Public Expenditure: December Monitoring

– in the Northern Ireland Assembly at 11:15 am on 12th February 2001.

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Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party 11:15 am, 12th February 2001

I will confirm some further decisions by the Executive as a result of the December public expenditure monitoring round for the financial year 2000-01. I have emphasised in previous statements on the monitoring of public expenditure that its primary purpose is to address emerging issues as a result of improved information on the estimates of requirements for expenditure and receipts by Departments.

The Executive are determined to look carefully at such issues and adjust bands where necessary. We need to look at what is in the public interest and how we can best pursue the priorities set out in the Programme for Government in what is usually a context of limited options in each monitoring exercise.

It is important that the points I will announce be set in a routine context, because the Executive want to deal with, and agree, those issues as a matter of routine procedure. That the Executive can deal in that way with important economic and social issues is as clear a statement as we could make of the significance of having these institutions and of the fact that we have an Executive that take account of evolving local issues and the concerns and aspirations expressed in the Chamber and in the wider community.

When I announced the outcome of the December monitoring round on 22 January, I explained that the Executive were giving further consideration to the deficits that have emerged in the Health Service trusts. Although I must ensure that procedures for financial control are being observed, it is also important to recognise that the problem of deficits in the Health Service is a symptom of much deeper problems in relation to funding, which we need to address.

The Executive will wish to examine issues in the resourcing of the Health Service to ensure that money is being used as effectively as possible. We need to examine our priorities in the light of the Programme for Government. We also want to carefully examine the relative levels of provision for health funding and other key services between here and England, Scotland and Wales, as we increasingly feel that the Barnett formula has worked against the interests of health and other programmes here.

With the agreement of the Minister of Health, Social Services and Public Safety and the Economic Policy Unit in the Office of the First Minister and the Deputy First Minister, I am today confirming that we are launching a joint review of the causes and consequences of the Health Service trust deficits. This will not be a punitive or hostile study. The Executive are determined to work constructively with Health Service management in the interests of all those in need of care and the wider community. We want to find ways to ensure that the financial management arrangements and the roles and responsibilities help everyone in this purpose and give them the kind of management information that will be of real help in this vital service.

We need to ensure that the problem of trust deficits does not recur. We need to match funding to need as far as we possibly can, but we also have to match spending to funding in order to respect the authority of the funder, which is now the Assembly. The steps that we are taking aim to fulfil both these objectives. Under the resource budgeting arrangements, which are due to take effect from 1 April, trust deficits will no longer be at one remove from the Department’s financial control totals as set by the Executive and the Assembly in the annual Budget exercises. The principle must remain that spending proposals are brought together by the Executive and presented to the Assembly but then reflected in Assembly votes of approval. This is a fundamental part of the democratic process, and we need to reinforce the arrangements in the Health Service in that important context.

The Executive have decided to inject £18 million of additional spending into the Health Service to address these deficits. At one stage the estimated requirement to address the deficits was £38 million. Since then the Department of Finance and Personnel and the Department of Health, Social Services and Public Safety have analysed the technical issues in more detail and reassessed the implications of aspects of the funding arrangements. Taking account of this work and the allocations agreed in the December monitoring round, it has been confirmed that the amount needed is now £18 million. By the nature of the issue this does not mean any new activity in that it is paying bills for activities and services that have already been carried out. However, it is important to avoid the constraints on services that would be necessary next year if the trusts had to deal with the deficits in the allocations provided in the Budget. We want the improvements planned in the Programme for Government to proceed, and this requires a resolution of the deficits.

However, the Executive are concerned to ensure that this injection of funding is distributed fairly and does not lead to any distortion in the distribution of resources or the way resources are planned and managed in the future. We welcome the full co-operation of the Health Service management in the forthcoming consultancy study. The results of the study and the action that we will take on foot of it will affect the view we take on future allocations to the Health Service as 2001-02 progresses and for the longer term.

The approach that we are taking represents a responsible and considered response to a difficult issue, but it is fundamentally one which will be of significant benefit, both in the short term and the long term, to the Health Service and hence to our people. In any society appropriate spending on health has to be a considerable priority. These allocations demonstrate clearly the Executive’s commitment in this context. The study that we are introducing will help management in the Health Service as well as the Department of Health, Social Services and Public Safety, the Department of Finance and Personnel and the Economic Policy Unit of the Office of the First Minister and the Deputy First Minister to work together to ensure that whatever future levels of funding are available are used to best effect to promote the best interests of the health of the region.

Allocating £18 million that remained unallocated in the December monitoring round still leaves a further balance of £10 million. The Executive have carefully considered how best to use the remaining resources, which allow us to address three important issues. It was not possible to come to these before now, given the considerable uncertainty over the Health Service deficit figure, which has only now been resolved through the analytical work that I mentioned earlier.

In the draft Programme for Government the Executive committed themselves to bringing forward proposals to introduce free travel on public transport for older people. In December I said that the indicative allocations for 2002-03 included substantial funding towards the cost of introducing a free travel scheme for older people from April 2002. We estimate that the total cost of the scheme will be about £10 million a year.

The plans announced in December included £4 million in 2001-02 and £8 million in each of the following two years. Since then, there have been helpful discussions in a working group of officials, which has been exploring options and considering the best way forward. I am pleased to be able to confirm today, on behalf of the Executive, that it has been decided that an additional £3 million will be allocated to this in 2001-02 by carrying forward part of our room-to-manoeuvre funds. An additional £2 million a year will be provided in the following years. That will allow full funding of a scheme for free travel for older people, taking effect from 1 October 2001.

There is no requirement for funding or assistance from district councils. That fulfils an important pledge in the Programme for Government and shows that the Executive can work together to find resources to implement key policy initiatives. That marks a distinct difference from the approach taken under direct rule. The Department of Finance and Personnel and the Office of the First Minister and the Deputy First Minister will be discussing the details of the scheme with Department for Regional Development officials as soon as possible to take that forward.

