Public Expenditure: Provisional Out-turn 2011-12
Sammy Wilson (DUP)
Thank you, Mr Speaker, for the opportunity to update the Assembly on the outcome of the 2011-12 provisional out-turn exercise. I bring glad tidings of great joy in the statement today, and it is not even Christmas.
The provisional out-turn outcome is important, since it is the main gauge of departmental spending performance over the course of the past financial year. It is also important because it determines the amount of resources that the Executive can plan to carry forward into the 2012-13 financial year. The key context for the provisional out-turn is the new EYF arrangement, which is referred to by HM Treasury as the Budget exchange scheme. I negotiated that scheme on behalf of the devolved Administrations with the Chief Secretary last year. It allows the Executive to carry forward end-of-year underspends up to a limit of 0·6% resource DEL and 1·5% capital DEL. Without that scheme in place, all end-year underspends would be lost to Northern Ireland, as, indeed, is the case for Whitehall Departments.
HM Treasury has confirmed that the Budget exchange scheme limits for 2011-12 amount to £49·5 million in respect of non-ring-fenced resource DEL and £13·6 million in respect of capital DEL. Both those limits exclude the Department of Justice, which is subject to separate end-of-year arrangements. Any underspends above those amounts will be lost to the Executive.
Before I set out in detail the terms of the amount of resources the Executive intend to carry forward into the 2012-13 financial year, I will highlight key aspects of the departmental provisional out-turn position. The departmental provisional out-turn returns resulted in total underspends of £68·5 million in respect of total resource DEL and £30·1 million in respect of capital DEL. That corresponds to departmental underspends of just 0·7% in respect of total resource DEL and 2·1% in respect of capital DEL. The departmental outcome is shown in the tables attached to this statement. I consider that overall spending performance to be excellent.
Let me take one example, because I know that there will be attacks. I will be asked why, at a time of austerity, there are any underspends. The Department of Health delivered a total resource underspend of £13·1 million out of a total budget of £4·4 billion. Now, if we put that in a context that perhaps the man or woman in the street can understand, we can see that it is equivalent to a household budget in Northern Ireland on the median wage of £355 per week. The amount that you would have left over out of that budget, had you achieved that level of underspend, would be just £1. I hope that those who criticise and carp about underspends recognise that that is the degree of tolerances that we work within. I doubt whether very many people could manage their weekly budget and finish up with just £1 of an underspend out of a weekly wage of £355.
However, there are some exceptions to that excellent overall performance, and I will highlight a few of them. In total resource expenditure, the Northern Ireland Audit Office recorded the largest underspend in percentage terms at 7·7%. That is deeply disappointing, as the Audit Office uses scarce resources that would otherwise be deployed by the Executive to deliver essential front line public services. Unsurprisingly, the capital underspends were greater in percentage terms, with the Department of Agriculture and Rural Development (DARD) having an underspend of 9·8% and the Department of the Environment (DOE) returning one of 10·4%. Those were the largest underspends among the main Departments. The Northern Ireland Assembly and the Food Standards Agency returned capital underspends of some 20%, although we must balance that against the fact that the monetary amounts were small.
The departmental provisional out-turn also shows that administrative expenditure declined by 5·3% in real terms across the Departments compared with the 2010-11 provisional out-turn position. I welcome that development. It demonstrates that significant inroads have been made into the departmental efficiency agendas. It also indicates that Departments have sought to protect front line services in a difficult budgetary environment.
I will now turn to the Budget exchange scheme. There are two key points that I will make before going into detail. The first is that the Budget exchange scheme assesses the 2011-12 spending performance at the Northern Ireland block level. Therefore, account needs to be taken of the various centre items that impact on the overall block position. In addition, although the caps apply to each of the spending categories, the Executive’s focus is on the non-ring-fenced capital and resource DEL categories, since the ring-fenced resource DEL is tightly controlled by HM Treasury and cannot be used for any other purpose than that for which it is designated.
