Fiscal Council operates and its functionality. Do you see anything that could be added to the Bill on that?

Mr Hetherington: There is the funding piece and the remit piece. My reading of the legislation is that the remit cannot be increased or reduced without coming back to the Assembly for approval. At the moment, the Bill protects what the Fiscal Council does in some respect. If additional work were to be required beyond a Budget assessment report and a fiscal sustainability report that the Finance Minister, for whatever reason, did not see fit to approve, could there be an avenue, for example, for the council to come to this Committee, as, I imagine, it would probably be in the first instance? I do not want to call that an escalation mechanism, but it would be useful, because, if there were to be a disagreement, it would give the chair of the Fiscal Council somewhere to go. To go back to what I suggested, if the Fiscal Council chair were to put forward a funding request that was not met by a significant margin or if there was a material difference between the request and the funding award from the Department of Finance, the Committee needs to understand the reason for that and explore it.

Ms Forsythe: That is a good point. When the departmental bids go through and allocations are made, we have sight of those. Your suggestion would be in keeping with that. It is for us to consider whether something needs to be added to the Bill to make sure that that transparency and trust flows through the process.

The other piece on the perception of independence has been touched on. There is a lot in the schedule 2 to the Bill about membership and staff. It is about the Department appointing them and all the reasons why you cannot be a member, such as also being a councillor, an Assembly Member and things like that. I am keen to draw that out. At the moment, the chair is Sir Robert Chote. It is clear that he is experienced. We are happy with the way that the work has gone, but imagine if we were to have a significant change of personnel, meaning that everyone was new and there was not that experience on the ground. The Fiscal Council members are appointed by the Department. It does not appear to me that the legislation makes any provision for an appraisal mechanism to see how things are going. The Bill seems to go through how everyone will be paid; the fact that elected representatives cannot be on the council; the fact that becoming an elected representative means automatic termination of appointment; and what happens if a person fails to comply with the terms of appointment or is unable, unfit or unwilling to perform the functions of the office. I cannot really see anything about some form of mechanism to appraise how things are going. Do you think we need anything on that?

Mr Hetherington: Something on assessing how the council is doing?

Ms Forsythe: Yes.

Mr Hetherington: There is a clause about an external performance evaluation every four years. I have some issues around the independence of that, but that process is there. My concern with it is that the council itself will develop the terms of reference and appoint the evaluator. That does not sound very independent to me, and there is a potential role for the Committee to have sight of the terms of reference and the identity of the individual who will conduct the review. There is a potential role for the Committee in that regard.

Creating a separate statutory body helps with the independence of personnel, and I am talking not about council members but about staff. At the moment, everyone in the council is seconded from the Department of Finance; ultimately, they work for the Department of Finance, albeit they are seconded to the Fiscal Council. As it becomes a statutory body, those staff will work for the Fiscal Council, not the Department of Finance. That move will help with the independence of staff as that does not exist at the minute.

Ms Watt: It ties back to what I said about disagreements and disputes. I am not sure whether there is any provision in the Bill for what happens when there is a disagreement between the Fiscal Council and the Department. Perhaps that needs to be added. It has not been an issue so far, but we do not know about the future.

Mr Hetherington: I will add to that briefly. In its response to my response, the Department of Finance made reference to the memoranda of understanding for data access between the Departments, the Northern Ireland Office and the council. There would also be a partnership agreement between the council and the Department of Finance. Information on what to do in the case of those types of escalation would form part of a partnership agreement or memorandum of understanding; that is the place for that, rather than the Fiscal Council Bill. From the perspective of the Committee's business, it will be for you guys to have sight of the drafts of those documents, when they are produced.

Ms Forsythe: Thanks very much. I have a final question. Ann made an interesting point about whether the council needs to respond to media or think tanks. Can you draw that out a little more? Is there direct provision or a statement of requirements to engage or respond?

Ms Watt: It is just interesting that the Bill is silent on that: it says nothing about any obligations on the council to respond to media questions. It might be helpful if it were a bit —

Dr Aiken: Open and transparent.

Ms Watt: — clearer on that. Does it have to answer questions from members of the public? I do not know. Does it get questions from members of the public? It certainly gets questions from me and always answers them, but I do not think that it is necessarily obliged to do so.

Ms Forsythe: I just thought that that was an interesting point. Thank you very much.

Mr Kingston: Thank you for your attendance, your paper and your comments. We noted your issues with timelines, quorum levels and so on, but you said that, overall, your view of the Bill is positive.

I have two questions. The first is on the appointment process, which has come up a few times. The Bill states that the members are:

and therefore, probably, by the Minister. It is not clear to me whether there are underlying protocols or policies about public appointments that will apply or whether it is purely at the Department's discretion. Maybe you are not the right people to ask that question of.

Ms Watt: Does it not say that it is subject to public appointment rules? I think that it does.

Mr Kingston: I do not see that line in the Bill.