The question of the gap between the old and new rounds of EU structural funds has caused considerable concern to many people in the community. It has been put strongly to us that the uncertainty over the timing of the new round of funding is leading to job losses and a break in the progress of the Peace programme that could have been avoided. As some resources remained unallocated, I put proposals to the Executive to address this issue. Those have been agreed. So far in this financial year, the Executive have provided £9 million of additional spending for gap funding, including £4·5 million for projects which were part of the Peace I programme. Those amounts have gone some way to dealing with the problem in the financial year ending on 31 March. However, we have recognised the problems that remain, given that it will be some time into 2001-02 before the allocations from Peace II and other programmes become fully available. Further action is needed.

At its meeting on 8 February, the Executive agreed a new approach to this that should allow for both continuity and change. It is important to recognise that the new round of funding includes some material differences from the first round. It would not be appropriate to simply roll forward every group and project that received assistance under the old round into the new round.

The Executive have agreed that Departments should be authorised to make advance payments to projects where they judge that there is a strong likelihood that the project will be eligible for funding and successful in an application under the new round. That would be subject to the procedures of the monitoring committees and funding mechanisms, when they are in place. It is important that this anticipated drawing down of the new round of funding is managed carefully. However, it should provide the continuity and certainty that everyone needs.

Much work has gone into developing clear criteria for the Peace programme, including detailed discussion with the European Commission. The criteria must be applied carefully. They are available to all Departments and can be used to help to secure the best use of available funding.

We also need to bear in mind that existing projects should not be funded without regard to the need to hold resources for new projects, which will meet the Peace II criteria. We need continuity and change as we adapt to the new programme.

This approach involves Departments making considered judgements about what applications will, and will not, succeed in the new round of funding. The criteria will help in this regard. Additionally, some new money is being set aside to insure, by providing a safety net, against the risk that a Department may assist a project, which may not, in the end, prove eligible for funding under the new peace programme. We propose to allocate £2 million of the room-to-manoeuvre fund — which is available now — and carry that into 2001-02 within the Executive’s programme fund for social inclusion and community regeneration. The first call on this £2 million should happen when Departments make gap funding available in good faith, and on criteria which are as close as possible to those adopted in the new programmes, and where, ultimately, the project aided does not succeed under the new Peace programme.

There remain substantial resources to be drawn under the Peace I programme. My Department will be actively working with relevant Departments and the Special EU Programmes Body to ensure the best use of these resources and to help with the problems of continuity from Peace I to the new programme. Meetings have been arranged with the main Departments concerned to reinforce the importance of this task and to help to take it forward. We need to maximise the benefit of Peace I money and ensure that it fulfils the key objectives set for the programme in order to pave the way for Peace II as well as possible.

This approach should serve to resolve the problem of gap funding, which has been a difficult issue for the voluntary and community sectors over the past months, and it should leave no remaining cause for uncertainty. The Departments concerned will be able to fund projects that are likely to succeed under Peace II. The Executive are also setting aside £2 million to provide a safety net so that if Departments need additional spending power, for the purposes of the new programmes, it will be available. This will be carried forward from 2000-01 to 2001-02 in the Executive’s social inclusion fund.

In some cases, it will be necessary to adopt an exit strategy for funding because some projects are not likely to come forward under the Peace II programme. This is an important aspect of the shift of emphasis which the Executive have agreed with the European Commission and the two Governments in relation to the Peace II programme, and it is part of adopting what is a different context from that of the original Peace programme.

During questions on the draft Budget statement in October 2000 I made it clear that we would continue to keep the forecast level of rate revenue under review. As was the case for the current year, I undertook that I would make use of any emerging additional revenue to help to keep down the increases in the rate requirements as far as possible. I am pleased to announce that because of the strong continued growth in valuations of domestic property there is some scope to adjust the domestic regional rate increase. The latest revenue forecast is £2 million higher than we assumed in December. The Executive have, therefore, decided to accept my proposal to reduce the increase from 8% to 7%. Because of the growth in the revenue base it does not mean foregoing revenue, but it will be of some benefit to the ratepayers.

The Executive’s approach to the domestic rate continues to take account of the realities that we have to face, namely that the levels of local revenue per household raised here are markedly below those raised in England, Scotland and Wales. Foregoing revenue would risk foregoing some of our key arguments in the case that we must put to the Treasury on the Barnett formula.

Turning to the non-domestic regional rate, the position is somewhat different. Given the effects of the proposed uplift of 6·6% in the non-domestic regional rate for 2001-02, I asked for more detailed work to be done on comparisons with England on the non-domestic rate. This has confirmed that the non-domestic regional rate here is not out of line with that in England. This strongly suggests that if we had a lower uplift in the non-domestic regional rate than was planned in December, this would not undermine the case that we need to put to the Treasury regarding the Barnett issue.

Now that the figures for the Health Service have been confirmed, we have some additional spending power in 2000-01 which could be carried forward into 2001-02 to replace an element of regional rate revenue. This would make it possible to reduce the uplift in the non-domestic regional rate from 6·6% to 3·3%.

On the evidence available, it seems fair that for 2001-02, the non-domestic sector should face a rates uplift that is broadly in line with the rate of inflation, especially now that we have found a way to do this without detriment to our overall spending levels, which would have been the case had we rushed into this issue in either December or January. The amount required is £5 million.

This is good news for the business sector and will not undermine the case that we need to make to the Treasury on the Barnett issue. We must look carefully at the impact of the rating system system, on business as well as on individuals and households, as part of the review of rating policy, which I will be referring shortly to the Finance and Personnel Committee. The Executive are determined to find solutions through the review that can make the best use of whatever resources are available and which are in the widest possible interest.

The proposals for the now reduced uplifts in the domestic and non-domestic regional rates will be introduced to the Assembly in the form of the Rates (Regional Rates) Order (Northern Ireland) 2001, which is due for consideration in March.

The four measures that I have announced on behalf of the Executive represent clear and decisive action on the part of the Executive in key areas. This has been made possible through routine, straightforward financial management and by facing up to the difficult issues with proper regard for prudence, sensible planning and the needs and aspirations of the community.

We have acted to ensure that the health deficit issue is fully addressed through immediate funding and a study to ensure that the circumstances are properly understood and that the health trusts and boards can make changes in management arrangements, which will ensure a better planning process and avoid deficits in the future.

