Draft Budget (Northern Ireland) Order 2004

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Jane Kennedy: We are conscious of our obligations to assist parents who choose that type of education for their children, and those who choose integrated education for their children. We have a statutory obligation to promote and encourage the development of integrated education, and we are also conscious of that. Parental choice is important, although it is not always possible to deliver in all circumstances. That certainly informed the decision that I took recently regarding the report led by Stephen Costello.

Mr. Gregory Campbell (East Londonderry) (DUP): The Minister will be aware that there was a lot of concern under the devolved system regarding the allocation of capital funding to the various sectors. Many people thought that the sectarian head count for the allocation of capital funding by her predecessor, the Sinn Fein-IRA Minister for Education, disproportionately disadvantaged the controlled sector. Will the Minister consider that?

Jane Kennedy: I am aware of the concerns that have been expressed. In relation to capital allocation, the Department of Education appears to be driven by bids that come in from schools and the governing bodies running the schools in Northern Ireland. We respond to demand, rather than driving capital development from the centre. However, I am conscious of the criticism that the hon. Gentleman raised. As we go forward with the Strategic Investment Board's proposals for the development of new schools—there is the potential for significant capital investment in that area—we will look to ensure that investment in schools is made across all communities, as is required.

Reinvestment and Reform Initiative

5. Mr. Stephen McCabe (Birmingham, Hall Green) (Lab): What progress has been made with the Reinvestment and Reform Initiative.[155711]

The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Ian Pearson): A £2.7 billion strategic investment programme to modernise Northern Ireland's infrastructure is under way. Major reforms are taking place in water, rating and other areas. Six former security sites have been made available for social and economic regeneration. I have announced in principle a decision to purchase another key site: the Clooney Army base. Work is under way to determine the best possible use of those sites.

Mr. McCabe: I thank the Minister for that response. I am conscious that the Strategic Investment Board has been in existence only since April of last year. However, would he not agree that there must be urgent progress on health investment in Northern Ireland, both in the acute and primary sectors, to address the problems of health inequalities and undercapacity? That should be a major priority.

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Mr. Pearson: I agree with my hon. Friend that investing in health is a key priority for the Government. The budget for 2004–05 will see a 7.2 per cent. increase in health spending, and the budget for 2005–06 will also see a further 8.4 per cent. increase in health service spending. At the same time, we are seeing an increase in the capital spend of more than 11 per cent., and plans for a new hospital in the south-west. We are putting more money into health, but we need health reform as well, as part of that investment. That is exactly what the Government are committed to delivering.

Mr. Andrew Hunter (Basingstoke) (Ind Con): In his first answer the Minister referred to rates reform. Have decisions been made since the Grand Committee last met? What timetable does he envisage for the introduction of the reforms?

Mr. Pearson: The hon. Gentleman may be aware that on Monday we will be debating an order relating to non-domestic rating. As far as domestic rating is concerned, I hope to publish further proposals for consultation shortly. I anticipate that that will result in legislation, hopefully in the Assembly, later in the year.

The Economy

6. Mr. Iain Luke (Dundee, East) (Lab): What assessment he has made of the recent performance of the Northern Ireland economy.[155712]

The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Ian Pearson): The announcement last week that Herdmans Ltd. and TK-ECC will cease manufacturing in Northern Ireland is clearly regrettable and demonstrates the challenges of the global economy. However, the number of seasonally-adjusted employee jobs in Northern Ireland in September 2003 was the highest on record, and, in terms of gross value added, Northern Ireland is one of the fastest growing UK regions, recording growth in GVA of 26 per cent. over the past five years.

Mr. Luke: I thank the Minister for that reply. Will he join me in paying tribute to the work of Invest Northern Ireland, which is helping to set up potentially high-growth, high-tech companies in the Province? Given the changes in the manufacturing sector, does he agree that such investment will go a long way towards securing the Province's economic future and creating new jobs and industries, which will play a significant role in creating wealth, prosperity and, I hope, a political settlement?

Mr. Pearson: I thank my hon. Friend for his question. He is certainly right about the importance of high value-added jobs to the future of the Northern Ireland economy. Invest Northern Ireland is very much concentrating on creating such jobs, and we will continue to concentrate on attracting foreign direct investment and assisting companies to move up the value chain and produce higher value-added products and services.

Over the past five years, the growth in the number of people in work in Northern Ireland has been greater than in any other region. Manufacturing exports have gone up by 36 per cent., and 13,000 new jobs have

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been created in business services. There has been real progress, and I entirely agree with my hon. Friend that we need stable, inclusive politics if we are to continue to secure economic benefits for the region.

Draft Budget (Northern Ireland) Order 2004

The Chairman: I remind the Committee that the debate can last for two and a half hours, and I make the ritual request for speeches to be short so that the maximum number of hon. Members may speak.

3.12 pm

The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Ian Pearson): I beg to move,

    That the Committee has considered the draft Budget (Northern Ireland) Order 2004.

We are considering the draft order as a result of the continuing suspension of the Northern Ireland Assembly. I know that, like me, hon. Members would like to see a positive outcome from the current review, with the early restoration of the Assembly. It is clearly preferable for decisions about public expenditure in Northern Ireland to be taken by locally elected representatives. However, the delivery of public services must continue, and we must seek Parliament's approval for the use of resources by, and the associated cash needs of, Northern Ireland Departments. I remind the Committee at the outset that the draft order does not cover Northern Ireland Office expenditure on law and order and other services.

The draft order has two purposes. The first is to authorise a total revised amount of resources for 2003–04 of £12.956 billion, as well as the issue of a total revised amount of cash from the Northern Ireland Consolidated Fund for 2003–04 of £9.579 billion. That represents a decrease in resources of £275 million and an increase in cash of £383.5 million over the position authorised by Parliament in the main estimates for the current financial year. The significant reduction in the resources position is due to revised requirements in respect of pension scheme liabilities for the principal civil service pension scheme and the teachers' superannuation scheme.