Ms Watt: OK. I might be wrong about that.

Mr Kingston: We will have to ask the relevant people about that. The Scottish Fiscal Commission told us that its appointments are publicly advertised.

Ms Watt: I think that it also does not state what qualifications, experience or expertise is needed. It seems that that would be an obvious thing to include. It is a serious job that requires strong expertise in the area, so I would have thought that that should be spelled out a little more.

Mr Hetherington: I see a role for the Committee in appointments in having oversight of the selection criteria and the recruitment process, to go back to the point that I made about that. Ultimately, we want to ensure that the appointments are meritocratic and the best people are selected for the individual posts. Having that oversight and being consulted on the recruitment process is important. In the paper that it produced, the Department of Finance indicated that the Commissioner for Public Appointments would sit on the recruitment panel for the competition, so that deals with some of the issues raised.

Mr Kingston: It is an issue that I and others will want to raise with the Minister next week to get more detail on the process.

My other question is on the relationship between the Fiscal Council and the Department. We must ensure that it is of genuine use and that the public have confidence in its independent scrutiny, but it cannot be too cosy. Likewise, it cannot become a tool for Opposition parties or critics, should they ever consider seeking to bend it that way.

Clause 2 states:

That seems to give the council some discretion, and, if something is causing it concern, it could decide to look into it. That provides scope for it to flex its independence. How would it sit alongside the like of the Audit Office, the Public Accounts Committee or even yourselves? At times, you might pick up on things that need some attention and, in a way, challenge what the Department is saying. Do you have a view on the ability of the council to show its independence?

Ms Watt: The ability to choose its topics is an important aspect of its independence. That is how I see it. It will have a statutory role to provide Budget reports and sustainability reports and so on, but giving it the freedom to do other things is important in allowing it to demonstrate its independence. There is another question there about whether there should be any constraint on that. I do not know.

Another thing that has been powerful in the years so far has been the messaging that Sir Robert has put out about being left to make his assessments without any challenge or pressure from the Department. The chair saying that explicitly is important.

Mr Kingston: It might be the case that, at times, the Department wants it to do some "what if" analysis but in an informed way. Again, your organisations might do that at times.

Mr Hetherington: The role of the Fiscal Council is primarily to critique, but it is not just to critique or to critique simply for the sake of critiquing. It is to critique for the sake of helping to inform decision-making. Therefore, there needs to be a good working relationship between the council and, primarily, the Department of Finance but all Departments. I see it from that perspective. However, with regard to independence, as Ann said, it has worked well because the people have allowed it to work well. However, we could be in a situation where one or more people could, for whatever reason, decide that they do not want it to work well. In that instance, the process has to be robust. As long as the chair has an avenue — a flexibility or somewhere to go — if his or her independence is being challenged, that helps. That is potentially a role for the Committee.

The Chairperson (Mr O'Toole): I should say, in defence of the official Opposition, in which I declare an interest, that, much like the Fiscal Council, it is an innovation that has helped improve accountability. Much like the Fiscal Council, it is short-staffed and underfunded, and it does its best to influence the debate up against it. Anyway, I do not say that as Chair of the Finance Committee.

I bring in Eóin Tennyson. Dr Aiken, my apologies.

Dr Aiken: Bring Eóin in first.

The Chairperson (Mr O'Toole): That is collaboration in the Finance Committee. That is what we want to see.

Mr Tennyson: I will be brief, Chair. Thank you, Ann and Gareth, for your evidence so far.

I will go back to the point about the flexibility that the Fiscal Council would have around thematic reports. Are there any themes that it would be of value for the council to explore that, perhaps, it has not explored to date or that it could revisit in the future?

Mr Hetherington: It is important, first of all, that the chair has the flexibility to investigate or review whatever areas he or she thinks they should. In simple terms, when we look at the money that the Executive spend, half of it goes on Health and half of the rest goes on Education — primary and post-primary education. Therefore, I expect that three quarters of the thematic reports would be in those two departmental areas. Probably, there are some thematic areas around reform of public services and how that can be delivered more efficiently, given the ongoing funding constraints that Departments face and, from what we see, will continue to face for several years.

Ms Watt: I agree with that. The council has made good choices so far in doing its first sustainability report on Health. That is something that, I know, was really valued, and people still refer to it. The most recent one is on waste water, so the issues that it chooses are the pertinent ones. Maybe, to go back to the comment about economic growth, there is something here for them in the underpinnings of income and well-being across society. Perhaps there is something in that for them. I have no other comments on that at this stage.

Mr Tennyson: That is helpful, thank you.

One of the issues that I talk about all the time in the Committee and in the Chamber is the elephant in the room in our public finances: the cost of division. That is a tricky space because not all those costs are direct financial costs to public services. Some of it is opportunity cost, and some is indirect economic cost. It is also very political, so it is a difficult space for an organisation such as the Fiscal Council to explore.