We have acted to introduce free travel for older people more quickly and in a more straightforward way than was possible in the context of the December Budget.

We have found a way through the problem of gap funding, which means that eligible voluntary and community groups will be able to make appropriate plans to secure the way ahead, in conjunction with Departments, by making progress towards Peace II on a workable basis.

We have acted to contain the increase in the regional rates without compromising the key issues that we all face in seeking additional resources from the Treasury. We can reduce the domestic increase from 8% to 7% without a loss in revenue because valuations have increased slightly faster than we were expecting. For that reason we have acted to bring down the increase for the non-domestic sector from 6·6% to 3·3%, which will be of significant benefit to local businesses.

These measures show the Executive at work. They show our determination to work in the interests of all in our community and across the full range of functions for which we are responsible. I hope the Assembly will join with me in supporting these four proposals, particularly in the political context which has made them possible.

Photo of Mr Donovan McClelland Mr Donovan McClelland Social Democratic and Labour Party 11:45 am, 12th February 2001

Order. Members, before we proceed may I remind you that several people have indicated that they want to ask questions. For that reason, I ask you, and the Minister, to be as brief as possible.

Photo of Francie Molloy Francie Molloy Sinn Féin

Go raibh maith agat, a LeasCheann Comhairle. I welcome this important statement from the Minister. It shows that changes can be brought about by negotiation and by shifting the people power in the street. The Minister’s quick response is very welcome.

I welcome the idea of paying off the trusts’ debts, but I want to voice my concern to the Minister that I hope that this is not an open-ended situation. The trusts should not feel that if there is a crisis in the future, someone will pay off the debts. Will the Minister state whether this will arise again with the extension of the one-year GP fundholding? Is that likely to lead to debts in the future?

It is good news for the older traveller that we now have a stand-alone measure and will not be depending on council funding. This is important, because it is more manageable.

In relation to gap funding, there are concerns in the community that the gap between Peace I and Peace II is extending. Some people believe that there is a policy to create a gap between the two funds, rather than to provide continuity. In that way valuable resources, personnel and experience could be lost. Can the Minister confirm when the Peace II programme will be on the ground?

The rates rise is an important measure. Although I welcome the reduction in the increase for the non-domestic rate in line with inflation, again I am concerned that the level of domestic rates will be maintained. Can the Minister confirm —

Photo of Francie Molloy Francie Molloy Sinn Féin

Will the Minister confirm — particularly to Committee members — that domestic rates will still cost the ratepayer the same amount of money? The new money is being brought in by the rise in valuation. It will not, therefore, save people any money. Like for like, it is not possible to compare district councils here with those in England, Scotland and Wales, because the services provided locally are different to those across the water.

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

I thank the Member for his questions. Under the stricture of brevity, I shall not be able to cover all of them.

With regard to deficits, it is not intended that action taken now to deal with the current serious deficit problem should, in any way, create a precedent or an incentive for further deficit spending in future. That is one reason for undertaking the joint consultancy study, together with the Minister of Health, Social Services and Public Safety and the Economic Policy Unit of the Office of the First Minister and the Deputy First Minister. This matter is not being taken lightly in relation to any concerns raised by the deficits — either issues of service pressures or the question of unmet need which must occur to people, not least in respect of those trusts which have not been showing deficits, and concerning questions of financial management. I am glad that the Committee Chairperson welcomes our starting the free travel scheme earlier, and on a fully funded basis, so that it is more straightforward. We did not have the resources available to allow us to commit to that previously, but we do now.

With regard to gap funding, I want to refute any suggestion that there is a policy to try to open up or to deepen any gap between Peace I and Peace II. There is certainly no such policy, and our announcement today goes beyond gap funding and moves us on to bringing forward Peace II. Again I emphasise to Members that in relation to the Peace I money, there are outstanding questions which must be addressed. We will be taking measures in that regard — again, proof that we are not treating the issue lightly.

I accept that the reduction in the domestic regional rate is not as much as people would have liked, but I refer Members to my point in relation to the case that we will have to make to the Treasury on the question of the Barnett formula. Comparing the functions of councils in England with those in Northern Ireland is not material to the issue of the regional rate. The previous rate increase of 8% would have seen an average household paying £16 a year extra. Now an average household will pay £14 a year extra.

Photo of Mr James Leslie Mr James Leslie UUP

The Minister’s statement contained several interesting points, but I shall confine myself to one.

Can the Minister confirm that as a result of his additional £3 million allocation, the free travel scheme will be introduced seven months earlier than would otherwise have been the case? Will he also comment on his statement that an additional £2 million a year will be provided in forward years? That seems to go beyond the scope of a monitoring announcement and into the realm of a matter pertaining to future budgets. Can the Minister explain how he manages to contain the allocation of £2 million in future years within his statement on monitoring?

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

The £3 million allocated to bringing forward the commencement of the free travel scheme for the elderly to 1 October 2001 rather than 1 April 2002 requires a consequent provision in future years. In making the decision to bring forward the scheme and to fully fund it, the Executive had necessarily to take a decision consciously in relation to provision for future years. The Executive have done that and have been fully open and transparent about it.

Photo of Joe Byrne Joe Byrne Social Democratic and Labour Party

The Minister’s statement was a good example of how the Executive are beginning to function in a meaningful way for the public, who will be appreciative of the forthcoming reduction in the regional rate, which has been one of the most contentious issues this year.

Can the Minister give details of the total amounts made available to date for gap funding? When will the money announced today be available to the community groups on the ground, who are anxious about the continuity of the Peace programme?

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

It is good to have a welcome for the direction in which we are moving in relation to the rates. We have only been able to do that on the basis of the money available to us, either through the improvement of the valuation base or because we do have this money available after dealing with other pressing spending items. I stress that we only have the money available after we have dealt with those other items, and it would have been wrong to make the money available before addressing our priorities.