The second is that the Department of Justice is subject to end-year flexibility arrangements agreed as part of the devolution of policing and justice powers. The Department of Justice should, therefore, be excluded for the purpose of the planned Budget exchange scheme carry-forward. The Department of Justice accounted for a significant amount of the departmental underspends, and I will return to the specifics of that Department later. Departmental underspends, excluding the Department of Justice, amounted to £44·8 million in non-ring-fenced resource expenditure and £7·2 million in respect of capital investment.
As to capital investment, the only centre item was a £1·3 million pressure, relating to the asset management unit (AMU) receipts. Although the asset management unit identified and delivered £2·8 million of capital receipts in 2011-12 against a revised target of £2·5 million, those were all below £1 million in value. In budgeting terms, those additional receipts were de minimis and were, therefore, retained by the Departments. Hence, they did not address the remaining £1·3 million pressure at the centre. That situation should not occur in future years as most of the remaining £97·5 million AMU receipts have now been allocated to the Departments.
The Executive are, therefore, now planning to carry forward £5·8 million of capital DEL into 2012-13. There were four “centre” adjustments to non-ring-fenced resource DEL. First, the regional rate provisional out-turn outcome was £13·5 million less than was forecast at January monitoring. That was because of a number of factors: principally, valuation reductions, increasing levels of rate exemptions and an increase in the planned write-off of bad debt. Secondly, £13·2 million of unspent resources were carried forward at the centre following the conclusion of the January monitoring round. Thirdly, we paid £0·6 million less in reinvestment and reform interest payments than we had forecast. Finally, a small balancing adjustment between the ring-fenced and non-ring-fenced categories added £1·2 million to the total underspend. The combined impact is that the Executive now plan to carry forward £46·3 million of non-ring-fenced resource DEL into 2012-13.
As I mentioned, the Department of Justice has separate end-of-year flexibility arrangements covering this spending review period. Under those arrangements, the Department can carry forward an unlimited amount of resources from one year to the next, and its provisional out-turn return should be viewed in that context. However, any funding carried forward must first be used to address additional security pressures, albeit with certain exceptions applying in each year.
The Department of Justice is allowed to carry forward the capital underspend on Desertcreat in 2011-12 for drawdown in future years within the current spending review period. It is also allowed to carry forward the first £10 million of its 2011-12 underspend for drawdown within the same period to meet any pressure. The Department of Justice now plans to carry forward £20 million of capital investment underspend on Desertcreat and make full use of the £10 million carry forward facility. Any remaining underspends that emerge will be set against security funding pressures.
The overall provisional out-turn position demonstrates that the strong spending performance that emerged since the restoration of devolution has continued, which, in an increasingly difficult budgetary environment, is commendable. The levels of underspend recorded by Northern Ireland Departments were relatively modest, and, crucially, the total amounts were within the Budget exchange scheme limits. That means that no resources have been lost to Northern Ireland. An important implication of that is that, contrary to what some believe, we do not have large amounts of unspent resource available to meet emerging financial pressures. The caps agreed in the Budget exchange scheme and the very modest levels of departmental underspend mean that the resource available to carry forward from one year to the next is not sufficient to address emerging financial pressures. However, the amount that the Executive now plan to carry forward is a significant funding boost for the 2012-13 financial year, and we can use it to deliver essential public services here. That is good news for all people in Northern Ireland, and I commend the provisional out-turn outcome to the Assembly.
Conor Murphy (Sinn Féin)
Go raibh maith agat, a LeasCheann Comhairle. Gabhaim buíochas leis an Aire. I thank the Minister for his statement. The Minister has spoken on this issue before, but, in view of the high level of reduced requirements declared in the January monitoring round, DFP is undertaking a review of Budget allocations for 2013-14 and 2014-15. Does the Minister consider it likely that there will be significant movements of money in this year’s monitoring process? How can he ensure that Departments declare their reduced requirements at the earliest possible opportunity? Will Departments have the opportunity to bid for any proposed reallocations for 2013-14 and 2014-15? What criteria will be used to determine any reallocations between Departments?