The second purpose of the draft order is to authorise a vote on account to allow funds to continue to flow to public services for the early months of the next financial year, until the main estimates for 2004–05 can be prepared and considered. To do that, the draft order seeks Parliament's authorisation for the use of resources amounting to £5.157 billion, and for the issue of cash from the Northern Ireland Consolidated Fund in the amount of £4.362 billion. In general, the resource and cash amounts required on account for the next financial year have been calculated as 45 per cent. of the total voted provision for this year.

Mr. David Lidington (Aylesbury) (Con): The Under-Secretary alluded to the significant changes in the supplementary estimates, which derived from changes in the calculation of liabilities under the two superannuation schemes. Will he share with the Committee the chief reasons for those changes to the

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calculations, which involve very large sums? Why have changes been made to the teachers' and civil services schemes but not to the national health service scheme? I would have expected the NHS scheme to be subject to the same regulatory pressures and economic effects as the other two schemes.

Mr. Pearson: There has been a change in accounting standards with regard to pension funds, which affects the resource position. That was done first when preparing the main estimates, as a result of which we have been able to hone down on our figure work. We have produced the changes as a result of an actuarial evaluation of the position. I hope that that clarifies the matter.

As its name suggests, the vote on accounts is not intended to seek final approval for the allocations for 2004–05. Instead, it seeks sufficient resources and cash to allow services to continue until the detailed work on the main estimates for next year has been completed in the early summer. At that stage, there will be a full opportunity to deal with the details of the spending plans for 2004–05. Details of the sums sought are given in the spring supplementary estimates and the vote on account, copies of which have been circulated to members of the Committee and placed in the Library.

The Secretary of State approved the Northern Ireland budget for 2003–04 in December 2002 and the main estimates, reflecting that position, were presented in June last year. However, since then, changes have been made to those plans, which arose primarily in the course of the routine monitoring rounds, in May, September and December, when budget cover is reallocated between Departments.

As with allocations contained in the initial budget, the expenditure associated with the revised allocations, and consequential change in cash needs, requires statutory authority. That is the purpose of the supplementary estimates and that aspect of the draft budget order. In the supplementary estimates we are considering the financial implications, in both resources and cash, of the Secretary of State's decisions to modify the spending plans for this year. I do not propose to go through the changes line by line, because that would take too much time, and the introduction to each departmental estimate, within the supplementary estimates booklet, sets out the main changes for which approval is now sought. That should be clear enough.

As I mentioned, the most significant sources of change to the main estimates position for 2003–04 arise from reallocation processes undertaken during the year—the routine monitoring rounds. Within the monitoring rounds in 2003–04, approximately £320 million has been reallocated to Departments, which has been financed from two main sources. The first source was uncommitted resources that had been carried forward from previous financial years under the end-year flexibility scheme. Scope for reallocation also arises through reduced departmental spending requirements or increased receipts within Departments.

Significant allocations within the monitoring rounds include £46 million to the Department of

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Health, Social Services and Public Safety, to address a number of issues, including hospital waiting lists and easing potential winter pressures. The Department of Education was allocated £41 million, which included £10 million directly to schools and £13.9 million to assist in providing additional classroom assistants for statemented pupils and teachers' pay. The Department for Regional

Development also received additional funding of some £38 million, to allow work to commence on the early upgrade of the Foyle bridge in the north-west and to help maintain the structural integrity of the Northern Ireland roads network, among other things. The Department for Social Development received an additional £109 million, which allowed it to address pressures in a number of areas, including social housing and the warm homes scheme. Significant sums were also allocated to the Department to modernise the benefit payments system.

In addition to the in-year reallocation process, which focuses on the Northern Ireland departmental expenditure limit, there have also been changes to annually managed expenditure—AME—within Departments. That relates primarily to demand-determined expenditure, where longer-term forecasting is difficult, and for which annual provision is made.

The resource and cash amounts for which approval is sought for 2004–05 represent a vote on account, pending the bringing forward of main estimates in early summer. A vote on account at this point in the financial year, prior to the year in which the cash or resources will be used, is a normal feature of Government financial management, and reflects both the allocation of cash to Departments and the allocation, up to a limit, for the use of resources. The vote on account will fund Departments in the interim to implement the ongoing programmes and services for which they are responsible.

The focus for 2004–05 and beyond continues to be on improving and reforming public services and infrastructure. The budget allocations I announced on 13 January provide for total spending on public services in Northern Ireland to rise by nearly 14 per cent. over the next two years bringing the total to over £8 billion in 2005–06. Within that, planned expenditure on capital investment will rise by around 42 per cent., from £750 million in 2003–04 to over £1 billion in 2005–06. We also plan to bear down on bureaucracy and to ensure that spending is focused on our priority services. That is what modern Government should be about—delivering the services and outcomes citizens need and expect.

The budget allocations for 2004–05 and beyond demonstrate our commitment to further investment in Northern Ireland's infrastructure. Placing a priority on investment in our public service infrastructure—in our hospitals and health services, our school buildings, our roads, our water systems and our transport and communications systems—is essential for sustained economic growth and development, and for ensuring a higher quality of life for everyone in the community.

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The strategic investment programme remains at the heart of our plans. In February 2003 I announced details of plans for infrastructure investment in excess of £2 billion. The projects within the programme now exceed £2.7 billion in value and touch upon every aspect of life in Northern Ireland. The programme is funded by a combination of conventional public expenditure, public-private partnerships and borrowing under the terms of the reinvestment and reform initiative.

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