In this financial year we made £9 million available for gap funding — £4·5 million of that went to the Peace programme. We now wish to see Departments making the sort of considered judgement that we think they are capable of, and that many community groups would like them to make, on whether or not people are eligible for the next round of funding, and making some advance allocations on that basis. We have provided the additional £2 million for the Executive’s social inclusion programme fund as a safety net, so that if Departments, in good faith, make allocations to groups that turn out not to qualify for the next round, that is covered and it is not an expense to the Department’s other programmes or to the wider Peace programme.

Photo of Gregory Campbell Gregory Campbell DUP

I welcome the Minister’s finding the necessary finance for free travel for the elderly. In keeping with your request to be brief, Mr Deputy Speaker, I have a very concise question.

Last week, the Deputy First Minister said:

"At no stage, and I repeat this, at no stage was a bid made to the Department of Finance and Personnel for funding for this by Mr Campbell prior to today."

Will the Minister confirm that my predecessor, Peter Robinson, made a bid for full central funding in July 2000? I renewed the bid in bilateral meetings with the Minister in September 2000 and again in December 2000. Rather than my having to release the documents, which would demonstrate the extent to which the Deputy First Minister misled the public, perhaps the Minister would be good enough to confirm that the July, September and December bids were all made to him.

12.00

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

I acknowledge the question. There are several issues. There was a bid in July in the context of the Budget discussions. That bid was for full funding of this scheme and is a matter of record. It came prior to Mr Campbell’s term in that Department. The point was referred to in one of the bilateral meetings that I had with all Ministers in September. However, it would be misleading to imply that those were the only terms on which free travel for the elderly, and questions on how to deliver it, were discussed. Although the point was referred to, I do not recollect the discussion as being about a straightforward bid for full funding with no other options.

Mr Campbell also said that a bid was made to me in December. In fact, Mr Campbell sent a memo to the First Minister and the Deputy First Minister on 7 December 2000, which was the day that the Executive were meeting to discuss my proposals for the revised Budget. Those proposals included one to have the scheme begin on 1 April 2002, with three quarters of the funding coming from us, and one quarter from councils. Mr Campbell’s memo acknowledged that the proposals he had been pursuing with councils were for part-funding by them, and it reflected on some of the difficulties of that. His memo was to the First Minister and the Deputy First Minister on the day of an Executive meeting and was in response to the recommendations from the Department of Finance and Personnel. I can confirm that communication in December, if that is what Mr Campbell was referring to.

I can also confirm that, subsequent to that, I had a further communication from Mr Campbell dated 23 January 2001 — the day after I made the statement on December monitoring. That communication put forward the proposal that he would like to be able to allow councils that were willing to participate to go ahead and contribute to a part-funding scheme this year, beginning in April 2001.

The Deputy First Minister’s point, I believe, was with reference to Mr Campbell’s comments last Thursday morning on Radio Ulster. Clearly referring to the opportunity that he said existed — and it was obviously in terms of the December monitoring round — he said that he had instructed his officials to make a bid to the Department of Finance and Personnel. We did not receive that bid, and I pointed that out in a note to Mr Campbell.

Photo of Alex Maskey Alex Maskey Sinn Féin

Go raibh maith agat, Mr Deputy Speaker. I welcome the statement, and the four proposals contained therein. It is quite remarkable that the proposals are possible. It is not because of the political context within which we are working, but in spite of it. It is remarkable that the First Minister has announced yet another timetable to collapse the institutions.

In paragraph 26 of his statement, the Minister states that he asked for further comparisons between the rates here and those, for example, in England. This matter was well aired over two or three months, particularly when I and others raised the point about the regional rate being increased too much above the level of inflation. I find it difficult to understand what information the Department — I do not mean the Minister, of course — did not have available to it when the deliberations were going on.

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

Comparisons are neither entirely easy nor straightforward, and many technical issues must be examined. However, one can conclude that businesses here would be paying similar rates to their counterparts across the water. Another relevant point is that we have a higher proportion of smaller businesses here. We were only able to consider using money to offset the expected higher rate increase after other outstanding issues were dealt with. Many of those who question why we were not able to go for this lower rate increase earlier are the same people who say that there should be significant additional expenditure on certain programmes.

The comparison with English rates has never been expressed to me before, but several Members expressed particular concerns about the effect of the rate increases on the non-domestic sector. Given that much of the argument on the domestic regional rate included references to the situation in England and the Treasury’s likely angle on that, I made a point of confirming that those same concerns did not apply. I feel that I have been quite open and fair about this — I was not aware of any of this earlier. Officials, working in the background, found the information. This, combined with the fact that we had money available at the end of the December monitoring round, allowed us to take this measure, which I hope people will welcome.

Photo of David Ford David Ford Alliance

I am sure that the Minister will be pleased to know that because of the illness of my Friend, Mr Close, he only has me to put up with today. I will probably be slightly gentler on him on some topics than Mr Close would have been. I am glad that the Minister of Health, Social Services and Public Safety is in her place. She has previously acknowledged the difficulties of funding different aspects of her work and the fact that the acute services sector has taken the lion’s share of available money compared to children’s services, community care and psychiatry.

Can the Minister indicate how he proposes to ensure that there will be a fair distribution of the additional resources allocated to Health Service trusts to ensure that the bigger acute hospitals do not, yet again, run off with the vast majority of the money?

I have no desire to interfere in the little spat between the DUP and the Minister on free travel. I welcome the extension of free-travel provision and, speaking on a constituency-level basis, I trust that this additional money will result in more resources for the Department for Regional Development to enable the Knockmore railway line to be preserved. I hope that the Minister will happily confirm this today.

Similarly, the proposals on gap funding must be welcomed. Can the Minister indicate more clearly how he is going to administer the inelegantly described "exit strategy" for those organisations which will no longer receive funding?

Finally, on the regional rate, the Minister will know that Members in this corner of the Chamber will welcome the reduction of the business rate. Will he assure us, on the basis of his statement, that any rises to this rate will be in keeping with rises in the rate of inflation and that it will not be increased as was originally planned? I agree that the Barnett formula is unjust and that it must be changed, but does he agree with me that to change it we must move to fair taxation as well as to a fair distribution of national funding — [Interruption]

Photo of Mr Donovan McClelland Mr Donovan McClelland Social Democratic and Labour Party

I am sorry. I am not taking a point of order.