Sammy Wilson (DUP)
The exercise that was undertaken looked first at the moneys allocated at the beginning of the Budget period in 2011-12 and at the return of moneys by Departments during that year’s various monitoring rounds.
We also look at the provisional out-turn figures and what Departments had anticipated as underspends for the rest of the year. We will also be looking at whether those were simply exceptional to that particular year or whether there was likely to be carry-over and the same behaviour repeated in future years in order to see whether there was a systemic issue in the budgets. The appropriate time for me to give details of that would be once we have completed the exercise. I would then reveal to the Assembly the outcome of that review.
We have not decided on definitive figures yet. However, the whole point was that, where we saw that there was an issue with the Budget allocation to Departments throughout this Budget period, money would either be taken back or additional money would be made available to them, and Departments could make a case if they believed that they had a long-term under-provision or we would make an assessment if there was a long-term over-provision. That will be subject to a separate statement in the Assembly. I do not have the detail of that because, as Members will understand, that exercise is still being completed.
Sammy Wilson (DUP)
The departmental average, if you take ring-fenced and non-ring-fenced, was 0·7%. The Northern Ireland Audit Office was 7·7%. We can draw our own conclusions from that. As I have said in the Assembly before — I am not attacking the Northern Ireland Audit Office — I believe that a body that preaches to other Departments prudence and proper management of money needs to do the same itself. Of course, the money that is used and then not spent is money that was not available for proper planned spend for other front line services.
Leslie Cree (UUP)
I congratulate the Minister on what looks like a very good return. I have two points. Will he clarify when provisional becomes absolute? We have the resource and capital figures, and we also have the carry-forward figures, but, as far as I can see, we do not have the ring-fenced figures. Does he have those to hand?
Sammy Wilson (DUP)
I do have the ring-fenced figures, if I can just find them. The ring-fenced resource is on table 2, which, I hope, is attached to the Member’s statement. I am not too sure whether those tables are with each Member. However, we do have a table for the ring-fenced figures. I am sure that the Member does not want me to read out the long list of ring-fenced figures for each of the Departments now. The underspend for ring-fenced resource was £14·2 million, or 3·3% of the resource figure.
Go raibh maith agat, a LeasCheann Comhairle. What level of resource has been realised through revenue-raising activity and how does that compare with the Minister’s very positive prediction in his pre-Budget statement to the House of December 2010?
Sammy Wilson (DUP)
I indicated that the revised figure for AMU was £2·5 million, and it achieved £2·8 million, which leaves £97·3 million to be delivered over the rest of the budgetary period. We have already had the discussion in the Assembly where we explained that, in the first year, much of the work that had to be done in identifying resources was being done. Given the level of market interest, it was deemed appropriate, in some cases, not to proceed with sales. In some cases, although some of those sales were progressing, there were legal issues and other issues that still had to be sorted out in the first year and that then had to be carried over to the second year. However, the important thing is this: no Department was impacted by the level of asset sales, in so far as Departments were able to live within their budgets. Departments were able to manage within their budgets, and the underspend and, indeed, overspend — there was not a huge amount of overspend in any Department — were kept to a very manageable level. So, I do not think that the service or, indeed, the capital spend was affected in any way. Departments met their planned current spend and capital spend targets. That is what the provisional figures show: what was planned was actually done. I think that the Member is looking for some criticism here. However, the fact is that there was not any negative effect from the revised capital sales.
Anna Lo (Alliance)
I thank the Minister for his statement. Given the considerable amount of underspend, would the Minister consider putting some of it towards supporting the green new deal, which has been shelved for some time?
