House of Commons - Northern Ireland Affairs

Select Committee on Northern Ireland Affairs First Report

FIRST REPORT

The Northern Ireland Affairs Committee has agreed to the following Report:-

NORTHERN IRELAND PUBLIC EXPENDITURE: CURRENT PLANS AND PRIORITIES

1. The departmental annual Reports to the House of Commons on the expenditure plans and priorities of the Northern Ireland Office and the Northern Ireland Departments provide a major opportunity for close analysis of the trends in public spending. We took evidence on the last published Report at the earliest opportunity after the Committee was nominated.

2. We received two memoranda and a letter responding to particular points on the format of the document from Mr Paul Murphy, Minister of State, Northern Ireland Office[1] and held one oral evidence session with him, as the minister responsible for the Department of Finance and Personnel, and officials. We received the invaluable assistance of Dr Graham Gudgin and Mr John Simpson as specialist advisers during the enquiry. We are very grateful to them for their contribution.

3. "Northern Ireland: Expenditure Plans & Priorities - The Government's Expenditure Plans 1997-98 to 1999-2000" was published in March 1997 as Cm 3616. This was, of course, a document prepared by the previous administration before the General Election. Nonetheless, the Government has said that it will act within the departmental headings on expenditure laid down by the previous Government for two years or so, so the departmental Report is in no sense out of date.[2]

4. The Government has generally kept to the priorities for public spending in Northern Ireland for the current year apart from devoting some extra funds towards education, health and Welfare to Work on a proportional basis as a result of increases announced by the Chancellor in his Budget and a virement of about £4 million for education from other aspects of the Budget. However, there may be more significant changes in the next financial year.[3]

5. This is a time of significant change in the system of accounting for public spending not just in Northern Ireland but in the whole country, as arrangements are made to introduce two new principles into public finance: the Private Finance Initiative (PFI) and resource accounting and budgeting. Both of these developments have been commented on elsewhere, by the Treasury Committee, the Comptroller and Auditor General and the Public Accounts Committee in reports to the House and generally in unofficial publications.[4] Some of our questions were directed to the development of these initiatives in Northern Ireland, which are proceeding under the present administration in the same way as planned before the General Election.

6. In addition, the Chancellor of the Exchequer announced a Comprehensive Spending Review (CSR) in order to enable the Government to put "its public spending principles into practice and ensure that, department by department, it implements its commitment to investment, employment, opportunity and fairness".[5] This review will affect Northern Ireland in the same way as elsewhere. The Committee collected copies of the papers sent in response to the Government's consultation on the Northern Ireland Comprehensive Spending Review, where these were available: these are listed in the Appendices to the Minutes of Evidence.[6] We shall keep a continuing scrutiny on the CSR and how it affects the public services in Northern Ireland.

7. The Block Grant is the main vehicle for defining the amount of Northern Ireland's share of public spending within the United Kingdom for any one financial year. Changes in public expenditure plans between the countries of the UK are determined by the Barnett Formula. The Treasury Committee has recently reported on the operation of this system.[7] We note that Committee's disappointment that no Government studies had been made in relation to the appropriateness of the Barnett formula and how it relates to needs.[8]

8. The assessment of public spending is a key part of our responsibilities. We shall continue to report on public expenditure over the course of this Parliament. We intend that there will be a series of closely focussed enquiries into specific areas of public spending which will balance carefully the need for prudence in spending with satisfying social need.

9. We have some recommendations for the revision of the annual departmental Report on current public expenditure plans. Although any changes in the format of the Reports would need to be agreed with HM Treasury,[9] the Department of Finance and Personnel already reviews the structure of the Report every year in an effort to improve the standard of presentation, so we assume that it will not be too difficult to revise the way in which the Report is organised.[10] We accept that no change will be possible for the 1998 annual departmental Report, which is too close to publication, but look forward to changes being implemented in the 1999 Report.

10. Although annual departmental Reports are primarily designed for parliamentary use, the potential readership of the Reports is wider than Members of Parliament.[11] At best, Reports should bridge the gap between the requirements of professional economic commentators and less specialised readers who may wish to research spending details relating to specific subjects. Overall, the Reports should provide general, authoritative guidance on the trends in public spending in Northern Ireland, backed up by close detailed description of spending programmes and changes in those programmes.

11. The most convenient way of combining general accessibility with detailed coverage sufficient for closely directed research would be for the Department to publish a short introductory document summarising the macro-elements of the report and setting them in a clearer context. This introductory document could include a general statement about the progress of the Northern Ireland economy. It could show most usefully where the money for public sector spending has come from and has gone to, summarised in a Table which would distinguish taxation receipts, the Grant-in-aid and other sources of revenue (such as the national insurance fund transfers).[12] This would link with a section or table which compared taxation to expenditure. This latter comparator, and changes over recent years, is a topic which is almost invariably of interest to readers of this type of document. Both of these additions would precede a presentation of Table 1.1, which summarises the allocations to the main Northern Ireland spending programmes. They would allow a reader to understand more easily the concept of the Northern Ireland block and the scope of the Secretary of State's discretion to allocate spending.

12. The introductory document could usefully include a comparison of spending levels with those in the other territorial units of the UK, especially with Scotland and Wales, similar to that on page 78ff of the Statistical Analyses, 1997-8[13] and especially Table 7.6 B on page 84 (giving comparisons for 1995-6). The Department commented in evidence that because this information was already available in the Public Expenditure Statistical Analyses there was no need to reproduce it.[14] This response misses one of the major points about the document - namely, that it should gather in one place useful, accessible information, much of which could be obtained elsewhere, but only with difficulty and even then only by those who know where to look. The inconvenience of reproducing material from a little known additional source is slight in comparison with the improvement in the accessibility of the information in the document.