Photo of David Ford David Ford Alliance

And that must refer to income tax and not the rates.

Photo of Mr Donovan McClelland Mr Donovan McClelland Social Democratic and Labour Party

Minister, I am sure that you may wish to answer one of those questions now. You may wish to respond to others in writing later.

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

In acknowledging several of the Member’s points, I stress that I am not having a spat with the Minister for Regional Development. The emphasis in this important proposal should be on who gets the benefit, not on who gets the credit. We should work on that basis. Although we refer to joined-up government, perhaps grown-up government would be a better term — let us concentrate on that.

Although it does not matter who gets the credit, for the likes of rate increases, it is pretty clear who gets the blame — and I recognise the unfairness of that.

In response to the other question on gap funding, when the Peace I programme was undertaken, and before there was any mention of Peace II, there had to be provision for exit strategies. That may or may not have been made on a satisfactory basis. This is causing us further problems, but the issue must be addressed. We want Departments to work on that and to make best use of my announcement today by way of gap funding and by moving to make allocations from the next round of programmes. Further work also needs to be done to maximise the spending on Peace I.

Today’s announcement bears no relation to the Knockmore railway line. That matter should be taken up with the Minister for Regional Development.

Photo of Prof Monica McWilliams Prof Monica McWilliams NIWC

I welcome today’s announcement, particularly in relation to free travel and the reduction in the regional rates. It is clear from many who have lobbied the Assembly that this is the kind of message they want to hear.

Last week UNISON, the trade union representing those in the community and voluntary sector, lobbied the Assembly. In its report ‘Communities in Crisis’ the union expresses its concern about the transitional nature of this funding and predicts that £3 million, not £2 million, is needed. What is more important, the report recommends that the Executive now take a serious look at mainstreaming these projects, many of which are examples of good practice, rather than wait for Peace II and leave it to the Health Service to pick up the psychiatric or social service costs.

The second point I want to make concerns the £18 million deficits that we are now picking up. I am concerned that proceeding with the Programme for Government requires a resolution to the problem of the deficits. Will this allow next year’s trusts to say that they cannot do what is in the Programme for Government and then have their deficits picked up? How does the Minister intend to address that problem?

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

I am aware of the UNISON paper to which Ms McWilliams has referred. It says that £3 million is needed for gap funding. I refer the Member to the statement I have made. We are authorising Departments to make considered judgements now and on the basis of those to make advance allocations to projects they believe to be eligible under the Peace II criteria. The £2 million that is going into the social inclusion fund now is there effectively to cover Departments against any risk of allocating moneys to projects that do not end up being eligible for Peace II. It is there to cover the Departments and protect the Peace programme. We hope that the allocations which can now be enabled by this approach will involve more than the total of £2 million. I ask the Member to look again at the statement and at the nature of the proposal we are dealing with. We are making a gear change. This is not the way in which gap funding has previously been provided.

The Member referred also to mainstreaming. One of our reasons for changing the nature and scope of the Peace programme and for further embedding and developing the notion of partnerships so precisely is so that our arrangements will sustain themselves after the Peace II programme. That is the only way to mainstream these things seriously in the long term.

In answer to the trust deficit question, we made significant provision in the Budget, with some increases in Health Service spending. It would have been inappropriate and inconsistent with the goals we set out in the Programme for Government to have left some of that additional funding for paying off these deficits. In the statement I made the point that there will be a significant difference between this year and next year because of the change to resource accounting and budgeting. Trust spending will no longer be at one remove from departmental control.

We have agreed a joint consultancy exercise with the Economic Policy Unit, the Department of Health, Social Services and Public Safety and ourselves to look at both the causes and the consequences of trust deficits. The Minister of Health, Social Services and Public Safety and I recognise that a number of questions arise in this regard, and we want to address those seriously.

Photo of Robert McCartney Robert McCartney UKUP 12:15 pm, 12th February 2001

It would be churlish not to welcome the Minister’s statement, particularly on such matters as free travel and the reduction in rates. Is the Minister aware that in the Chancellor of the Exchequer’s coming Budget one of the incentives may be a substantial reduction in business rates? In Northern Ireland, however, while there is to be a reduction in the increase in business rates, there is nevertheless to be an increase. Is the Minister aware that the public at large are becoming a little concerned at the millions of pounds that can be found down the side of the sofa or at the back of the piano when it is necessary to address what is clearly an urgent problem?

I have taken up the issue of business rates with the Minister outside the Chamber. Increasing small business rates will put a substantial and significant number of hard-working, self-employed business people out of work, while simultaneously the Executive are pumping money into the IDB and LEDU in order to lay out huge capital sums to create new jobs. Is it not something of a paradox that on the one hand he is putting people out of business while on the other hand he is laying out large sums of money to encourage new jobs?

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

I thank the Member for his question and acknowledge that he has spoken to me about the non-domestic rate increases. Quoting averages can be dangerous in this context, and I have already stated that the change in the domestic rate will be from £16 a year to £14 a year. With business rates the increase will be reduced from £299 a year to £150 a year. I am not sure that the rate increase was going to have quite the adverse effect on individual businesses that some people have suggested, but I do recognise that the margins are significant, particularly when people are working in marginal circumstances.

We will look at what is happening elsewhere with rates. Across the water non-domestic rates are increasing at the rate of inflation, and we have been able to achieve the same rate for the non-domestic sector here. I cannot promise that that will be the case next year, because we will have to look at next year’s funding requirements in the light of many circumstances and pressures. It would be irresponsible of me to make a blanket commitment.

We are sensitive to the impact of rate levels and are aware that several issues need to be examined. This also applies to rates in the commercial sector, and some commercial areas are affected and others are not. These issues can be best addressed in the wider review of rating policy which is to be undertaken and on which I will soon refer papers to the Finance and Personnel Committee.

Photo of Alan McFarland Alan McFarland UUP

I welcome the Minister’s announcement of an additional £18 million to clear the health deficits. I hope that the Minister of Health, Social Services and Public Safety will ensure that there is equal distribution and that an unfair proportion does not go to the large hospitals. I wonder if the Minister has considered giving some money to those poor GP fundholders who through no fault of their own also have deficits.