Sammy Wilson (DUP)
First of all, let us just knock this on the head: there was not a considerable level of underspend. Average underspend for the past seven years — if I can find the figures — was 1·4% and 7% in respect of resource and capital. We have less than half of that; in fact, we have a third of it for this year. So, the level of underspend is well down. The money we are carrying forward — £46·3 million in resource money and £5·8 million in capital money — will be available for Departments to bid for. I do not know whether that will go towards the green new deal, education, health or all the other things. The Executive will receive bids from Departments, and on the basis of those bids, will decide what should be given the highest priority. I am sure that the Member will come to me time and time again during the next year with the many priorities she sees. I think that it would be very foolish of me to say at this stage that the money will be exclusively set aside for one purpose. I want to see what bids come from Departments, the priorities in those bids and how Departments can manage the spend they ask for.
Sammy Wilson (DUP)
The main reason for capital underspend in the Department of Justice is that the training college at Desertcreat has not yet been started. The Minister, I am sure, will be able to give the Assembly full reasons as to why that has not happened. However, following the negotiations that the First Minister and deputy First Minister had with the Government at Westminster, we now have the ability to carry that money forward. Indeed, any underspend in the Department of Justice can be carried through until the end of this financial period. That gives the Department some breathing space to make the decisions that have to be made in respect of Desertcreat.
Mitchel McLaughlin (Sinn Féin)
Go raibh maith agat, a LeasCheann Comhairle. I also want to acknowledge that this is a very good report. I think that it continues the progress that has been made in recent years. I note the Minister’s specific reference to the Audit Office. I have to say that I am disappointed by that; I think that it is a petty point. We are talking about a reasonably small sum of money, £700,000, in terms of essential front line services. Perhaps the Minister will comment on the fact that his Department had an underspend of £2·7 million, which is more than four times that amount, and what impact that would have had on essential front line services.
Sammy Wilson (DUP)
Of course, the important thing is what percentage of the total budget that represents, not just the money. My departmental underspend was below the average; it was 1·4%, I think, as opposed to 7·7%. That is the context in which it has to be looked at.
Sammy Wilson (DUP)
We spent — I hope that I am right on this figure — £1·6 billion on capital spending in 2011-12. Given the calls from various sectors in the economy for the Assembly to try to do something to alleviate the impact of the recession, especially on the construction industry, and in a year in which budgets were fairly tight, the actions that the Executive took, such as switching some current spending to capital spending, looking at how we could borrow, the sale of assets, and a range of other things, spending £1·6 billion was an achievement.
Let me put it in context — and, again, I do not have the exact figure but I remember reading it in one of the journals recently. It probably means that more than half of all construction work in Northern Ireland now depends on spending by the Assembly. It means an awful lot of jobs for people in the building industry, an industry that has been hit fairly hard by the recession. That is the kind of impact that this is having, while at the same time improving the infrastructure in Northern Ireland so that we have one that is capable of being used once the upturn in the economy occurs.
Roy Beggs (UUP)
I concur with others that those who have been managing the finances must be congratulated.
The Minister explained that there is a sizeable capital underspend in the Department of Justice as a result of Desertcreat and that that money can be carried forward. Other than that, the two Departments with sizeable capital underspends are Agriculture with £2 million, or 9·8% and Environment with £700,000, which is, I think, 10·4%. In his statement, the Minister used the word “unsurprisingly” about these Departments. I know that there has been a repeated failure in the Department of Agriculture, but what is happening to ensure that lessons are learnt and that there is better financial management in such Departments?
Sammy Wilson (DUP)
In my answer to the Chairman of the Committee for Finance and Personnel, I indicated that we were looking at the budget allocations that had been made over the period. We asked whether there were any systemic issues that needed to be addressed and whether there was a need to look at some of the budget allocations that had been made. I suppose that that is one of the areas that we have to look at. Where Departments underspend consistently in a certain area, we have to drill down and find out the reasons for that.
I do not have the specific answer to the Member’s question at the moment, but it may well be that, like the Department of Justice, the other two Departments may well have some huge capital expenditures that they intend to undertake but that have been delayed for one reason or another. If that is the case, then the capital money can be brought back to the centre and be reallocated at some other stage. I know that some Departments returned money, which would not show up in these figures, during monitoring rounds last year because they could not spend it but indicated that they would be looking for it again this year as they would be capable of spending it then. I do not know why DARD and DOE did not return the money at an earlier stage, and it has been left as an underspend at present.