13. Much of the material which would be suitable for an introductory document is already in the public domain and easily accessible to the Department. Indeed, some is already in the first three chapters. The introductory document would not provide much new information, but would present in a more coherent form information which is to some extent already available. Its purpose would be to set the scene for the more detailed coverage of Expenditure Plans in the second (main) volume.

14. The Department's response to the concept of a separate introductory document was set out in the Minister's letter to us.[15] It did not approve of the proposal for two reasons.

The first was that such a document would make Northern Ireland's document different from other annual Reports and would depart from the Treasury's defined "core requirements" for annual departmental Reports. This objection is without solid foundation, since there is no need for complete uniformity in presentation. As the Treasury Committee has pointed out, Departments must observe the core requirements, but, provided that they meet these, Departments have considerable discretion in how they present their Reports.[16] The principle of publishing a two volume annual Report is not new: the Ministry of Defence publishes its annual Report in two volumes, for example, although not in the form which we propose. The Treasury, in its note on the core requirements, also recognises the possibility of differences: "Departmental reports must also include any additional information in their departmental report which departments have agreed with their Select Committees should be so included".[17]

The Department's second objection was based on the lack of a formal link between revenues and expenditure within Northern Ireland. Although this point is technically true, it ignores the clear political link between the two items which is of considerable public interest.

15. The Department admitted that the analysis of the relationship of EU funding and expenditure, including the ERDF funding, was not clear.[18] We found the ERDF reference in Table 1.1 confusing, if not obscure. In the 1997 Annual Report the Department introduced a new, supplementary Table (Table12.6, on page 269) showing the actual and planned ERDF spending in each main programme of public spending in Northern Ireland. This is a useful innovation, but it does not give a complete picture of the allocation of EU funds. The Department should spell out the details of this source of funding in the introductory document. We are pleased to note that the 1998 Report will contain additional information on the EU Peace and Reconciliation Programme and that the Department has taken action to include information on the other EU funds in the 1999 Report.[19]

16. We make two general suggestions about the main volume which would make it more comprehensible. First, each of the chapters detailing the work of the Northern Ireland Department should start with a table and description which take identifiable figures, or lines, from Table 1.1, and then go on to show the further breakdown. At present it is not always possible to see how the aggregate in Table 1.1 breaks down in departmental sub-totals. The Minister has acknowledged that this would be useful and has promised to examine how the 1999 Report will reflect this.[20]

17. Second, we are concerned that the method of compilation leads to a very varied standard of coverage of information relating to expenditure with examples of detailed material being included which is not directly relevant. For example, why include statistics relating to road traffic deaths (see Northern Ireland: Expenditure Plans & Priorities - The Government's Expenditure Plans 1997-98 to 1999-2000, paragraph 7.34)? The Minister has accepted that treatment of this information could be improved.[21]

18. There is a lack of consistency between chapters, particularly in respect of providing indications of planned levels of service provision. Although the focus on cash plans must remain an essential element in each chapter, we feel that many potential readers would also find it useful to have indicators for the volume and quality of service provision. Consistent means of providing such indicators might include 'real' expenditure figures (i.e. deflated for anticipated inflation). These should continue to be augmented with direct volume indicators (numbers of policemen, teachers, nurses, miles of new road etc) but in a more consistent manner. In particular, most attention might be given to the largest items of expenditure and the timescale for which volume indicators are displayed should be consistent and wherever possible should cover the full three years of the planning period.

19. Much of the existing text describes general departmental aims which we assume will not change in substance from year to year and which is too general to be of significant use in a document describing detailed expenditure plans. To some extent, the content is dictated by the Treasury's "core requirements", but the primary purpose of any text accompanying departmental tables should be to give reasons for significant changes in real expenditure compared with past outcomes or previous plans. In future, we would like to see text more closely reflecting this.

20. It is difficult to imagine that consistency between chapters can be achieved without a greater degree of editorial co-ordination than has been the case before; and it is of key importance that a particular Department (presumably the Department of Finance and Personnel) should play a more active editorial role in overseeing the content of the report and taking a view of the document as a whole. We were disappointed that the Department of Finance and Personnel said initially in its evidence that an overall editorial role for itself was "neither practical nor appropriate".[22] Subsequently, however, the Minister did say that DFP was "actively seeking to further strengthen its editorial coordination".[23] In our view, the Department is ideally placed to exercise a strong monitoring function and give much closer guidance on a common format for the presentation of information within Annual Reports. This would enhance, not interfere with, the "utility of the presentation".[24]

1 Ev. pp. 1, 24 and 66. Back

2 Q. 4. Back

3 Q.31. Back

4 See eg "Better Accounting for the Taxpayer's Money" Cm 2929; "Resource Accounting and Budgeting in Government: The White Paper Proposals", Report by the Comptroller and Auditor General [HC334, Session 1995-96]; Treasury and Civil Service Committee - Fourth Report, Session 1994-95: "Simplified Estimates and Resource Accounting" [HC 212]; Treasury Committee - Fifth Report, Session 1995-96: "Resource Accounting and Budgeting in Government: The Financial Reporting Advisory Board" [HC 309]; and Sixth Report, Session 1995-96: "The Private Finance Initiative" [HC 146]; Public Accounts Committee - Ninth Report, Session 1996-97: "Resource Accounting and Proposals for a Resource-Based System and Supply" [HC 167]. Back

5 HM Treasury, 1997a, p. 22. Back

6 See Ev. pp. 33 ff. Back

7 See Second Report from the Treasury Committee: "The Barnett Formula", Session 1997-98, HC 341. Back

8 ibid., paragraph 12. Back

9 Ev. p. 29. Back

10 Ev. p. 29. Back

11 Ev. p.66: about half of the copies printed go to Parliament or Government Departments and Agencies. Back

12 Ev. p. 29. Back