The Executive’s review of the Department of Health, Social Services and Public Safety is welcome; it should produce some clarity on health funding. Will the Minister encourage the review team to introduce a standardised system for tracking health funds so that we know where the allocations go and can be sure that the best value is being given to patients at the point of delivery?

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

We need to address the liability that the deficits represent, and not least the liability in service planning and management. Therefore, it is best that we resolve the historic or cumulative deficits as they stand. However, we need to go beyond that and look at many of the underlying questions raised, not least those referred to in relation to a management information system. That is important, not just for financial control but also because it would mean sound service planning geared to meeting need on an equitable basis. I recognise that the pattern and the nature of trust deficits raise serious equity questions about what is done to resolve them and to avoid them in the future. The consultancy study that has been undertaken on terms of reference agreed by the three Departments involved should be able to contribute positively to that.

Photo of Patricia Lewsley Patricia Lewsley Social Democratic and Labour Party

I also welcome the Minister’s statement and commend him for his actions, particularly on the gap funding and the £2 million now available. Can the Minister tell us what additional actions, if any, he would propose to the Departments to assist the community and voluntary sector further?

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

Several issues need to be addressed, but not all together. We cannot make progress on any one point without attending to all the others. However, gap funding is not simply allocated in the same way as before. We are now asking Departments to judge who is eligible and, on that basis, to make advance allocations against the funding programmes. Furthermore, we are asking them to do that in relation to Peace I funding because a considerable amount of money is still available there. We have engaged with the Special EU Programmes Body on this.

As Members will recollect, in what was a new departure in the Budget, we have created Executive programme funds. Some of those programme funds will be of particular interest to the community and voluntary sector, not least the children’s fund, an arm of which would need to be accessible to applications directly from that sector. The social inclusion/community regeneration fund, by its scope and terms of reference, should allow Departments to continue their good work with the community and voluntary sector.

Photo of Peter Robinson Peter Robinson DUP

I would like to take the Minister back to the issue of the Department for Regional Development’s proposal for free fares for the elderly. Is the Minister aware that a Department does not ultimately produce a scheme and deliver the goods? An operator does that, and the Minister and the Department for Regional Development have to negotiate with that operator. Can the Minister therefore inform the House why it was thought appropriate for the First Minister, the Deputy First Minister and himself to announce details of the amount of funding available prior to entering into negotiations with the operator? By doing so, they prejudiced the added benefits that could have been obtained had negotiations taken place beforehand.

Will he further tell the House why documents and information, which would have allowed him to enter into negotiations that would have produced improved services in rural areas, were withheld from the Minister for Regional Development?

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

First, on the circulation or availability of papers, that is not my responsibility, so I cannot comment on that. In relation to the earlier part of the question, once the Executive had taken a decision, there was going to be a decision presented here today. I do not think that many people would have liked me to leave part of the statement blank because certain matters were subject to negotiation. If anybody is taking issue with what the First Minister and the Deputy First Minister said on Thursday evening, I remind Members that the Minister for Regional Development referred on Thursday morning to a bid of between £5 million and £7 million that he said that his officials were making to the Department of Finance and Personnel.

On ‘Good Morning Ulster’ the Minister for Regional Development referred to a bid. He said:

"I have made a bid, and I have instructed my officials to make a bid to the Department of Finance and Personnel."

He referred to a sum of between £5 million and £7 million. Mr Robinson cannot make an argument against the First Minister and the Deputy First Minister and not apply it equally to the Minister for Regional Development.

Once the Executive have taken decisions on these matters and have allocated figures, I have to present those decisions here so that they become public quickly. Members of the Finance and Personnel Committee would not like me to say to them that there are certain parts of this that we are keeping blank because of other negotiations. I would make the point that negotiations still have to be undertaken. An amount of money has been made available, but several details still have to be worked out, and they include negotiations with the transport providers. We are quite clear on that.

Photo of Barry McElduff Barry McElduff Sinn Féin

Go raibh maith agat, a LeasCheann Comhairle. Ba mhaith liom fáilte a chur roimh an ráiteas a rinne an tAire inniu. I welcome the Minister’s statement. It is a good news statement in several regards, not least in the area of free travel for senior citizens, which brings us closer into line with the rest of Ireland.

My question is on the regional rate reductions, which is a step in the right direction. I draw attention to the commitment to look carefully at the wider impact of the rating system on business, individuals and households. I ask the Minister and his Department to embark on a comprehensive programme of public consultation. This should be aimed at listening to the views of the wider community, increasing public awareness on the procedure and methodology for arriving at the regional rate, and on the range and character of public services financed by the regional rate. This mirrors an approach taken by Omagh District Council, which held an open forum.

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

In my statement I referred to the wider review of rating policy, which will look at many of the business implications, including some of the points touched upon by Mr McCartney earlier and at the distribution of the domestic rate burden. I hope that the review will look at the whole question of rating in a root and branch way.

I do have to offer everyone a reality check. We do need to raise money from the rating system and we are not going to be able to come up with a rating system with such a menu of exemptions and reliefs that will exempt everyone from paying. People under that illusion are simply not living in reality. I remind those Members, who normally are very articulate in telling me how much public expenditure we actually need, and how much we need into services, that the margin of additional expenditure afforded to us by the rating system is significant. If we were to try to cut the moneys represented by the rates, we would soon be hearing strong protests from the expenditure areas immediately affected by such cuts.

I will forward papers to the Finance and Personnel Committee soon. These papers will outline the main phases of the review as we see it unfolding, consistent with the Programme for Government. That will include a strong public consultation phase.

Photo of Peter Weir Peter Weir UUP

Although I welcome aspects of this announcement, such as free travel for the elderly and the reduction in the increase of the non-domestic rate, I have to express concern at the somewhat meagre reduction of the increase in the domestic rate.

If the domestic rate were reduced from 7% to an inflation rate, what resources would be required to achieve that? As today’s announcements have been funded from the £68 million resulting from the December monitoring round, will the Minister give the House a breakdown of where that money came from? How much of it came from departmental savings and easements? How much of it came from the money saved with the suspension of the Executive last year? How much has come from other sources?