Paul Maskey (Sinn Féin)
The Minister mentioned the underspend of £700,000 from the Audit Office. I suppose it is up to the Audit Committee to go through the figures there. However, there is no mention of the tens of millions of pounds that the Audit Office, and its joint work with the PAC, has saved government in recent times, which has been very effective.
Recently, the Minister’s Department has attacked the Audit Office. Is that because some senior civil servants are now starting to run scared of the Audit Office and the PAC?
Sammy Wilson (DUP)
I do not think that anybody is running scared of anyone. The Audit Office has a job to do, which it does, and no one expects it to do its job other than properly. All I have done is highlight the fact that the office, which scrutinises departmental effectiveness and efficiency, consistently — this is not a one-off — year on year, bids for resources that it does not spend and, even worse, waits until the end of the year to surrender those resources. Had that happened with a Department, I guarantee that the Audit Office would have had something to say. It is perfectly legitimate for me to point out that the people who scrutinise should also be subject to scrutiny about how they spend —
Sammy Wilson (DUP)
The Member, from a sedentary position, says that that is what we do. Perhaps Members could be given an explanation about the recommendations that his Committee has made to ensure that the Audit Office does not return a year-on-year underspend of around 7%, which is certainly above the average. That could be the subject for a debate in the House some time. Perhaps the Member’s Committee is not doing its job either.
Paul Girvan (DUP)
I thank the Minister for his statement. I welcome the pleasant report and the fact that we have spent the majority of the money and are left with a very small underspend: 0·7% in resource DEL and 2·1% in capital DEL. What has driven the reduction in administrative expenditure? Have any Departments breached their budget controls, as set by their original budgets?
Sammy Wilson (DUP)
This out-turn is not being driven by a draconian percentage that has been laid down arbitrarily by the Executive or the Department. That is a good thing. Departments were allocated their budgets, and they then produced savings delivery plans to show how they were going to live within those budgets. It is pleasing that most Departments took on board instructions from the Assembly that, at a time of budgetary constraint, Members did not want front line services to be cut while Departments, and departmental administration, stayed fat. The result is a pleasing 5·3% reduction in departmental administrative costs. Some areas have not performed as well as that, and some have had overspends — for example, the PPS and DSD. In DSD’s case, that might be due to the fact that, as unemployment goes up, more staff have to be employed to administer benefits, and so on. The PPS is ramping up its role, so its administrative costs have probably risen.
Jim Allister (Traditional Unionist Voice)
I am sure that the Minister would agree that, in a time of austerity, one would expect the underspend to be at its lowest because, if times are austere, there cannot be much money to spare. Today, the House is being given a retrospective view of the out-turn. For the good conduct of financial management, how important is it that there is transparency from the very beginning of the process, when money goes into Departments, until it comes out, spent or unspent? Will the Minister update the House on the apparent reluctance of the Department of Education to co-operate and give financial transparency? How big a drag is that on financial management?
Sammy Wilson (DUP)
I thank the Member for the question. That is an issue that I have brought to the House. I promised that we would move forward on that during the debates on the Budget last year. I think that it is important that Committees and Members of the House should know, when the money goes into a Department, what it is meant to be spent on and whether it has been spent on that. If it is not spent on that, Departments should have to come back to the Executive and ask for the money to be moved from one heading to another.
The Member is quite right. I am disappointed, and I think that the Committee for Finance and Personnel has expressed its disappointment. The new budgetary arrangements would also cut out a lot of the duplication in this House in respect of debate on the same issue time and time again, and it probably would have focused the debate more on where the money is being spent, how the money is being spent, and whether it is being spent on the things that Ministers said it would be spent on. I am disappointed that we have not got that through. I do not know why, as the Member has pointed out, the Minister of Education does not want such transparency. The one thing that I do not believe we can do is compromise on delivering that transparency, and I hope that the matter will be resolved quickly enough for legislation to come through the House and to have the changes for the next Budget period.