Whilst I completely agree that there has to be flexibility and that we cannot be prescriptive in what we want the Fiscal Council to look at, would there be value in it, in some way, reflecting on the cost of division? For example, it could do a thematic report looking at a specific part of the public sector, reflecting on whether there are costs to duplication of service in that sector. We have not had a significant study of the cost of division since, I think, Ulster University did one in 2016 and, before that, Deloitte undertook a study. I do not say for a second that the Fiscal Council would be the right body to do a big root-and-branch review, but is it something that the Fiscal Council could or should consider as it goes about its work?

Ms Watt: Its role is to think about the sustainability of the public finances, so I suppose you could say that the costs of division are one aspect of that in looking at Education, for example. That raises another issue in my mind, which is, if the Committee thinks that the Fiscal Council should do something, have you got a way to tell them that?

Mr Tennyson: yes.

Ms Watt: However, maybe that is a bit of an aside.

I suppose it is looking across the board at the sustainability of the public finances and what comes out to it as the biggest issues, and you get back to exactly what Gareth said: 70% of the Budget goes to Health and Education. The cost of division is within that, is it not?

Mr Hetherington: Cost of division certainly merits research. Is it a role for the Fiscal Council? I do not know. As you rightly pointed out, you are bringing it into a political debate, and I will leave it at that.

Ms Watt: It looks at the sustainability of the public finances and particular things. They looked at Health and at waste water. If it were to look at the sustainability of the Education budget, it would ask questions about, "Why are we funding two schools in one town or village?". The Fiscal Council could get into those areas, but I also think that it would be cautious about that because it is quite a political question.

Mr Tennyson: Understandably. I discussed this with the Fiscal Council itself, and I understand its hesitancy and caution. However, equally, the council has previously outlined the potential revenue that would arise from certain revenue-raising measures. To me, that is also inherently political and controversial, so providing an analysis and setting out the options is not necessarily the same as making recommendations for public policy. It is an area that we talk about an awful lot in abstract terms, but there is little up-to-date information. Whilst the Fiscal Council may not be the right body to do a root-and-branch study like the ones that we have seen before, it would do no harm to occasionally consider and have due regard to that and to think about whether it is relevant to one of the themes that it is exploring.

It is really helpful to hear your reflections. Thank you.

Dr Aiken: Thanks very much indeed. I have two points to make. They may have already been covered.

One of the reasons why the Fiscal Council works at the moment is the strong relationship between Sir Robert and the Department of Finance permanent secretary, Neil Gibson. There is a good relationship, but the legislation rightly does not stipulate how to maintain that relationship and the interdependence between the two. I would like to hear your views on how we might shape the legislation to make sure that we have that. There is an implied need to get on to trying to achieve that.

The other point is probably a bit techie, but I have just spent five days in Kuala Lumpur at an AI conference, and the one thing that really struck me was the issue of data adequacy. We have heard before from Sir Robert and other officials that the data adequacy in Northern Ireland is not great. How do we achieve the data adequacy that means that we can start to get meaningful responses from across the board? I just want to chuck those two questions out there.

The Chairperson (Mr O'Toole): Steve, do you mean "data adequacy" as in GDPR adequacy or adequacy as in the quality of the data?

Dr Aiken: The quality of the data.

Ms Watt: I might leave the data one for Gareth. Sorry.

Dr Aiken: I think that I already know Gareth's view on that, but you can say it just for the record.

Ms Watt: The first point about the relationship is hard to answer. How do you legislate for that?

Dr Aiken: It works. That is the thing, Ann.

Ms Watt: Yes, it works. The key things are the appointments, the money, the disputes and problems and access to data. It seems to me that those are all completely necessary to make the Fiscal Council work properly, and, if the Department were to start not cooperating on any of those fronts, there would be a lot of problems. However, I do not think that the Bill says anything about the Department having to cooperate, does it?

Dr Aiken: No.

Ms Watt: Maybe that is something to consider. Maybe the Bill needs to say that the Department should cooperate and support the activities of the Fiscal Council while recognising its independence.

Dr Aiken: explicit.

Mr Hetherington: The legislation requires DOF and other Departments to provide information, so the Fiscal Council has total access to information in a timely manner. There are two elements, and I gave a response before about people and process. It works at the minute because the people get on, but, for me, putting it on a statutory footing will put in place a process so that, when the individuals do not get on for whatever reason, the process allows it to work. That is one of the big benefits of putting it on a statutory footing.

On your point about data, yes, I am hugely supportive of using technology and data to improve all decision-making, whether in government, public service or elsewhere.

Dr Aiken: Thanks.

The Chairperson (Mr O'Toole): Members, no one else has indicated that they wish to ask a question, so, at this stage, I thank Ann and Gareth for giving us such useful evidence. We look forward to hearing from you further on other issues, as we often do. Thank you very much. Thanks, members. Thanks, Ann and Gareth, for that. We appreciate your time.