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party 12:30 pm, 12th February 2001

With regard to where the money came from, we covered those points in the December monitoring round itself. I made the point that, with regard to the £68 million available, some items were clearly sizeable and exceptional. One was the fact of the change to the treatment of domestic rate rebate. That gave us a further £23 million — essentially, a windfall. There was a further £7 million, for instance, from the Department of Enterprise, Trade and Investment, which was money from returned shipbuilding loans that had been held against a possible claim from Harland & Wolff. There was also the £9 million which the Assembly, partly because of suspension and other phasing problems with plans, did not spend this year.

Those are three items accounting for £40 million that we had previously allocated. There were also the additional receipts, including those from housing and the Water Service, and other regular easements from Departments on a fairly routine basis.

It is a matter of providence that we had that room to manoeuvre in the December monitoring round. It is one of the reasons we should not confuse the providence that we now have with the need for prudence that we had up until that point. We could not have made provision for lower rate increases without knowing that we had the resources to do so and without knowing that we could meet our expenditure commitments. That is why these matters have taken time.

I have made the move to rates after we had looked at the other pressing issues such as the health trust deficits. There was a stage, a few weeks ago, where it looked as if the figure for health trust deficits would be £38 million. When we held £28 million over, we thought we could still be facing difficulties there.

Fortunately, with good work between the Department of Health, Social Services and Public Safety and the Department of Finance and Personnel, we have been able to come up with a clearer and a more helpful picture. That has now enabled us to move in other key directions that I hope all Members will welcome.

Photo of Derek Hussey Derek Hussey UUP

Does the Minister agree that there is an implied rap on the knuckles to management in the Health Service in the statement? It appears that it is now going to have to be given some kind of "management information" — to quote from the statement.

There are technical issues amounting to £20 million of a difference. What are they doing as managers within the system? We are told that there is an effort

"to ensure that whatever future levels of funding are available are used to best effect to promote the best interests of the health of the region".

Has this not been the case so far?

On the issue of free travel, I understood from Translink that the current system was costing in the region of £6 million a year on the 50% reduction. Can the Minister therefore confirm the figures in his statement? My understanding is that it should be in the region of £12 million.

On the issue of gap funding, the Minister referred to outstanding matters in Peace I. The Deputy First Minister has already agreed with me that the Protestant/Unionist community has yet to rise to comparable funding levels with the Nationalist community groupings. Will the funding ensure catch up through the proactive promotion of schemes in that part of the community where it is needed? Will the Minister assure the House that that will happen?

One final point — [Interruption]

Photo of Derek Hussey Derek Hussey UUP

This is the final point. In his statement, the Minister, instead of using the term "rates", says

"levels of local revenue per household raised here are markedly below those in England".

Will the Minister comment on the fact that households on the mainland also have to take water charges into account? Is it implied in the Minister’s statement that households in Northern Ireland may be faced with such charges to bring them up to comparative levels on the mainland?

Photo of Mr Donovan McClelland Mr Donovan McClelland Social Democratic and Labour Party

The Minister may wish to answer some of those questions in writing.

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

I will bear that helpful suggestion in mind.

First, it is wrong to characterise the consultancy study as a rap on the knuckles, just as it is wrong to characterise the money going into the deficits as a signal that people can accumulate deficits in the future. Both interpretations are wrong. We are trying to deal with, and recognise the measure and background of, the problem.

As for the December monitoring bid, which clearly reflected the problem in certain ways, the Department of Finance and Personnel and the Department of Health, Social Services and Public Safety have been able to bring the estimated deficit down to £18 million after examining the problem. That has been achieved through technical re-categorisation and an assessment of the impact of the allocations that were announced a couple of weeks ago in the December monitoring round.

The real issue now is to ensure that the trusts know that they can proceed on a positive, purposeful and sound management basis to plan services based on next year’s Budget without worrying about the deficits. We also need to make a success of the consultancy exercise. The three Departments concerned, and Health Service management, need to make sure that we do not run into these problems in the future, not least by ensuring that the management information system — which is needed because of changes in budgetary arrangements — is put in place. Making that improvement and change for the future should not be viewed as a punitive or critical exercise.

With regard to the rates and examining what households pay here, the fact must be borne in mind that people across the water pay council tax and water charges. I make the point that we fund the Water Service here. There is no Barnett formula consequential for doing that. I remind Members that that is a relevant issue when one examines what resources we have. The Treasury provides no funding for the Water Service. Remember, therefore, that that is the only additional money that is raised to support the Budget, including funding for the Water Service. Money for the Water Service has to be found by stretching the Barnett allocation for other services or from the regional rate.

There are questions about how we fund services, and Barry McElduff touched upon this earlier. It was asked whether we should be hypothecating services that rates, or a portion of the rates, pay for. All these issues must be considered in the rating policy review. It would not be a comprehensive review if it were not open to such consideration.

Photo of Mr Donovan McClelland Mr Donovan McClelland Social Democratic and Labour Party

I remind the Minister and Members of the time constraints.

Photo of Mrs Annie Courtney Mrs Annie Courtney Social Democratic and Labour Party

The statement shows the Minister of Finance and Personnel’s commitment to the Health Service, the business sector, householders, the elderly and the community sector. These announcements will be widely welcomed across society. The statement shows that this Minister of Finance and Personnel stands at the centre of joined-up government.

Will the Minister provide details on when the findings of the Health Service consultancy will be ready for implementation?

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

We hope to get the joint consultancy study under way shortly. We do not intend it to be a prolonged exercise. The Minister of Health, Social Services and Public Safety, the Economic Policy Unit and I recognise that this needs to happen sooner rather than later. We want to ensure that the results of that study give us good light under which to consider funding needs as they arise for the Health Service in the coming financial year and beyond. I hope that we will be able to work with the benefit of some conclusions and insights from this consultancy study within a few months.

Photo of Sammy Wilson Sammy Wilson DUP

I welcome this act of repentance by the Minister of Finance and Personnel on behalf of the pro-agreement parties in the Executive. It is nice to see that the pro-agreement parties have seen the error of their ways on the issues of free transport and the regional rate. Is this really an act of repentance for past misdeeds, or a bribe in relation to future elections? To use the Minister’s own words, is it the Executive at work or "at its work"?

Photo of Mr Donovan McClelland Mr Donovan McClelland Social Democratic and Labour Party

I am not clear that there was a question there.

Photo of Sammy Wilson Sammy Wilson DUP

Can I come to my question?

Photo of Sammy Wilson Sammy Wilson DUP

Does the Minister accept that all the arguments that he put forward on 18 December in relation to his refusal to accept the amendment on the regional rate have been proved to be false? Will he tell the House when he found out that the valuation of domestic property gave him an extra £2 million?

When did he get the result of the more detailed work that showed that, contrary to what he said on 18 December, people in Northern Ireland do not pay more for non-domestic rates than is paid in England? Will he tell us when he was convinced that by not increasing the non-domestic rate by 8% he would not be putting in jeopardy any discussions on the Barnett formula?

Perhaps, having got his homework wrong last time, the Minister can now tell us, in answer to a previous question, how much it would cost to reduce the domestic rate to 3·3%. Will he now consider alleviating the burden on domestic householders by restricting the increase to 3·3%?

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

I did not mislead the House on 18 December. I never said that we were paying non-domestic rates at a proportion that was lagging well behind Great Britain. I always made that point in relation to domestic rates. I subsequently have made a point of trying to check out the position of non- domestic rates — not an argument that had been made to me. That information became available to me at the end of January. It was at around the same time that confirmation of the buoyancy of around £2 million came through.

At the stage of the draft Budget, and at other times, including in December, I made the point that if the figures showed a buoyancy that allowed us to raise the same amount of money with a lower rate increase, we would consider that. That now has happened.

I have a point to make to Members, especially to those who tell me that there are all sorts of things that we should be doing on Barnett: that we should be taking on the Treasury, and so on. In relation to what we are raising as a contribution from households in the domestic regional rate, we will be in a very weak position in making any case to the Treasury. The Treasury will be able to say "Here you go again; you want English taxpayers to pay more for services yet you will not do anything to raise from your own households even a larger fraction of the amount that is being raised in England and Wales". Therefore, Members need to remember that when we quote and when we rightly argue parity on many grounds, that case can be used against us.

It is only since the Executive have examined other spending issues and the money that was available in the December monitoring round — not all of which could have been reliably predicted in December — that they have been able to make these judgements. It is wrong for Members to suggest that the Executive should set a particular level of rate increase as a priority, ahead of public spending needs and the needs of certain services, and regardless of anything else. If that line had been taken I might have been unable to make some of today’s welcome announcements. As was clear from my statement, if £2 million buoyancy means that the Executive can reduce the rate increase from 8% to 7%, each 1% will work out at £2 million.

Photo of Mr John Kelly Mr John Kelly Sinn Féin 12:45 pm, 12th February 2001

Go raibh maith agat, a LeasCheann Comhairle. I congratulate the Minister on his comprehensive and socially meaningful statement with regard to health, free travel and — with reservations — rates.

I particularly welcome the joint review of the causes and consequences of the Health Service’s trust deficits. At a recent meeting of the Health, Social Services and Public Safety Committee a Member suggested that the Executive had set up a hit squad to investigate deficits and monitoring procedures in the Health Service. I am glad to know that that will not be a punitive or hostile study. Does the Minister recognise that those deficits result from the historic years of underfunding? Will he assure the House that those deficits may not have accrued from carelessness but may have come about because people were targeting social or health needs in those trusts?

No age limit has been set for those wishing to avail of free travel. Women are pensionable at the age of 60. Will the Minister and his officials keep that in mind? Does the Minister accept that, on Thursday morning, Gregory Campbell made a pre-emptive strike on the free travel issue and was making no contribution to the debate?

Photo of Mark Durkan Mark Durkan Social Democratic and Labour Party

I am glad that John Kelly has found much to welcome in what I have said.

The people who will carry out the consultancy report into the trust deficits are not a hit squad. It is about trying to get on top of the problem and make sure that we understand it fully. There are several issues involved. I accept what Mr Kelly said about the service pressures and needs that trusts face and how those have a bearing on some of their spending patterns. However, the study will also examine other issues to try to ensure that deficits will not rise to the level that they previously have without effective recovery action being taken. The Executive must be fully aware of the extent of the trust deficits, particularly as we move into a different regime under resource accounting and budgeting. The point of the consultancy study is to ensure that the Executive — and the Assembly, as the public expenditure management — are in the position that they need to be, as well as making sure that the trusts, as far as possible, have adequate funding.

We have already dealt with the sequence of the statements. We need to focus on making the scheme for free travel for the elderly work. Several details still need to be worked out. Some of them will be addressed in the interdepartmental working group that the Executive established some time ago, and the Department for Regional Development will have to pursue many of the issues directly with transport providers. We need to get on with that work and achieve the outcome that we want, rather than arguing about the provenance of it.

Photo of Edwin Poots Edwin Poots DUP

On a point of order, Mr Deputy Speaker. First, you called two Members of the Ulster Unionist Party consecutively. When calling Members to speak, I understood that you had to do so on the basis of how they were aligned when they were elected to the House. You called Mr Weir and then Mr Hussey. That removed the opportunity for other parties to have their full allocation.

Secondly, perhaps you could facilitate Mr Taylor by giving him a copy of the rules of the House on the use of mobile phones. We know that he does not attend very often, so he may not understand them.

Photo of Mr Donovan McClelland Mr Donovan McClelland Social Democratic and Labour Party

I do not want to delay the House. As you know, we are going to a memorial service at 1.00 pm. Mr Taylor is quite aware of the rules on mobile phones. With regard to calling two Ulster Unionist Members in a row, I understood that Mr Weir did not fall into that category. I hope that that explains the situation.

The sitting was suspended at 12.52 pm.

On resuming (Mr Deputy Speaker [Sir John Gorman] in the Chair) —